AUT - Aurora Oil and Gas

[Ramblin Round]

Pioneer isn't crying for anyone. Their chalk wells in DeWitt will blow your mind when they are announced.

 

[condog]

Eagleford continues to set a cracking pace as the hottest unconventional play int he US. Setting new records for rigs, production flows and acerage prices.

Article dated 5th May

PLS sees the Eagle Ford play possibly passing the Marcellus and Haynesville for market activity through the rest of the year as companies jockey for position in the U.S. hottest unconventional play including opportunities in the "oil window." As an example, Talisman announced earlier this morning that it would acquire Common Resources' Eagle Ford assets for $360 million. This number calculates out to record metrics of $9,700 per acre and/or $30,000 per flowing MCFe

From : http://quotes.stocknod.com/stocknod/?ChannelID=3197&GUID=12947945&Page=MediaViewer
Disclaimer: I and ASF take no responsibility for content or safety of external links.

 

[Ramblin Round]

Here's Petrohawk's take on Eagle Ford. It is definintely reflective in the DeWitt County horizon of where they want to put their money too.

Eagle Ford Shale

Petrohawk has expanded its position in the Eagle Ford trend, where it is currently operating 8 rigs, to include three distinct areas of development: Hawkville, Black Hawk and Red Hawk. Each of these areas has different production profiles which all provide the opportunity for large scale development. The Company forecasts that with the current capital budget allocation in 2010, and a modest increase in drilling capital allocated to the Eagle Ford Shale in 2011, oil and natural gas liquids production is expected to increase significantly to approximately 15%-20% of total production by the end of 2011. Currently, oil and natural gas liquids production is approximately 3% of Petrohawk's total production.

The Hawkville Field, in La Salle and McMullen Counties, Texas, is expected to continue its role as the core commercial production area for natural gas and liquids. With approximately 25 wells on production, the bounds of Hawkville Field production are expanding to the east and north. The initial well in the Joint Venture with Swift Energy was successfully completed during the first quarter. The Bracken JV #1H initially tested at a rate of 9.0 Mmcfe/d on a 24/64" choke. The well's production rate was subsequently restricted temporarily, awaiting the installation of further production facilities, to a choke setting of 17/64" at a rate of 6.4 Mmcfe/d with a stable flowing casing pressure ("FCP") of 5500#. The second well in the Joint Venture is waiting on completion and the third well is drilling.

The third well in the Black Hawk prospect in Dewitt County, Texas, the Kickendahl #1H, was recently completed at a rate of 3.1 Mmcf/d and 745 Bc/d on a 12/64" choke with 7,550# flowing casing pressure. This result is very similar to the first two wells that have been completed, even though the well was still cleaning up and the rate was increasing at the time of the report. The fourth well to be completed will be the Krause #2H. Its lateral length is approximately 5900', and it is the first well in the prospect with an extended lateral length. Its completion is scheduled for mid-May.

In the Red Hawk prospect in Zavala County, Texas, the Company is drilling ahead on its second well, the Mustang Ranch "C" #1H. It is anticipated that the well will be completed within the next 30 days.

To date, Hawk Field Services has completed construction of approximately 65 miles of primarily 16" pipe in the Eagle Ford Shale. An additional 100 miles of gas gathering line, 15 miles of condensate gathering line and 60 miles of liquids gathering lines are budgeted for construction during the remainder of 2010. The Company also expects to increase treating capacity in the Hawkville Field area by installing another 150 gallons per minute (GPM) amine plant, increasing Petrohawk's total treating capacity to 250 GPM in the Eagle Ford Shale. An additional 12,500 barrels of condensate stabilization capacity are scheduled to be added to plant sites in both the Black Hawk and Hawkville areas during 2010.

 

[condog]

Given the calamity hitting markets this week ive re-done my calculations.

Based on the 30 day flows provided for Weston and Kennedy. Morgan ive estimated 1200bc/d + 1.2MMgas, Rancho T1 T2 T3 and Ip at 750 bc/d & 2mmcfg/d. Kowalick unfixed, or fixed at 600bc and 3.3MM.

Ive given declines of 30% in year 1 and to 50% in year 2.
Ive estimated new well costs at $6M and allowed an average of 20% of each well cost.

Ive calculated new mcap on a PE of 8 for end of year net earnings.
using $65 for condensate and $4per 1000cfGas.

Gives me end of 2010 valuation of 88c without Kowalick fixed or 95c with Kowalick fixed. Note does not take into account delay for revenue after paying hilcorp. But also allows no future value applied. Just an unrisked
multiple of earnings model.

End of next Fyr = $2.62 with Kowalick fixed, 30% decline in 2010 wells and estimates of 600boc and 1mmcfg for 15 wells at $6M and paying 20% of well costs. PE of 8

End of 2011/2012 fyr = $5.66 with 25 new wells in 2012, 50% decline of 2010 wells, 30% decline of 2011 wells. 2012 wells at 600bc and 1mmcfg at $6M each paying 20% of cost. PE of 8.

By that stage AUt would have 50 of its 80-130 wells.

Please note this is amatuer calcs, may contain erros or misjudgments. Do not base decisions on them. Seek expert advice. But i welcome feedback etc. Of course some are going to say thats to high, this is too low, you cant use PE etc etc. Its just one model and its the simplest to explain in here.

For those that want to take it a step further you could give future wells a value and risk factor. Ie i could assume 1 in 10 wells will fail completely, and give each future well 3% of its value, 5% 2 years out and 10% the year before etc. But it gets messy to explain. Using thise types of calcs the figures come out much higher becasue theres more then 10 wells the following years. So the simplest way is to just bump up the PE to 10 or 12 to allow for growth.

So with PE of 10 i get 1.09 at end of current Fy, 1.18 with Kowalick fixed
3.28 at end of next FY, and 7.07 the following. This has no allowance for failures other then conservative PE

PE of 12 1.31, 1.42 with Kowalick, 3.93, 8.49

Average PE's run at around 14-18 for this sector with many bigger companies up around 21+
As i said some will say you cant use PE. But you can if you estimate earnings, there just an error factor you need to know exists.

imo its realistic to expect higher Pe's due to growth, but dont get carried away there is still risk. Many US peers operate into the 30's but under a lower tax regime.

As i said may contain errors. So cross check DYOR and seek advice. Do not rely on these, but i hope they help.

 

[condog]

This is just the calcs of the first yr in case anyone wants to cross check the method, bag it or add to it. Theres then a spread sheet of each with the subsequent wells added and declines applied.

 

[condog]

Heres the 2011 calcs or 2nd financial yr

Heres the 2012 calcs or 3rd financial yr


DYOR, may contain errors, seek expert advice.

 

[McCoy Pauley]

Thanks for posting a screenshot of your calcs, condog. I've always wondered how you do your calcs. Now I have an idea and can (hopefully) apply it myself.

Not currently in AUT but reading this thread has piqued my interest.

 

[condog]

Thanks for posting a screenshot of your calcs, condog. I've always wondered how you do your calcs. Now I have an idea and can (hopefully) apply it myself.

Not currently in AUT but reading this thread has piqued my interest.

Your welcome Pauly

Ive got ROe, NPV, NROE, spreadsheets that are ten times ass complicated as this one, but at the end of the day these ones come out close and they are fast, easy and simple to explain. Im not reccomending AUt, because id be reckless to, but its definitely worth a very very good look at.

Somewhere in this thread theres a post by agent with a reference to the Pattersons valuation which they have since upgraded to 93c and which will again be upgraded in July or earlier. Well worrth a read, even though i think its extremely conservative.

 

[condog]

One reason to ALWAYS cross check and DYOR. I found an error in the decline rates. In column I. I have fixed and adjusted it.

My new valuations for my personal use. They do not allow for well failure or calcualte growth. PE is used as the tool to allow for both those. Figures based on those mentioned above in previous post. 30% declin in yr 2, 50% decline in yr 3 for each well. Condensate $65, gas $4 per 1000 cfg. (close enough). Based on AUT presntation forward plans of 10 wells in 2010, 15 in 2011, 25 in 2012. well cost $6M due to speed and economies, AUT share of well cost calculated at average of 20%. Revenues see spreadsheet.



2011 calculations corrected



2012 calculations corrected



Please Please Do YOur Own Research, cross check and take responsibility for your actions. Do not rely on these calculations. May contain errors and do not take your circumstances or risk tolerance into account. Diclaimer - i hold.

 

[McCoy Pauley]

Cheers condog. I saw agentm's post on Patersons Securities' target price for AUT. I do recall that Patersons had a target price of about $1.33 or thereabouts on CSS.

 

[condog]

Cheers condog. I saw agentm's post on Patersons Securities' target price for AUT. I do recall that Patersons had a target price of about $1.33 or thereabouts on CSS.

Thats pretty close to my own im targeting $1.37 at end of calandar 2010, if the current drilling program is finished and not accellerated.

 

[Slipperz]

I'm finding myself in agreeance with a lot of your posts Condog.
One point I would argue on your forecasting is the price of gas.
I think you have been to conservative at $4 per mmsf.
Even after this weeks correction we are still looking at $5 per mmsf by years end and that's a 25% premium on current market prices.

http://www.cmegroup.com/trading/energy/natural-gas/natural-gas.html

 

[condog]

One point I would argue on your forecasting is the price of gas.
I think you have been to conservative at $4 per mmsf.
Even after this weeks correction we are still looking at $5 per mmsf by years end and that's a 25% premium on current market prices.

Im not in disagreeance, I always model for myself a figure i think can be achieved. I dont like pesimistic modelling, but i do like to be surprised to the upside.

Just for you i will plug in $5 and post results - its not a massive difference.
You will also note i think ive been pretty conservative on the condensate and extremely conservative on the gas flows



If i jam those 2011 and 2012 wells up to 600 condensate and 2000Kcfgpd we get 2011 and 2012

PE 10 $3.70 and $7.91
PE 12 $4.44 and $9.49

 

[Slipperz]

Thanks Condog.

Indeed also the flow rates and levels of condensate are very conservative given our most recent drilling success.

Over time as our acreages are proved up even further I think our location in the condensate window of the play is going to prove very lucrative.

A few more good results like this weeks and eventually the market will have to start factoring in the value of our position.

Just ran the comparison of this weeks trading and we have slightly underperformed the XJO due to the last minute sell off on Friday, but overall it hasn't been too drastic.

Glad I moved out of AZZ, but even at current prices I am happy to stay onboard with AUT.

 

[condog]

Changing well costs to $8M lowers 2012 by about 45-50c
2011 by about 20 c and 2010 by about 10c for any given calc.

 

[estseon]

Condog,

have you allowed for royalties (29/30% off the gross) and for tax, both local US state tax, US federal tax and Aus tax, if not fully credit relieved (probably)?

For back of the envelope calculations, I have assumed net/net to be about 40% of gross revenues - that allows for some revenue expenditure costs. Initially, the jvps will have tax losses to absorb, then amortisation of well costs, but these will be mopped up quite quickly.

I also assume (as many people seem to do) an averaged 330 day year to allow for shut down for maintenance etc - probably conservative.

On the plus side, AUT's drilling projection could be completely under-stated. The EME and ADI capital raisings are very recent and the 10 well projection for 2010 is out of the window. Neither EME nor ADI needed capital for 2010 for S/L on the old projections.

 

[rcm617]

Great set of spreadsheets condog, however I think you're being a bit optimistic with the condensate figures.
If you look at kennedy and weston and work out the condensate figures for the 30 to 60 day production it works out at 367 b/d for kennedy and 324 for weston according to my calculations, despite their IPs of 1130 and 414 respectively. I suspect despite high IP for condensates for morgan and kennedy they will all settle down around the 300 to maybe high 400 for the likes of morgan by the second month of production. Bit hard to tell on two wells at this stage,but it is probably better to be a bit more conservative, especially as these are only figures for two months and we dont know the rate of decline further into the year.
Of course I could be completely wrong.

 

[McCoy Pauley]

Thats pretty close to my own im targeting $1.37 at end of calandar 2010, if the current drilling program is finished and not accellerated.

I was referring to a price target on a completely different company, condog - Clean Seas Tuna (CSS).

 

[Slipperz]

Been doing a bit of research on US natural gas in general with a view to getting a good working knowledge of our market.

The report below is a weekly release that seems to have all the relevant information on the weeks trading.

http://tonto.eia.doe.gov/oog/info/ngw/ngupdate.asp

More relevant research data here

http://tonto.eia.doe.gov/dnav/ng/ng_pub_top.asp

 

[condog]

esteon and Rem , thats why i like this method, you can just say oh no thats too optimistic or pesimistic and pick a higher Pe to suit your outlook.

Esteon, i havent factored in taxes and rowyalities, i assumed wed be tax free for at least the firts year or two. Can easily do so if you wish, just pick a point and rate.

See attached for ammended valuations below. Note this are getting pretty conservative in terms of taxes and costs, so you need to factor in growth in your PE's imo.

Note assumed no tax this year due to loss offsets.


Please Please Do YOur Own Research, cross check and take responsibility for your actions. Do not rely on these calculations. May contain errors and do not take your circumstances or risk tolerance into account. Diclaimer - i hold.