Re: Respect for All Opinions: but I disagree on valuation at 10 times cashflow.
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Welcome to the Connacher Oil and Gas Hub on AGORACOM
Connacher is a growing exploration, development and production company with a focus on producing bitumen and expanding its in-situ oil sands projects located near Fort McMurray, Alberta
Message: Re: Respect for All Opinions: but I disagree on valuation at 10 times cashflow.
Oct 26, 2009 10:10PM
| Evaluation as suggested in my previous post | |||||||||
| M$ | ENCANA | ENCANA | ENCANA | ENCANA | ENCANA | ENCANA | CONNACHER | ||
| ENCANA | 2005 | 2006 | 2007 | 2008 | 06/2009 TTM | average | juin-09 | ||
| opcashfliow | 6731 | 7924 | 8429 | 8830 | 8885 | 222 | |||
| shares | 855 | 778 | 750 | 750 | 750 | 403 | |||
| debt | 6700 | 6577 | 8840 | 8755 | 8688 | 960 | |||
| share price (*) | 50 | 50 | 60 | 50 | 60 | 1 | |||
| EV | 49450 | 45477 | 53840 | 46255 | 53688 | 1363 | |||
| EV/cashflow | 7.3 | 5.7 | 6.4 | 5.2 | 6.0 | 6.2 | |||
| (*)share price average visually estimated on last quarter as anticipation of year result to be published 4 months later | |||||||||
| rough cashflow evaluation example of Connacher algar included Refinery neglected | |||||||||
| WTI | 70 | ||||||||
| sell price | 60 | ||||||||
| cashflow | 30 | ||||||||
| prod | 20000 | including oil& gas | |||||||
| days | 360 | ||||||||
| cashflow | 216 000 | kUS$ | |||||||
| In this cashflow estimate Connacher is well priced by the market because | |||||||||
| there is more risk and no discount in ratio wrt ENCANA | |||||||||
| I do not know what the cashflow will be You do your own cashflow estimate and you can compute your share price | |||||||||
| Remember you have the estimate from the market and that is 222 M$ on plateau production algar included | |||||||||
| Taking Encana is doing Connacher a favor | |||||||||
| Encana has lower cost of debt and capital | |||||||||
| Encana has lower risk due to better finantial security and better risk management | |||||||||
| Encana achieves economies of scale | |||||||||
| 2/3 of Encana is gas and the capex/cashflow for gas is better than in oilsands in situ | |||||||||
| The growth rate of a business is not dependant on size but on its freecashflow wrt capex for growth. (see wallmart) | |||||||||
| Encana oil and Connacher have stricly the same integrated economics except that scale favors ENCANA |
Regards,
Hubisan
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