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Dollarfigure > Post any company that your currently aware of that are waiting for drilling results > Cirrus Energy - BUY - $1.20 Target - undervalued View modes: 
  • Cirrus Energy - BUY - $1.20 Target - undervalued

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    2.5 stars

    Cirrus Energy Corporation - CYR -
    .54

    August 31, 2010


     

    Year end August 30,

     

    2009a

    2010e

     

    2011e

     

    Production

     

     

     

     

     

     

    Oil & Liquids

    Bbl/d

    97

    125

     

    88

     

    Natural Gas

    Mmcf/d

    0.0

    8.8

     

    13.6

     

    Total Production

    Boe/d

    97

    1,588

     

    2,357

     

    Oil & Liquids Weight

    %

    100%

    8%

     

    4%

     

    Production per Share

    Boe/Share

    0.00

    0.01

     

    0.01

     

     

    %

    -25%

    1257%

     

    45%

     

    Production per D.A. Share

    Boe/Share

    0.00

    3.57

    â

    0.03

     

     

    %

    -21%

    513345%  â

    -99% á

    Financials

     

     

     

     

     

     

    Cash Flow

    $Mm

    (2.6)

    9.4

     

    16.8

     

    Cash Flow Netback

    $/Boed

    (72.92)

    16.20

     

    19.56

     

    Cash Flow Per Diluted Share

    $/Share

    (0.04)

    0.11

     

    0.19

     

    % Change Year-Over-Year

    %

    N/A

    N/A

     

    75%

     

    Earnings

    $Mm

    (5.4)

    (24.8)

     

    (32.5)

     

    Earnings Per Diluted Share

    $/Share

    (0.08)

    (0.29)

     

    (0.37)

     

    % Change Year-Over-Year

    %

    N/A

    N/A

     

    N/A

     

    Capital Expenditures

    $Mm

    61.5

    44.4

    á

    15.0

    â

    Capex / Cash Flow

    %

     

    473% á

    89% â

    Free Cash Flow

    $Mm

    (64.1)

    (35.1) â

    1.8

    á

    Cash Use / Cash Flow

    %

     

    473% á

    89% â

    Net Debt

    $Mm

    (25.7)

    (24.9) á

    (32.7) â

    Bank Line

    $Mm

    30.0

    19.7

     

    19.7

     

    Bank Line Capacity Available

    $Mm

    55.7

    44.6

    â

    52.4

    â

    Entry Net Debt / Cash Flow

    x

    N/A

    N/A

     

    N/A

     

    Capital Structure

     

     

     

     

     

     

    Basic Shares

    Mm

    73.3

    88.2

     

    88.2

     

    Options

    Mm

    0.7

    0.0

     

    0.0

     

    Warrants

    Mm

    0.0

    0.0

     

    0.0

     

    Convertible Debentures

    Mm

    0.0

    0.0

     

    0.0

     

    Diluted Shares

    Mm

    74.0

    88.2

     

    88.2

     

    Fully Diluted Shares

    Mm

    78.7

    93.4

     

    93.4

     

    Market Cap.

    US$Mm

    162.8

    47.6

     

    46.3

     

    Enterprise Value

    US$Mm

    140.2

    23.4

     

    14.5

     

    Valuation

     

     

     

     

     

     

    Share Price

    $/Share

    2.50

    0.54

     

     

     

    Net Asset Value

    $/Share


    .66

    $1.21

    â

     

     

    Price / NAV

    %

     

    45%

     

     

     

    Price / Cash Flow

    x

    N/A

    5.0

     

    2.8

     

    Price / Earnings

    x

    N/A

    N/A

     

    N/A

     

    DACFM

    x

    N/A

    2.0

    á

    0.8

    â

    Target DACFM

    x

    N/A

    7.0

    á

    4.0

    â

    EV per Boe/d

    US$/Boed

    1,414,766

    13,500

    á

    5,759

    â

    Target EV per Boe/d

    US$/Boed

    541,461

    49,181

    á

    29,776

    â

    EV per Boe - Proved

    US$/Boe

    90.70

    14.97

    á

     

     

    EV per Boe - P + P

    US$/Boe

    15.23

    2.52

    á

     

     

    Pricing

     

     

     

     

     

     

    WTI

    US$/Bbl

    61.97

    81.52

     

    87.03

     

    Brent

    US$/Bbl

    62.61

    81.62

     

    86.78

     

    NYMEX

    US$/MmBtu

    4.16

    6.50

     

    7.00

     

    UK NBP

    US$/MmBtu

    4.77

    6.81

     

    7.38

     

    Exchange Rate

    US$ / CDN$

    0.88

    0.97

     

    0.97

     

    Oil & Liquids

    CDN$/Wellhead

    63.05

    73.89

     

    81.58

     

    Natural Gas

    CDN$/Wellhead

    N/A

    7.37

     

    7.58

     


    When Opportunity Knocks… Buy Cirrus Energy Stock

    ?   In our view, Cirrus Energy stock has been beaten up

     

    way too much.  While some of the negative sentiment

     

    is warranted, the current valuation is far too cheap

     

    to ignore.  This is an opportunity that will surely be

     

    missed by some, but one day, in hindsight, will have

     

    looked clearly obvious.

     

     

    ?   Cirrus currently has a market capitalization of ap-

     

    proximately CDN$48.0 MM, and with positive work-

     

    ing capital of approximately CDN$25.0 MM (
    .28 per

     

    share), a potential buyer could acquire Cirrus with

     

    a net cash outflow of  CDN$23.0

    MM.  Furthermore,

     

    fiscal 2011e cash flow is now estimated at

    CDN$16.8

     

    MM, and if cash flow is purely

    harvested, it implies

     

    that a potential acquirer would have a net cash out-

     

    flow position of approximately

    CDN$6.2

    MM after

     

    about 12 months.  Capital reinvestment would obvi-

     

    ously reduce the free cash flow

    generation;

    however,

     

    production is expected to remain relatively flat for

     

    most of fiscal 2011e from the current producing assets.

    ?

    The Company is presently trading at a fiscal 2010e cur-

     

    rent DACF multiple of 2.0x and a fiscal 2011e current

     

    DACF multiple of 0.8x.

     

     

     

    Cirrus Energy Valuation Sensitivity on Production and Reserves

     

    ? Cirrus’ working capital position is approximately CDN$25.0 MM (
    .28 per share), which implies that the Market is currently ascribing a value of approxi-mately CDN$22.7 MM (
    .26 per share) to the Com-pany’s current production and Proved plus Probable reserves.

     

    ?   Once working capital is backed out of the equation,

    Cirrus is trading at $9,584 per flowing Boe and/or $2.48/Boe on Proved plus Probable reserves. As such, we are of the opinion that there is considerable upside from the current trading price.

     

    ? For instance, at $30,000 per flowing Boe, Cirrus En-ergy has an implied value of $1.09 per share (102% premium to the current stock price). Recall that the Netherlands gas price remains very robust, versus the North American gas price, which is due to the gas price being partly weighted toward a six-month lag to the Brent reference oil price.


     

     

    Opinion: OUTPERFORM

     

     

     

     

     

     

     

     

    12 MONTH TARGET PRICE

     

     

     

    $1.20

     


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