TXN - Texon Petroleum

[Ves]

It seems that the new CEO IS treading water if he doesn't get a move on then his options exercisable when the SP is $1 may not be worth the paper they are printed on.

They have until Dec 2015 if I remember correctly.

 

[philly]

They have until Dec 2015 if I remember correctly.

Hi Ves, yes you are correct.
Are you willing to wait that long for a Bombers flag?
Probably not.
I just want TXN to take their chances. ATM they are trading at 60c that is less than the SPP price of 65c last year.
And oh by the way GO CATS

 

[poverty]

Are you willing to wait that long for a Bombers flag?

He'll be waiting longer than that.

 

[philly]

Does anyone have any thoughts about TXN? Seriously, doesn't look like its going anywhere. The SP is stagnant at below the 65c when they had the SPP last year. I'm going to have a look at the other ASX listed companies with a foothold in the Eagle Ford. Must be better value out there. I'm losing patience with TXN.

 

[starman45]

TXN, bearish in the medium term, is trapped between resistance and support 0.63 0.55. The rebound from the 200 SMA, is bringing the stock to the support. Until the achievement and maintenance of resistance, the sellers are in advantage. IMHO.

 

[philly]

The new Chairman and CEO of TXN was Senior VP for Exploration for Petrohawk 2006-2008. Petrohawk was very successful and managed to get itself taken over recently at a significant premium by BHP.

Also, Mr Foss gets a total of 7 million options. 70c exercise, but only if the SP is over $1.05. He's not getting much salary (by CEO standards) unless he achieves that.

As I understand the current position TXN is selling the Leighton/Olmos field [no bidders yet] and now has put the Eagle Ford leases on the market as well.
Is there anything else to sell?
Don't know where we are heading now.
Potential takeover target?
Any thoughts?
I hold TXN

 

[Kremmen]

Don't know where we are heading now.
Potential takeover target?

Absolutely. They are basically saying they have a good asset and the quickest, easiest way to turn that into shareholder value is a takeover. Excellent news. If they can get bought out like Petrohawk was by BHP, that would be brilliant.

I've had 2 stocks taken over in the last 6 months, LLA and FMS. Both at ~100% premiums. I'd be more than happy for TXN to do likewise.

 

[boff]

I am confused by today's press release.
To quote;

Texon advises that it has appointed Albrecht & Associates, Inc. and RBS Morgans Limited to seek potential buyers for all or part of the Company’s 7,200 acre Eagle Ford oil project.

OK, so Eagle Ford is up for grabs.

On the basis of the productivity of Tyler Ranch #2(H) and Hoskins #1(H), new wells are forecast to produce over 600,000 barrels of oil equivalent, 90% of which is oil and gas liquids.

OK, so does that mean 600,000 barrels up for grabs?

There are 96 Eagle Ford well locations on these leases (including the 4 wells already drilled) representing a resource potential to the Company’s Working Interest of over 55 million barrels of oil equivalent.

Or does it mean 55mmb?

I'm going to discount 85% of that to give (at $100/barrel) a value of 4 cents a share for the former and 340 cents a share for the latter.

Could someone please correct me, because neither seems right to me (or if the latter, I've not discounted enough).

 

[Kremmen]

OK, so does that mean 600,000 barrels up for grabs?
Or does it mean 55mmb?

600k/well x 92 = 55.2M

Probably need to discount it more than you did, though. Capital/drilling/tax/admin costs tend to add up to $25-40/barrel. Plus there are no guarantees that other wells will be nearly as good as the first few. (I assume TXN tried to pick the good spots for their first 4 wells.)

 

[philly]

So what are TXN's Eagle Ford leases worth?
They hold 7200 acres

I found this at http://eaglefordshaleblog.com

How Much Per Acre For Eagle Ford Shale Gas Leases?

The Eagle Ford shale is the nation’s hottest oil and gas play and oil companies are paying top dollar for leases in areas where the concentrations of oil and natural gas liquids are the highest. The Eagle Ford shale is a rock formation that covers a broad, crescent shaped area that runs from the Mexican border to southeast Texas. Landowners lucky enough to own mineral rights in areas considered to hold natural gas and oil are being approached by landmen, or representatives of oil and gas companies with offers to lease their property. Oil companies are interested in everything from half- acre city lots to multi-thousand acre ranches and the amount of lease payments per acre are all over the place. There have been Eagle Ford shale leases made early on, in potentially marginal areas to the north and south of the main play, for as little as $50 an acre. Some savvy landowners in areas where the production is expected to be incredible, have held out for over $6000 dollars or more per acre. When you hear figures such as “$22,000 paid by Marathon Oil for Eagle Ford acreage”, realize these numbers are not what landowners are receiving, but are what was paid in transactions between corporations holding already leased land.

 

[philly]

I have gone back over recent transactions in the EFS and come up with this
The giant Chinese oil company CNOOC paid $1.1 billion for 30% of Chesapeake Energy's Eagle Ford acreage. That works out to about $12,000 per acre.

India's giant Reliance Energy bought into Pioneer's acreage. That deal worked out to over $10,000 per acre.

Canadian independent Talisman and Norwegian Major Statoil, agreed to pay $1.3 billion for 97,000 acres. That's about $10,900 per acre.

Marathon Oil paid $3.5 billion to buy Hilcorp Resources’ Eagle Ford shale holdings. They got 141,000 net acres and that’s about $22,000 per acre.

Shell oil has 106,000 acres in the Harrison Ranch in the Eagle Ford shale. It paid $10,000 per acre.

So pretty much the average is $10,000 so TXN would be looking at $72,000,000

currently there are 242,539,848 shares on issue + 13,000,200 options on issue
[this includes the 7,000,000 options issued to the CEO and exercisable at 70 cents provided the share price reaches $1.05]

Lets say that all options are exercised the total no of shares increase to 255,530,048

so a crude calculation would be US$72,000,000 / 255,530,048 shares = $0.28 per share

 

[boff]

Does anyone have any thoughts about TXN? Seriously, doesn't look like its going anywhere. The SP is stagnant at below the 65c when they had the SPP last year. I'm going to have a look at the other ASX listed companies with a foothold in the Eagle Ford. Must be better value out there. I'm losing patience with TXN.

MAD

I held that for a year, never moved off its range in the low 20s. Of course I sold before Xmas. And then look what happened.

Sure, they were a different style of oiler, but still in Texas.

 

[Kremmen]

so a crude calculation would be US$72,000,000 / 255,530,048 shares = $0.28 per share

At anything around that level, nobody would exercise their options, hence the divisor in the above is inflated.

More importantly, those purchases have been huge areas. The quality of wells is highly variable and the oil-rich area of Eagle Ford is the only part that matters, given current gas prices. A good analysis of value would have to look at the specific area. (And I'm not going to do a good analysis, just pluck out a few figures that I've seen.)

Initial production rates in Eagle Ford seem to mostly be under 1000 boe/d. Anadarko has been reported as having initial average rates of 500-800 boe/d. TXN's average initial rate is 1432 boe/d. (1332, 1228, 1605, 1562) This appears to indicate that TXN's area is well above average.

Looking at initial 60-day average, TXN has 632, ? , 731 and 693 boe/d.

By comparison, let's look at AUT;
recent Longhorn (ann 23/1/2012): 502
recent Excelsior (ann 23/1/2012): 271

AUT, with 16365 net acres, has a market cap greater than 1.2B, valuing its holdings at over $73k/acre. The majority of that area (9075 net acres) is Longhorn, which has 60-day average rates around 30% lower than TXN. If we take AUT's current value and increase it by 30% to $94k/acre to make it comparable to TXN's superior results, we get a TXN value of around $2.65/share.

[This is why I've sold out of AUT and hold TXN.]

 

[philly]

At anything around that level, nobody would exercise their options, hence the divisor in the above is inflated.

More importantly, those purchases have been huge areas. The quality of wells is highly variable and the oil-rich area of Eagle Ford is the only part that matters, given current gas prices. A good analysis of value would have to look at the specific area. (And I'm not going to do a good analysis, just pluck out a few figures that I've seen.)

Initial production rates in Eagle Ford seem to mostly be under 1000 boe/d. Anadarko has been reported as having initial average rates of 500-800 boe/d. TXN's average initial rate is 1432 boe/d. (1332, 1228, 1605, 1562) This appears to indicate that TXN's area is well above average.

Looking at initial 60-day average, TXN has 632, ? , 731 and 693 boe/d.

By comparison, let's look at AUT;
recent Longhorn (ann 23/1/2012): 502
recent Excelsior (ann 23/1/2012): 271

AUT, with 16365 net acres, has a market cap greater than 1.2B, valuing its holdings at over $73k/acre. The majority of that area (9075 net acres) is Longhorn, which has 60-day average rates around 30% lower than TXN. If we take AUT's current value and increase it by 30% to $94k/acre to make it comparable to TXN's superior results, we get a TXN value of around $2.65/share.

[This is why I've sold out of AUT and hold TXN.]

Kremmen,
if the divisor is too high then I will use the no of shares currently on issue as the divisor hence a crude calculation would be US$72,000,000 / 242,539 848 shares = $0.30 per share

You are correct that one needs to look at the quality of the acreage on offer.

I think that if you compare AUT with TXN then :
you have to include AUT'S interest in the Sugarkane as well as Longhorn and Excelsior,
you have to factor in that AUT has many producing wells whilst TXN has 4 producing wells and
you have to factor in that AUT committed to drilling many new wells this year

As best I can ascertain the highest price paid so far in the EFS is $22,000 per acre by Marathon Oil when it brought out Hillcorp who had acreage and was the operator of the Sugarkane field on behalf of AUT, AWE & EKA. The Sugarkane is good quality acreage so $22,000+ per acre for TXN could be achievable.

Not sure your $93k per acre stacks up BUT would be extremley pleased to be wrong.

I hold TXN, AUT & EKA

 

[Kremmen]

Not sure your $93k per acre stacks up BUT would be extremley pleased to be wrong.

Oh, I don't think it does either. AUT's market cap in $/acre is huge compared to ... well, pretty much everyone. It could be that TXN is under-priced or that AUT is tremendously over-priced and, well, honestly I think it's more the latter.

However, the rising oil price and the Seaway pipeline reversal (see Reuters) pushing up WTI out of its recent discount to other oil prices will be good for all of them.

 

[Agentm]

$10k per acre is not what this oil field will sell for.. never!

my view of texons cash value per share after the sale of the olmos and efs is in excess of the $1.20 region in terms of share value

recently $25k per acre was paid, and that field had not had anything like the work done on it like texons acres have, and keep in mind texons mcmullen acres have producing efs wells that are among the counties best producing efs wells!!



the marathon deal was not sold on a uniform price per acre, it was sold as an oilfield

texon is selling the mcmullen efs acres as an oilfield.

the people close to that marathon deal know what the calculations were, and if you told me i could buy sugarkane in and around the turnbull wells in north west karnes county, i would have buyers lining up..

whne the marathon deal went through they priced it as an oilfield, so very high prices were paid for the proven and PUD acres, and the other regions that at that stage were not drilled were priced at a much higher price..

i will repost a post i put on another forum to explain..





peter strachan in november said this of texon

Texon is an undervalued

"asset play with an assessed value of $1.20 per
share. The company now holds 6,734 valuable
Eagle Ford Shale acres. StockAnalysis
calculates that based on industry multiples, the
company’s EFS interests alone would be worth
75 cps in a trade sale"

$1.20 on the november 2011 total of 6,734 acres

in january 2012 texon announced an 8% increase in the efs acreages

so $1.30 would be a fair representation of peter strachans (guess)cash value for texon based on its revised acreages as of last month.

we dont know what calculations he used, but i think it would be fair to assume it was conservative and a guess based on average price per acres seen recently.

with texons recent rise in the sp in line with WTI rise, i think as it becomes evident that the efs will be sold, at various points in time its likely some speculation will arrive in the share.

there has been a substantial spike in the shares traded daily but little movement in the sp apart from the correction to the WTI price..

those close to the recent marathon deal with hilcorp understand that the price per acre was not calculated uniformly in the acreages, the proven and producing sugarkane region was priced at a premium, and values 3 times anything like the average given for the entire deal were given for the more productive acreages in the sugarkane.

based on that, its fair to say the mcmullen acreages of texon are perhaps 60% towards the EUR's of the sugarkane, maybe higher?

so when texons efs oil field is sold as an oil field, using the equations they use on a sale like that, i would doubt if peter strachans rough guess based on what i believe is an average on last known efs sales, will actually be close to the sale price that texon achieves in the coming months.

its very possible in my view that the texon smaller patch of efs, with 90% oil flowing, 3d's and a proven undeveloped figure and some very good wells in play will achieve some pretty high values far in excess of the current average price guess based on a sale of 100,000's of efs acres with a substantial acreage portion basically unproven.


all imho and dyor

 

[Agentm]

texon enters the ASX 300 as of today

 

[Agentm]

this post was posted by riche on another forum but will explain some points that are worth considering for the month of march

Been thinking...

The last update to reserves was 25/8/2011 ("Reserves - Mid Year 2011")

Texon runs a Dec year end which means that the 2011 financials will be release some time late in march.

For the last couple of years just prior to the financials TXN has updated its reserves for the AGM/Annual report.

eg
29/3/11 Reserves - Year End 2010
30/3/11 Financial Report - 31 December 2011
&
22/3/10 Texons Proved and Probable Reserves Increase to 3.0mmboe
31/3/10 Financial Report - 31 December 2009

So I'd have thought it was a fair to assume that they'll do the same again this year.

The chart on page 2 of the 25/8/2011 announcement shows the Proved & Probable jumping from 2.2mmoe in 2009 to 3.9 in 2010 to 5 in mid 2011.

Given the fact that TXN has had the #s 3 & 4 EFS wells come on line since the last update in August, my guesstimate is that TXN will at least double its Proved & Probable reserves to 10mmboe. On last years increase the SP jumped from 71c to 92c in the 3 days that followed. MAD's recent reserves upgrade helped something similar for their SP.

So march is looking like it could be a bit of fun:
1) (am I too optimistic to hope for..) an olmos sale conclusion
2) the formal release of EFS sale docs (which will give an indication of possible price)
3) inclusion in the S&P 300
4) reserve upgrades
5) Dec financials

Nice set of shorter term catalysts lining up!

 

[Kremmen]

1) (am I too optimistic to hope for..) an olmos sale conclusion

Point 1 achieved today. 4 to go.

 

[boff]

Point 1 achieved today. 4 to go.

Point 3 also