AUT - Aurora Oil and Gas

[condog]

The International Energy Agency has released its World Energy Outlook for 2010, forecasting for the first time that the global crude oil production peak that so many have long feared, has in fact already been reached””more than four years ago. International demand has since fallen slightly thanks to a recent global economic downturn, but once economies around the world have recovered, the IEA says daily crude production alone will no longer be sufficient to meet their needs.

http://www.hybridcars.com/news/international-energy-agency-says-peak-oil-began-2006-28912.html

 

[condog]

Im using a purely cash flow projection model. I understand your concerns about PE, but at the end of the day using a PE multiple gives you an answer similar to an NPV valuation with a 10th of the work.

Any valuation model has human error elements and whilst your concern is the use of PE, if i was using NPV model then the RR and ROE would be the issues for concern and they could make it even less accurate. They are subjective also.

I have taken into account tax and royalties totalling 40% in my calcs. Ive used 450 bocpd and 1.5mmcfg as my average applied to each well for 12 months and a 30% decline on that figure for year 2. I used to put in the exact flow of each well but found it easier going forward to use an estimated average, so whilst 450 is generous for Kennedy or Weston, its super conservative for Rancho and Morgan. 450 is close to the average.

PE can vary significantly and yes it is subjective, hence why i often mention multiple PE targets. My projected yr 2010 cash flow equivelents for 20 wells are
$1,442,663
$1,442,663
$1,442,663
$1,442,663
$1,442,663
$1,442,663
$3,606,656
$3,606,656
$3,606,656
$4,327,988
$1,442,663
$1,442,663
$1,442,663
$1,442,663
$1,442,663
$1,442,663
$1,442,663
$4,327,988
$4,327,988
$4,327,988

The numbers vary due to the working interest of each lease. 1.44M are the Sugarloaf wells Longhorn at 25% and Ipenema at 30%. Then when i totaled them i take of 40% tax and royalties to give a total projectedcash flow of $28,131,919 multiply that by your PE, then divide it by your number of shares to get a projected sp.

Then i also do a second valuation where i add in 10% of the cash flow of the wells for the following year. To get a second higher valuation. I fully tax it then i get its valuation.

The valuation i quote in here is the average of the two. Oil price used is $77 and gas at $3.25. I havent used an exchange rate as i have assumed all earnings are in USD and 100% reinvestment of capital, plus parity for cash held.

Right now using some peoples analogy because of the heavy number of drilling in Sugarloaf, the actual weighting is an average of 16% NRI. If you assume they have 20 wells at 16% interest then thats 3.2 net wells at end of 2010. Each well on average produces $14.4M annually totals 3.2 * $14.4 = 46M. Tax that at 40% gives 27.6M after tax and royalties. Use a PE of 13 = 13 * 27.6 = $358,000,000. But since we are holding $108M cash you need to add that to this giving an estimated mcap of $466,000,000.

No share issued = average approx 320000000
466000000/320000000= $1.50

Which is damn close to my valuations current sp and you have to remmeber this method places no value at all on reserves, JV deals, derisking, reserves, reserve upgrades, acerage accreditive acqusitions etc. How much you discount the cash flow and how much you build in for those other items is subjective.

On a stock that is as young as this in its new life growth phase is always going to have subjective items included in its valuation. However i would rather enter with a valuation , then with blind faith. Many would argue that you cannot even value a stock like this as its earnings are un proven. Whilst literally that is true, in reality those people miss these opportunities as thier principals stop them being able to apply a value.

If you went and bought WOW or JBH today you would buy it paying more then its worth, because people are prepared to pay a premium for those shares, almost all of the time. Rarely can you buy those shares at discounts to thier intrinsic value unless there is a real concern in the market place.

Yet here is AUT trading imo at less then its current cash flow valuation.
so using that analogy and applying some of next years expected income to it, if i add $7M to its earnings for 2010 which imo is 10% of the 70 odd million i expect it to earn in 2011, then i get a valuation for 31 Dec 2010 of $2.25.
If i say well thats rediculously cheap they are going to easily safely surpass that figure, so apply 20% which is $14M, i get a Dec 31 valuation of $2.69.

Interestingly my old man ran through the valuations using the intrinsic valuation method and none of my figures and came up with a Dec 31st 2010 valuation of $2.37 and a Dec 2011 valuation of $3.70 to $4.90 depending on RR.

Im not saying either of these are right or will occur, but they show the potential growth on offer.

PLEASE Do Your Own Research AND SEEK EXPERT ADVICE AS WE COULD BOTH BE HORRIBLY WRONG.

 

[condog]

True 5 new well apps is definitely a sign imo of an impending accelleration is imminent. euroz seem to think they have secured thier second frac crew.

The combination of all these well apps which is unprecedented and Euroz saying they have the second frac crew as you say is definitiely a price catalyst, especially once IP and 30d flows start gathering pace.

New well apps approved include
Georg 11/11
Yosko 11/11
Foster 11/11
As previosly reported here, but then
Carter Unit 16/11
PMT Unit 17/11
and Barboza Unit 17/11

If thats anything to go by with the new pace then we can begin to expect new highs very soon imo. Likewise on the back of the 170DJIA rise and the fading of the storm inthe teacup Irish situation things look very bright for the near future imo.

esteon in regard to your points
"
2. We await news of land acquisitions, which mean increased reserves

3. We were promised a new certification of reserves in January 2011."

Yes the land acquisition news needs to start flowing asap, not to drive price, but to prove mgmt did the right thing by going a CR rather then an SPP at a later date.

Id dearly love the new reserve cert to be on the back of our new acerage. I think it would be a waste of money to get a reserves cert followed by acerage announcments.

In regard to TO offers i cant see anything realistic approaching and i certainly hope if one does arrise we can ferociously defend it. I cant see Jon rolling over like a dog for the sake of 40c or so.

 

[fflintoff]

True 5 new well apps is definitely a sign imo of an impending accelleration is imminent. euroz seem to think they have secured thier second frac crew.

The combination of all these well apps which is unprecedented and Euroz saying they have the second frac crew as you say is definitiely a price catalyst, especially once IP and 30d flows start gathering pace.

New well apps approved include
Georg 11/11
Yosko 11/11
Foster 11/11
As previosly reported here, but then
Carter Unit 16/11
PMT Unit 17/11
and Barboza Unit 17/11

If thats anything to go by with the new pace then we can begin to expect new highs very soon imo. Likewise on the back of the 170DJIA rise and the fading of the storm inthe teacup Irish situation things look very bright for the near future imo.

esteon in regard to your points
"
2. We await news of land acquisitions, which mean increased reserves

3. We were promised a new certification of reserves in January 2011."

Yes the land acquisition news needs to start flowing asap, not to drive price, but to prove mgmt did the right thing by going a CR rather then an SPP at a later date.

Id dearly love the new reserve cert to be on the back of our new acerage. I think it would be a waste of money to get a reserves cert followed by acerage announcments.

In regard to TO offers i cant see anything realistic approaching and i certainly hope if one does arrise we can ferociously defend it. I cant see Jon rolling over like a dog for the sake of 40c or so.

You appear to be replying to a post that doesn ´t exist! Probably too much copy & paste. Cheers Hic!

 

[condog]

You appear to be replying to a post that doesn ´t exist! Probably too much copy & paste. Cheers Hic!

Yep true i was replying to a person from here in another media area, and hence thought the reply may have been relevant to folks reading in here as well.

 

[condog]

Not much discussion in here of late, but fact is they are still fraccing, drilling, putting in applications and hopefully making some accreditive acqusitions of surrounding acerage.

New well apps approved include
Georg 11/11
Yosko 11/11
Foster 11/11
As previosly reported here, but then
Carter Unit 16/11
PMT Unit 17/11
and Barboza Unit 17/11

Those well apps show imo an impending accelleration fo the program, which will only add value faster. Must be news soon on flows and ip's plus a new spud or two.

I have written to Jon and asked whats happening re acerage, im not expecting a reply as it would breach ASIC, but hopefully it remind him we want to know. I mentioned its important that the acerage be purchased soon, otherwise a CR could have been suplimented by and SPP. Lets wait see.

 

[condog]

A lot of very very good news for AUT holders to consume this morning.

T3 Fantastic with 864 bpd and 2.46 mmscf/d on a restricted choke over the 60 day period

T4 The drilling final depth being reached in 13.5 days. If this is replicated going forward it should dramatically improve NPV of wells.

Sienkiewicz #1 - Operations are underway at the Gilley #1H well which is within the Longhorn AMI.

The Franke #1H 3,000 ft of horizontal section. Ready for frac. Short due to directional probs.

The Turnbull #2 well is severely choked back whilst H2S readings are monitored and thiscontributes to the production figures of 440 boepd equivelent

May#1 835 boepd equivelent

Luna #1H well is complete and this well commenced cleaning up to
sales on the 18th November 2010.

Direct Assets #1H (10% WI) The fracture stimulation of this well has commenced

Kowalik #1R (11.65% WI) The remedial operations on this well have been successfully carried out

Operations are underway at the Gilley #1H

Recent Aurora wells have successfully utilized a restricted choke setting to improve the production profile decline curve.


Then we have apps in and approved for 9 others :

Urrutia Unit
Kennedy 2h
Kennedy Jones Unit
Georg
Foster Unit
Yosko Unit
Carter Unit
PMT Unit
Barboza Unit

 

[condog]

Even the International Energy Agency expects peak oil now
Jeff Rubin
Globe and Mail Update Posted on Wednesday, November 24, 2010 6:18AM EST



The optimism typically found in the International Energy Agency’s annual World Energy Outlook report is strangely missing this year. Instead, the IEA is taking a far more sober perspective on the world’s oil-consuming future due to our ever-greater reliance on costly unconventional oil sources.


Output from currently producing fields is projected to fall precipitously, looking ironically like the steeply declining trajectory of peak oil’s Hubbert curve. (I say ironically because the IEA has historically denied the existence of peak oil.) According to the report, by 2035 three-quarters of currently operating oil fields won’t be producing anymore. In fact, current fields are only expected to account for less than one-fifth of that year’s production.

http://www.theglobeandmail.com/repo...y-agency-expects-peak-oil-now/article1810104/

 

[kyrondgm]

some big trades just gone through, i have no idea what they mean though, exercise of options?!

 

[AngusSmart]

some big trades just gone through, i have no idea what they mean though, exercise of options?!

Somebody moving their holding from on portfolio to another i think. they should move it to mine.. i wouldnt argue!

 

[condog]

Excellent excelllent news on two fronts, hilcorp are developing a new pipline and processing facility and Luna doing 884boepd on a highly restricted choke.

Great news for AUT

 

[fflintoff]

Inference by agentm on HC that Hilcorp has endangered its wells by applying faster drilling techniques. The remark may have been prompted by well known sour grapes as it doesn ´t appear to be borne out by results?


“Hilcorp had a problem in more than one well, they have also used sub standard pipe and connectors and had plenty of problems in losing wells, and bad frac operations and also busted pipe issues, like many who use that cheap chinese steel.

txn have opted for superior steel and connectors..

wait for a result before comparing txn to other operators. you always encounter bad crews, or problems during a drill, but your really have to question why there is the need to use sub standard steel in wells and taking high risks like losing a well for the want of speedy completions”

 

[ParleVouFrancois]

I was under the impression that Hilcorp was one of the more professional outfits doing fraccing jobs North America? Maybe he's just spreading disinfomation, but if one was to check, what would the result of "substandard chinese steel" (I loled at the Chinese reference) be exactly? A stopping of production? Surely AUT would have announced any production halts at it's wells, and surely "substandard chinese steel" has no impact on completion time and instead just impacts on the costs? I'm quite confused.

 

[condog]

Its at this stage completely unverified rumours and should be treated as such.

Some people have proven to have very questionable motives and you should use your best judgement to try and look beyond the words on the page.

Raises more questions about the need to defame AUT and thier motivations then it does about Hilcorp.

TXN has been pumped and cross promoted across several threads in several forums, and now its pulling back as its been ridden hard and so far nothings changed for the better. Perhaps that may be some fodder that should be considered in any such evaluation of sources.

Its another classic case of some people putting too many hopes on something that still has high risks and little certainty.

 

[ParleVouFrancois]

Just was in the AZZ chatroom, there's someone over there slagging AUT and how it's "unlikely to ever return 500 million to shareholders". Probably just sour grapes but he makes reference to it in almost every post (sushi if you're interested in setting him straight with some facts ConDog). Haters gonna hate I guess.

 

[WRONG'UN]

Well I've read most of the 1700 odd posts on this thread, along with all the significant company announcements, and I bought some yesterday at $1.50.
I'm more interested in what AUT are doing, and how successful they are, than in heresay and innuendo. I'm also watching the oil price, and the AUD/USD rate - this information is factual.

 

[condog]

yeh poor old AZZ holders have had a tough 9 months going backwards, looking in dire straights, then they got thrown a massive life raft and all the shareholders kept leaping from the decks. They would feel pretty angry at present and yes some or a lot of that anger and blame will get misdirected as jealousy. Let them be, they will live and learn.

Sushi loves to have an argument.

 

[lemontree]

Well I've read most of the 1700 odd posts on this thread, along with all the significant company announcements, and I bought some yesterday at $1.50.
I'm more interested in what AUT are doing, and how successful they are, than in heresay and innuendo. I'm also watching the oil price, and the AUD/USD rate - this information is factual.

And to add to the impressive company announcements, we've got a 30 D average production rate of 822 boed from Patino #1

 

[Assasin]

Well I've read most of the 1700 odd posts on this thread, along with all the significant company announcements, and I bought some yesterday at $1.50.
I'm more interested in what AUT are doing, and how successful they are, than in heresay and innuendo. I'm also watching the oil price, and the AUD/USD rate - this information is factual.

Gee your timing is good. Check out todays announcements.
Agree with what you've done, the last 8 months of post are golden for anyone wanting the lowdown on AUT even if it is done by amateurs.
Goog luck.

 

[condog]

That Ipenema result is better then i expected, especially in terms of liquids content. Its certainly wont harm our reserves ugrade in 2011.

Great result for all parties.