ADI - Adelphi Energy

[Sdajii]

Well played Angus, there are some great buys out there today, if only I had the cash to top up

I hear you there! On Wednesday I put in everything I could spare. No regrets, but today is an even better opportunity and all I can do is watch!

 

[AngusSmart]

I need to find the money now..

i have a spare kidney for sale! and maybe a lung!

looks like i just cracked in at the lowest point too. i was surprised to see someone selling at it.

 

[WRONG'UN]

Does anyone have any idea how the proposed 40% "super tax" will/won't affect Aust companies that have their activities offshore? Mr Rudd claims Aust resources are owned by "the Australian people", who are therefore entitled to a (big) slice of the cake. The Australian people do not own the Eagle Ford shale, nor any possible resources in Yemen.
As they say, the devil is in the detail.

 

[condog]

It only applies to resources in Australia. Its not on oil and gas anyway, they have had theres in place for years.

It wont get through the senate anyway, so i wouldnt worry about it too much. If they drastically reduce it the coalition might back it, but not at that rate.

 

[Hatchy]

It only applies to resources in Australia. Its not on oil and gas anyway, they have had theres in place for years.

Hi Condog,
I thought it was for all resources?
I do agree that it only applies to things that are literally taken out of aussie soil, but I was under the impression that flowed through to oil and gas - well at least CSG.

 

[Ramblin Round]

Here's a great article found on the internet regarding production plans and goals for shale plays all the way through year 2030 and beyond. It was published in 2007 and seems right on track to what we are doing around here.


http://www.npc.org/Study_Topic_Papers/29-TTG-Unconventional-Gas.pdf

 

[McCoy Pauley]

Hi Condog,
I thought it was for all resources?
I do agree that it only applies to things that are literally taken out of aussie soil, but I was under the impression that flowed through to oil and gas - well at least CSG.

I think the proposed tax would apply to CSG (that's the impression I've had from Origin Energy and Arrow Energy) but "traditional" forms of oil and gas production would not be covered by the proposed tax because they already have their own rent tax levied.

 

[Agentm]

how can the royalty apply to a resource not in the territory of australia?

i think you may be confusing what the proposed tax law applies to imho..

anyone want to post up where this new rudd tax is taxing in ground resources world wide please?

 

[condog]

Its absolutely definitely only applies to resources mined in Australia. And i still think it wont get through in anything like its current form. The coalition will block it in the senate, they are 100% definite on the record going to block it.

But an ammended version might get through, it would still only apply to operations on Australian soil, not Aussies mining over seas.

 

[McCoy Pauley]

Coalition doesn't have the numbers in the Senate to block anything by itself. If the Govt persuades the Greens and the independents to support the legislation, it would be passed. Greens are all for it, so it will depend on Xenophon and Fielding.

 

[estseon]

As long as the US does not follow suit, the new law shouldn't be a concern for us. The new tax might deter excessive exploitation of Aus mineral reserves. The giant miners might be forced to reconsider their plans.

 

[Agentm]

this study done recently is posted with the permission of the author

its covering a lot of issues that ADI and AUT have been presenting on the sugarkane. thats the eagleford and chalks combined..

this study has no knowledge of the region we are in, they have no idea that conocophillips has been flowing chalks wells in the play, and recently have opened up eagleford wells throughout dewitt karnes and live oak counties, nor are they aware of the Hilcorp/TCEI/aussieJVP region. the AMI longhorn and ipanema and of course the excelsior play hilcorp/tcei are in

the reason for them missing it imho is that they dont identify the sugarkane Cretaceous play thats been passed by RRC as an eagleford/chalks target

but in light of all the short laterals like kennedy and weston really equalling and surpassing the best the petrohawk wells have performed at, and now the 4400 foot lateral of morgan really mirroring the best of the best..

all good news for adi holders

 

[Agentm]

i am including these further slides as the forum limits the number to 10..

the entire presentation i think really makes the jvp acreages look outstanding

]

 

[Agentm]

last 2 slides they presented are copies of ones i have posted before but still express the inportance of what petrohawk and eog are saying about the wetgas and oil aspect of the play

 

[WRONG'UN]

Thanks, Agent - that's going to take a bit of digesting!

I've just posted some analysis on the AUT thread, based on ADI's latest presentation.

Applying the same rationale to ADI, I get an after (30%) tax valuation of
($US1.2m x 0.7 / 0.89) x 235 /147 = $A1.51

There is, of course, Yemen.

For EKA, the valuation is ( $US1.2m x 1.25 x 0.7 / 0.89 ) x 235 / 154 = $A1.60

DYOR

 

[WRONG'UN]

Make that $A0.80 for EKA - I forgot to allow for the farm-out.
...........................................

 

[Agentm]

nioka

i recall you wanting some more independent broker reports.. this appeared on another thread but interestingly mentions the need for AUT to raise capital and praised the jvp management for excellence in reporting as well as really praising hilcorp. all of which a i agree with,,

i swapped out of aut and backed it all back into adi.. which are at excellent prices.. as i think short term, AUT will have that cap raising hurdle to overcome and i think the prices i got were excellent

i gather aut will also introduce a further broker report in the next few days..

this is a cleaned up version of that report as appeared on another thread.


The Sugarloaf trio, Adelphi Energy, Eureka Energy and Aurora Oil & Gas reported initial flush production of 5.15 mmcf of gas and 2,046 barrels of condensate from their Morgan #1 well and 6.81 mmcf of gas and 780 barrels of condensate from the Easley #1 well.

The trio acknowledged that these initial production rates were not indicative of a short or long term production profile. But they claimed the rates compared very favourably to results achieved by other participants in the wider Eagle Ford Shale play.

The current four Sugarloaf wells could return $13,000,000 gross a year to ADI and AUTs 10% equity interest. So far we have the following daily production profile for the Hilcorp farm in wells:
Well Gas Condensate mmscfep/d
Weston # 1H * 5.70 mmscf 378 bocpd 9.1 mmscfe
Kennedy #1H * 2.47 mmscf 540 bocpd 9.6 mmscfe
Easley #1H ** 6.81 mmscf 780 bocpd 31.0 mmscfe
Morgan #1H ** 5.15 mmscf 2,046 bocpd 17.9 mmscfe
Total 20.13 mmscf 3,744 bocpd 67.6 mmscfe #

* 60 day average. Recompleted previously drilled wells.
** Initial production. New wells.
H stands for horizontal.
# Converted at 12:1 that is 1 bo equals 12,000 cubic feet of gas (12 mcf).

Adelphi Energy and Aurora Oil & Gas each have a 10% interest in the Sugarloaf project after Hilcorp‟s farm in. Eureka Energy has 6.25%.

So ADI and AUT have net daily production on the above numbers of 6.76 mmscfe/day. Or 2 mmcfs/d and 374 barrels of condensate per day. One mmcf of gas at US$4.00 per mcf is worth a gross US$4,000 a day or US$120,000 a month or US$1,460,000 a year. One hundred barrels of condensate at say US$75 a barrel is worth US$7,500 a day or US$225,000 a month or US$2,700,000 a year.

So provided flow rates don‟t change and oil and gas prices remain the same, ADI and AUT could be looking at some US$13,000,000 a year in gross sales revenue from the first four wells alone. But flow rates will decline. That‟s inevitable. How fast only time will tell. It is not unusual to see up to a 30% decline in the first year. That decline could be offset by higher prices.

The break even gas price for the project looks to be around US$2.73 an mcf, reportedly the lowest of all US shale plays. And of course by drilling more wells. The JV expects to have one more recompleted well, Kowalik #1H, and one new well, Rancho Grande #1H, in production by the end of June.

In Adelphis recent investor presentation it claims up to 200 potential new well locations on the 23,500 acre lease that is the Sugarloaf AMI. With full scale, multi rig development to commence in 2011 when the JV partners will pay for development wells at their respective equity interest level. The Sugarloaf project‟s economics look very strong. The numbers stand up to close scrutiny. The professionalism and experience of Hilcorp has made all the difference to a project we once derided. All three companies involved are competently managed and factual and transparent in their presentations.

There is little of the hyperbole that accompanies so many of the junior Aussie oilers operating in the US. So the share price of the JV partners have not been inflated with b/s.

Which stock to support is a question.

Adelphi, Aurora or Eureka with its slightly smaller equity interest.

Aurora has an interest (50%) in the Longhorn and Ipanema projects in the same Sugarkane field. These are AMIs not shared by Adelphi or Eureka. And Hilcorp is now drilling the first two of three farm in wells on Longhorn (Turnbull #1 and Turnbull #2) with one farm in well to come on Ipanema. So the Longhorn and Ipanema acreage that only Aurora has the interest in provides Aurora with three times the net acreage interest that it, ADI and EKA have in Sugarloaf. Paterson Securities recently put a research paper on Aurora with a target price of $0.92

(this line next look like a real typo,, where they say adelphi imho instead of AUT... but he is correct in his calculations that AUT need capital )

But bear in mind that Adelphi like Adelphi and Eureka before it, will likely need to raise more capital to meet their drilling commitments if, as seems anticipated, Hilcorp will go hell for leather in developing the three AMIs. We don‟t know what a well costs but assume it is around US$5 million so payback is reasonably quick at less than six months. In short it probably doesn‟t matter which of the three stocks one chooses.

Adelphi which is currently raising money at $0.25 and Eureka Energy are our current preferences given the leverage of their lower share prices when compared to Aurora.

This past week ADI dropped from $0.295 to $0.275, AUT from $0.65 to $0.61 and EKA from $0.14 to $0.13. The drivers for these stocks will be the news flow as Hilcorp gets on with the drilling and completes and places more wells on production. The third well Rancho Grande was due to be fracced and completed this month. And for Aurora only, results from the Turnbull wells can‟t be too far away. The possible downside is a dramatic fall in gas prices though we don‟t see them falling much further as the US economy rebounds. It is always possible decline rates will exceed expectations, though the JV doesn‟t think that will happen based on analogue fields. And for ADI and EKA the drilling priorities of Hilcorp could become an issue if Longhorn and Ipanema prove even better fields than Sugarloaf.

 

[nioka]

i swapped out of aut and backed it all back into adi.. which are at excellent prices.. as i think short term, AUT will have that cap raising hurdle to overcome and i think the prices i got were excellent

i gather aut will also introduce a further broker report in the next few days..
.

I bought both ADI and EKA with the intention of an AUT swap. I decided to hang onto the AUT that I intended to sell into the swap for a few more days while the brokers update their reports. I also like to buy Fridays, sell early the next week. I wont have to sell as many AUT to finance the purchases by the way the market is trading so far this week. I may also just sell some of the purchased ADI and/or EKA and retain the freebies. These three just keep on with trading opportunities.

 

[estseon]

"i swapped out of aut and backed it all back into adi.. which are at excellent prices.. as i think short term, AUT will have that cap raising hurdle to overcome and i think the prices i got were excellent"

There was impressive volume and price stability in AUT trading today (last night for me). That suggests two-way trading and it suggests no particular dislocation between the ADI & AUT prices.

IMO, it will be the drilling programme for H2 2010 that will be most important and with ADI & EME raising capital for additional activity, whilst AUT still saying that its own cap raising is likely in 2011, there is a strong suggestion that the rigs might return to S/L for the rest of the year. If Hilcorp maintain their awesome rate of drilling and completion, that could mean that S/L could have 15+ producing wells before the end of 2010. That will be good for all of the JVPs but ADI & EKA have the greater gearing and the prospect of future development of S/L being self-funding should take an awful lot of risk out of the equation.

AUT will have the results of the 3 Turnbulls and Ipanema. It is disappointing that the 3 Longhorn wells will be so closely grouped because it will still leave a degree of speculation concerning the productivity of the rest of the Longhorn acreage whose boundaries have yet to be defined. The prospective cap raising will be a damper on the price but AUT cannot really plan anything until it knows the degree of ramp-up in 2011 and whether any S/L cash will be available to fund development of the other acreages.

There could be an AUT price surge after favourable Turnbull results but a 2-rig development programme of S/L for the rest of 2010 could result in ADI outpacing AUT in H2 2010.

My thoughts, FWIW - possibly very little.

In the meantime, I have to mull whether to pocket 70k free ADI shares. The only certainty is that there is no way that I would take cash out at this time.

 

[choppy]

But flow rates will decline. That‟s inevitable. How fast only time will tell. It is not unusual to see up to a 30% decline in the first year. That decline could be offset by higher prices.

Sorry AgentM, but 30% is a pipe dream. 70% is much more likely. The trend average is around 70-80% so far.