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AOK - Austex Oil

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It seems to me that the Australian SA authors just discovered AOK too. The thing is that they discovered AOK at A$0.20, which is a 3 months delay after the American SA authors discovered it at A$0.12.

This is the latest bullish article about AOK written by an Australian SA author. It was syndicated a few days ago when the stock was at A$0.20:


http://seekingalpha.com/article/2248683-austex-cant-stop-wont-stop


But AOK currently trades 10 times its 2014 EBITDA at the current price of A$0.20. Yes, this is 10 times. This is not a low multiple.

AOK had ~$8.5 million EBITDA in 2013 and is estimated to have ~$11 million EBITDA for 2014.

AOK currently has Enterprise Value at ~$110 million, including the preferred shares and the notes.

110 / 11 = 10 times. Ouch!
 
tradernor said:
And these are two additional articles about AOK from SA that increased the awareness about AOK in North America and internationally:

http://seekingalpha.com/article/1953581-five-of-the-fastest-growing-e-and-p-companies

http://seekingalpha.com/article/195...il-majors-buy-high-growth-undervalued-juniors
Click to expand...

Hi Tradernor thanks for posting these articles. All the analysts are singing from the same hymn book. No doubt that the SP is benefitting from this added exposure. I'm a happy holder :)
 
AOK released Monthly & Operations Update for My 2014 today. Producrion is up to 39,482 BOE.
Daily average is 1273 BOE [up 140 BOE per day over April 2014.
There is a warning however that production may be lower in June 2014 as AOK focuses on the build up and development of infrastructure. Once that is completed focus will return to production which should coninue on its upward trend as more wells are drilled and brought on to production.. I am a happy holder :)
 
The update released this time last week can be seen from clicking on the link below.

Maybe some of the oil experts here maybe able to give us any idea if this is one to keep an eye on, or keep it at arms length:confused:

http://www.stocknessmonster.com/news-item?S=AOK&E=ASX&N=807086

Today's action saw it breakout of a recently formed channel on rising volume - it also went up just over 14%.

140724 - AOKs.gif​
 
This article by Jay Snodgrass appeared on www.seekingalpha.com overnight.

The New, New AusTex
Jul. 24, 2014 3:42 PM ET |

AusTex (OTCQX:ATXDY and ASX:AOK) has been on a tear over the past 90 days, as the company gets through a large amount of actual and perceived overhang and corrects its balance sheet. In my April 10 article AusTex is AOK and followed up with AusTex Can't Stop, Won't Stop, I detailed the special situation opportunity that both individual and institutional investors could play. Since then the stock has increased nearly 60% and I've had quite a few Seeking Alpha readers ask me what's next.

New Cap Table

Before we look into the future let's quickly review what happened since my April article. In early June, the first set of ~20.5 million A$0.15 June 6 options were exercised, generating about $3 million in option premiums. More importantly though, the noteholders elected to convert all of their $7.5 million in notes that matured in mid June which freed up capital that had been previously restricted to pay down those notes. Over the past few weeks, the majority of the ~27 million A$0.15 July 29 options appear to have been exercised too, generating an estimated $4 million in option premiums. On June 19, the company announced that they had $11 million in cash. Adding in the $4 million from the July option exercises, the company is well positioned with no debt and ~$15 million in cash.

Ordinary Shares (MM) ~550*
Preferred Shares 116.7
Total Issued Shares 666.7*
Outstanding Options 98.1
Wtd Avg Option Price $0.17
Debt nil
Cash on Hand $15mm*
Source: AusTex July 17 presentation and *Jay Snodgrass estimates

Production Ramps Up

Operationally, the company has not slowed down one bit. On June 30, the company announced that production for May averaged 1,273 boepd, up 30% from January. This number is a little deceiving as the company announced that it had an additional 18 wells in various stages of pre-production. Based on the company type curve, that represents an additional ~700 boepd that will come online in the near future, about 100% increase from January production. According the company's most recent presentation, the economics on these wells are excellent with nearly 100% IRRs based on current pricing.
Source: AusTex July 17 presentation

Proven Vertical Mississippian Strategy

In their most recent presentation, the company announced that only 1 of ~40 producing wells to date has been determined to be uneconomic. Given the estimated dry hole cost of only $200,000 this makes AusTex's vertical strategy a winner. Early on investors mocked the company for not pursuing a horizontal strategy. Since then many of the large and smaller operators that pursued a horizontal program have given up and left the play.

The Mississippi Lime is an unusual play where it seems as though in many areas the cost-benefit/risk-reward payoff of vertical vs horizontal leans toward vertical development, especially for a smaller, less capitalized operator. Hats off to management for resisting the pressure and temptation to go horizontal.

Growing Land Position

As the company has perfected their drilling and proven their development strategy, they've quietly leased additional nearby acreage. In the past year, they've increased acreage by 60% to ~8,700 acres. Fortunately, they were out of the market during the big land boom from 2010-13 and today they are largely able to acquire acreage at pre-2010 prices. In addition, they've built significant infrastructure which makes it possible for them to develop the new acreage far quicker. In this play with high amounts of water production, infrastructure is vital.
Source: AusTex July 17 presentation

The Next 6 Months

The remainder of 2014 should be transformational for the company. They currently sit on an estimated $15 million in cash with no debt. In the near future, I anticipate the company will release an updated reserve report which should be significantly higher than the most recent 12/31/13 report. Shortly thereafter, I expect the company to announce a revolving credit facility with a major bank. Based on the 12/31/13 report, they should easily be able to borrow $15 million, but I suspect their borrowing base will be closer to $20-25 million with the updated report. Combined with their current cash that would give them a lot of dry powder to exploit their top tier Snake River project. And most importantly, they will be able to do so without further diluting equity shareholders!

With a credit facility in place and growing acreage position, I would also expect management to ramp up drilling from two rigs to perhaps four rigs. Given the shallow nature of the play, this would enable them to drill perhaps 14-16 new wells per month.

In April, I put a A$0.25 ($12.50 for ATXDY) price target on the stock and yesterday it hit A$0.24. The company still trades at a significant discount to its 12/31/13 1P reserves. With the convertible notes and options overhang largely gone and cleaned up balance sheet, I suspect more institutions will take the stock seriously. In fact, just last week Australian hedge fund Perennial Investment Partners disclosed a ~5.5% position.

With all of the catalysts coming up, I could easily see a A$0.35 price ($17.50 for ATXDY) by year end, representing ~50% upside from today's price.

I HOLD
 
This note appeared in the Australian Financial Review [Street Talk]
Freestyle Investors, led by former deal makers at private equity giant TPG Capital, has built a stake of as much as 25 per cent in US-focused oil and gas junior AOK.

As both AUS & US markets are currently closed AOK has not released any announcements.

This follows IOOF taking a 5.4% stake in mid July 2014

I HOLD
 
Looks like a breakout at 0.26 with a short term target of 0.304.Technical buying signal at au stoxline.
 
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