here ugo.... target price seems a bit conservative given drilling program and total number of akk ordinary shares?
Austin Exploration Ltd
High Impact Drilling to Commence at Two Projects
Austin Exploration Limited (“Austin”, “AKK”, “Company”) has reported that drilling is imminent at its Birch Project, which is targeting the Eagle Ford Shale. The project consists of 5,000 gross acres (AKK 93.5%) located in Burleson County, Texas. Austin will drill three vertical appraisal wells on its acreage, the first of which will commence next week. The well is planned to be fracced over the Austin Chalk / Eagle Ford Shale interval, which is interpreted to be over 300 feet thick at this location.
The Company has also announced that drilling at the Pirie-1 well in PEL 105 (AKK 50%), in the Cooper Basin is scheduled to begin in Q1 2012. The well has been delayed for many months due to severe flooding in the region. Pirie-1 is targeting a structure that was previously intercepted by the Toonman #1 well, encountering oil in tight sandstones. It is interpreted that the use of fracture stimulation should result in commercial flow, with potential for ~1 million barrels of recoverable oil (Hartleys estimate).
Birch Project – Up to US$210m Potential NPV
Austin’s acreage has been independently estimated to have potential Net Present Value per well of US$7m. Based on 30 net wells, this implies possible unrisked value of US$210m for the Company, if the appraisal program is successful. Austin completed significant due diligence prior to acquiring the acreage position, which indicated positive parameters, including: average initial production of 263 barrels of oil per day from 12 nearby vertical wells into the Austin Chalk, location in the oil / wet gas window where economics are better elsewhere in the play, slightly overpressured and thick reservoir (300ft), initial production of 463 barrels of oil per day from a nearby horizontal with a 13 stage frac job.
The first three wells in the appraisal program will be drilled vertically and then fracture stimulated in order to determine the optimal design for a horizontal with a multi stage frac, planned for H1 2012. We would consider 50-100 barrels of oil per day on initial production to be encouraging from a vertical well with one frac.
PEL 105 – Pirie-1 Well Q1 2012
If successful the Pirie-1 well may add 1.3cps in value for Austin, by our estimation. The permit also has several 2D defined followup targets that could result in additional value. Drilling by operator, Adelaide Energy Ltd, is scheduled for Q1 2012.
Pathfinder – 9,741 Net Acres in Niobrara Shale
Austin recently acquired 9,741 net acres (11,460 gross) located in Fremont County, Colorado in the south west of the DJ Basin. The project is known as Pathfinder and is nearby to the Florence Field, which produces from the shallower Pierre Shale and has modest production from the Niobrara / Codell.
AKK’s pre-acquisition analysis showed that the Niobrara in the area displayed many parameters at the upper end of expectations for achieving commercial oil production, including: very thick total section (avg 560ft), high porosity (avg 12%), high resistivity (>120 ohm/m over a large portion of the acreage), evidence of fractures and oil recovered to surface by wells into the Niobrara. An appraisal well at Pathfinder is scheduled for H1 2012.
AKK has several projects that could provide significant upside in the near term. We rate Austin as a Speculative Buy with a price target of 6.5cps.
AKK Price at posting:
2.8¢ Sentiment: Buy Disclosure: Held
