Then I would start to add.. careful up here... Great stock, as I said,, all looks great for sure,, Solid,, balance sheet,, Just be careful.. Yes I went short yesterday,,Please do not think because of that , I'm here to bash, We shall see..Bol to all...
BCEI will drill over 70 wells this year and over 100 In 2014. At this rate of growth they will be completely out of drilling space in just a few years. For this reason they soon have to make a major purchase of new acreage which will mean they issue new shares, dilution. This applies to all shale companies, they effectively run out if space. That's why no shale stock warrants and can never support sky-high valuations.
Almost certain that BCEI will acquire new acreage in 2013, the share price is now strong and management don't like to gamble in case next year the stock price will be lower. Besides next year everyone will realise that the company will have to buy more acreage and that fact alone would severely depress the stock price so again it doesn't make sense to wait until 2014, better do it in 2013. Expect a deal to be anything from $300m to $500m in size.
With expected growth of 67% in 2013 and 58% in 2014, I agree with your multiple of 30 on EPS. The difference is that for such a rapidly growing company, I think it's more appropriate to use current year's estimate (EPS of $2.20 per share), not last year's EPS. Even using your method, we're talking fair value of $104 in 2015 (30 times 2014 estimate of $3.46). Hey, I'll take it!
in response to mkiu2006a. IMHO a PE of 30 isn't crazy high when growth is crazy high. over 100% production growth from 2011 to 2012 with no signs of slowing down. 26% production growth from 2012 Q3 to Q4. They appear to be on pace to blow away 2013 production guidance. I expect a 2013 exit rate of at least 22,000 Boe/d.
Pe of 30 is too high, like crazy high. All shale companies need to sell equity every few years to buy more land. BCEI has plenty money for all it's drilling in 2013 but in 2014 they need to sell shares (dilution) to buy more acreage because their years of drilling inventory will be too low. For these reasons you rarely get any of these stocks trading above a forward multiple of about 10 or 12.