Before you post - please save this thread for an intelligent discussion of THIS issue- if you lost money and are angry or buying without being able to articulate any facts- please skip this thread!
BTE using an independent appraiser - and a 10% present value discount came up with a $31 value based on year-end commodity prices.
Is this a fair analysis? Specifically why or why not?
This is old but explains the contrast between appraised value and what someone will pay for the assets:
Assessing value in canada is not as easy as taking market value of what's in the ground and discounting it for a few things, which is all an appraisal is. There are continuous changes in royalty structures which are aimed to take more and more profit from the companies as prices rise. There is the very high development costs in Canada and there is the fact that at ~$40 or so many canadian oil projects are completely unviable financially.
I doubt the appraisers take those things into account.
When they appraised it oil was at $30 +/- a barrel and BTE was under $10 (in March when the appraisal came out). Now oil is $70+ and BTE is up only 60% so there is a lot of catching up to do. What I like about this one is that they keep buying up properties and adding to their reserves. So in spite of the 7% divvy, the reserves grow. Eventually the price will reflect that. If the reserves were shrinking it would be a loser. The minute they increase the divvy the price will pop.
This is a good trust, but I would take their NAV figure with a huge grain of salt, due to the following facts:
-Assumptions for WTI are well ahead of oil prices YTD and of the forward strip
-Estimates based on AECO NG prices nearly double current levels. It simply isnt possible to make money with NG below $4, so not only should NAV be ratcheted way down, anyone producing NG currently is actually losing money. NG estimate is 6.82 and 7.52 for 09/10 and current AECO spot is 3.61. Huge impact on reserves value.
-Their oil sands and thermal assets are not viable below $50 WTI. Look at their own presentation re ROR when oil is at 45, 40 dollars.
-Their NAV figure is based on 10% discount, and for 2P. Nobody values assets at more than 20% discount these days and probable production should be discounted even further, in the current weak environment (not much money for exploration, so probable reserves will stay probable for the foreseeable future).
-The NAV figure is for before tax. Trusts will become taxable in 2011, so the after tax value is more relevant.
-The NAV figure is in C$, so that needs to be taken into account as well. Further, if oil declines, C$ goes down as well, putting further pressure on the NAV figure.
-Recent Scotia NAV figure came in below $9 and that was before NG fell another 30-40%.
-Baytex diluted equity about 8% in recent equity offering, so another downward revision of NAV/share
-Strong heavy oil differentials are a relatively new phenomenon. If/once heavy oil returns to historical pricing, it will be a huge hit to NAV.
-Lastly, with current commodity prices, debt is likely increasing.
Given the above facts, I believe this trust to be more than fully valued.
Caj - interesting points let's discuss some of them.
Aren't the estimates made using year end prices ( 2008) of $5 mcf and $39 Oil ???
Using a 10% discount is about the present value of money is it not? What it is supposed to measure or say is that 1 million next year is only worth $910 thousand today (more or less). It has more to do with interest rates than oil and with low interest rates - 10% may be too high rather than than too low.
You are correct about the Canadian dollar - of course some on here buy on the Toronto in C$ which equal about $.81
Baytex diluted equity by 8% do you mean they issued 8% more shares or did you figure in what they received for the shares?
Good analysis though - let's see where we may have some common ground.
You seem to be anticipating that oil/NG prices will remain near where they are for quite a while, as your BTE value estimates are based on present figures with no future esimates.
Whenever the current market is relieved of its depression, oil will not remain anywhere near present prices and will surge higher, surely quickly surpassing the high of 2008. Any stock related to oil is a screaming bargain today, but unfortunately many of us do not have sufficient holding/buying power to gain greatly from that gift in the coming years.
Certainly - DVN Devon Energy -depending on how one values its land holdings is worth between $100 and $120 a share even at these low prices.
ATP has a PV-10 value several times its share price, however as its an offshore explorer, costs are higher too.
SUn Suncor sells at a fraction of its reserve value and the Petro Canada merger won't dilute it.
CHK is another example and its presentations give you scenarios for each NG level. The CEO takes huge compensation and spends too much time on his political issues.