Seven Generations Energy Ltd. class A common shares T.VII

How Under-Valued is VII Vs. Peers Part 1 of 2

[retiredengexec]

Like everyone, this week had a wide range of emotions from relief to deflation as the week ended. In this note I'll summrize what happened over the last month and curent price range as it relates one banks $18 price outlook for 2019, against VII's Canadian and Permian Peers.
Let me say that $13.68 per share against cafhflow of about $4.90 per share is a 2.79 times multiple, which should paid for the poorest of companies and even perhaps a restaurant.Ridiculous.

The last month had three negatives; 1) the potential US-China trade war, 2) the NYSE correction and 3) the drop in WTI. These three factors affected all quality US independent oil companies, as did VII. I'll present the drops as follows early October price per share/November 2 price /and the % drop. Here goes. VII/16.31/13.68/16%; EOG/130/102/20%, CLR 72/50/31, PXD 181/147/19, CXO 160/140/12. When viewed in this context, we didn't do to bad, but unfortunetely we started off at a discount. Oh and we hasd the drop in Condy prices as well. We'll have to watch this closely. THat said Whiting should be onstream this week and take 250,000 BPD of heavy.

The following tables  are instructive at showing how undervalued VII is. the EV/DACF number for VII is based on a share price of $18.00.
CDN Peers             Debt/CF         % Drawn                Boe/d                          EV/DACF                            
VII                           0.8                  0                            220,000                     3.4
TOU                        1.2                33                            288,880                     5.9
ARX                        1.0                   0                           147,000                     6.2
POU                        2.6                79                           103,559                      5.4
NVA                        1.5                 69                            57,440                       4.3
Median of total        2.6                56                            62,8749                      4.9
Peer Group       

Permian Peers      Debt/CF         % Drawn                Boe/d                          EV/DACF                              
VII                           0.8                  0                            220,000                     3.4
ECA                        1.7                  0                            438,440                     4.3
EOG                       0.1                  0                            829,678                     6.5
Medium of              1.1                  0                            291,678                     5.4                         
Permian Peers                     

As a wise man said " the price is whatever the market will bear". That said, absent latent market bias against VII, it should trade at a multiple between 4.9 and 5.4 times DACF. Assuming DACF in 2019 of $5.25 per share this represents a range of $25.70 - $28.35. You can look the average of analyst coverage in the Globe reports. The Averageis about $23 with Raymond James at $27 with a Strong Buy. 

In Part 2 of this review, I will examine the geological potential of VII's land base which has been overlooked by the market (they are only looking at a fraction of it and rightly so as they have been more or less crucified for not meeting guidance). Hint: they will be major LNG players. I will also offer my opinion as to why they fell from grace and why should be forgiven for past transgressions so that the market will pay reasonable multiples again.

[TUMONE1]

Very good analysis.   I strongly agree with you here.  They are extremely undervalued.   The markets have been getting hit especially when it comes to oil in Canada.   Remember what happened to Meg and HSE.  (HSE is run by Li-Ka-Shing and his company has over 1B shares but the float is just over 30% with him controlling the majority.)  I say this as I worked directly

[retiredengexec]

I believe the float is about 163 Million shares (Could be wrong). CPPIB is the largest institution followed by ARC Financial and the sucessor to Kern Capital. I  am a longterm VII investor and  like you was active last week.  CPPIB has had less than a zero rate of return on VII so far. I agree with your stute observations on the global financial side. Things could turn fast. Some

[retiredengexec]

I believe the float is about 163 Million shares (Could be wrong). CPPIB is the largest institution followed by ARC Financial and the sucessor to Kern Capital. I@ am a longterm VII investor and@ like you was active last week.@ CPPIB has had less than a zero rate of return on VII so far. I agree with your stute observations on the global financial side. Things could turn fast. Some positive factors

[TUMONE1]

I do hope the float is that or lower.  Would be good for "Protectionism" - did I say that> LOL Midterm elections playing big role in volatility.  People have to get over the fact that interest rates can rise and the stock market with it.  I have done some talks on this. Look at charts in the DOW and Long Bonds - they prove this - market myth proved. Also we have a big

[retiredengexec]

Tumone. Very sage observations. Agree with you.  I like your financial view on things. My fingers are crossed that TRump will stop the Tariff nonsense. Next big market mover is the upcoming early December Opec meeting. I think they will move to tighten supply. They do not want another 2014 debacle.