re: Ann: Initial Production Rate-1,207 Boe/d ... GoVenus,Point...

re: Ann: Initial Production Rate-1,207 Boe/d ... GoVenus,

Point taken, so let's look into the BOEPD number

-The gas AZZ is producing has a high calorific value, 1,300 MBTU, so it commands a premium price.
-The last quarterly stated average gas price received in Q1 was AUD $4.98 per mcf.
-Of the 300BOEPD, how much is actual oil, 240 would be my estimate.
-using a 16.5:1 as revenue equivalency basis, (higher value Gas @ 4.5USD mcf: Oil @ 75 USD), 60 * 16.5 = 594mcfd, which I think is reasonable given the decline on the gas appears to be lower than on the liquids, and we are dealing with a gas IP of around 1600mcf/d on FD3.

Do take into account AZZ has other fields producing and in Q4 was already earning close to $500K per quarter without FD2. I did not account for the already producing Oyster Creek and other fields at all in my calcs, so you can use that as a buffer for any margin of error.

I think the numbers are reasonable and perhaps even conservative. But do look into them and give me your view.

Mir, I never thought we would agree on something :-)

Anyhow while I agree with you AZZ and AUT will eventually be valued on the productivity of their individual acreage, I think you are starting too soon to extrapolate the results of just a few wells - until we know the flow rates and decline rates from a dozen or two dozen wells, the most accepted way to value a company is on a per acre basis. You can uplift the AUT acreage for higher productivity but you also need to risk that valuation until it is booked as independent proven reserves.

The JVP's now have a significant premium priced in over AZZ. At the end of this year, when both AUT and AZZ have 10+ wells a more sound comparison can be made based on acreage productivity.

Until then the, way I see it is the valuation should largely be based actual acreage quantity, with a risked uplift for the JVP due to higher productivity of initial wells on acreage and surrounding acreage. How much you wish to uplift is up to you, but I beleive up to 3x higher valuations are now being put on the JVPs, which severely discounts AZZ. Note I am not saying the JVPs should cheaper, just that AZZ should be much higher.

The valuation discussion has already been done to death on HC and I do not want to reignite it as has tended to end up a mud slinging exercise which is counterproductive for all investors. After all the only way these Eagleford shares will see sustained gains is by attracting new money, not by churning holders between them. But who you pick depends it depends on your time frame, how much risk you can handle and what you believe the ulimate producivity of the resepective acreages will be before the results are there to prove it. Any maybe you pick a few players - the Eagleford is now a race no horse can lose imo.

So just to sum up the acreage valuation is what you currently see referred to on most takeover or JVP valuations - it is still done on a per acre basis, and I still expect to see this until 2011 when I would expect proven reserves backed up by a dozen wells, stabilised rates, declines etc to come more into play.