re: Ann: Open Briefing - MD on Profit, Produc... for those that...

re: Ann: Open Briefing - MD on Profit, Produc... for those that havent been to the website for a look here is Hartleys analysis post HY results


Amadeus Energy Ltd

Strong Half Yearly Results Reported

Amadeus Energy Limited (“Amadeus”, “AMU”, “Company”) has reported a strong half yearly result, despite the downturn in oil prices in the last quarter of 2008, with underlying profit (before non cash items) of $9.6m. Reported profit was higher, at $26.6m, due to a mark to market of its US$55 oil hedges, which are now in the money. Cashflow from operations was A$17.5m and debt repayments of US$12.5m were made during the period.

Exploration Fortunes Reversed Post Period

Exploration results during the period were mixed, with several unsuccessful wells resulting in write-downs of $18m. Subsequent to the end of the period, the Company has experienced a reversal of fortunes and 3 medium impact wells at its Longville project have recorded success, resulting in a potential reserve increase of ~0.5 million barrels of oil equivalent (“BOE”). This is equal to approximately one year’s worth of production for the Company.

Production of 2,150 BOE per Day

Amadeus has a strong, long-lived production base from its core assets and has displayed consistent success from its exploration program, incrementally adding production and reserves for the last five years. Production is expected to increase once the successful Longville exploration wells are tied in to sales in ~60 days time.

Low Cost, Profitable at ~US$20 Oil Price

The Company has operating costs of ~US$15 per barrel of oil equivalent, and we estimate that it would remain cash flow positive at as low as ~US$20 oil price. This is due to the Company’s operations being located onshore in the USA, where substantial infrastructure exists. This allows for relatively inexpensive and fast tie in of discoveries to sales as well as low cost onshore drilling expenses.

Forward Activity and Capital Management

In light of the current global economic crisis, the Company has deferred expenditure for some of its higher risk exploration projects to ensure that all future activity is more than covered by cashflow. Amadeus has US$56m in debt (reduced from US$66.8m) and interest cover of >7X, indicating a strong ability to service this debt. The Company currently has 1P reserves of 9 million boe, which we estimate to be worth A$121m at current spot prices (US$45 oil, US$4.20 gas, $0.65 AUD/USD). This represents a ~70% debt to asset valuation ratio, which is relatively high but not unmanageable. The same assumptions, adjusted for debt, overheads and exploration, imply value of 41cps, indicating the market believes that energy prices will never increase. Any recovery in energy prices will have a positive impact on gearing.

We believe that there may be potential for a reduction in reserves in mid April due to the low oil price; however, this should be offset by the recent exploration success or a recovery in oil and gas prices.


AMU.asx


Buy






3 Mar 2009


Share Price:


$0.240


12mth Price Target:


$0.70














Brief Business Description:


Oil producer with long lived assets located onshore USA.



Hartleys Brief Investment Conclusion


Low cost producer with strong track record of increasing production and reserves.



Managing Director & President, USA:


Geoffrey Towner (Managing Director)


Betty Dieter (President, Amadeus USA)


Top Shareholders:


WYLLIE GROUP PTY LTD (12.2%)


J P MORGAN NOM AUST LTD (3.9%)


SPINIFEX HOLDINGS PTY LTD (4.1%)


Company Address:


Level 11, 225 St. George's Tce


Perth, WA, 6000



Valuation:


$0.93


Issued Capital:


200.9m


- fully diluted


200.9m


Market Cap:


$48.2m


- fully diluted


$48.2m


Debt (31 Dec '08):


-$81.0m


Cash Equiv (31 Dec '08):


$4.3m



FY08a


FY09e


FY10e


Prodn (mmboe)


0.745


0.625


0.761


Op Cash Flw


$30.2m


$33.8m


$42.0m


Free Cash Flw


$9.4m


$1.9m


$11.5m


NPAT* (A$m)


$33.6m


-$4.0m


$19.6m


EPS ($, bas)*


16.7x


-2.0x


9.6x


P/E (basic)*


1.4x


-12.1x


2.5x


EV / EBITDA


2.9x


12.1x


4.4x


DPS ($)


-


-


-


Franking


100%


100%


100%


Dividend Yield


0.0%


0.0%


0.0%


N.D. / equity


94%


57%


48%


Chg in Cash


16.2


-8.6


9.2


- per share


Net Cash End


$19.2m


$12.2m


$25.0m


2P Reserve (oil mmbbl)


14.37


EV / 2P Reserve


8.7x





*normalised


Source: Hartleys Research






Dave Wall

Oil and Gas Analyst

Hartleys Ltd