Comprehension 101

Hmmm.... one takes a mini break and a war of words erupts ...settle down and focus. Everyone will have an opinion and unlikely we can all live happily ever after.... ahh a fairytale ending is it not?

Possibly we all should be reading and comprehending the company and the business a little more closely.

Lets start with

(A) Strong oil and gas flows from Red Bud 1H

"...has produced more than 20,000 barrels of oil equivalent (80% oil) under natural pressure during flow back operations which are currently underway."

What an interesting announcement for Redbud. Why break the protocol of IP30 and stating choke size? (especially given HK operating as a "factory").

Don't forget, IMO this well was put into production on Jul 31 (why else would TXRRC have reported production in Jul). Looking at the report it calculates to 799BOE on day 1. Model says 20,488 is IP 30. I'll be able to cross check against reported TXRRC Aug production when available (mid Oct). Since Aug has 31 days and assuming online the whole time the Aug report would be about 20,816 BOE and total produced till end Aug is 21,615BOE

That's my thought there (sorry to take so long AussiePunter)


(B) Annual Report

Flowery isn't it. RC definitely has this part right "Progress would be linked to access to capital more than any other factor". Not sure I would agree with the part about AKK proving the potential ... lucky for them (and us) that HK discovered El-Halcon and Birch happened to the in HK designated sweet spot. Luck, timing and skill  - don't mess with the order.

RC also right with "...The pace of this development will be determined by the Operator, with Austin concentrating on keeping up with drilling..." HK has made it clear they are driven by getting their acreage to a HBP state ... we also know there is a fair amount of pooling of acres so while we may be participating in more wells per se, they will not be at 30%WI & 22.5% NRI all the time - as evidenced with both Redbud and Currington.

A lot is being "telegraphed" in the AR IMO. Don't confuse cash flow with free cash flow. Don't confuse EBITDA with actual earnings. All things being equal (such as oil no dropping to $80/bbl for instance) will produce cash in Q4 - but not free cash flow (much to much Capex going on).

Looks like AKK is "preserving" cash ... "...It is our intent to drill Pierre wells until this main gas line is connected and then drill alternating Niobrara and Pierre wells...". & "...the balance of the cash flows from a successful debt deal would be dedicated to the development of the Company's Niobrara assets". We know how much cheaper Pierre wells are to drill.

Where are my bullish posters on Bourke #5....  just like I posted when I reported the IP, this well is not as good as the others .... but at least it is economic at 12 BOPD (a gross figure - our NRI is approx 4.5bopd at that number


I will once again caution anyone who reads the AR that it is not a generally accepted principle to report 3P and a NPV valuation on 3P Reserves (just isn't done and not allowed by SEC as I understand the rules). Obviously more "relaxed" in the land of Oz.


Now I will leave you with a passing observation - and anyone who is planning to attend the AGM please ask...

Why is it that AKK - a producing oil and gas company - doesn't report how many BOE's it produced during the year? I mean not even the total (not that I could find anywhere). Certainly note any breakdown of the production from its 4 assets. No analysis at all on pricing received on sale of product. Nothing at all on the costs at each property.

These are important items for investors. Real shame I can't make it.


(C) Debt Deal

Be careful what you ask for. It will come. It wont be panacea. Lenders will be very focused on production and operating netback (dropped significantly with the $10/bbl oil drop).

AKK will grow into its debt - can't see it happening any other way.


GLTA (and go easy on one another)

ting