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MMEX .583 Valuation & $30 Million NOL Tax Shelter

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stervc Member Level  Monday, 03/13/17 03:42:44 PM
Re: drog68 post# 6645
Post # of 17353 
MMEX .583 Valuation & $30 Million NOL Tax Shelter

Following the 8-K filed by MMEX below, I will show how the ”potential” valuation for MMEX is approximately .583 per share based on the info from the 8-K below:
Item 1.01 Entry into a Material Definitive Agreement

On March 4, 2017, MMEX Resources Corporation (the “Company”) entered into an agreement with Maple Resources Corporation (“Maple”), a related party, to acquire all of Maple’s right, title and interest (the “Rights”) in plans to build a $450 million, 50,000 barrels per day capacity crude oil refinery in Pecos County, Texas (the “ Refinery Transaction” or the “Project”). Pursuant to the Refinery Transaction, the Company agreed to acquire the Rights in exchange for the issuance of 7,000,000,000 new common shares (the “Purchased Shares”).

Completion of the Project is subject to the receipt of required governmental permits and completion of required debt and equity financing. The Company has previously incurred continuous losses from operations, has an accumulated deficit of approximately $30 million

Based on the math from the 8-K info above, I have derived how it is fair to presume .583 per share as a fair valuation for MMEX:

50,000 Barrels Per Day x 365 Days Per Year = 18,250,000 Barrels Per Year

The link below confirms that the current retail price for a barrel of oil is $48.00+ per barrel. I will presume the price of oil to be $40.00 per barrel for the purpose of this post:

18,250,000 Barrels Per Year x $40 Per Barrel Retail Price = $730,000,000 Revenues

The link below confirms a Price to Earnings (P/E) Ratio of 39.94 for 2017 for companies existing within the Oil/Gas (Production and Exploration) Industry:

The P/E Ratio is the variable that is multiplied by the Earnings Per Share (EPS) to get where a stock should fundamentally trade compared to the other stocks within its Industry or Sector. The links below should help to better understand the P/E Ratio logic:

Because of the $30,000,000 listed as an Accumulated Deficit, this means that it is going to be officially used as a Tax Shelter as a Net Operating Loss (NOL). This will greatly enhance the profitability of MMEX. I was going to presume a Net Profit Margin of 10%, but with adding this $30 Million NOL, this makes it very fair to presume at least a Net Profit Margin of 20% for the MMEX operations. I will explain more about the NOL as a Tax Shelter after I explain the share price valuation below.

$730,000,000 Revenues x .20 Net Profit Margin = $146,000,000 Net Income

I believe to air on the side of caution, let’s presume a worst case scenario for the Outstanding Shares (OS) being maxed out to be 10 Billion shares:

Net Income ÷ Outstanding Shares (OS) = EPS
$146,000,000 Net Income ÷ 10,000,000,000 (OS) = .0146 EPS

EPS x P/E Ratio = MMEX Share Price Valuation
.0146 EPS x 39.94 P/E Ratio = .583 per share

Please, anyone with an issue with any of the variables I used above to derive the MMEX valuation, simply use the ”Substitution Property” to replace that variable and I am still confident that… bottom line… it will still reflect that MMEX is worth quite a few pennies.

MMEX $30,000,000 NOL Tax Shelter

MMEX has stated to have $30,000,000 listed on their Balance Sheet as an Accumulated Deficit within their 8-K fled below which is also no confirmed within its recently filed 10-Q filing below:

This greatly justifies the company’s position as a huge merger candidate. The MMEX public entity is very attractive for a huge positive Net Income generating company wanting to merge into MMEX which is why this deal is being completed. This is because of the $30,000,000 being available to be used as a 2 year carry back and 20 year carry forward Tax Net Operating Loss (NOL) to reduce the taxable income for a merging company’s future tax years. That’s an average of roughly $1.5 Million in the reduction of its taxable income per year over a 20 year time frame or $3 Million in the reduction of its taxable income per year over a 10 year time frame. This is basically like adding $1.5 or $3 Million or so back into the MMEX amount of Net Income generated. Merging this project into MMEX would be better versus registering as a new entity or IPO-ing because you won’t have such huge ”tax shelter” otherwise as a huge tax benefit already existing.

Below are some good videos to listen and understand the logic regarding Net Operating Losses (NOL):

Net Operating Losses (NOLs) on the 3 Financial Statements


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