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Warren Resources, Inc. Message Board

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  • jj_js_007 jj_js_007 Mar 9, 2009 7:04 PM Flag

    Q4 Earning estimates and why the stock is down

    Got my hands on Cannocord Adams and Wachovia analyst report that downgraded WRES. Here are the target price, Crude and NG model price, and their concerns:

    Cannocord Adams:
    Target Price = $0.89
    Crude/NG Model Prices = $45 and $5
    Concerns - Funding gaps due to negative cash flow in 2009 and capex of $22M. Decreased proven reserves limits WRES ability to borrow

    Target Price = $0.54
    Crude/NG Model Prices = $55 and $5.75
    Concerns - Poor crude fundamentals, covenant risks (the same as I mentioned in the previous email - EBITDAX/Interest ratio), and negative cash flow which will result in funding gaps

    1. Wachovia target price is lower though the crude/NG price assumptions is higher as the analyst did not take into account WRES hedging positions (Cannocord did)
    2. Both assumed that WRES will spend $22M on Capex.
    3. Cannocord has a better model. Crude price is now higher than assumptions.
    4. The spread between realized price and crude is $10-15 per barrel
    5. 2.5X higher cost structure than peers

    My take for WRES to move higher:
    1. Higher Crude Oil Prices - Above $55 per barrel for sustained period - This will solve many issues above. Crude is moving at the right direction now but I'm not sure if this is sustainable
    2. Renegotiate a better Credit Facility with Bankers - this is the biggest overhang on the stock now. They will only be violation of their convenants in Q3 2009(as the EBITDAX/interest ratio) is annualized and WRES earned a boatload of cash in Q2 and Q3 2008.
    3. Potential surprises with upside
    - Much Lower capex than $22M anticipated
    - Much lower cost structure (briefly confirmed by WRES during the con call)
    - Appproval of regulatory requirement in California

    Comments appreciated

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    • re: "Cannocord Adams: Target Price = $0.89"
      posted 9-Mar-09 07:04 pm by jj_js_007

      the 0.89 target was dead-on!!

      WRES retraced to 0.90 on Tu 7 April

      before climbing to 1.12 on Fri 10 April


      Q: WHAT DOES Cannocord Adams say NOW?

      huh? ?

      THANK YOU $IR!!

    • WRES is now back to 0.76, exactly where I bought it 2 weeks ago caving to fear and bailing out @ 0.51 the day it finally had a gap up open after the all-time low of 0.41 made at the close that day.

      Q: ANY THOUGHTs on WHY WRES has been RETRACING even though OIL is going HIGHER?

      Q: IS WRES LIKELY TO GO LOWER $TILL - like to 0.51 ?

      huh ? ?

      any thoughts by you $age$ would be appreciated.

      Thank you $ir$!

0.105-0.0250(-19.23%)Feb 9 3:59 PMEST