Ann: Investor Roadshow Presentation March 2012 , page-18

re: Ann: Investor Roadshow Presentation March... tui,

interesting point about mkt cap.

Mkt cap increases both through appreciation in value of assets (if recognised by the market) and through capital raisings.

Capital raisings that increase NAV/share are, by definition, value enhancing for shareholders.

AUT provides a lesson in point. It is just a few days over 2 years since I invested first in AUT at 42c/share. The Mkt cap was then about A$94m. The price and mkt cap now are 359c and about A$1.5bn. Shares in issue when I invested 2 years ago were 224m and now about 420m. So, share price 8.5x and mkt cap nearly 16x.

What we want to see is a multiple increase in the share price. To get there, new capital will have to be raised. But, if STX can do in the next 2 years what AUT has done over the last 2 years, I doubt that many will be complaining.

Increased mkt cap alone is vanity. Increased NAV/share is what we want. If the management get it right, now, and stick to the unconventional formations, it should happen, if lady luck smiles upon us.

The AUT mkt cap suggests $90k/acre for its holdings in the Karnes county AMIs. That valuation is expected to increase by a multiple as closer spacing etc is proved up. The STX presentation suggests up to $30k/acre for Eagle Landing JV acreage. It could be conservative once proved up.

"Once proved up" is difficult to guess in terms of wells drilled but Marathon was talking to Hilcorp, the former operator of AUT's acreage, at a time when there was about 1 well drilled per 2,000 gross acres. That would translate into about 16 wells for Eagle Landing, or about 4.5 net wells to STX.

That gives an idea of the capital needed. The level of dilution will depend upon success with the current drilling, good PR and management focus.

The presentation released a few days ago suggests that the "new leadership team" has both that focus and experience in unconventional formations.