These charts below are from the 6th Oct 09 Broker Presentation from the AUT website.
http://www.auroraoag.com.au/media_pres.asp
Thought now where getting away down the track and have our maiden reserve report about to be unleashed they might provide some insight to the way the company and brokers think.
Hartleys are tipping a 300% upgrade from 7% ultimate recovery to 22% ultimate recovery.
Note: I have doctored the last image to show current market capitalisation.
This is the original Resource estimate. Note this is pre farm in so AUT has half these figures Net.
Form Hartleys most recent report
We are expecting ~50 million barrels of oil equivalent in total reserves (1P, 2P, 3P combined).
Maiden Reserve Report July 2010
Netherland, Sewell and Associates Inc (“NSAI”) undertook an independent resource estimate over Aurora’s acreage in September 2009, as depicted in the figure below. At this time, no multi stage fracture stimulated horizontal wells had been drilled and a conservative recovery factor for the Eagle Ford Shale of 7% (Best Estimate) was used. Given well performance on the acreage and recovery factors achieved in other shale plays it is possible that an ultimate recovery factor of 22% may be more appropriate. Our time with the Texas Crude geologist also highlighted large potential upside in the development of the shale, as it may be possible to produce from multiple horizons over the interval and also decrease well spacing significantly. This all depends on assumptions around whether the current fracture stimulations are resulting in drainage of a small percentage over a large area, or a large percentage over a small area.
Whilst it is hard to predict what assumptions NSAI will use for the maiden reserve report, we believe that there is potential for an upside surprise for the market. A significant portion of the field has been proven by wells (see Fig. 2), which should contribute towards a decent 2P number, although we expect that most reserves will be categorised as 3P until more wells are drilled and there is more production history.
Conclusion – Expect Further Upwards Revisions
Aurora is well funded to participate in up to 40 wells over the next 18 months, with a further 450+ wells possible over the following years. We have only included 330 wells in our current model and have also risked the projects by 20-35% until more wells are drilled and there is more production history. Recent well results suggest that our assumptions are conservative on flow rate, GORs and also drilling costs.
We expect that, as further results are known, adjustments to our assumptions and relaxing of discounts associated with risk will result in upwards revisions to our valuation and price target.
We continue to rate AUT as a Buy and have increased our price target from 102cps to 123cps.
And Euroz comments
Our $1.18/sh price target refl ects the valuation metrics applied to Sugarloaf in ADI’s
target statement.
Strong results from the forward programme (particularly Longhorn) will give cause to
reduce our 30% discount factor. Coupled with model economics benefi tting from lower
drilling costs (Euroz assumes US$8m/well vs. current <US$7m) and lower decline rates
(as witnessed by Petrohawk)
this would directionally move our valuation towards $2/
sh.Corporate machinations are evident from heightening acquisition activity in the play –
Shell, Talisman and Reliance have all recently entered the liquids-prone part of the Eagle
Ford play.
Investment Case:
AUT is now fully funded to participate in an accelerated drilling programme that has
been driven by IP and production data that are some of the best reported in the Eagle
Ford trend to date. We remain attracted by the leverage to the oil price that is offered
via investment in AUT as well as the low risk and scalable growth to production and
earnings in the medium term. Buy.