new ratings, page-7

hi Pisces,

I do have a bit of a fetish about this stock, but it's good to have a little fetish now and again...

AUT is at the leading edge of a potential revolution in global oil production and they've gone balls out on this. Their recent acquisition, financed by debt, was a brave move especially as they'll be operating, which is a whole new ball game for them.

But shale oil is still essentially an 'unproven' commercial enterprise. It is still unclear what the long term performance of the wells will be and whether Shale Oil plays will ultimately be economic (Conoco Philips CEO said exactly this recently). Data from other, more mature shale oil plays (North Dakota Bakken shale for example) suggests that initial reserve estimates & economics can be massively overinflated. This can be a major problem if your borrowing base is leveraged off Reserves.

The link below is to a recent analysis of Bakken & Eagle Ford Shale Oil. The conclusions from this are that the high productivity, commercial wells are in small ‘sweet spots’ within the play and that Eagle Ford wells may have an effective life of 4 yrs and peak production in the EFS as a whole may be in 2015-2017.

http://www.postcarbon.org/drill-baby-drill/