Valuing Oil & Gas Stocks
Posted: Tuesday Jan 18 3:15:43PM 2005
One indicator I use, I guess because I work in the O&G industry and it always gets mentioned in merger & aquisition discussions, is $/producing boe. This is included on the QIS reports and is simply market cap (share price x shares o/s) divided by daily production in boe. Of course, a company can produce like crazy and not replace reserves, so one has to consider reserve life & continued ability to replace reserves (ie drilling success) when using this factor.
Posted: Tuesday Jan 18 10:42:03AM 2005
Good questions here. I am always trying to learn more about what drives a stocks price as well. Unfortunately there never seems to be just any one thing (that would be too obvious and too easy I guess). The minimum combination of factors that I like to look at are earnings growth, earnings yield, EPS, debt load and quality of management. If these numbers are steadily improving then so usually does share price. This seems to hold true in all sectors including oil and gas. As of late I am also beginning to realize that PR and media exposure (the madness of crowds??) helps a lot in driving share prices. This is often a negleted area in the small cap sector and I wish that companies would pay a little more attention to it. In this technological age even such a simple thing as an upto date web site is often neglected (ILI being a case in point). All that said and done, it is the challenge that keeps us sharp and gives us a reason to get up in the morning!