Universal Energy Corp (UVSE)

[BMiles]

Posted by: brodyterrier Date: Friday, July 18, 2008 1:18:46 PM
In reply to: BMiles who wrote msg# 10820 Post # of 11304

I am definately not an accountant and not really an oilman although I have been involved as a non operating working interest owner in a lot of wells and have a good feel for how oil deals are put together.

If reserves are 136 BCF then that equates to 136,000,000 MCF. Using an average price of $10 per MCF would equal a total value of $1,360,000,000. If you assume a NRI of 9.375% UVSE's share would be $127,500,000. However that is the value of the production over the life of the wells which would be several years. In order to assign an asset value to UVSE you would have to calculate the net present value of a revenue stream to be received over a period of years. There are a lot of variables in such a calculation and I don't have the expertise of calculate it.

Having said that, $127,500,000 is an incredible amouth of revenue for an early stage E&P comapny and to be profitable at this stage of the game is almost unheard of.

The real issue for me is what share price could be expected based on the anticipated revenuues for this company. If we could get a handle on what the EPS would be that could be equated to a PE multiple.

My favorite example is the smaller companies in the Haynesville Shale play. Stocks seem to trade as much on future expectations as fundamentals. HK is trading at a PE of 411. If you look at smaller players like GDP. It has lost 25 million dollars for each of the past several quarters but has traded in a 52 week range of 16 to 86. An even smaller player QBIK which is an OTCBB stock has ranged from around a dollar to $5.25 in the past year or so and has not made a dime in the 6 or 7 years it has been around.

If Loan Oak is successful and USVE can bring even 7 or 8 % of this $127,500,000 to the bottom line in the first year that would equate to earnings of about 4 cents per share disregarding any other income they may have based on 250,000,000 shares outstanding. Even a 10 PE ration would translate to a PPS of 40 cents.

If someone did not have a positon in this stock the potential upside seems to greatly excess the downside.

However, i have a current positon of around 400,000 shares at an average of 8 cents. I have the resources to average down to close to the present PPS but if I do so and Loan Oak is not successful then I expect to see the PPS to drop to 1 cent or less at least in the short to medium term resulting in a significant loss. Therefore I have to make a decision as to which way to go.

Even though there are a lot of posts here that I wonder why someone would take the time to write or read there is a lot of intellignt discussion as well so I intend to monitor this board more closely in the fuure.

Just my opinion.

Brody