Late-value investor extraordinaire
Benjamin Graham -- who believed folks could make money in the stock market if they bought companies for less than the present value of their cash flows, even in the event of bankruptcy -- became all the rage after the market tanked last week. Since then, analysts have been searching for bargains among the rubble -- including possible takeover targets. One such analyst is Ray Deacon, a senior analyst at energy-centric
brokerage firm Pritchard Capital Partners LLC, who wrote that he had
spotted three microcaps energy companies that fit that description.
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In a report Tuesday, Deacon identified: NGAS Resources Inc. (recent price of $2.86 per share), Rex Energy Corp. ($9.14) and Warren Resources Inc. ($6.17). He says each of these is trading at or below the value of its proved developed producing reserves using a Nymex natural gas price of $5.75 per thousand cubic feet and an oil price of $80 per barrel. Asuming no capital for development of any acreage or proved undeveloped reserves, he sees a floor value of $2.70, $8.30 and $3.85 per share, respectively.
While Deacon thinks the availability of capital could defer the development of each company's more risky properties, "We sincerely doubt that proved developed reserves are going to be worth less than the current valuations on each of these names," he wrote.
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NGAS is an Appalachian natural gas explorer based in Lexington, Ky.; it bought a pipeline in the area from Duke Energy Corp. a few years ago for $18 million. It's been mentioned as a takeover target before but has remained independent.
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Rex Energy, based in State College, Pa., also explores in the Appalachian Basin as well as in Illinois and the southwestern U.S. It went public last year at $11 per share in an offering led by KeyBanc Capital Markets Inc. But it's been looking to pare back: In early September it said it was putting its Texas and new Mexico properties on the block to fund ventures in the Marcellus shale region and the Illinois basin.
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And Warren Resources, based in New York City, went public in 2004 at $7.50 per share in another offering led by KeyBanc. It is one of the top developers of coalbed methane natural gas in the Rocky Mountains. It also has properties in the Los Angeles Basin of California as well as in Texas, New Mexico and North Dakota.
For larger oil and gas explorers with lots of cash sitting on their balance sheets, these companies might be tasty treats. -
Claire Poole
