Petrobank: Clearly Undervalued

Jul. 1.10 | About: Petrobank Energy (PBEGF)

I spend a lot of time looking at different publicly traded securities. Every once in a while an undervalued opportunity is just very obvious.

I think Petrobank (OTCPK:PBEGF) is such an opportunity. Here is a quick summary and I will follow up in later posts with more detail.

Petrobank has four main assets

1) 110,240,000 shares of Petrobakken that currently trade for $21.50 and therefore have a market value of $2.37bil.

2) 65,720,000 shares of Petrominerales that currently trade for $24.52 and therefore have a market value of 1.66bil.

Now stop there for a second. Those two together equal $4.02bil. Petrobank's current market cap is 106,000,000 x 38 = 4.04bil. So in other words, you buy Petrobank today and you are paying for the value of Petrobank's Petrobakken and Petrominerales holdings - both of which are I think very undervalued on their own, so even that is a pretty good deal.

But what do you get for free ?

3) Petrobank's heavy oil division, which has a PV value of $3.3bil of 2P and contingent reserves (that is $31 per share).

4) Petrobank's THAI technology, which is patented and appears will allow for huge advances in amount of oil that can be recovered in heavy oil reserves. This the real wildcard as it has the potential to be worth billions. The nice part is that you pay nothing for it in the current share price.

So for $38 per Petrobank share today you get

1) $38 worth of Petrobakken and Petrominerales, both of which appear considerably undervalued.

2) $30 of heavy oil assets.

3) Wildcard THAI technology that could be worth more than the the other three parts combined.

I'll put together some valuation work on all four parts individually and provide them as completed

Disclosure: Author is long Petrobank and Petrobakken