CFW Valuation Method II...(From another board)
This approach is based on the commonly used PV-10 value. In their last presentation (November), Cano reported a PV-10 value of $2.15 billion. This is based on their latest reserve engineering report which I have no problem with. But the reserve report was issued June 30, 2008 which is the beginning of their fiscal year and they used a SEC price deck of $140/bbl oil. So as you can see, one should not use that. I reduced the oil price assumption to $42/bbl oil and came up with a PV-10 value of 644 million. So the question becomes how much does one discount the PV-10 value to arrive at what someone is willing to pay for the Company. This past summer, Cano sold their Pantwist oil field for $42.7 million. Its PV-10 value was 94.7 million. They essentially received 45% of the PV-10 value. Arguably, a moderately steep discount. But that is their internal benchmark. So applying that to the Company's current estimated PV-10 value puts the buyout worth of all their proven reserves at $289 million.
$289 million divided by 54.5 million shares = $5.30 share price
Comments: One can again argue that the company would sale at a higher price per share given they currently have only 7 million in debt and own considerable on the ground infrastructure (trucks, completion rigs, etc) and the 149 million barrels of probable and possible reserves have been assigned no value.
Final Thoughts
As you all know, I have initiated a position in Cano. I plan to add more at advantageous prices. There is considerable volatility in the share price. Trading volume averages about 500k daily. I have come to learn a great deal about Cano, so if you have any questions ask away. As evidenced by its current share price these past few weeks, it has probably found a bottom between 30 - 45 cents. I am hopeful it returns to this range again so I can scoop up more cheap shares, but the heavy inside buying lately has been bumping up the prices lately. Good luck to all.
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