Lochan, I hope it was a rhetoric question, and you don’t expect investment advice from me. Remember, it was speculation and, according to cynic, it was extremely premature? :) I own a few hundred thousand shares, and the more I deal with pinkies (NWOG is just one of them) the more I come to conclusion: if you are not ready to lower your cost basis (by trading and averaging down) – sell and move on! There is no guarantee that the merger will be completed (hopefully, it will!), but I still feel NWOG is a good place to be… especially at this price level.
Let’s do one more “premature” calculation – compare NWOG, SNG and unknown company (UNKN) we are looking to merge with. For SNG and UNKN I use a real dollar amount that NWOG is ready to pay for them: $45 mln and $80 mln. Reserves: C1-C3: NWOG = 36 (47 with Shalinsky) mln brls; SNG = 13 mln brls; UNKN = 19 mln brls; UNKN also owns 354 mln brls of D1 reserves – it’s 2 times more than we sold to MOL for $15.5 mln, so I give them additional $32 mln cash value. So, we have: SNG: 13 mln brls = $45 mln; UNKN: 19 mln brls = $80 mln - $32 mln = $48 mln; NWOG: 36 (47) mln brls = $???. Now, using my premature calculator for average cost of reserves that NWOG is ready to pay for SNG and UNKN - $3/brl (3.46 and 2.53), we will get the value for NWOG: $108 ($141) mln, which leads us to the PPS $0.17 ($0.22 – with Shalinsky). Note: I cut the prices down when it’s uncertain (SNG cost, NWOG reserves), I didn’t include the cost of additional businesses, which are significant for SNG, potentially significant for NWOG, and unknown for UNKN.
So, I am don’t have any opinion or recommendation, but my “premature” calculator thinks that NWOG is 4-5 times undervalued… at least.
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