Canadian Oil & Gas Stocks

Kelt Exploration Ltd Valuation – August 2018 $TSE-KEL

Company Profile (excerpt from Reuters): Kelt Exploration Ltd. is an oil and gas company based in Calgary, Alberta. The Company is focused on the exploration, development and production of crude oil and natural gas resources, primarily in west central Alberta and northeastern British Columbia. The Company’s land holdings are located in Inga/Fireweed/Stoddart, British Columbia; Grande Prairie (including Pouce Coupe, Progress, Spirit River and La Glace), Alberta; Karr, Alberta, and Grande Cache, Alberta. The Company holds interests in approximately 136,000 gross acres in Greater Grande Cache area, which is located approximately 30 kilometers north of Grande Cache, Alberta. It also has interests in over 89,760 gross acres in Karr area. The Company has interests in over 394,190 acres in Grande Prairie area. It holds interests in over 88,120 gross acres in Inga area. The Company holds interests in over 50,550 acres in Fireweed area. The Company also has interests in approximately 53,040 gross acres in Stoddart area.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TSE-KEL – August 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,795,979,281 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.48 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -1133.33% Fail
6. Moderate PEmg Ratio PEmg < 20 -56.26 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.04 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.48 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -3.90 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$0.17
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$2.48
MG Value based on 0% Growth -$1.46
Market Implied Growth Rate -32.38%
Current Price $9.64
% of Intrinsic Value N/A

Kelt Exploration Ltd does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability or growth over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $0.01 in 2014 to an estimated $-0.17 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Kelt Exploration Ltd revealed the company was trading above its Graham Number of $3.42. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -56.26, which was below the industry average of 59.52, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-2.38.

Kelt Exploration Ltd scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$2.38
Graham Number $3.42
PEmg -56.26
Current Ratio 0.48
PB Ratio 2.04
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $47,738,000
Total Current Liabilities $98,566,000
Long-Term Debt $198,202,000
Total Assets $1,337,688,000
Intangible Assets $0
Total Liabilities $480,669,000
Shares Outstanding (Diluted Average) 181,706,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.11
Dec2017 -$0.13
Dec2016 -$0.29
Dec2015 -$0.91
Dec2014 $0.09
Dec2013 -$0.07

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.17
Dec2017 -$0.30
Dec2016 -$0.33
Dec2015 -$0.29
Dec2014 $0.01
Dec2013 -$0.02

Recommended Reading:

Other ModernGraham posts about the company

Kelt Exploration Ltd Valuation – Initial Coverage $TSE:KEL

Other ModernGraham posts about related companies

Canadian Natural Resources Ltd Valuation – August 2018 $TSE:CNQ
SM Energy Co Valuation – August 2018 $SM
Surge Energy Inc Valuation – July 2018 $TSE:SGY
CIRCOR International Inc Valuation – July 2018 $CIR
SEACOR Holdings Inc Valuation – July 2018 $CKH
Inter Pipeline Ltd Valuation – July 2018 $TSE:IPL
World Fuel Services Corp Valuation – July 2018 $INT
Shawcor Ltd Valuation – July 2018 $TSE-SCL
Imperial Oil Ltd Valuation – July 2018 $IMO
CES Energy Solutions Corp – July 2018 $TSE-CEU

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Back To Top