i went to an AUT presentation yesterday & a few of us had a chat after the presentation, it's a bigger no brain-er than ever.
key points
1. AUT is currently trading at $10 to $11 boe (pre royalties on 3p)the average on the TSX is $25 to $30 on 2p,AUT will be 2p by the end of the year.
2. gmp commented about the possibility of the reserves being 10 times larger . 20 acre spacings with one well in the chalks & one in the eagleford gives you about 8 times & then you increase the EUR by 30% to 40% & there you go but must be tested first.
i would be more than happy with half that,the point is AUT reserves should increase dramatically in the future.
estseon "the only issue is connectivity between the wells"
if you get connectivity you may lose some EUR but 2 x 600 mboe is better than 750 mboe.
3.AUT should go into field development by mid next year which means multiple wells from one pad as opposed to drilling to retain acreage.cost of wells will come down & tighter well spacings.
4. aut acreage is in the sweet spot of the eagleford as shown on page 12 of the presentation plenty of red dots.
5. drilling & frac crews under control with hilcorp.
i will try to remember more.
Nice post skc.I really like to know more about AUT and do some research on these guys, but statements and sentiments like these in a forum really turn me off.
The only no-brainers out there are if a stock has $1 in cash but trading at 20c. When a company needs to drill, prove up resources and sell in a market as a price taker, there is always some risk.
It may be a wonderful risk adjusted return, but it's rarely a no-brainer.
Nice post skc.
Even 'Blue Chips' have risk.
Take a carbon tax being introduced.
Peace in the Middle East.
Water converted to power.
No finance due to world implosion.
Do you guys think either the version of AUT follows the other like the ASX sometimes has a good lead off the DOW?
IE: AEF rising last night is that maybe on the back of AUT rising yesterday?
I really like to know more about AUT and do some research on these guys, but statements and sentiments like these in a forum really turn me off.
The only no-brainers out there are if a stock has $1 in cash but trading at 20c. When a company needs to drill, prove up resources and sell in a market as a price taker, there is always some risk.
It may be a wonderful risk adjusted return, but it's rarely a no-brainer.
Condog, no man is a mesiah, what is mir the only one to hold AUT from day one???
You need a reality check , there was nothing wrong in SKC post.
lol, at your put downs.
I really like to know more about AUT and do some research on these guys, but statements and sentiments like these in a forum really turn me off.
The only no-brainers out there are if a stock has $1 in cash but trading at 20c. When a company needs to drill, prove up resources and sell in a market as a price taker, there is always some risk.
It may be a wonderful risk adjusted return, but it's rarely a no-brainer.
Cigarette butt investing for net net stocks isn't always a no brainer either as there are usually reasons for them comapnies being priced at a discount.
Anyway to AUT, I was interested in how to calculate reserve increases from smaller well spacings as in a traditional resevour extra holes are to increase flow rates and to target stranded accumulations.
Is all the oil in the shale a case of stranded reserves i.e. as they need fraccing to flow at adequate rates and that decreasing the spacing wouldn't cannabilise oil that would have been pumped up by another well at a later date. I.e. that it does indeed increase reserves not just flow rates.
If indeed this is the case why aren't they already using the smaller field intervals and 20 acres just seems like a small area given the amount of money they need to spend to drill and frac a hole.
Makes $2.80 seen obscenely cheap int he grand scheme of things.
I also have issues using relative valuations vs the TSX as reason why AUT is undervalued as I had a rule of thumb of $10 per 2p boe as fair value as that seemed to be closer to the going rate on the ASX and for some of the companies at times their 2p reseves had negative value.
Said lots of good stuff
'Oil 101' from amazon is pretty good.Hi condog,
I was just wondering what information you have used to build your understanding of the way these operations work and the metrics that are important to them. I'm pretty new to this and have followed your posts with great interest and read the company reports referring to wikipedia and such to decipher unfamiliar acronyms.
To my noob eyes your analyses of the company data seems really good, and I'm certainly bullish on long term oil prices. Enough so that I've taken out a small interest in AUT. However I'd still like to understand it all a bit better (and maybe top up a bit more if I don't miss the boat) so was hoping you could point me in the direction of some educating material on the general industry rather than AUT itself
Thanks,
Alex.
From Euroz
Aurora Oil and Gas Ltd. (AEF-T, AUT-ASX); BUY, $4.50
AEF releases 2010 Reserve Report
3P reserve increased to 112.197 million boe
AEF reported 3P reserves of 112.197 million boe, marginally up from the post acquisition July 1, 2010 assessment of 111.560 million boe. The biggest difference is the fact that NSAI has started to shift the possible reserves into the 2P category, with 15 wells on stream at the end of December versus only 6 wells in the July report. Proven reserves were up to 14.5 million boe or 167% from July, while probable reserves increased to 15.4 million boe or a 41% increase.
NSAI has shifted the type curve
We have made no changes to our 2011 or 2012 estimates to reflect the new reserve report. Our 2011 average production forecast remains unchanged at 3,100 boe/d with a projected 2011 exit rate of 5,000 boe/d. In 2012 we continue to expect rapid production growth with an average rate of 8,050 boe/d.
Valuation
Based on the new NSAI type curves we have re-run our valuation model and using the GMP price deck, we estimate the NPVs per well range in value from $1.2 million to $13.4 million based on the various type curves. With an inventory of ~900 (190 net) locations this generates total value of $1.9 billion or $4.50 per share. Given the low risk nature of the development we feel this is an appropriate valuation approach.
Increasing target price to $4.50 (was $3.85)
The reserve report clearly highlights that with its aggressive drilling program AEF will be able to convert the vast majority of its possible reserves into the 2P category by December 2011. We still see significant upside potential from increased EUR’s over the next few years based on improved well performance and recognition of competitor well results on offsetting acreage, where they are already indicating EUR’s per well that are anywhere from 20% to 50% higher than what AEF is currently being booked at. Further to that we see significant downspacing potential as the play will likely progress from 80 acre spacing to 60 acres and eventually 20 – 40 acre intervals. We also see upside in the Austin Chalk formation which could significantly increase the resource potential on its lands. We continue to view AEF as one of our top lower risk development stories with huge growth in volumes as management continues to forecast peak production from its current drilling inventory of 29,000 boe/d net to AEF by 2019. We reiterate our BUY recommendation and are increasing our target price to $4.50 (was $3.85), which indicates potential upside return of 50% from current levels.
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