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  • rcsam rcsam Sep 28, 2011 1:40 PM Flag

    insanely cheap

    The Sept presentation was affirming. Production up in Sept and on track for year end projections. The company has a lot of debt but very manageable. Of the $2 billion, $750 million is a 3% convert not due until 2016. The other debt is well covered. The netback to Petro is one of the highest in the industry at $60/bbl. Cash flow is $600 million/yr at $83 oil covering interest 6x. At this price, it is selling at NPV of reserves and all the land is free. The drilling locations are development so low risk and at current recovery rates are worth $32/shr.

    I think there is some concern that year end production numbers will not be reached. It does not matter. There is fear the dividend will be cut. It does not matter. Cash is gushing in and they are spending it on completion and infield drilling. The ROI on new locations is 65% based on the presentations. Cardium is a huge field with a long life. They also have prime locations in Montana Bakken. There land is worth over $1 billion in Montana based on recent transactions.

    This is great buying opportunity. The stock could easily be $20 in a year and the chance of it going lower is small. I fear Petrobank will try to buy in the balance of the stock and we will get zilch for it. So far, no effort just buying their own shares.

    BMO rated it underperform today so big dumping by their clients. If this is not making the bottom I do not what would.


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