Back from hols...People might be interested in this comment by...

Back from hols...

People might be interested in this comment by Daniel Butcher J P Morgan (dated 30 March 2012 re AUT but not yet released on AUT's website):

"We expect US shale technology to continue to improve, and to enhance both incremental recovery and improved economics in fields across the US. A rising tide should lifts all boats, and many players will benefit from this trend.

However, the valuations placed upon marginally economic shale acreage are very low. If new technology can make them economic, they will experience disproportionately large uplifts in value compared to fields that are already
economic. There are also indications that some technologies offering step-change improvements such as HiWAY fracs create a bigger uplift in flow rates in poorly
producing areas with low permeability, etc. For this reason, we think whilst AUT's highly productive acreage will benefit from technology, it may not be the best way to
play the theme.

Exposure to the US shale technology theme is available through many internationally traded stocks, and some ASX micro caps..."

This does not in any way affect my view of my holding in AUT, which is that it is a relatively low risk "deposit account" that could still provide multiple returns.

But I do find in this support for my strategy of holding EKA for the higher risk higher multiple returns that might be provided by, particularly, Brioche. And that is what JPM seem to be saying. If you want to play the shale theme, you can get higher multiple returns from the companies developing the more marginal shales.

But there is one important factor that might distinguish EKA from other micro or small caps developing those more marginal shales: EKA's price is more than underwritten by its Sugarloaf interest. So, EKA is a 'sweet spot' play with a wild card. But some patience is needed. The Company needs to secure the right deal before drilling Brioche and they need an experienced operator. They also need the technology.

Another comment from JMP - note: like GMP Securities and Euroz, they got off their corporate situpons and they went to the field of operations and they talked to the people on site:

"...We also learned more about the rationale of the JV in
deciding to test 40-acre well spacing in the oil window –it is partly because the hydrocarbons there do not flow or produce from the outermost part of the ~200 ft long fracs very well compared to the gas/condensate window. The possibility of frac interference is expected to beless of an issue in the oil window. Additionally, the operator (Marathon) indicated that a small frac overlap of 10%-15% or so was not expected to significantly impact recoveries –although only testing will confirm that theory."

This might be more applicable to PdeA but MRO is also drilling closer spacing in the Sugarloaf condensate region and doubtless EKA is watching results very carefully.

The results of closer spacing might not be reflected properly in AUT's price for, maybe, 12 months. EKA will probably lag behind that but, if the evolving technology applied to Brioche can produce the results, we could see a significant re-rating of EKA beyond that of AUT's.

I view EKA as a longer term hold but one that could provide greater multiples - possibly 2 or 3x AUT at Friday's closing prices. That might even be conservative.