Zion Oil & Gas Inc (ZNOG)

[KyOil]

mrbojangle, here is a good compare: Apache with ticker APA.

https://investor.apacorp.com/news-releases/news-release-details/apa-corporation-announces-fourth-quarter-and-full-year-2021

They are about the size necessary to fulfill Zion's vision and are independent.
900 million barrels in reserves
386k bopd
$14 billion market cap
6.14 PE
1.2% dividend
2,250 employees

The most straight forward way to estimate Zion's pps is to the use APA's ratio of $14 b cap / 900 mill reserves = $15 market value per barrel of oil. This is direct compare with a similar sized company that is an independent oil producer (not integrated like Chevron)

So, if Zion finds a 500 million reserve, then a reasonable pps would be something like:
500 m barrels x $15 per barrel / 800 m shares = $9.375 pps

Going the PE route to estimate pps for a 500 million reserve is more difficult. First start with the netback of say $20 per barrel or whatever the estimate is. Then assume the 500 million barrels is produced over 5 years. So, that's 100 million barrels per year (274k/day). With a netback (profit) of $20 per barrel, then that is a annual profit of: 100 million barrels in a year x $20 per barrel = $2 billion earnings (profit) per year. Apply the PE of 6.14 to the annual earnings and a market value of $12.3 billion is obtained. Divide by the share count of 800 million and $15 per share is obtained. When using a PE its imperative to estimate annual earnings first. It is apples and oranges to multiply the reserve netback by a PE.

There are two down falls in comparing to APA:
1. APA reserves are PROVEN and Zion's will be PROBABLE when first announced. There is a large discount from PROVEN to PROBABLE, perhaps as much as 50%.
2. Most independents keep at least 5 years of reserves out in front of their production. So, this whole analysis assumes that Zion is finding new reserves every year to match production. Its no easy task to find 100 million barrel reserves EVERY year in a small country.

When both of these down falls become top of mind in the investing community, then the pps will drop. Initially I would not be surprised if the pps jumps to $5 or $10 upon announcement of a 500 million find (scales with size of the find), then drop to $2.

With a 100 million reservoir announcement, the pps scales down from the 500 mill case; jump to $1 or $2, then drop to about where it is now.

Notice I used 800 million shares outstanding. That provides about 300 million shares for capital to build out the field.