Value Microcaps Junior Energy

[farwest]

Digi - MMT

Your numbers assume U9 etc will be a success, which is far from certain - the well is targeting a new structure. While I think there is very good potential, the downside may be being "stuck" at ~14-15K bopd until the horizontals are drilled.

As such, rough numbers indicate MMT would be generating ~$20MM earnings per Q while cost recovery is in the current ~68% range and declining as capex spend slows. Perhaps $70MM annualized with ~$200MM cash flow.

On success, your numbers are optimistic - we can surely expect numbers to slide as once they hit ~21K, there isn't any more Agip export capacity available. Have to add more pump stations to increase capacity or build another p/l to Shell. That will take ~1 yr or so. Again, MMT will plateau with earnings around $100MM and cf around $250MM annualized until new export capacity is arranged.

MMT offers a play trading at a PE of ~2.5 on base "no growth" case, to PE of ~1.5x on success case. On cash flow basis, trading at 0.9x fwd cf to 0.7x.

Even accounting for Nigeria "risk", the numbers are hugely compelling.