AMU has shown a glimpse of what an even more impressive company...

AMU has shown a glimpse of what an even more impressive company it is on a path to become - its recent roadshow and latest lot of announcements all pointing to the prospect of major growth in earnings and in its net asset value.

Geoff Towner was in Sydney last week doing the rounds of brokers, fund investors and selected media commentators. The roadshow was basically to run through the presentation already released on on the AMU website. It is an impressive story, and current WTI oil and Henry Hub gas prices make it even more appealing.

Some of the impressive messages I took away from the presentation I attended were:
1. AMU's current 1&2P reserves of 13 million barrels would, in today's market, have a value in excess of US$130 million (or A$183 million). Those reserves will grow significantly as production from recent drill successes provides the necessary data, and as a result of highly likely further drill success on its Raccoon Bend, Red Creek and Halletsville South prospects.
2. The value of the 13 million barrels of reserves alone is more than double AMU's market capitalisation on the ASX.
3. Oil and gas production is growing, and coupled with healthy WTI oil and Henry Hub gas prices should deliver substantial profit growth over last FY.
4. AMU's oil drilling program is likely to enjoy plenty of success, with the Raccoon Bend program for example likely to at least double production from that field (and give AMU at least another 350 bopd).
5. The biodiesel plant in Adelaide is on track for a construction start in the near future - and the next plant at Picton will kick off 3 or 4 months after that. Each of these plants will be very profitable. (My own estimates suggest each will deliver about A$5 million in profit to AMU once they are in full production).

On top of this AMU has recently released a series of announcements that suggest plenty more joy is in store for its shareholders.

Among those recent announcements were the start dates for drilling on Raccoon Bend and Red Creek.

October 1st (today Texas time) will see the first of the 5 B2B wells spudded on Raccoon Bend. AMU has high expectations for this drill program - having previously flagged it could triple production (and deliver additional attributable reserves to AMU of between 6 to 10 million barrels in the process!).

And October 5th will see the first of 2 B2B wells spud on Red Creek. Although these wells have low flow rates (around 80 bopd appears the average), they all add up. Success from RC could easily see another 100 bopd attributed to AMU.

In addition, AMU announced yesterday the acquisition of another exploration lease targeting substantial oil (2.5 mmbbl) and also gas. Although not to be drilled for a while, on their past record of canny acquisitions I am sure AMU have made another earnings positive buy.

But the most interesting of the recent announcements was the snippet contained in the Annual Report which noted that the Halletsville South deep gas play was likely to contain 12 to 15 'producers'. Note: not just drill targets, but producers!

Given that AMU has stated that the 2 recent deep gas successes from HS are expected to drop over A$1 million in profits annually to its bottom line, the prospect of another 12 similar successes has me drooling. That suggests a likely A$6+ million in profits from just from these additional Halletsville South wells.

On this basis it is not out of the question that in the next one or two years AMU could easily be delivering over A$20 million in profit!

This would come from oil and gas business profits in excess of A$10 million (ie over $4m from current production and an further $6m from more HS drilling) and A$5+million from each of the Adelaide and Picton biodiesel plants - for another A$10 million.

When you add in the prospect of:
* a significant expansion of production from Raccoon Bend,
* further drill success on the latest acquisition down the track,
* any further acquisitions, and
* more than just 2 biodiesel plants (AMU has previously flagged plans for up to 5) .....
the case to dive in and stock up on AMU shares looks very compelling.

There must be somebody else out there who has joined the dots like me - the buyer of over 5 million AMUOBs yesterday for over $1.6 million must be convinced.

Seems like plenty of upside still to come.