Replies to post #11763 on Value Microcaps Junior Energy

[kozuh]

Thanks, farwest, re: Novus ...

Your analysis explains the very poor performance

of the stock over the past 6 months.

[Bobwins]

good points. Of course every junior has probably forecast higher oil prices than current so they are all going to be below forecast.

However I still think that the move up from 2745 to 4500boepd at 12/12 will improve all their ratios.

On the enterprise value per boepd, Novus ranks above the median valuation of 51K at 63K but would drop to 38K or below median valuation at year end.

In terms of debt, Novus ranks 12th best out of 51 juniors. They are not heavily indebted and are well below the median value of 1.6X annualized cashflow. Again, higher production is going to lower their potential debt ratios or at least keep it reasonable.

I also maintain that the factors you brought up did not cause the poor share performance. Novus has a similar chart to most juniors I have looked at.

I still like the high netback model. It gives them the best chance of being able to self fund their capex.

[cliffvb]

NVS - Where did you pull your after tax PPV10 values, farwest? I checked Novus' annual information form, and the PPV10 value before tax is $331 million. PPV10 After tax is shown at $281 million. NAV/share base on PPV10 after tax and after deducting debt is $1.39 and twice the current PPS.

Of course, one can argue that the PPV10 values assume above current mkt prices for oil, which is true for all oil producers now. Because NVS enjoys wider margins on cash flow net backs than most other producers, lower prices hurt them less than most. Also, keep in mind that NVS is also rapidly growing reserves. Their reserves of light and medium oil increased by 56% last year alone. I look for another nice jump when 2012 year end reserves are announced next year.

Novus is one of the cheapest when comparing Q1 cash flow to mkt cap and cash flow to net debt on the informative list of Juniors that Bobwins provided a link to recently (thanks Bob). NVS look like a good buy to me here.