Author Topic: GXE - Gear Energy  (Read 44577 times)

cameronfen

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Re: GXE - Gear Energy
« Reply #110 on: July 24, 2018, 02:02:43 PM »
I have 30 companies in my spreadsheet (mostly horizontal wells producers) and GXE is the only one below 10 years. If you were to do it on PDP reserves, it is pretty low.

That is something that you guys should ask the CEO about IMO.

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If I may take the devil's advocate position, Gear is a really good operator, I think there performance and reputation of there executives demonstrates that.  If you trust that management will make good acquisitions then you dont want their PDP to have a long life.  The longer PDP is the more capital you have lying around earning no return.  The faster you can extract the oil out of the land the less time you have money tied up in capital, land, or management costs, without the assets being fully productive.  This is one reason their ROI is so high, they are very effective in extracting as much of their PDP as fast as possible.  The analogy here is with asset plays and compounded and almost looking for the opposite in P/TBV for one versus the other. 


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Re: GXE - Gear Energy
« Reply #111 on: July 25, 2018, 06:05:09 AM »
Yes they are a good operator and have done a good job at keeping costs low and made heavy oil wells look pretty attractive with sound drilling and fracking techniques.

However, reserves is the lifeblood of an O&G company. And even if it would be nice to extract everything instantly from PDP, you can't. So maybe I should have mentioned 1P instead of PDP.

On that point, 2P NAV is how you normally assess value. Before taking this acquisition into account, GXE trades at 0.83 times which is pretty high vs an average universe at around 0.4 to 0.5 times. And keep in mind that evaluators are using energy prices in future years at higher prices than today.

So if people are looking for a premium, it seems to be already trading there today.

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cameronfen

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Re: GXE - Gear Energy
« Reply #112 on: July 25, 2018, 09:25:47 AM »
Yes they are a good operator and have done a good job at keeping costs low and made heavy oil wells look pretty attractive with sound drilling and fracking techniques.

However, reserves is the lifeblood of an O&G company. And even if it would be nice to extract everything instantly from PDP, you can't. So maybe I should have mentioned 1P instead of PDP.

On that point, 2P NAV is how you normally assess value. Before taking this acquisition into account, GXE trades at 0.83 times which is pretty high vs an average universe at around 0.4 to 0.5 times. And keep in mind that evaluators are using energy prices in future years at higher prices than today.

So if people are looking for a premium, it seems to be already trading there today.

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My point is not that PDP isn't like a valid way to value and E&P, my point is you are too used to saying PDP is 3x EV this company is a good buy.  PDP is .8 of EV this is overvalued.  This is one way to buy E&P but not the only way.  Gear is a different kind of E&P.  One reason their PDP is so low, is because they have expertise in extracting oil from land really fast.  This results in high ROI.  If you want more PDP as a premium to flowing barrels or market cap, by necassisty you will lose the ROI that makes Gear attractive.  I don't think you can insist on a higher reserve life without significantly harming ROI.  Personally ROI is more what I look for. 

Pondside47

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Re: GXE - Gear Energy
« Reply #113 on: October 08, 2018, 05:54:12 AM »
http://gearenergy.com/wp-content/uploads/2018/10/Gear-Insider-Trading-Report-October-5-2018.pdf

Latest insider purchase record shows Ingram exercised option purchase at $1.17 a share, spending $136K CAD in total.

Pondside47

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Re: GXE - Gear Energy
« Reply #114 on: October 18, 2018, 07:10:33 AM »
I hate to bring up this topic but does anyone know if the borrowing base is determined by WTI or an actual price reflecting the WCS differential?

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Re: GXE - Gear Energy
« Reply #115 on: October 18, 2018, 07:40:48 AM »
It is based on the NPV of reserves so it will use WCS future estimated price for the heavy portion.

If you look at the Annual Information Form, the evaluator shows assumptions used.

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Pondside47

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Re: GXE - Gear Energy
« Reply #116 on: October 22, 2018, 04:37:32 PM »
It is based on the NPV of reserves so it will use WCS future estimated price for the heavy portion.

If you look at the Annual Information Form, the evaluator shows assumptions used.

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Thanks, but I don't think the AIF shows the assumption or details of the new debt facility after September acquisition. Any idea why Gear can't get rid of the semi-annual review of borrowing base? Is it more of a size issue?

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Re: GXE - Gear Energy
« Reply #117 on: October 23, 2018, 05:47:42 AM »
Amended credit facility would have taken into account reserves and cash flows acquired to determine new authorized amount.

The semi-annual review is standard procedure accross the industry especially for small to mid-cap players.

The bankers will review recent results with the company, cash flow, covenants and yes will likely calculate NPV using strip prices (actual). They also look at PDP NAV and 1P and not only 2P.

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influx

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Re: GXE - Gear Energy
« Reply #118 on: March 15, 2019, 09:46:40 PM »
Amended credit facility would have taken into account reserves and cash flows acquired to determine new authorized amount.

The semi-annual review is standard procedure accross the industry especially for small to mid-cap players.

The bankers will review recent results with the company, cash flow, covenants and yes will likely calculate NPV using strip prices (actual). They also look at PDP NAV and 1P and not only 2P.

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Not much interest here, eh? Is anyone invested in this one or PRQ?

tombgrt

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Re: GXE - Gear Energy
« Reply #119 on: March 16, 2019, 12:08:11 AM »
Trading at a ridiculous price here. Wcs pricing at 2018 highs, not impacted by line3 delays (in fact benefits because of temporary gov. restrictions). Should cut off at least 20m in debt by end of q2. Should consider buybacks too, especially once production up again.