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Hyperdynamics Corporation
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Time will tell who is right on the valuation!Lots of good comments. I just have a couple of points. First, the valuation that I put on the concession ($400 million) is the valuation on spud date. There is still uncertainty as to whether the well actually gets drilled. As a consequence, I do not expect a $400 million value today. I use a $2 number for barrels in the ground based on success. That is, if the well is a success and points to a 650 million barrel prospect, I believe $2 is a justifiable number to use (in a $60 oil world I would use something closer to $5.) Conoco's sale to Woodside is the basis for my use of $2 and this was in a much lower oil price environment. I am not trying to place a predrilling dollar value on potential barrels. If I was going to do that, I would use 31% of $2 or about $.62. If I thought of it this way, then I would just multiply 650 by $.62 to still get $400 million. It doesn't matter how you want to think of it, you still get $400 million. THe question is - how much of a discount will the market place on the expected value because of risk aversion. Well, that depends. In general, I place lots of small bets on prospects like HDYN and I am generally willing to pay about 10% less than the expected value. To each his own. Since stocks are priced at the margin, it's the marginal buyer that matters in the end. A $50 million dollar expected value makes no sense to me. The well would never get drilled if this was the case. I think some on the board are confusing the expected value with market value. Other than the $2 per barrel number I use (which some good points were made, though I think they missed the point as I explained above), the other inputs into the expected value calculation are from NSAI. You can also think of valuing HDYN using the Black/Scholes option pricing model. It isn't that hard, I just don't have the time this am (Maybe at a later date) I also strongly believe that I am being conservative in my expected value calculation at spud date. By April, I expect a much higher oil price. My guess is that we see $60. Also, on success, the odds of the other prospect having oil go way up. In a sense, I am using a low price per barrel and a low number of barrels on success as a way to adjust for risk aversion. I agree with the posters that believe Ray will likely raise enough money to drill more than one well. Today, HDY is worth $50 million. This value is for 80% of the concession today, which still incorporates a lot of risk about whether a well gets drilled. Does anybody actually believe that as we move toward drilling and the pieces fall into place that the value falls. Yes, the share price of HDYN will depend on the various financing arrangements, but the concession value will rise toward $400 or so. We will know in fairly short order who is right. If you really believe the concession will only be worth $50 million in front of drilling you should sell today. Risky |
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Msg # | Subject | Author | Recs | Date Posted |
124960 | Re: Time will tell who is right on the valuation! | HDYN_SH | 0 | 12/7/2016 2:39:11 PM |