Bought some more this morning in the 1.55 (Canadian) range. Looks like the most undervalued junior Canadian oil and gas play. By my calculations the 4th quarter should be unbelieveable. With 16 cents cash flow per share reported, at $1.55 Rival is selling for 2.4 times cash flow. But by may calcs that cash flow could easily rise by 50 % + in forth quarter. With 1100 boe per day current end of quarter production and 100 behind pipe (and probably already on stream), 1200 boe versus average 3rd quarter production of 914, works out to a 31 % increase in production without any new well successes. They can possibly bring on an additional 100 to 200 boe by the time they next report. Prices for natural gas will also be up for the forth quarter (probably 10 % or more).
With operating costs falling per boe as production volume increases, netbacks are soaring. My guess is they will report 23 cents of cash flow per share in the forth quarter giving them a P/CF ratio of 1.68. But of even more importance is the reserves total. Both Diaz and Choice reported new reserve calculations (based primarily on increases in product prices) and both rose substantially on the news. I haven't seen anything from Rival recently on reserve valuations but higher model prices and their drilling successes should increase the value of their reserves very significantly (more than for Choice or Diaz) and thus the net asset value per share of those reserves will appreciate significantly.
Rival's price should rise significantly from here either because investors begin to realize how undervalued it is or because a big player will try to take it out. I should also add that temperatures are a lot colder today in Central Canada and expected to stay well below average for the next 10 days, that will help energy futures.
