Value Microcap DD

[james54188]

HNR DD


http://www.investorvillage.com/smbd.asp?mb=1250&mn=272&pt=msg&mid=2459839

Here's what I understand the value prop to be:

First off, HNR's proven reserves on an NPV basis after royalty, but pretax are worth $616 million. (45 mil bbls * $48/price per bbl * 29% disc rate =$616 mil)

After tax that's $308 million which divided by 37.5 mil shares outstanding (before buyback) is worth a share value of $8.22. Add the cash on balance sheet and due to HNR and you get approx what the stock is currently trading for.

HNR's website talks about it here: http://www.shareholder.com/harvestnr/ReleaseDetail.cfm?ReleaseID=249864
And SEC reports are here:
http://sec.freeedgar.com/displayHTML.asp?ID=4665231

The huge upside in HNR is in the recovery rate on the reserves.

Harvest's original SMU fields had original total oil in place of 1.1 billion bbls of oil. Oil recovered and currently included in proven reserves is 26% of that amount or 291 mil barrels, up from an original recovery estimate of 8%.

Petrodelta, with the addition of the 3 new fields, has total original oil in place of 4.9 billion barrels or 4.5 times that of the original SMU fields. If you apply a 26% recovery rate to that oil, you get:

Description ------------------------------ Petrodelta
Total original oil in place ---------- 4,900,000,000
Recovery rate -------------------------------- 26%
Ultimate oil to be recovered---------1,274,000,000
HNR interest---------------------------------------0.32
# bbls of oil----------------------------------407,680,000
Price of VZ oil ------------------------------ 48
Value of oil produced ---------------- 19,568,640,000
Discount rate- NPV ----------------------- 0.29
NPV of reserves net to HNR ---------- 5,674,905,600
Tax ------------------------------------------------ 50%
Value of reserves net to HNR------- 2,837,452,800
Shares before buyback --------------- 37,500,000
HNR value per share -------------------- $ 75.67


I am no oil analyst and I'm working 100% from my own read of Harvests reporting, and I may be off a bit here or there, but I think it's pretty obvious there is huge upside in the stock...

RUF