AKK 0.00% 0.3¢ austin exploration limited

Biggest O&G bargain or a value trap, page-5

  1. 11,058 Posts.
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    A great question ... but what really defines "value"?

    I was reading some interesting articles around value, spec stocks and the market in general. Some views and thoughts of how may/may not apply to AKK

    1. Look for catalysts (as in anything that could materially impact the company). The obvious ones in O&G would a drill result for explorer or JV for junior developer or a good Reserves report or an unexpected CR and so on.

    Catalysts (or we thought) for AKK - all IMO and by no means an exhaustive list. SP is closing share price on the day sourced from Yahoo (no reference to intraday high).

    a. JV with HK. SP movement:
    = 1.2cps (08/5/13 low point before JV announcement)
    = 1.8cps (31/5/13 announcement of JV with HK)
    = 1.4cps (30/7/13 notice of closing of JV with HK
    Worked well as a short term trade for those that had anticipated and timed it. Worked poorly for those that saw that "catalyst" as re-rating the stock higher.

    b. 1st well result of JV with HK
    = 0.9cps (09/12/13 low point before spud announcement)
    = 1.1cps (23/12/13 announcement that 1st well spud with HK JV)
    = 1.3cps (26/03/13 announcement of 1st well IP)
    Once again, worked well as a short term trade for those that had anticipated and timed it. Worked poorly for those that saw that "catalyst" as re-rating the stock higher. Also had the punters forgotten that while the result was good the immediate production (and therefore cash) impact is zero - the after payout drill carry effect.

    c.,d.,e.,f., Reserves Report, Debt, SPP, 1st paid EFS well....all catalysts in some way related to production that while anticipated have yet to have an impact


    2. Look for leverage - meaning something the market has yet to appreciate. An example might be a large acreage position in a play that hasn't been fully discovered or delineated.

    Leverage for AKK might be....
    a. Pathfinder - will the Niobrara be as productive in the southern fringe as it has been at Wattenberg?
    b. Pathfinder - will AKK JV for E&P
    c. Pathfinder - flowing oil now because of GPA plant operations - a material change to production
    d. Birch - When and how many EFS wells are coming. Expecting just one, but plans may change


    3. Specific to O&G, the thought was wrt catalysts, "Reserves and Production" is what the game is about - even on the junior side. What the tricky part to do is figure out the "timing" of the catalyst. The argument was how early to be able to capture the "speculative premium" but avoid being one of those investors who are perpetually early and tie up their capital.

    4. How are the markets pricing in the catalysts? In a fast moving (good?) market you need to anticipate the catalyst and the market's reaction to the news. The market at present seems to favour analysis of the result leaving the checkwriter (buyer) time to accumulate their position.


    Net result - premature again ...(hate it when that happens).
 
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