more drilling success - big dollars ahead

AMU announced today its Trio Gerdes #1 well is being cased for production testing, with a target to place the well on production by the end of July 2004.

This is the second success in this neck of the woods for AMU - with the first well on this play being cased for production testing about 2 weeks ago.

The TG#1 well encountered multiple pay zones which log samples indicate will flow at commercial rates and which are likely to have significant reserves. (Areal closure is in the range 200-500 acres).

Additional drilling in the area will be conducted in the third and fourth quarters of 2004.

The significance of these successes is huge. These wells (if they are anywhere near as productive as others in the region) have the potential to drop very large dollops of dosh into AMU's coffers. And to do so for decades to come.

How significant you might ask? An indication of the bounty likely to flow from them may be gleaned from the AMU announcement of 18 May.

That announcement noted these wells have the potential for reserves in the 5-10 billion cubic feet of gas. The Midcox formation in the immediate vicinity of these wells has demonstrated reserves of up to 20 billion cubic feet of gas and 500,000 barrels of oil per well - and this from traps that generally cover an area of 100-150 acres. (The fact that today's announcement notes the current well appears to intersect zones with an apparent areal closure of 200-500 acre presumably means even bigger reserves here) .

Looked at another way, that announcement noted that each well has the potential to yield US$75 million in operating revenues (that's over A$100 million at current exchange rates). Other wells within a couple of miles have been producing for over 25 years and still have 5-10 years of reserves left in them.

This latest success is the second well in a 10-15 well program. Don't tell me there wont be more successes to come.

And based on the estimated flow rates from their first success on this play, this latest drill success flags a huge revenue growth, which will be sustained for decades to come.

Time for a major re-rating of the little Aussie oiler in my view (and that is just on the oil and gas business - the same is true when you look at their bio-diesel prospects too).

Time to break out the champers for AMU holders!!