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PRIMARY PETROLEUM Message Board

  • hott_pick hott_pick Oct 20, 2011 12:29 PM Flag

    Valuation after signed deal- $1.53 pps

    Interesting ! After the signed commitment PIE.V has $.72 cash per share- $15mil on hand + $41.5mil 1st install+ $7.5mil +$41mill 2nd install. --- total of $105 mil cash or $.72 cash per share.

    Based on Primary's website average land values in the SAB are $800 acre based on last years valuation. That makes Primary's 50% interest equal.145,000X$800 or $116 mil or $.81 per share.

    Total value of share price is$1.53 (.72+.81)

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    • $1.53 a share? Since we closed at .66 today we should see lots of buying in the morning.How could the professional oil people not see what you see-Sounds like you may be a pump and dump investor.

    • Where does the $5,000 per acre value for Primary's land that is thrown around here come from? The Rodman presentation in September says the highest vale ever paid has been $3300 per acre. Has there been something since September? Anyone know what Primary paid for land at the most recent State of Montana lease sale?

    • I don't think the first installment goes directly to PIE. It goes to the JV and be used for seismic and drilling. The partner will be paying $41million of the JV's expenses, of which PIE owns 67.5% of. So in all the JV partner is paying $7.5mm plus $27.625mm in PIE carry for 94,575 net acres. This assigns a value to the acreage of about $372/acre at this stage. That is right where our stock is.

      The second phase is only an option. Means nothing unless exercised.

      • 1 Reply to rutlando
      • The news release clearly states the JV "will pay $48.5 million to acquire a 32.5% working interest in Primary’s 291,000 net acres". They've already paid PIE $7.5M. The remaining $41.5M will also be paid to PIE to fund the first phase. Your $27.625M number is erroneous. Your 94,575 net acres number is correct. So effectively, the JV is paying $48M for control of 94,575 acres, which is about $513/acre. Of course, this is just the first phase, so to end the evaluation here would be short-sighted. IF the JV opts for a second phase, they will have ultimately paid $89.5M for 147,500 acres (50% of 295,000) which comes to $606.78/acre. But again, this is not the ultimate vale of PIE; only the cost to get through the second phase of their W Montana property. What revenues will be generated from oil in the ground once developed? And please don't discount PIE's other properties -- Long Coulee and Saturn -- as there is value there as well. An outright purchase of property is different than purchasing a working interest, so assigning a per acre value is misleading IMO.

    • Sframe, I always welcome to be corrected. The discussion is far more interesting. In anycase we have a tremendous opportunity here. and again today bought more shares than I should have. Thanks.

    • Oh my goodness. That's why we do this folks!!!

      Thanks, jackhiller, you are absolutely correct. And hott_pick, pardon my interruption. Go on about your business...

    • bingo!

    • your figures are completely wrong. Pie is not getting all that cash. They get $7.5MM and the rest goes into a drilling program that, only if successful, could lead to additional investment.

      By my calc the deal values PIE at about $0.70/share or just about where it is trading. If the wells to be drilled pan out then there might be some real value here but that is purely speculation.

      • 3 Replies to infr0mthecold
      • disappointed but farm out deal ensures that PIE will not have to raise capital to fund operations, and 3D and drilling are coming; my guess is until we get some data, the pps is raw value number and will rise or fall as surrounding acreage is derisked, sold and comps calculated for similar acreage. PIE will soon begin discounting news flow from 3D and prospect and if a well looks promising, animal spirits will flow to pps quickly; and there always could be a transforming event which will affect raw land values.

        The good news is the JV contract is done and we have our mysterious partner. PIE can move on to the next phase of exploring and monetizing the prospect. Given the current environment and news, the prospect of an outright sale for a hefty premium has been revalued. Transient players are exiting. Was an outright sale a serious consideration? I do believe that there remains a concern that PIE will pursue an add on acquisition which will dilute equity short term and it is a problem until other details are disclosed. It sucks short term but can be a tremendous opportunity for cheaper shares for those of us with higher cost basis. Owners under .50 may take their chances, sell and try to time an entry later. It's probably going to be a long boring winter with some of these microcap oilers. The best laid plans.....

      • So you discount the cash part of the deal. How else do you think Primary would have secured financing (cash) to proceed with exploration and drilling ? Issue more shares ? And your assumption that the cash will vanish with no cash flow from producing wells is a bad one based on the data. You have no oil experience. Do you ?

        Hey, produce your calculations and we can have a more meaningful discussion.

    • dws.redsonja@verizon.net dws.redsonja Oct 20, 2011 12:31 PM Flag

      Wonder if we will ever see $1.53? I would be happy to just get over a buck.

 
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