December 17, 2009 - 11:05pm EST by
2009 2010
Price: 0.50 EPS $0.50 $0.50
Shares Out. (in M): 22 P/E 1.0x 1.0x
Market Cap (in $M): 11 P/FCF 1.0x 1.0x
Net Debt (in $M): 15 EBIT 20 20
TEV ($): 26 TEV/EBIT 2.0x 2.0x

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I think there is a great opportunity right now to buy into a tender offer and not lose any on the worst case, and potentially make a lot more on a good scenario.  On Dec 11, substantial shareholder Pacific International commenced a tender offer at 50 cents. If this succeeds, this is  one heck of a steal. 

In a nutshell, this is back of envelope analysis for PGRI.

For 10 million dollars, the buyer is buying a company with:

-over 2.4 million barrel equivalents of proved developed reserves, of which 2 million is producing. (see Reserve Report Summary for 2007 10K and 2008 10K)

-at least another 6 million barrel equivalents of proved undeveloped reserves 

-debt of 16 million offset by gains from hedges on at least 750,000 barrels at prices from 85 to 95 dollars per barrel



These wells are long-lived, low volume wells which produce about 2 to 3 barrels a day. In a year, some 400,000 barrel equivalents are produced.  Lifting cost is

about 21 $ a barrel.  At 70 dollar prices, this is an annual 20 million dollar gross margin dollars for each of the next for years to a strategic buyer. Clearly, the tenderer

is stealing this company.  They are opportunistically stealing this company right before the annual appraisal of the reserves come up.  Oil was at 35 at the end of 2008 and

now it is at 72.  



There is a market for these wells, and the proved developed wells can sell for at least 20 to 30 dollars a barrel, whereas the proved undeveloped wells can sell for $10 a barrel.

The sum of these will be about 100 million dollars. The tenderer is trying to buy the company from ignorant investors for 10 cents on the dollar.

I am hoping a club member who is somewhat experienced in activist investing will read this report,  can easily see the value and may actually do something, like urge the board to put the company up for sale.   Right now, the board has 10 days after Dec 11th to respond to the tender offer. It will be interesting to see what happens ...









The tender offer is the catalyst.  I am hoping an activist value investor who reads this might actually do something and urge the board to put the company up for sale before the tenderer steals the company.

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