ARD FY2007 Estimates Announced
Expect Revenues of $148 million, Net income of $72.37 million, and EPS of $4.15 on production of 1.85 million BOE in FY2007;
Today will mark the official release of ARD FY2007 estimates. The "official" estimates released today are in essence the 'realistic' projections of a previous calculation of ARD FY2007 estimates. Analysis indicates that ARD will have EPS of $4.15 in FY2007.
To arrive at FY2007 EPS of $4.15 the following was projected:
1. Production: 1.85 million BOE
2. Average Realized Price per BOE: $80
3. Average Net Profit Margin: 48.9%
4. Shares Outstanding: 17.43 million shares
The math is as follows:
Revenue:
1.85mm (BOE) X $80 (ave realized price)= $148 million
Net income:
$148mm (revenue) X .489 (net profit margin)=$72.37mm
EPS:
$72.37 mm(net income) /17.42 million shares = $4.15 EPS
Lets now compare our estimate with that of the Wallstreet consensus estimate. First lets meet the Wallstreet analysts. Everyone but Richard Moorman has a bio online. The current analysts covering ARD include:
1. Philip J. McPherson - C. K. Cooper & Co.
(Director of Research)
* Degree in Economics - East Carolina University
2. Barry Borak - Decision Economics, Inc.
(Sr. Analyst - Energy Sector)
* MBA - Boston College (1990)
* MS Petroleum Geology - Rennselaer Polytechnic Institute (1978)
* BA Geology and Mid-Eastern History/Archeology - Queens College, CUNY (1975)
3. Richard T. Moorman - Capital One Southcoast
(No Bio Available)
4. David M. Heikkinen - Pickering Energy Partners, Inc
(Managing Director)
* MBA - Tulane University
* BS - Mechanical Engineering - University of Missouri
5. Neal Dingmann - Pritchard Capital Partners
(Vice President and senior energy analyst)
* MBA - University of Minnesota
6. John J. Gerdes - Sun Trust Robinson Humphrey
(Analyst - Energy Exploration & Production)
* MBA - University of Chicago (1994)
* BS Petroleum Engineering - University of Tulsa (1986).
The above gentleman who get paid to cover ARD have impressive resumes for the most part. At least 4 of the 6 individuals have an MBA. At least 2 of the 6 have degrees in petroleum or geology. They all have many years of experience analyzing companies. The FY2007 consensus EPS estimate coming from these seemingly very intelligent people is $2.79. (The range is $2.47 to $3.13.) The consensus estimate is a result of 4 of the 6 individuals above submitting their earnings estimates when polled. Keep in mind that at least 2 of the 4 estimates (maybe all 4) are coming from guys with an MBA. These people are often referred to as "smart money." They comprise a small section of Mr.Market. Afterall, their analysis and target prices help many investors value ARD shares and is what leads many to buy or sell the shares. We all know that Mr. Market taken as a whole is often times "irrational" and "inefficient."
Based on my simple math there is no doubt in my mind that barring a collapse in oil prices (ain't gonna happen) ARD will earn $4.15 in FY2007. This is 48.7% higher than the current consensus analyst estimate of $2.79. ARD will earn 32.5% more than even the current high consensus estimate of $3.13.
If we lock in our best efforts guess on FY2007 EPS there is no doubt in my mind that I will be closer than that of the analysts.
Disclosure: I do not have an MBA or degree in business. I feel this is to my advantage as I am able to realize the big picture and don't over analyze. The other advantage I have is that I have a portfolio that allows me to devote a significant percentage of my time studying ARD. The analysts don't have this advantage. They must cover a much larger portfolio of companies. Another advantage I have is that I can make a projection that I feel is accurate without fear of going against Wallstreet sentiment (groupthink), being questioned and having to justify my estimate, being denied a bonus or even worse: losing my job for being wrong. In other words, these guys make EPS estimates and price targets with the goal of "not being wrong" instead of "trying to be correct." One need only look at the price target of some of these seemingly intelligent people. One guy has a price target of $40. Another $43. Based on the current price of $38 these target prices seem to reflect a high degree of analyst paralysis in light of the fact that ARD is growing production, revenues, net income, and earnings per share consistently and rapidly.
Based on the FY2007 EPS of $4.15 and a P/E multiple of 25 the target price for FY2007 is $103.75. The target price is expected to occur on or before the release of Q4 FY2007 results (expected release March 2008.)
$4.15 (EPS) X 25 (P/E) = $103.75
This represents an increase of 72.9% over the FY2006 target price of $60.
In conclusion, it is evident that growth in earnings at ARD will be phenomenal in the coming 6 quarters. Earnings growth will continue to drive share price higher. The drilling programs in 2006 and 2007 will also add significant proved reserves in absolute terms and also on a per share basis. This will serve to reinforce the rising valuation of ARD shares based on earnings. Expect analysts to revise their FY2007 EPS estimates and price targets higher with each passing quarter. Those who hold the shares long term (years) will realize significant financial reward.
Expect Revenues of $148 million, Net income of $72.37 million, and EPS of $4.15 on production of 1.85 million BOE in FY2007;
Today will mark the official release of ARD FY2007 estimates. The "official" estimates released today are in essence the 'realistic' projections of a previous calculation of ARD FY2007 estimates. Analysis indicates that ARD will have EPS of $4.15 in FY2007.
To arrive at FY2007 EPS of $4.15 the following was projected:
1. Production: 1.85 million BOE
2. Average Realized Price per BOE: $80
3. Average Net Profit Margin: 48.9%
4. Shares Outstanding: 17.43 million shares
The math is as follows:
Revenue:
1.85mm (BOE) X $80 (ave realized price)= $148 million
Net income:
$148mm (revenue) X .489 (net profit margin)=$72.37mm
EPS:
$72.37 mm(net income) /17.42 million shares = $4.15 EPS
Lets now compare our estimate with that of the Wallstreet consensus estimate. First lets meet the Wallstreet analysts. Everyone but Richard Moorman has a bio online. The current analysts covering ARD include:
1. Philip J. McPherson - C. K. Cooper & Co.
(Director of Research)
* Degree in Economics - East Carolina University
2. Barry Borak - Decision Economics, Inc.
(Sr. Analyst - Energy Sector)
* MBA - Boston College (1990)
* MS Petroleum Geology - Rennselaer Polytechnic Institute (1978)
* BA Geology and Mid-Eastern History/Archeology - Queens College, CUNY (1975)
3. Richard T. Moorman - Capital One Southcoast
(No Bio Available)
4. David M. Heikkinen - Pickering Energy Partners, Inc
(Managing Director)
* MBA - Tulane University
* BS - Mechanical Engineering - University of Missouri
5. Neal Dingmann - Pritchard Capital Partners
(Vice President and senior energy analyst)
* MBA - University of Minnesota
6. John J. Gerdes - Sun Trust Robinson Humphrey
(Analyst - Energy Exploration & Production)
* MBA - University of Chicago (1994)
* BS Petroleum Engineering - University of Tulsa (1986).
The above gentleman who get paid to cover ARD have impressive resumes for the most part. At least 4 of the 6 individuals have an MBA. At least 2 of the 6 have degrees in petroleum or geology. They all have many years of experience analyzing companies. The FY2007 consensus EPS estimate coming from these seemingly very intelligent people is $2.79. (The range is $2.47 to $3.13.) The consensus estimate is a result of 4 of the 6 individuals above submitting their earnings estimates when polled. Keep in mind that at least 2 of the 4 estimates (maybe all 4) are coming from guys with an MBA. These people are often referred to as "smart money." They comprise a small section of Mr.Market. Afterall, their analysis and target prices help many investors value ARD shares and is what leads many to buy or sell the shares. We all know that Mr. Market taken as a whole is often times "irrational" and "inefficient."
Based on my simple math there is no doubt in my mind that barring a collapse in oil prices (ain't gonna happen) ARD will earn $4.15 in FY2007. This is 48.7% higher than the current consensus analyst estimate of $2.79. ARD will earn 32.5% more than even the current high consensus estimate of $3.13.
If we lock in our best efforts guess on FY2007 EPS there is no doubt in my mind that I will be closer than that of the analysts.
Disclosure: I do not have an MBA or degree in business. I feel this is to my advantage as I am able to realize the big picture and don't over analyze. The other advantage I have is that I have a portfolio that allows me to devote a significant percentage of my time studying ARD. The analysts don't have this advantage. They must cover a much larger portfolio of companies. Another advantage I have is that I can make a projection that I feel is accurate without fear of going against Wallstreet sentiment (groupthink), being questioned and having to justify my estimate, being denied a bonus or even worse: losing my job for being wrong. In other words, these guys make EPS estimates and price targets with the goal of "not being wrong" instead of "trying to be correct." One need only look at the price target of some of these seemingly intelligent people. One guy has a price target of $40. Another $43. Based on the current price of $38 these target prices seem to reflect a high degree of analyst paralysis in light of the fact that ARD is growing production, revenues, net income, and earnings per share consistently and rapidly.
Based on the FY2007 EPS of $4.15 and a P/E multiple of 25 the target price for FY2007 is $103.75. The target price is expected to occur on or before the release of Q4 FY2007 results (expected release March 2008.)
$4.15 (EPS) X 25 (P/E) = $103.75
This represents an increase of 72.9% over the FY2006 target price of $60.
In conclusion, it is evident that growth in earnings at ARD will be phenomenal in the coming 6 quarters. Earnings growth will continue to drive share price higher. The drilling programs in 2006 and 2007 will also add significant proved reserves in absolute terms and also on a per share basis. This will serve to reinforce the rising valuation of ARD shares based on earnings. Expect analysts to revise their FY2007 EPS estimates and price targets higher with each passing quarter. Those who hold the shares long term (years) will realize significant financial reward.
posted by -Aztec- at 8:46 AM
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