By Ian Gilson, CFA
New Western Energy (OTC BB:) has announced the acquisition of 300 acres known as the Fields Lease. This is contiguous to the acres held in the B&W Ranch Lease and the Smith Lease. This area is well known for its history of oil production from several oil bearing strata. No acquisition costs were given.
The oil reserves per acre for B&W and for Smith are very close to each other so we have assumed that the Fields data will be the same. That means that the 300 acres would add close to 1.6 million bbl of oil to the reserves.
The market cap. to oil reserves ratio for New Western Energy is one of the lowest amongst the small oil companies, as shown in the valuation table of this report. Using the new reserve estimate and the median market valuation we have increased our price target from $1.30 to $1.40.
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