AUT - Aurora Oil and Gas

[condog]

From Euroz

Comments Price Target: $4.50/sh
We view the key drivers to AUT’s relative outperformance in the oil and gas sector a function of consistency of results as well as a demonstration of
growth to reserves and production, that will drive increasing cashfl ows from this Q.
With application of reservoir management (via restricted choke) to the last 10 wells, production has consistently averaged 750-1000boepd (using 6:1
gas to oil conversion) for the fi rst 60 days.
We understand that restricted choke settings are maintaining tubing head pressures of several thousand psi: This has very positive implications for
deliverability in terms of low rates of decline and high cumulative production.
As we have seen through our analysis of well data to date, decline rates, for wells drilled since Morgan-1H, are consistently sub-10% month on month
over the fi rst 60-90 days of well life.
As per the table, AUT’s wells are clearly on course to produce an average of 200kbboe/well (of which av.60% liquids) in the fi rst year.
The results are generally exceeding our forecasts; as demonstrated by the ‘AVERAGE’ results generated from the AUT wells to date.
At US$90/bbl oil, US$50/bbl LPG and US$4.5/mcf commodity prices this would equate to ~US$14m in gross revenues versus average well capex (tie-in)
circa US$8m/well. This continues to suggest an average well payback of circa 6mnths.
This highlights the compelling economics of AUT’s acreage as well as alludes to the leverage to commodity price.
With new offtake infrastructure currently undergoing commissioning, we expect the Operator to relax choke settings to be more in-line with Rancho
Grande. This could have an uplift of up to 50% on gross production in our view.
Confi rmation of movement in reserves will also help consolidate current market valuation. 1P has more than doubled to 10.7mmboe and 2P has
increased to 22mmboe.
Notably the oil component has gone up 4mmboe (8%) on 3P numbers.
On this basis we expect the 83mmboe of 3P reserves to continue to migrate into 2P and ultimately 1P over the next 12-18mnths under the current drilling
programme.
We anticipate that the 3P is likely to grow to +100mmboe with subsequent reserve statements as Netherland & Sewell (independent reserves certifi ers)
acknowledge out-performance of AUT’s wells to their type-curves.
Additionally, we note industry trends for this part of the Eagle Ford are lobbying hard for future reserves to consider tighter well spacing for fi eld
development as well as higher EURs refl ective of improved completion techniques: This will have signifi cant bearing on reserves to the upside.
We have recently adjusted our model to factor-in LPG production (current av. 100bbls/mmscf) and impacts to revenues assuming a long term US$50/
bbl LPG price.
Our resulting valuation increases to $4.02/sh, though we are already seeing further upside noting that AUT’s wells are averaging higher than forecast oil
to gas ratios. We set a $4.50/sh price target.
Investment Case
On-going operational results continue to build on the quality argument for AUT’s Sugarkane Field interests. Sub-10% month-on-month decline rates
are exceptional and deliverability from these wells is underpinning best-in-play pay-backs. Consistency in results gives us a high degree of confi dence
for the economics of full-fi eld development as well as growth to all reserves categories.
We set a price target of $4.50/sh as we believe our assumptions remain conservative given the out-performance of AUT’s wells to date.
Furthermore, we expect as AUT’s acreage demonstrates profi tability within the next 18mnths, AUT will earn a premium noting that its growth to reserves,
production and cashfl ow is not compromised by geological risk and that fi eld production decline is some 10yrs away.
Euroz Securities declares that it has acted as underwriter to and/or arranged an equity issue in and/or provided corporate advice to Aurora
Oil & Gas Ltd during the last year. Euroz Securities has received a fee for these services.

WOW a 50% upgrade on target over the current sp. If this doenst trigger some buying and new highs i will be amazed.

 

[trader8888]

trader8888
"Mir could you please foward me a copy as well, cheers."
where to

Whoops, ausgolfballs@bigpond.com

Cheers

 

[Magic Man]

Hmmm I was always comfortable holding this with a support level of 2.90 which has been tested 3 times. Today thats been broken all the way to 2.81 and the volume is disgraceful to say the least, Im still hugely keen on the stock but if it closes below 2.90 are the technical s getting the better of it??

Dont gte me wrong still like the stock just confused as to why the down trend.

 

[estseon]

Hmmm I was always comfortable holding this with a support level of 2.90 which has been tested 3 times. Today thats been broken all the way to 2.81 and the volume is disgraceful to say the least, Im still hugely keen on the stock but if it closes below 2.90 are the technical s getting the better of it??

Dont gte me wrong still like the stock just confused as to why the down trend.

Could be that some investors were waiting for the reserves report to topslice and re-invest: the share has had a thundering rise in quite a short time. The NCAI report is disappointing in that it seems to be stuck in a regulated and possibly outdated valuation basis - the 80 acre spacing, for instance. When the general consensus of the oil companies in the area is that denser drilling is a more appropriate assumption, the valuation departs from reality.

TXN suggested that the assumptions made result in about 5% recovery. In other shale fields they are looking at a much higher figure (in one article posted on HC a figure of 40%, or 8x the figure assumed, was being suggested). This is the result of technology but the regulation bashers have yet to catch up.

So, nothing has happened apart from a delay before the true value of the reserves can be officially recognised. Whilst there is argument for standardised valuation criteria for valuations for comparisons, it merely means that all relevant companies are undervalued to the same extent.

Both brokers increased their target prices. They're close to the company and Euroz, I believe, has made a site visit and were pretty impressed with the Hilcorp operation.

I'd guess that it's rebalancing of portfolios delayed until after the reserves valuation. In Canada, it might be speculators closing out after being stampeded in by CMG's initial story of a 10-fold increase in reserves in time. But how much time? Not before NCAI can tick the relevant boxes. Hilcorp is drilling to secure leases not to tick boxes. Securing the leases must take priority.

 

[Sdajii]

Wow! Spectacular buying opportunity if I ever saw one! Looks to me like a lot of people were waiting for the reserves upgrade (which was great) before selling. The upgrade came out, the traders sold, the market overall is looking poor over the last couple of days so people are spooked, and the price is low.

Price target of $4.50 and a share price under $2.90! On some stocks that may not be too meaningful, but on this one it's awesome! People selling out under $3 will be kicking themselves for not waiting a few weeks to get $3.20+, maybe $3.50, or $3.50-$4 if they wanted to wait a few months.

Unfortunately I don't have a lot of spare money at the moment but I've topped up this morning with what I could afford. Not much, but oh well!

Good luck to all buyers/holders

 

[jetblack]

Not wishing to cause a stir but just going by T/A there is a good chance AUT will test around the $2.50 level, comming off that double top, the support was around that $2.90 level , maybe today confirms this. Only my opinion.

 

[Assasin]

Magic Man,
I think you may have to put these in a drawer for 2 months while things settle down, Libya, oil price, etc.
The thing I'm looking at today is what else would you put money into that is safer than AUT. With recent upgrading of reserves, huge derisking, higher valuations and with so many wells to begin.
Very difficult to diversify when there's so much action in the EFS.
Good Luck

Holding: AUT, SEA, EKA, TXN, HOG, MHM

 

[zzaaxxss3401]

Hmmm plenty of sellers at the moment. Perhaps Thursday is the new Friday - with a public holiday on Monday, are people thinking of taking a long-long-weekend and taking profits today?

Might just have to buy another small parcel.

 

[shanti]

Activating many a stop loss triggers on the way must be compounding the situation

 

[Sdajii]

Activating many a stop loss triggers on the way must be compounding the situation

Absolutely! I think that's a fair chunk of the explanation Look at the chart, look what happens every time AUT has a dip, look at the fundamentals, including the recent news, opening in Canada, etc etc. Awesome stuff!

 

[AngusSmart]

Activating many a stop loss triggers on the way must be compounding the situation

one of my small holdings got hit..

 

[dashwood]

this isn't about aut only have to construct a 'watchlist' to see all non-aussi based oil is fairing badly. I imagine this couldn't have been a worse time to try and get good news releases across!

 

[BrightGreenGlow]

this isn't about aut only have to construct a 'watchlist' to see all non-aussi based oil is fairing badly. I imagine this couldn't have been a worse time to try and get good news releases across!

Now down to $2.77....amazing hey... there must be another story we aren't hearing?? Oil is going great and AUT is going great fundamentally... why people rushing off? 6 times more volume of sellers. :S Really weird. When should we plunge more money in?

 

[WRONG'UN]

Forget the good fundamentals, today the sp is in the hands of the stop losses below the multi-touch support level of 2.90. It's such an obvious place to put a stop loss, I wouldn't be surprised if the sp rebounds when enough people have been booted out of their holding - a failed breakdown. We shall see!

 

[Magic Man]

Does anyone foresee the general market falling to 4500? we are in a big down trend at the moment? This may effect the stock?

Condog do you still have you $7+ price target come christmas?

 

[bbker]

Forget the good fundamentals, today the sp is in the hands of the stop losses below the multi-touch support level of 2.90. It's such an obvious place to put a stop loss, I wouldn't be surprised if the sp rebounds when enough people have been booted out of their holding - a failed breakdown. We shall see!

Would it be reasonable to set a buy at $2.50 or is that ridiculous? (no dickheadery intended)

Yes I think the stop-loss triggers which also contributes to panic selling, which in turn restarts the whole downward spiral

 

[nioka]

Now down to $2.77....amazing hey... there must be another story we aren't hearing?? Oil is going great and AUT is going great fundamentally... why people rushing off? 6 times more volume of sellers. :S Really weird. When should we plunge more money in?

AUT, along with the stockmarket in general, is caught up in the overall grand plan that is designed to transfer wealth from the general savings of the average "joe" to a few who insist that they alone have the right to wealth. Part of that plan is to encourage you to borrow from them for investment purposes then use your stop loss, which you are told is necessary to protect your savings, to buy from you at a discounted price and sell back to you again when they decide to pump the stock market again.

How to avoid the trap;

1. Dont borrow to invest.
2. Dont set a stop loss.
3. Don't think you can outsmart the system without resolve.
4. If the fundamentals are sound. Hold.
5. Lemming rushes are there from time to time and usually are buying opportunities but only when used in conjunction with 1 to 4.

 

[zzaaxxss3401]

How to avoid the trap;

1. Dont borrow to invest.
2. Dont set a stop loss.
3. Don't think you can outsmart the system without resolve.
4. If the fundamentals are sound. Hold.
5. Lemming rushes are there from time to time and usually are buying opportunities but only when used in conjunction with 1 to 4.

1. Check.
2. Check.
3. Check.
4. Check. And bought more at $2.70
5. Check.

Good advice nioka.

 

[skyQuake]

1. Dont borrow to invest.
2. Dont set a stop loss.
3. Don't think you can outsmart the system without resolve.
4. If the fundamentals are sound. Hold.
5. Lemming rushes are there from time to time and usually are buying opportunities but only when used in conjunction with 1 to 4.

Or set up a nice stop at say $2.90, don't cancel it, and buy back in later after a washout?

 

[onthesword]

...........ok but you will have to do your own research on this; i believe aut has been caught up in an african country where the govt wants to nationalise the miners. many workers have been left short with unpaid wages etc and the aut site is in limbo for the time being. as mentioned dyor on this as i'm not completely sure of the details.