Ann: Operations Update and Earnings Guidance , page-25

Oldish article but AJL are telling us nothing.

"And voila," he says, "problem solved." said Campbell.

He needs to go!


More tears ahead, or a round of drinks
Richard Hemming
April 12, 2011

Boom or bust is one way you could describe the prospects of drilling group AJ Lucas.

In fact, one small cap fundie did describe it that way. He is one of many running a ruler over

AJ Lucas, whose shares, at $1.80, have slid almost 40 per cent in the past three months.
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Everyone knows that the company is mired in debt, but it is also sitting on two potential game-changing assets - its shale gas prospects, Cuadrilla in Europe and Mount Prospect in Texas - that could be worth hundreds of millions. And remember, this is a company with a market capitalisation of $110 million, a far cry from the $460 million or so when the stock traded at $7 in late 2008.

However, one thing holding many fundies back is the fear of "getting slotted", as one put it, with a capital raising, which would probably be in the order of $30 million. To this the ire of AJ Lucas's chief executive, Allan Campbell, is raised. "As usual when it comes to us, the market has it wrong ? why would we do an equity raising at current levels if we haven't done one before this?"

Short-term debt, maybe?

Even after the sale of its underground in-seam business for $25.5 million last month, AJ Lucas still has $110 million or so of debt and tax liabilities that need to be paid this year, and $43 million of convertible notes, held by Goldman Sachs, that are redeemable at 90 days notice.

Campbell says the company's balance sheet will be restructured in the next month. AJ Lucas intends to refinance its debt, which means reclassifying it from short to long-term, and to "write back" its Monument Prospect asset that was written down by its $87.5 million cost.

"And voila," he says, "problem solved."

AJ Lucas has thrown about $150 million at the two shale gas assets. The Monument Prospect up for sale could be worth $US100 million and the Cuadrilla project could be worth hundreds of millions.

The catch is that more cash needs to be thrown into these prospects. So, despite what Campbell says, it could be a case of investors holding their nerve and making a killing ? or being killed.

More dry weather in Queensland and NSW will help its drilling rigs increase turnover and JP Morgan's $2.17 valuation assumes that it's business as usual for the company.

But the boom scenario for the company is selling its stake in the Monument Prospect and further developing Cuadrilla, where drilling is now under way.

If prospecting is a tricky business, trying to sell an asset is even trickier, says the son of its founder and 9 per cent holder, Andy Lukas. "There's a lot of clever dicks in this business, and we've heard a lot of 'yes, buts', probably more 'buts' actually ?"

If investors scent a capital raising is on the cards, the stock should fall further ? if not, it's off to the Ivy Room to join Campbell, Lukas and the boys for celebratory drinks.