AMU today announced it has agreed to acquire a 73% working...

AMU today announced it has agreed to acquire a 73% working interest (representing a 58% net royalty interest) in a 530 bopd producing lease!

That 58% net should yield around 307 bopd attributable to AMU. That is the equivalent of just over 9300 barrels of oil per month. If it goes through as expected it would mean AMU's production for FY2003-04 will come in around 50% up on last FY. That is a spectacular rise in production, and especially sweet coming on top of the 20% rise in production over the last FY.

What's more, based on the announced reserve figure of 1.8mmbblo for the lease, the company's asset backing just went up another 950,000bblo (53% of 1.8mmbblo), or around US$9.5 million.

The announcement also flags significant upside exists for higher production and reserves (a possible 2.5mmbblo gross).

On the basis of the Shaws valuation, this acquisition should be worth a conservative 15-20 cents per share to AMU. Again using Shaws latest estimates of the oil and gas business being worth around 50 cents per share, that would take the fully paids to 65-70 cents.

I guess the market will wait to see if the due diligence proves positive on this acquisition before reacting too much - but WOW, what a deal.

However, the significance of this deal goes way beyond just this lease, because this deal is indicative of the sort of canny buying and growth the company can achieve when it has the wherewithall. And that wherewithall is looking pretty impressive now. With the November 03 options well in the money and sure to deliver $5+ million to the company, its US bank valuing AMU's asset backing at US$17 million (the value on which it is prepared to lend) and the November 04 options looking like they too will all be converted - AMU will have a sizeable war chest to pursue growth through more canny acquisitions.

I suspect shareholders can look forward to more such deals and the company being substantially bigger and more profitable in the very near future.

This of course takes no account of the impressive growth likely to accrue from the biodiesel project. That too has been ticking off critical milestones - the announced offtake agreement being the most recent - and is surely due for due diligence approval from ANZ any day now.

While AMU has made significant strides in its share price over the last couple of months, it certainly appears there is plenty of upside still to go.