AUT - Aurora Oil and Gas

[condog]

I do, but i think the simplest formula is

Right now we have 1660 BOEPD post royalties off 18 wells of which many of the 18 are from the lowest NRI AMI.

AUT has repeatedly stated they are on track for 60 more wells at end of 2011, and that the majority of the wells will be from non sugarloaf AMI's.

Hence lets assume 60 more wells with 50% more NRI then Sugarloaf.

Equates to 1660/18= 92.2BOEPD for current production

1.5*92.2 = 138 BOEPD post royalties * 60 wells = 8300 new BOEPD + 1660 = 9960 BOEPD at end of 2011. As a really rough guide. Please cross check, as may contain errors.

9960BOEPD @ $110 per boe = almost $1.1M per day = approx $33.3M per month gross post royalty revenue. Well opex costs at approx .2 * $20000 * 78 = $300K per month

$33M * 12 = approx $396M p.a.
At PE of 10 = almost $4B
Even if we halve income to $200M net p.a. and give it a conservative PE of 10 we have a very rough $2B valuation

 

[trader8888]

These are my valuations - for 2011 CY end

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Wells and performance -

NET wells to AUT > 15.8
Average BOEPD per well > 600
15.8 x 600 = 9480 BOEPD

-----------------------------------------------------------
EBITDA -

Production > 336 days a year
$95 Oil

9480 x $95 = $900,600 a day

336 x $900,600 = $302,601,600 (for the year)

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Costs -
Maintanence - 20,000 x 15.8 = $316,000 p.a
Opex - 2 million p.a
Capex - 6.7 million (costs to drill well) x 15.8 = 105,900,000

Total expenditure = $108,216,000

-----------------------------------------------------------
EBIT -

$302,602,600(EBITDA) - $108,216,000(total expenditure) = $194,386,600

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NET proit -

$194,386,600 - %40 (tax & royalties) = $116,631,960

Net Profit = $116,631,960

-----------------------------------------------------------

On this net profit figure we are currently trading at a PE of 9.6

EPS = 116,631,960 * 410,000,000 (SOI) = EPS .30c

PE Ratio = $2.88 * .30 = PE Ratio of 9.6


These are the figures taking into acount a higher PE ratio

PE of 15 = MC of 1.75 Billion, SP $4.50
PE of 20 = MC of 2.33 Billion, SP $6.00
PE of 25 = MC of 2.91 Billion, SP $7.50

Notice that at a PE ratio of 15 is right in line with EUROZ and GMP with their valuations, just something i noticed.

At the end of the day this is just a guide and it does'nt take into account upside that can be added by the likes of - higher EUR's, tighter well spacing, higher condensate ratio's, NGL's, new frac technology, higher oil price, reduction in well costs and so on. But is does give a benchmark price that you can go of to see if you are still in a growth stock or the stock your in is reaching its peak. Its pretty clear to me AUT still has a lot of growth left in it and the factors that could expotentially increase the value of AUT are numerous.

This is'nt investment advice.

 

[condog]

Cheers trader for taking the time to do it accurately.

Those figures your presenting are in line with my spreadsheets of a few months ago, with end of 2011 at $6-$8 imo. Doesnt mean it will be reflected in the share price, however, value will ultimately attract price.

Got to say i found this report he best ever for AUT. The figures look like they are really going to start talling up now with 4 rigs, soon to be 5, 2 ful time frac crews and a 3rd secured. So many wells about to flow and so many more to be drilled this year. I think the price of AUT today on the back of that news is rediculous. I sold down TXN with an intent of buying more AUT on the back of these 2 quarterlies.

 

[trader8888]

Cheers Condog.

Yeah i agree one of the best reports ive seen in a while from AUT.

These are some of the key points i picked out the report today.

- Petrohawk have increased the gross EUR for wells in their over pressured condensate rich gas acreage adjacent to Sugarkane (known as the Blackhawk area) from 500-750 mboe per well to 1,200 mboe per well.

- Up until late February there have been some production capacity constraints due to gas handling restrictions with in the Field. An interim solution was engineered by the Operator and since Commissioning of a new wet gas line to the Field several wells have increased production as Chokes are opened.

- Within Sugarloaf, the majority of the leases with expiry dates during 2011 have now been held by Production (�HBP�)

- The drilling schedule for 2011 is approximately 60 wells based upon the existing fleet of 4 rigs being supplemented by a 5th rig around mid year. Each rig is presently averaging 27.4 days On each location and this average is falling. The rig count and well duration indicates that the Operator is on target to achieve the planned 60 well program by the end of 2011. The schedule for 2012 has not yet been set, but Aurora anticipates a higher well count to this year.

- With the arrival of the second long term contracted stimulation crew and a third crew secured for approximately a month, the current inventory of wells awaiting stimulation will be dealt with by the end of May. With an additional 12 wells expected to be drilled during Q2 2012 we expect a total well count of 40 by mid year with approximately 35 wells on production.

- The Operator has been optimizing well recovery through reservoir management techniques. Early production has been restricted in order to maintain reservoir pressure and well performance. This approach has proven to be very successful in other shale plays such as the Haynesville and early indications from wells that have been �choked back� are that decline rates have been significantly reduced and ultimate recovery projections are expected to rise.

- Ultimately the testing of tighter well spacing will determine the potential for significant upside to recoverable reserves. The installation of full field processing facilities and during 2012 the move to drilling multiple wells from pads

- With a further 60 wells planned during 2011, Aurora management anticipates that the majority of the possible reserves will be transferred into the 2P category by year end.

- There are currently a further 5 wells that have been fracced and are on production before the end of April 2011. The current inventory of drilled and cased wells is expected to be addressed by the end of May giving a significantly increased total of approximately 35 wells on production by that time.

- At the time of writing this report Aurora�s net production (after Royalty and cost recovery) had increased to 1,660 boepd.

With these new production figures it makes my CY end Exit valuation of 9480BOEPD look pretty achievialbe. 5000BEOPD (Post Royalty) is way to conservative IMO. We may be close to that figure by the end of this Quater, taking into account this statement by the company "end of May giving a significantly increased total of approximately 35 wells on production by that time" considering this quater was only 18 wells on production and many of those wells would have been the lower working interests.

The statement by petrohawk regarding EUR's is very interesting as well.

A few new wells approved for Excelsior AMI as well.
- ESSE-SMITH UNIT A
- ESSE-SMITH RANCH UNIT B
- KELLNER-MCMAHON UNIT
- KELLNER-JONAS UNIT

 

[BrightGreenGlow]

With all the new wells and crew coming on board when does one suppose we will become cashflow positive?

 

[trader8888]

With all the new wells and crew coming on board when does one suppose we will become cashflow positive?

Assume 9500BOEPD CY end 2011 and next year a 80 well drilling program.

------------------------------------------------------------------------------------

9500 x $95 (oil) = $902,500 a day

336 production days a year

902,500 x 336 = $303,240,000 Gross profit a year

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80 Wells = 20 NET wells to AUT (calculated on a %25 NRI basis)

CAPEX = 20 x 6.7 (well costs) = $134 Million

Maintanence = 36 (Net wells) x 20000 = $720,000 a month or $8,640,000 a year

Admin - $6 million, a year

Total Out goings = $148,640,000

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Going on these figures

Gross profit $303,240,000 - Total Out goings $148,640,000

Gives you an EBIT of = $154,600,000

So by my calcs we should be cashflow + early next year sometime.


This is'nt investment advice.

 

[condog]

AUT have always said peak negative cashflow is in early 2011. If you go back to the last few presentations, yhey have a column grapgh showing thier anticipated cash flow.



This is due to well repayments having a lag on well costs. Id suggest imo Q3 2011 will be easily cash flow positive. Could be wrong, but thats my opinion.

Thing is just like the well results now are flowing thick and fast, when the cash starts flowing, its going to , imo, grow rapidly.

IMO once it starts flowing , it will grow by 4 to 5 wells at 20odd% NRI, per month.

If your willing to hold 5 years or so, what share price do you think AUT will be worth based on the above graph??

 

[condog]

From
http://www.oilbarrel.com/nc/news/di...its-eagle-ford-shale-wells-reveal-th/771.html

April 28, 2011

Early Mover Advantage Starts To Pay Off For Aurora Oil & Gas As Its Eagle Ford Shale Wells Reveal The Quality Of Its Acreage Position

When Aurora Oil & Gas drilled its first well in the Sugarkane field in Texas back in 2005 nobody suspected the ASX-quoted small cap would six years later be a much larger cap company with a front seat in one of the hottest shale plays in North America. That play is, of course, the Eagle Ford Shale in southern Texas and the reason no one suspected Aurora would present such a key investment opportunity for those seeking exposure to this liquids-rich shale is because the company’s first wells here were actually targeting the gas-bearing Austin Chalk formation.
Those initial wells also identified the potential of the deeper shale play and encouraged the company to build a lease position in the area, giving it real early mover advantage in an area where acreage parcels are now changing hands for increasingly inflated prices; M&A activity remains strong with US$5.5 billion in transactions announced since June 2010. Aurora, which is now dual listed on the ASX and TSX, has working interests ranging from 9.1 per cent to 36.4 per cent in four...

We picked it. Perhaps they just dont keep thier eye on the ball. We picked SEA as well which they also missed.

 

[redMax]

Condog

Roger Montgomery has replied on his blog to your comments

http://blog.rogermontgomery.com/who-asked-for-easter-holiday-homework/#comments

 

[condog]

Condog

Roger Montgomery has replied on his blog to your comments

http://blog.rogermontgomery.com/who-asked-for-easter-holiday-homework/#comments

Yeh saw that ta.

I have a close associate who knows Rogers/Climes/Stockval methods inside out and back to front.
He using comsec numbers, but correcting the number of shares outstanding comes out with:

End of:
2011 $5.34
2012 $12.45
and 2013 $13.23 (this one i dont agree with, I think its more likely to be higher)

Im not saying thats right or wrong, but i trust his valuations more then Rogers in most cases. Rogers a smart cookie, but where he does fall short imo is in his projections for companies whos earnings are rapidly evolving from basically nothing to a projected highly profitable company.. IMO hes the master of valuing traditional companies, but his methods dont suit a company like AUT, unless you project numbers forward.

The AUT valuations on his Blog are done by Lloyd, not Roger. But imo they where endorsed by Roger in his inital reply to Lloyd. He seems now to be backing away from that stance. Perhaps hes realised they are valuing something they really didnt understand the ins and outs. Imo Lloyd made some fundamental errors, becuase he drew to many assumptions on items he really didnt understand how they work. Most notably the well repayment method to Hilcorp. Additionally the improving declines, which he clearly hasnt monitored close enough to draw the conclusions he drew.

 

[alexc2005]

I for one am looking at topping up next week.

Bought my initial parcel at $2.82, they look to be great value at the moment at $2.65, thats a tuesday morning job for me.

 

[estseon]

With all the new wells and crew coming on board when does one suppose we will become cashflow positive?

Current production is funding the equivalent of about 2 Longhorn wells each month. Management projections for about 'mid year' would possibly fund the ongoing drilling programme. AUT has said that profits tax is not an issue this year because of brought forward losses and ongoing CapEx.

However cash settlement of production always lags by a couple of months or so. In cash terms, much of Q1 production will be reported in Q2.

Unless they ramp up drilling or infrastructure expenditure, I would have thought that cash flows will be pretty balanced by Q4

Major third party gas pipeline infrastructure is under construction an was due to come into service early in 2012. That'll broaden the user market for the production, which could be beneficial for prices as well as releasing constraints on production.

 

[BrightGreenGlow]

Thanks guys. I would have thought the higher nymex oil would have given a better result for the quarterly...

http://www.oilbarrel.com/nc/news/di...its-eagle-ford-shale-wells-reveal-th/771.html

Just a small read..

 

[condog]

Current production is funding the equivalent of about 2 Longhorn wells each month. Management projections for about 'mid year' would possibly fund the ongoing drilling programme. AUT has said that profits tax is not an issue this year because of brought forward losses and ongoing CapEx.

However cash settlement of production always lags by a couple of months or so. In cash terms, much of Q1 production will be reported in Q2.

Unless they ramp up drilling or infrastructure expenditure, I would have thought that cash flows will be pretty balanced by Q4

Major third party gas pipeline infrastructure is under construction an was due to come into service early in 2012. That'll broaden the user market for the production, which could be beneficial for prices as well as releasing constraints on production.

Too me its like any other business. Growth is constrained by cash at bank and cash flow. Any time there is an accelleration in growth it requires extra capital.

This is the reason EKA will be cash flow positive way before AUT. Every time AUT announces expansion, increased or accelerated development it pushes back the point of positve cash flow. Many fret and regard this as a failure by the business that it has now income or no cash flow.

I say they dont understand the business. Any accelleration it can afford without massively diluting us , or sending us broke is great. If it pushes the breakeven point back, who cares, as we ultimately will be more cash flow positive and have more cash flow growth once it finally occurs.

Sure its confidence inspiring to see more revenue then expenses in the quarterlies, but ultimately we are in this thing for the growth, not the pretty balance sheet that some fundamentalists go chasing.

right now Jon Stewart is driving a phenominal pace of growth and managing to do it with cash at bank and cash flow to sustain it. The way hes spoken about furhter acquisitions and development, it wouldnt surprise me if every time we are about to become cash flow positive, he announces an accelleration of development or an acquisition.

Whilst that will push back breakeven point, its ultimately tax effective and if done well will have far more benefit to the value of the company then holding cash or paying dividends.

You got to remeber this is how growth is driven. ABC learning got it all wrong they used debt to grow rapidly. What Jon is doing is funding it from cash flow and occasionally from Capital Raisings. No problem with the CR's if they are done well and immediately accruive. So far the market has voted in favour of his strategy.

If he pushes the breakeven point out another 6 moths or 2 years it just means when the point is realised the cash flow growth will be phenominal.

 

[isplicer]

AUT have always said peak negative cashflow is in early 2011. If you go back to the last few presentations, yhey have a column grapgh showing thier anticipated cash flow.

View attachment 42647

Wow, that's a very engaging graphic right there. Where was it sourced condog? Was it the company report?

 

[nioka]

This is the reason EKA will be cash flow positive way before AUT. Every time AUT announces expansion, increased or accelerated development it pushes back the point of positve cash flow. Many fret and regard this as a failure by the business that it has now income or no cash flow.

I say they dont understand the business. Any accelleration it can afford without massively diluting us , or sending us broke is great. If it pushes the breakeven point back, who cares, as we ultimately will be more cash flow positive and have more cash flow growth once it finally occurs.

This is a good theory but in practice many oilers get "oil" fever. They spend all their income chasing the next bonanza and after a few dusters suddenly the funds dry up, nothing left for dividends and the SP drops. The run has been good for the directors and executives as they had their performance payments in the good times but if the shareholders didn't get good divvies or sell and profit take then they are left to ponder the what ifs. Investors can get this gold/oil fever too, you see it reflected in the posts. Make sure you dont catch the infection. Take a little profit along the way as insurance. DYOR.

 

[condog]

This is a good theory but in practice many oilers get "oil" fever. They spend all their income chasing the next bonanza and after a few dusters suddenly the funds dry up, nothing left for dividends and the SP drops. The run has been good for the directors and executives as they had their performance payments in the good times but if the shareholders didn't get good divvies or sell and profit take then they are left to ponder the what ifs. Investors can get this gold/oil fever too, you see it reflected in the posts. Make sure you dont catch the infection. Take a little profit along the way as insurance. DYOR.

yep seen that plenty of times. Right now whilever money is being spent on good things that grow the future cash flows im as happy as a pig in mud. If mgmt start wasting money or diversifying into areas im unhappy about, taking chances on dusters, then yep, time to sell.

 

[condog]

Spent most the last day and a bit crunching the sums on a few oilers, but AUT in particular. I wanted to cross check my figures against a few doomsayers.

One thing obvious i noted is that the well figures used by Euroz are extremely cautios. They are doing thier sums on 39 wells in 2011, 55 in 2012, 64 in 2013 and 71 in 2014. Not only are these number wrong, but they are way out on the low side.

I make it we started this quarter with 15 wells and 18 now on tap. they have 60 planned and the latest presentation, plus my calcs confirm that by end of 2011 we will have between 75 and 78 wells flowing to sales.

So i have re done my figures . My figures are for discussion purposes only. Whilst i think they are right they may not be.

Please note my figures do not take in the 12 months earnings from 2011. They are 12 x the earnings for what i believe they will be in late Dec 2011. Hence i believe these will be right at that point in time. Prior to that we are worth less, after obviously more.

I have been conservative. AUT says average well flows are 787boepd post royalties.. Ive used 500 for 31 dec 2011. AUT should have plenty of tax credits, but ive included tax and royalties at 30% for the moment and $5.2M admin costs annually.

Ive used $16K per month opex per well as its currently $20K in the NSAI report, but about to go down to 12K per well per month due to multi well pads.

Feel free to offer alternatives or suggestions / corrections.


And for the formula junkies

Some fundamentalists will argue that you have not added in CAPEX. My view on that is you dont, when your spending $6.8M on wells that will payback in 6 months and will continue to return significant free cash flow beyond . Some call that risk. Possibly true, but imo thats why we managed to buy AUT at 20 odd cents. Because we developed a method of applying cash flow valuations prior to things unfolding. And thats why where sitting here now thinking AUT is still great value.

 

[trader8888]

condog it looks pretty good, similar to mine actually.

I was going to say you have'nt added the CAPEX in to drill the wells, but you updated your post. Personally id prefer using them in my calcs, but each to their own.

 

[condog]

Wow, that's a very engaging graphic right there. Where was it sourced condog? Was it the company report?

Its from 34 page company preso released to ASX on 8/3/2011