..... Two posters who I highly regard informed be about this stock in the last two weeks, so I thought it was time to check it out... If you dont agree with my view, then accept that, and either try and debate it off, or explain it... dont attack me... If you are going to be like that, then let me make this post and get back to what it is I do before I have to start defending my research...... Here is my shared research I sat down and did in an hour this morning......
Im not excited about the company...AZZ is similar to what ive been saying about GDN... But in saying that, AZZ has more going for it than GDN, so no direction comparison in that respect.... First of all, I have noticed some inconsistancys in the share price predictions (outlook) in the companys market releases...Developing/Producing the Shale zone at The Eagle Ford interval is not a company making project, even though it is potentially large in resource... The revenue stream is drawn out for 15 years plus... If only those revenues could be drawn out in 2-3 years!... Its a major difference, and these sorts of revenues are not large enough to grow a strong cashflow positive company to support a market value of 63 million... AZZ has run hard this year up about 500%...
This company is all about Eagle Ford shales testing program now... horizontal well and fracture stimulation... West Wharton and Oyster Creek provide little real production umff...... Looking at The Edwards Objective straight away I see a problem... 80 BCF target, its just not enough... 80BCF one well, YES... but thats off 20 wells...
Eagle Ford Shale potential right now, but not the sort of attractive investment for me.... hype usually has a part to play initially so there could be trading opportunities....exposure to risk makes it not worth it overall, but who knows what will happen .... Such a lofty current market valuation is being held up by a thread...... Ok... I read in the latest company ann that this project Yellow Rose, and The Eagle Ford Shale target, could add $7.84 worth of value to the company....
I cant post link until Ive made 5 posts... (its in recent report)...
The first thing I saw wrong was how there was no discounting (which cripples those revenues drawn out in 10 years plus)..... and that each well costs 5million US dollars to drill, where they state different drilling costs in the summary.... so on the High end estimates of the size of the resource 140 development wells would be required to get Gas in total of 288 BCF... so out of revenues of 1.4 Billion US... 140 well * $5M=700 Million US. making the resource worth 700,000,000 over 20 years... AZZ is sinking all its funds into this well (a few million left perhap?, I didnt have time to look at cash position exactly)... Each one of these shale wells could recover 4-7 BCF... so say 6BCF... Therefore each well will earn 30million US dollars over its life time... so a drips and drabs earner unless you get many development wells in, and I just cant see this company maintaining their current exposure in the project over the next few years as this is costly to get off the ground... There might be a time for this company... not yet though..... Initial run will pull back (if there is one), because the market will eventually sink in the 6MMCF ann, and go ohhhh.... "thats not really that large"... Boy, I would like to see AZZ get 100 wells in there, .... AZZ's partners budget for further development of Eagleford would be 120million US dollars next year... How on Earth is AZZ going to be able to fund its position as a drips and drabs potential producer for at least the next two years....... Im not excited for this company...
On another note Eagle Fold Shale came in 50 feet above estimates... Hum... And what, When they flow tested The Edwards Objective it flowed at less than 2MMCF which is below the breakeven point for taking the project further......... humm... by how much less than 2MMCF did Edwards flow at, can anyone tell me? It didnt say... This might give a better indication on how Edwards might flow... Discoveries and flow testing along the Edwards trend to date have been successful in the 8MMCF per day region, in La Salle County... .^sc
AZZ Price at posting:
27.0¢ Sentiment: LT Sell Disclosure: Not Held
