AUT - Aurora Oil and Gas

[thesnowyforest]

Condog,

Your work on AUT is unbelieveable.

Im about to purchase some with my super this week. SUPER CHARING my super! haha

U been watching SSN? Keeping an eye on the Niobrara play which is about to ramp up. Would be interested on your throughts over on the other thread.

Not cross promoting, just keen on your throughts.

 

[condog]

Condog,

Your work on AUT is unbelieveable.

Im about to purchase some with my super this week. SUPER CHARING my super! haha

U been watching SSN? Keeping an eye on the Niobrara play which is about to ramp up. Would be interested on your throughts over on the other thread.

Not cross promoting, just keen on your throughts.

Ive definitely got one eye on SSN, but i didnt like the number of shares on offer. Should have bought it when i first researched it at 1.5c

 

[rcm617]

Hi condog,

In the presentation AUT gives their estimation of production for 2011 at an average of 3500 boepd, so on 365 days gives a total for 2011 of 1,241,000 boe.
In your spreadsheet you have preroyalty totals as 2,887,500 using 500 boepd per well. If we deduct the 30% royalty you are using that will give a total for the year of 2,021,250. So using AUT figures they are working on 500*(1241000/2021250) per well, ie 307 boe per well post royalties for 2011.
Sorry to keep labouring the point, but I think you're a bit optimistic with your figures per well, especially once we enter the second year and start getting a higher percentage of older wells.
I agree that with new techniques they will probably push up this figures up, and that AUT is a buy at these levels, however I always think its best to work with conservative figures.

 

[trader8888]

Hi condog,

In the presentation AUT gives their estimation of production for 2011 at an average of 3500 boepd, so on 365 days gives a total for 2011 of 1,241,000 boe.
In your spreadsheet you have preroyalty totals as 2,887,500 using 500 boepd per well. If we deduct the 30% royalty you are using that will give a total for the year of 2,021,250. So using AUT figures they are working on 500*(1241000/2021250) per well, ie 307 boe per well post royalties for 2011.
Sorry to keep labouring the point, but I think you're a bit optimistic with your figures per well, especially once we enter the second year and start getting a higher percentage of older wells.
I agree that with new techniques they will probably push up this figures up, and that AUT is a buy at these levels, however I always think its best to work with conservative figures.

This is condogs valuation for that one point in time the 31/12/11, thats the way i read it and thats how ive got my valuations as well.

 

[rcm617]

I just see people talking about long term averages as high as 600 boepd for wells, which I think is not being realistic as the AUT presentation shows.

 

[condog]

I just see people talking about long term averages as high as 600 boepd for wells, which I think is not being realistic as the AUT presentation shows.

Ive had a few drinks in celebration of our lost souless soul...from saudi/afghan, so i might regret what i post.

I am quoting a point in time as at 31 Dec 2011. Of course the average for 2011 will be monumentally lower then the high point for the year. But serioously if your making an investment today do you want to know what the average for they year is, or do you want to know how much money your investment might be worth at the end of the year.

I respect your respectful manner, but id also say its incredibly easy to pick aparts someone elses numbers that they put forward. I believe mine are in the ball park, if you have an alternative valuation for 31 Dec 2011 or any other point in time then please show us what it is and why, preferably with its working. To me putting foraward averages for a year is a joke, because it means the first part of the year its rediculously ambitious and the last part of the year its rediculously under valued. So whats the point. Pick a point in time and justify your reasons i say.

I understand what your saying, but i dont agree. So please put your alternative forward and hopefully the troops will have two good alternatives to discuss or to reach a consensus from. Thats not a bad post considering i think im a bit over 0.05

 

[condog]

A great post by esteon elsewhere

The 29 April report shows quite a few companies short sold at about 30% of turnover. AUT is an ASX 200 company and it is possible that some of the action reflects selling of the index.

The price rose today.

Hilcorp must be confident of holding the remaining leases by production to be now diverting resource to testing of denser/multi-drilling and Hi-Way fracs. There might be some interesting reports in Q3 2011. Also, AUT has now put a figure on improved production using choking of the post-farmout wells (Easley and Turnbull 2 excluded). They'll be able to firm up on this as time passes and more wells can contribute to the data.

Who cares a monkey's what the traders think? This project is moving forward and testing of improvement techniques seems to be continuous. Successful multi-drilling will lead to greater recovery measured in terms of multiples, faster and cheaper development and savings on infrastructure. And that is not next year - they're starting to test and experiment this quarter. The current price might be a distant memory by the year end.

I say theres always some morons who are going to get their shorts wrong. Some will short when they see the index going. 30% is disapointing, but i think we all saw thisafternoon that the value is there. The low was 2.53 for the day but it rocketed down and up on light volume. When all these frac results come through by end of may the value proposition will be fantastic if curent sp is similar.

Just ask yourself this. If punters thought this thing was worth 3.00 at start of 2011, what the hell is this thing going to be worth at end of 2011 with 78-80 wells on tap.

Imo shorting at $3.30 in early 2011 is feasable. Shorting in May at $2.65 with the current reports and impending results imo is moronic. Sure do it on down days with strong US leads, but any other day, i believe there will be more losers then winners.

 

[rcm617]

I appreciate your posting your spreadsheets on here, and as you say it is easy to pick apart somebody elses numbers, but you did invite people to do so.
Like I said, you mentioned averages of 787 boepd and trader is working on averages of 600 per well, which in my opinion is unrealistic, so I gave my reason for this, verified by todays presentation. Fair enough if you dont agree with it thats up to you.
As to my valuation, I'm accumulating at these levels but will start looking at taking profits once it goes over $3.00. This may change depending on market and additional information.

 

[trader8888]

I appreciate your posting your spreadsheets on here, and as you say it is easy to pick apart somebody elses numbers, but you did invite people to do so.
Like I said, you mentioned averages of 787 boepd and trader is working on averages of 600 per well, which in my opinion is unrealistic, so I gave my reason for this, verified by todays presentation. Fair enough if you dont agree with it thats up to you.
As to my valuation, I'm accumulating at these levels but will start looking at taking profits once it goes over $3.00. This may change depending on market and additional information.

RCM, you have to remember that the amount of wells coming on each month is going to keep the average up, even after about 5 months wells are still producing at around 600BOEPD according to AUT's presso today.

Now combine this with the new hi-way frac technology and some of the outstanding wells that have come on line recently which have actually inreased from 30 - 60 day flow rates and you can see how i am using an average of 600BOEPD for my calcs.

It looks as though the campaign is stepping up a notch next year with 80 wells planned (subject to change)

 

[condog]

I read Agents post on HC about AUT. What a complete load of garbage. Im not sure why hes trying to get AUT investors to sell and buy TXN, but his ranting is rediculous and so unfounded its not funny.

Good job Sharejon and esteon.

 

[skyQuake]

The volume on the open today is tragic..

but it hasnt opened yet!

 

[sammy84]

but it hasnt opened yet!

Hence why it's tragic so far :

 

[5haretrader]

Looking to get back into an oiler with the recent slide on the market.

I like AUT because of it's relative safety, and it's capacity to make over $200 earnings in 2012.

I like SEA because it is like AUT's little brother. Different acreage, and different styles of exploration, but in 2-3 years time it should be producing a similar amount of oil equivalent as AUT will be by the end of the year.

I like TXN because it is an operator, which while has some disadvantages, lets them have a bit more control over proceedings. It also has some decent EFS land to tap into in the next few years. The only thing holding me back is they aren't exactly going at this acreage with a full head of steam.

Used to really like SSN, but I just reckon SEA has a bit more valued tied down where it really matters, and it is a slightly cheaper stock after all.

So the question is, which one?

I reckon AUT will break $4 by the end of the year based on forward projected revenue. But for the other two (TXN and SEA), I'm not quite sure what to expect out of them...

In order of preference, I have it down as SEA > AUT > TXN.

Anyone have any thoughts on this one?

Also, can someone please confirm that if AUT has a 22% average working interest across it's acreage, does it pay 22% of the 20k per month operating costs, or the full 20k? Also, does it pay 22% of the $7M well cost, or the full $7M?

Cheers.

 

[nioka]

Looking to get back into an oiler with the recent slide on the market.

I like AUT because of it's relative safety, and it's capacity to make over $200 earnings in 2012.

I like SEA because it is like AUT's little brother. Different acreage, and different styles of exploration, but in 2-3 years time it should be producing a similar amount of oil equivalent as AUT will be by the end of the year.

I like TXN because it is an operator, which while has some disadvantages, lets them have a bit more control over proceedings. It also has some decent EFS land to tap into in the next few years. The only thing holding me back is they aren't exactly going at this acreage with a full head of steam.

Used to really like SSN, but I just reckon SEA has a bit more valued tied down where it really matters, and it is a slightly cheaper stock after all.

So the question is, which one?

I reckon AUT will break $4 by the end of the year based on forward projected revenue. But for the other two (TXN and SEA), I'm not quite sure what to expect out of them...

In order of preference, I have it down as SEA > AUT > TXN.

Anyone have any thoughts on this one?

Also, can someone please confirm that if AUT has a 22% average working interest across it's acreage, does it pay 22% of the 20k per month operating costs, or the full 20k? Also, does it pay 22% of the $7M well cost, or the full $7M?

Cheers.

I've spread the risk by having AUT TXN and EKA switching between those three as the value ratios change. You havent included EKA I notice.!

Note the contribution to the well cost varies. There are some percentages free carried as part of the lease conditions with land owners. It is more complicated that straight percentage relative to percentage return.

 

[condog]

I appreciate your posting your spreadsheets on here, and as you say it is easy to pick apart somebody elses numbers, but you did invite people to do so.
Like I said, you mentioned averages of 787 boepd and trader is working on averages of 600 per well, which in my opinion is unrealistic, so I gave my reason for this, verified by todays presentation. Fair enough if you dont agree with it thats up to you.
As to my valuation, I'm accumulating at these levels but will start looking at taking profits once it goes over $3.00. This may change depending on market and additional information.

Yeh thats fine, just you seem to have a pretty concrete view, it might be worth you bashing up a few spreadsheets to show that view. Youve obviously though long and hard about it which is great. No problems with varying viewpoints. Good healthy discussion is great, and it stops a lot of the up and down ramping, which can creep in from time to time.

Cheers.

 

[estseon]

A problem with valuing on the basis of production/well at this stage is that the differences in levels of working interest will result in very different figures depending not only on the mix of wells drilled but also on the order in which they are drilled. Certainly, they have indicated the planned mix but, without knowing the order in which they are drilled, it's all a bit hopeless. Each Longhorn well is the equivalent of 3 1/2 Excelsior wells. There are relatively few Sugarloaf wells left to be drilled this year and similarly Ipanema so most will be either Longhorn or Excelsior. Also, there will be 10 wells drilled but not producing at the end of the year and it's anybody's guess which ones they will be. The only reasonable certainty, because of disclosures by EKA, is that those 10 wells will not include any Sugarloaf wells.

 

[condog]

My valuations for one single point in time. 31Dec 2011 and then 31 Dec 2012. Calculated on a non-discounted projected cash flow (however the $90 oil price is conservative compared to current condensate sale price).

May contain errors and be incorrect. For discussion purposes only, always seek expert advice and do your own research.

I have 4 scenarios with varying average flow rates from 700boepd down to 300 boepd. Current quoted average boepd is 787boepd, but that includes a lot of very fresh wells.

Note i have issued 50,000,000 shares in 2012. Unlikely to be that many, but if we get land acqusitions or want to accellerate drilling it could happen, so ive built it in. I guess, the two middle scenarios are likely to be most accurate, but thats only an opinion. And in my opinion a PE of 15

 

[rcm617]

Sorry condog, I dont actually keep any spreadsheets on the valuations, to many variables down the line, I just keep records of production and work out likely future flows from that.
I still think that you may have misread the quarterlies, the average of 787 was the daily average for the total of all the wells.
They mentioned sales in the quarter net to AUT of about $5m, which gives you some idea of what price they averaged during the quarter 787*90*70= 4,958,100 so about $70 per boe which of course would increase a bit this quarter with the increase in price of oil, tempered somewhat by the low price of gas.
In the presentation they mentioned net production had increased to 1660 by the end of April, and they expected production by year end to net 5000boe post royalties or 6800 pre royalties.
From that I would assume that the bottom one of your spreadsheets would be the most likely scenario.
Like I said thanks again for supplying your spreadsheets, these are just my calculations and probably also contain mistakes which I would be quite happy for anyone to point out.

 

[condog]

I still think that you may have misread the quarterlies, the average of 787 was the daily average for the total of all the wells.

RCM why is it that thier quoted average is so unreliable. If its the quoted average of all wells, its not bad, because at the end of march due to the hold ups with frac crews we actually had, had a long period with few new wells coming on.

I understand that a quoted average at end of may when the on tap wells suddenly jumps to 35 would be an average above a sustaianable level. And yes even 787 is above any sort of sustainable level. But to think they are going to decline from an overall average of 787 now to an average of 400, is imo way too conservative, especially withthe significantly improved flows and declines of late and the fact they are trialing "highway Fraccing" which yeilded PEtrohawk 25% increase in flows and better declines.

Each to thier own but i think we need to agree to disagree. My opinion is you are being way to cautious. Just speaking mathematically the chances of reducing an average from 787 (minus the 20% revenue that comes from dry gas) to an average of 400, when at the time of 787boepd, there was 25 wells on tap, including around 8 or so that are more then 6-8 months old. To manage to bring that average down when there will be roughly 55 new wells all helping take the average up, i just dont think your in the ballpark at all. Its almost a mathematic impossibility if future results are even equal to past resuslts, let alone if they come out better.

That average, also already includes weston, kennedy and easly which are some of the older wells with the highest declines. So its been taken into account when they produce the average of 787boepd.

Your calculation yeilding average boe of $70 could be correct. But given they said $5M net to aut. ITs hard to know what they have taken out prior to net. Are they talking royalties, royalties and tax, royalties, tax and hilcorp cost recovery. Who really knows, it would however be safe to say they acheved $70 or better per boe for the quarter.

One month of this quarter has passed and i think its safe to say they should so far be achieving figures at least $20 higher then last quarter.

The 6800boepd pre royalty and 5000 post royaltie is also very very conservative imo, and an outdated figure. What it does do though is allow us to calculate the approximate royalty. 1800/6800= 26.4% royalty.

 

[rcm617]

The 787 is not the average for each well last quarter, its the daily average of AUT's share of all the wells over the quarter ie, as quoted by AUT, average production for the quarter.
If it was the average production for each well, net sales to AUT would be well over the $5 million mark.