TX Value Investor
Long/short equity, oil & gas

Warren Resources; A Rare Deep Value E&P Opportunity

E&P analysts, and investors, are borderline obsessed with production growth, catalysts and asset popularity. They rarely talk about an energy producer's proven value as a reason to invest. Production growth is nice - as long as it's economic growth. As are catalysts - it's nice to have reasons for the stock to go up, right? But how do you really value an energy company?

E&P 101

An energy company's value is essentially the value of its proven reserve cash flow stream (discounted, of course) plus the value of any unproven/undrilled/unexplored reserve potential. Most E&P companies trade at a healthy premium to their proved value because they usually have large undeveloped acreage positions and lots of unproven "upside." Companies that are

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