Added Substantially To This Stock Today
This morning I received great news on my single largest investment. The news was so good I sold some other holdings and added to my investment as the market was asleep at the wheel. For those who don’t know the company I am talking about let’s do a quick mental exercise so you can try to figure out what you would pay for these assets.
An E&P business generating $350 million in annual revenue and $125-150 million in adjusted EBITDA with bad hedges rolling off in the next couple of quarters.
A contract drilling business with 21 rigs (16 super-spec) generating $21,000 per day in rates in a spot market north of $30,000 per day. Replacement cost of a super-spec rig is north of $20 million and these should generate $75-80 million in adjusted EBITDA at $30,000 per day.
51% interest in an unlevered midstream company with a preferred liquidation distribution of $353.7 million to the outside third party before the company receives any value.
In Q2 the company generated $134 million in revenues and $70 million in operating income (before hedges).
I would be curious to know what you would pay for these asset with just this information that I have provided. I would also be curious what you think the public market valuation of these assets are. The person who comes closest to the public market valuation will get a free subscription to Alpha Letter Pro for one month. Feel free to reply to this email with your answers.
For Alpha Letter Pro subscribers, let’s dive into the economics of this business so you can see why I really like it
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