Jones Energy is extremely overvalued and likely has no equity value. Gastar Forex interest rate differentials charts is extremely overvalued and likely has no equity value. Each quarter, I expect to publish new reports with updated quarterly information.
This is the seventh in a series of reports I am publishing. Summary Results Here is a summary of the results I will describe in this report. JONE and GST are completely overvalued, having too much debt relative to their asset bases. I do not have positions in any of the companies highlighted in this report.
Valuation Methodology In the report, all market value analyses apply May 4, 2018 stock prices. Financial and operating data are based on December 31, 2017 results and are adjusted, as appropriate, for transactions occurring after December 31, 2017. 75 natural gas at Henry Hub. As it relates to basis differentials, for 2018 estimates I apply current discount levels to different basins, but for DCF analysis I assume that sufficient infrastructure is built such that differentials normalize. P is worth the net present value of its projected cash flows from the extraction of a finite resource, in this case oil and gas. P can only produce a finite amount of oil and gas and thus a finite amount of cash flows. Ps to assess the quality and quantity of their oil and gas resources.
This report will walk you through the results of these five analyses for each company, enabling you to view relative and absolute valuations for each company. Ps’ commodity hedging position as it relates to an investment thesis, unlike many readers on Seeking Alpha. Hedges are typically in place for 12 months, and sometimes 24 months for some volumes. But, when you are valuing 20-30-40 years of production, whether 2018 is hedged or not is irrelevant to the NAV value. Wells that have already been drilled are represented by company proved developed reserves disclosures. Resource from land that can be drilled in the future must be calculated. Estimate what percentage of the resource extracted is oil vs.
P can produce from their existing asset base. I can also estimate how much of the resource will be oil vs NGLs vs nat gas. This distinction is very important because the value of oil, NGLs and nat gas are not the same. Chart 1 below shows the Proved Reserves and potential resource from future drilling sites for each company in this report. The chart also shows the aggregate amounts for the group of companies I follow that focus on a particular geography. Delaware basin group, so all of MTDR’s resource base is included under this column, even though some of the resource base is from the Eagle Ford and Haynesville shale basins. I value the Arkoma and China assets for their proved developed reserves only, thus there is no value attributed to future drilling sites.