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Wednesday, May 23, 2018 11:20:28 PM
Please take some time to verify my numbers and approach - Thanks All.
Assumptions:
- Outstanding Shares 60,000,000
- Current Market Price Per Barrel $50
- NetBack $20 Per Barrel (Conservative; goes up as market price rises)
- Israel Barrels Per Day 240,000 barrels
- 1 Bbbls recoverable in oil field
Good things are coming! Exciting moment to be a part of Zion Oil and Gas as we bring energy independence to Israel - Zion Oil and Gas Facebook Page
Israel currently requires 240,000 barrels of oil a day. 240,000 x 365 = 87,600,000 barrels of oil a year.
Until Zion exceeds 87,600,000 barrels a year, Zion will have a single dedicated customer that has already agreed to pay the current market value for every barrel produced.
Zion's primary mission statement is to make Israel Energy Independent. Until Zion can produce 87,600,000 barrels a year, Zion will not have fulfilled that mission.
Let's assume that Israel has been blessed and Zion is (after implementing their oil field development plan due June 30, 2018) able to supply all of their oil needs on a yearly basis for the next 10 years.
87,600,000 x 10 = 876,000,000 barrels of oil. Rounded off, Zion needs to discover a 1 Billion Barrel Reserve to supply Israel's oil needs for the next 10 years in order to make Israel Energy Independent.
We know that Zion has a single customer who has a demand of 87,600,000 barrels at market price. If Zion is able to fully supply this demand and is able to make a Netback of $20 per barrel, then Zion will have earnings of 87,600,000 x $20 = $1,752,000,000 per year.
How do I calculate the P/E ratio of a company?
The price-earnings ratio (P/E ratio) is a valuation measure that compares the level of stock prices to the level of corporate profits, providing investors with a sense of a stock’s value. To calculate a company’s P/E ratio, use the following formula:
P/E ratio = price per share ÷ earnings per share (EPS)
Where EPS = earnings ÷ total shares outstanding
If Zion is able to fully supply Israel's oil needs (as they seem to state they can in their Facebook Page) with a $20 NetBack, then Zion will have an EPS = $1,752,000,000 / 60,000,000 outstanding shares = $29.20 for the year.
if Zion carries a P/E ratio of 10
[Where P/E ratio = price per share ÷ earnings per share as defined above]
10 = PPS / $29.20
- OR -
PPS = 10 x $29.20 = $292.00
In other words, with a P/E Ratio of 10, and Zion is able to fully supply Israel's oil needs and they are able to make a $20 Netback with 60,000,000 outstanding shares, then Zion will command a share price of $292.00.
What is the average price-to-earnings ratio in the oil & gas drilling sector?
Oil and Gas Drilling P/E Ratios
As of January 2015, the average P/E ratio for the oil and gas drilling sector is 25.4.
PPS = 25.4 x $29.20 = $741.68
NOTE: As of today, there are 57,200,000 outstanding shares. I continue to use 60,000,000 outstanding shares. There is no telling how many shares will be outstanding post rights offering. The maximum number of outstanding shares post rights offering (not including the warrants) is 57,200,000 + (57,200,000 * .10 = 5,720,000) = 62,920,000.
If half of those rights are actually purchased, then 2,860,000 more shares or 60,060,000 shares ... ~60,000,000 outstanding shares.
According to the 10-Q:
As of April 30, 2018, Zion Oil & Gas, Inc. had outstanding 58,021,582 shares of common stock ...
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