I think we are also forgetting that RGNO is DEBT FREE, that is what we have been told.
Thanks for your post on a hypothetical evaluation of RGNO. I'm repeating it here for late comers who may have missed. I hope this is OK with you. I believe your work on this is most valuable!
Posted by: Millenium323
In reply to: pizzabuster1 who wrote msg# 13554 Date:5/17/2007 11:18:30 PM
Post #of 13761
We know that Regions has one well producing for sure. The WD #1 well which was pr'd in January came in at 273 mcf/day. So lets assume that Regions doesnt drill another well the whole year. And lets calculate what Regions market cap and price would be on the basis of that one well using a price/sales ratio of 9.
273 mcf/day = $700,000 in revenues per year for Regions.
(273 mcf/day x $7.00 natural gas = $1911 revenues per day x 365 days = $697,000 in revenues from one well, so round up to $700,000)
$700,000 in revenues x 9 (price to sales ratio) = $6.3 million market cap for the one well based on a price/sales ratio of 9.
So based on a price to sales of ratio of 9, Regions should have a $6.3 million market cap based on the one 273 mcf/day well.
$6.3 million mkt cap divided by 165 million shares outstanding = a share price of .038.
So on the basis of the one well, the WD #1 well which came in at 273 mcf/day and using a price to sales ratio of 9 that would give RGNO a market cap of $6.3 million. Which would equate to a .038 share price for just the one well.
Right now we are at .025.
So we are being priced on the basis of one well and are undervauled using a price/sales ratio of 9 even if this is the only well that is drilled the rest of the year.
But what about the other wells? Those arent even priced in at all.
That would be my pitch. A price/sales ratio of 9 is a bit high but there are plenty of other small cap oil stocks with debt and no growth that are trading at that multiple.
And as far as we know, Regions has no debt and should grow rapidly. Not to mention the fact that they will have numerous other wells in production now and if not now by years end.
If the fractures on the Gua #2 work that could bring in 5 mmcf/day. That would be about $10 million in additional revenues per year. $10 million in revenues x 9 (price/sales) would give Regions a $90 million market cap or about .50 per share. But I dont want to get to far ahead of myself. That is hypothetical. But I can say with almost certainty that they will definitely have more producing wells than the WD #1 this year and probably do already.
