Data Table Description
Just like in the previous analogy we have downloaded the corporate reserve reports, extracted the value of the company at the 10% discount rate(just a standard measure meaning that this is the value of the company if we discount the future cash flow to the present at a 10% interest rate). The 10% NPV number is a good one to use since we have a company that is taking on many risks in it’s day to day business, including the risk of falling commodity prices. If the industry environment was more stable, than a lower discount rate would be appropriate.
With the value of the different pieces of the company in had we also look at the latest quarterly financial reports to determine the net debt of the company and the latest quarterly cash flow. With the net deb we can calculate the net asset value by taking the respective reserve categories and subtracting the net debt. If the real estate company in the previous example(Real Estate Analogy) has net debt of $5.0 million then the NAV would be $12.81 – 5.0 million = $7.81 million. If we were to buy the company and we could pay $5.0 million then that would be a good deal, conversely paying $12.0 million may result in the loss of our capital. So with that in hand here is the description. Data Table
PDP
PDP reserve value – Net Debt The existing producing assets of the company less the net debt.
Proved Value(1P)
PDP Value + Other Value + PDNP(proven developed non producing) + PUD(Proven undeveloped) Sometimes in industry and analyst reports this is designated the 1P Value of the company. One caution though is that most of industry does not take off the net debt, which is just wrong.
Proved + Probable(2P)
Proven Value + Probable Value – Sometimes in industry or analyst reports this is designated as the 2P Value, again most of the time net debt is not subtracted from this value, but here it is.
Net Debt/ Cash Flow
Net debt is the Long term debt + the current liabilities – the current assets. Usually this is broken out by the reporting company on their quarterly report in an easy to read format(gold stars to the companies that are clear about their net debt).
Cash flow is more of a grey designation on some quarterly reports but should be just the cash the company generates, in this case in the preceding 12 months. Some companies use operating cash flow, ignoring interest payments and G&A, some report cash flow with and without hedging results and the companies that have operations outside of Canada include some form of currency fluctuations in these numbers.
Upside to Proved(1P)
This is just the Proved value divided by the most recent share price used expressed as a percentage, positive numbers mean the share price could rise to equal the proved value, negative numbers the share price could fall to equal the proved value.
Upside to Proved + Probable(2P)
This is the Proved + Probable value divided by the most recent share price, just like the upside to proved a positive number indicates the shares could rise to equal this value, a negative number the share price could drop to equal this number.