Good news. There is massive good news coming about this company.
I actually called Huffman and discussed the PR issue he posted. Ray is a good guy, done lots of things right and I don't want to micromanage him.
But I am in total agreement with Huffman about the PR specialist. Ray isn't perfect, and since he's an oil man, he shouldn't be expected to be an expert in public relations. There's lots more revenue coming in, so Ray should spend a piece of that money on the PR firm to do the job right. It's critical to getting the P/E ratio where it ought to be, and well worth the investment. This company is growing and that means adjustments have to be made.
I hope both Edgar and Ray have read this. Edgar said he might have his representative push for it at the shareholders meeting.
I’ve always felt you gotta look at how something’s priced. If it’s priced to high, sell it, if it’s priced too low buy it.
In comparing oil companies there are a number of metrics that can be used. P/E ratio. Premium of market cap to net tangible worth. Book property value to PV=10, etc.
When I compare thissen to other comps like FPP, REN or KOG, it seems to get about half value of these other companies. It didn’t used to be that way, but after the share price slide that started in the spring of 2012, thissen has been valued quite a bit less than the others. Would you think the CEO had anything to do with the lack of respect in the share price?
If you look at that data, four of the five original wells that opened up around October 2011 are still producing solid levels:
Banks State 16-21 1H..0
Gunderson 15-22 1H…6639
I suspect this might be a good estimate for long term stabilized production rates. The total of these five wells was 32,360. Divide by five wells, and 31 days of production, you get 209 barrels per day.
Within two years, Earthstone has announced plans to put 95 wells into production in the Banks, including the wells already on line. With all of them online, and a 3-4% working interest at 209 BOPD, quarterly production from this field comes to 54,200 to 72,300 BOE. Earthstone also gets about 20,000 BOE from non Banks Field oil wells.
The quarter ending June 30, 2013 disclosed production of about 37,000 BOE. So looking forward, we could expect production rates of 100-150% more. Bobby has suggested this might not do much for earnings because the depletion rates are too high.
It's possible to get out of a thinly traded and highly hated stock like Planar, even if you hold 20K, 30K or even 50K shares that you want to dump. You have to show some patience because the volume swings quite a bit from day to day. While some days there is almost no trading, on others there will be some volume.
I'd suggest placing an order for about 5K at about the bid price. Make it an all or nothing order because you don't want some high frequency trading scooping up 300 shares of your bid then just walking the price down. If nobody bites try it again a couple days later. Sometimes the MM or other high frequency trade computer will scoop up the shares you've offered, even if there are no real buyers.
Also put in a volume email alert, so that when you get a higher volume day, you are alerted and get another chance to dump some shares. If you pay attention, and do it in increments, you should be able to unload your shares within a few weeks.
Most of the trading occurred in three blocks amounting to 2,800 shares, the lion share traded at 15.05/shr.
As soon as it was over, the bid jumped to 15.40 with no shares traded until the close. Then one share trades at 15.67 to set the final day's price.
Just remember, if they can cause an irregularity in a single day, they can have the same proportional impact over months.
Unless Ray has a health problem, he isn't ready to sell. His dream is finally being fulfilled. The plan to take this company to $50 million or more in revenue. We are still two or three years off. JMHO!
The poison pill is an interesting topic.
On the one hand, it was implemented some three years ago, so the impact should have been baked into the share price long ago. It wouldn’t explain the extreme price weakness in recent times.
But Earthstone share price is undervalued by almost any metric. If you look at EPS, price to book, PV-10 to fixed asset ratio, or whatever method of valuation you might prefer, ESTE share price comes in at about 50% of value when compared to KOG or FPP, etc Is the poison pill part or all of the reason for this under valuation?
If Ray decided in a few years to sell (after he’s completed his vision) we can only guess whether the real value of the shares might be unlocked.
One more comment about the poison pill. Earthstone has a P/E ratio around 10 when it should trade at a 20 ratio. But if the poison pill has repelled institutional investors, the lower P/E may be a long term reality.
So is it worth buying this company, knowing that the P/E ratio could be fixed, but Ray may not do what is necessary for a long time, 2, 5, 20 years….who knows how long.
Also, if eps goes to $3 or $5 in the next couple of years, will that 10 P/E ratio follow it?
There are so many potential catalysts for a share price change.
Just going from a P/E of 10 to 20 doubles the price. Maybe Earthstone could bring in some institutional interest without giving up the poison pill.
And what about production rates? With the Banks project, we should see a double within two years. More data will come out at the shareholders meeting this Wednesday.
Then we have oil prices. What if they go to $120 per barrel?
Nothing’s a sure bet. The economy could go bad, bringing oil prices down. Earthstone could keep increasing admin costs out of control. Depletion costs could be higher than originally thought. The EPA could put all sorts of costly regulations on Bakken production.
A very interesting set of issues.
Well we have higher trading volume. Thursday was the second highest trading day of the year and Friday ties for the third highest trading day of the year. And for a change, normal ratios are being reported to Finra, both in the proportion of Nasdaq published volume and the percentage short.
That tells me the trading has been more than the recent stuff that looked fictitious, like a computer trading to itself while it walked the price down.
There has clearly been a buyer, but there also has been a seller. On numerous occasions, I’ve seen 2,500 shares being offered at 16.00. Who knows how many shares they want to unload.
If Ray did decide to sell, I suspect we’d get full value for the 96 wells online or still planned for the Banks Field. That would be worth considerably more than $16 per share.
However, it doesn’t appear to me that Ray has lost his entrepreneurial spirit. He’s added all sorts of staff to find new developments. And look at the effort they’ve put into Nebraska. It doesn’t look like a company positioning itself for sale. JMO.
You've been a proponent of calling the company. They don't return phone calls very promptly. Their website for customer contact has errors in it, looks like after you submit a request, it fails. The investor email address that has been published on the site for more than a year is a bad link. It was bad last year when I emailed them, and it is still bad today. info@earthstoneenergy does not work!
Wouldn't it be nice if the company would just put the stockholder meeting presentation materials on the website in a timely fashion. It's still missing. Makes me wonder if there were some fireworks!
Despite that fact, we've almost hit your 17.35-17.37 target price.
The most incredible run I ever followed was LCAV from 2002 to 2005. It had a triple whammy. Bankrupted it’s competitor, then followed an uptick in the economy. The triple whammy came from higher prices charged to customers, opening more centers, and getting a higher p/e ration that went to 30. The price increase in stock was a 50 bagger, unfortunately I watched most of it.
We have a similar triple whammy here. More production, higher oil prices and a p/e ratio of 10 that is unrealistically low. Hang on to your shares.
I dont' want to suggest Earthstone would be a 50 bagger. But the triple whammy leverage is in place, and the potential two year pop is significant.
Again, 2.5 five times more production, potential of 15-20% higher oil prices and a p/e that could go from 10 to 20.. Wow.
That’s the projection for this fiscal year from page 31 of the shareholder meeting slides.
Considering that the first quarter already reported 36,967 BOE, it doesn’t look like they expect much growth for the rest of the fiscal year.
In the past two years there had been $23 million invested into CapEx. Now another $17 million planned for this year. With those meager year over year volume increases, it brings into question whether the payback is adequate for this investment.
Of course Earthstone has a partner, Statoil who you’d think did their own analysis and decided the payback was worth the money
I have a hunch the 155,000 might be a botched figure. If the company puts out $40 million in CapEX over three years, yet gets incremental production of only 40,000 to 50,000 BOE per year, there is no IRR of 50%. It would probably be negative. Also it doesn't make sense with all the new production reported in the Banks starting in July.
Nice to see they clarified the Working Interest in wells, also stating the NRI. I assume this is Net Realized Interest, and probably the one stat that matters.