re: Ann: Sugarkane Field Reserves Update for ... Hi...

re: Ann: Sugarkane Field Reserves Update for ... Hi Icharus,

Don't confuse Sugarkane, which seems to be the whole field, with Sugarloaf, which is the assembly of leases in that field forming the AMI in which EKA, AWE and EME (UK) participate (with MRO and TCEI).

AUT has now discharged what appears to be the principal condition precedent for the first drawdown and we will now find out what precisely it had in mind for the $85mm.

I idly wondered whether the Hilcorp/AUT/EKA party might re-convene further North East along the trend. EKA is already active there. There seems to be money chasing proved and partially proved acreage and that some of the buyers are looking for an investment return. As AUT said, exploration risk in its acreage is effectively zero. So there is money to be made by buying up virgin acreage in the trend, proving it up, drilling to hold, and then selling off to longer term investors looking for a good and secure return on their cash.

EKA, for instance, mentioned in its 2011 report & accounts that:

"...On the 3rd of May 2011, Eureka announced that it had secured a 100% working interest of 3,975 acres in the Eagle Ford Shale in Burleson and Washington Counties, referred to as the Brioche asset. The opportunity was identified by the same technical team that identified the Sugarloaf asset and the Pan de Azucar asset..."

The "same technical team" - all EKA personnel? Or AUT / ex ADI involvement?? In former times there was discussion of a possible merger between AUT and EKA. Perhaps there are still BoD links and possibly also with the former team at ADI?

So, might AUT be doing the same? What will Hilcorp do with the buckets of cash? AUT's facility is larger than expected and double the figures previously suggested. Is it all required for the ramp-up?

Whilst I would be most surprised if AUT moved out of the EFS trend, because that is its selling point on the TSX, I see no reason why it should not engage in planting a new orchard to produce fruit that could ripen over the next couple of years. It has some initial cash and also access to capital in the form of realisations from some level of harvesting of existing assets. There's no time pressure and it might wait for the Austin chalk reserves to be recognised in the "valuation" by NSAI.

Just an idle thought...