TransGlobe Energy - speculative undervalued small cap oil company..

[Chigu]

Hey just an update, if you bought it at 7.50, it's currently trading at 9.01, nice 20% gain right there.

[cannadian]

Hey just an update, if you bought it at 7.50, it's currently trading at 9.01, nice 20% gain right there.

Hey, yeah that's true - looking at the chart it looks like the price could drop back down to the $7 region before I think it'll turn around. I'm not a technical guy but I have a background in maths so I'm just basing this on the pattern that I see...

But in the long-term I'm not all that interested in a 20% gain. If Egypt doesn't nationalize oil I strongly believe this company will be at $30+ a share within 1-3 years.

Basically the bet I've made is that in the worst case scenario I lose 100% of my initial investment: but if the bet goes the way I think it will I'll gain 300%.

Therefore as long as the odds of Egypt nationalizing oil in the next few years is below 67% then I've made a statistically intelligent bet - not factoring in other concerns anyways, but I don't think the odds of Egypt nationalizing oil are anywhere near 67% so there's a good cushion there.

To protect myself though I may put in stop losses for 50% of my shares once the stock doubles, so that I can get my initial capital out of the stock and be left with "free" shares haha

[Ethan]

Hey thanks man, I actually ended up purchasing some TGL a little while back at the $7.50 level. I know that oil is up over $100, but I've noticed (anecdotally at least) that many oil stocks seem to be undervalued right now relative to the oil price. Stocks like SU have barely increased compared to a 25% increase in oil prices...

Also, TransGlobe Energy just released their updated reserves, what do you think of this for 1 year? Apparently the market likes it, stocks up more than 4% on the news.

http://www.marketwire.com/press-rele...gl-1607268.htm



And that's not counting a couple of other acquisitions they made which are awaiting government approval.

Growth is a definitely a good thing. Did they have post the actual reserve report? Within the reserve report they net present value the oil reserves given the companies costs to obtain that oil, the length of time it will take to extract the oil and a forecast of future oil prices. If they haven't posted the actual reserve report they might discuss the results in their MD&A. It should give you a pretty good indication as to what their oil is worth (since oil in the ground is not an asset and does not affect the statements of a company).

Something I've been meaning to do for a while but haven't gotten around to is comparing the NPV of the P3 reserves to the market cap (less redundant assets) of several companies. Might provide some insight as to which companies are undervalued.

[cannadian]

Growth is a definitely a good thing. Did they have post the actual reserve report? Within the reserve report they net present value the oil reserves given the companies costs to obtain that oil, the length of time it will take to extract the oil and a forecast of future oil prices. If they haven't posted the actual reserve report they might discuss the results in their MD&A. It should give you a pretty good indication as to what their oil is worth (since oil in the ground is not an asset and does not affect the statements of a company).

Something I've been meaning to do for a while but haven't gotten around to is comparing the NPV of the P3 reserves to the market cap (less redundant assets) of several companies. Might provide some insight as to which companies are undervalued.

Check out post #10, they just released it: 3P reserves are up 43% in 2011 and the production replacement is 500%.

Is the netback the sum of the costs associated with producing/marketing the oil? If so, could I just take their total reserves (60 million barrels), subtract the 12.5% from the brent price that they get (I think this is correct according to their latest presentation), then subtract the total netback and you'd have the net value of the oil reserves?

What do you think of their 2011 performance by the way? Up 43% and 500% production replacement...

[Ethan]

Check out post #10, they just released it: 3P reserves are up 43% in 2011 and the production replacement is 500%.

Is the netback the sum of the costs associated with producing/marketing the oil? If so, could I just take their total reserves (60 million barrels), subtract the 12.5% from the brent price that they get (I think this is correct according to their latest presentation), then subtract the total netback and you'd have the net value of the oil reserves?
What do you think of their 2011 performance by the way? Up 43% and 500% production replacement...

Netback is revenue less drilling costs per barrel. In making the calculation you described, that assumes they can withdraw all reserves at todays costs and today's oil prices, which is not realistic. The full reserve report will estimate the net present value of the oil considering the companies production capacity and their estimates of price changes in both their costs and the price of oil over the time it will take to extract the oil.

[cannadian]

Netback is revenue less drilling costs per barrel. In making the calculation you described, that assumes they can withdraw all reserves at todays costs and today's oil prices, which is not realistic. The full reserve report will estimate the net present value of the oil considering the companies production capacity and their estimates of price changes in both their costs and the price of oil over the time it will take to extract the oil.

Ahh, thanks.

Here's the full report:

http://www.marketwire.com/press-rele...gl-1607268.htm

So 3P reserves are up 43%, with a production replacement of 507%. The 3P net present value discounted at 10% for 2011 year-end is $825 million versus $605 million year-end 2010.

Edit: what are your thoughts on the above?
Double Edit: keep in mind that this doesn't include a couple acquisitions, and that they still have plenty of capital to make more acquisitions in 2012.