hartleys report

i was away last week and found this 14/9/10 if not already seen

RED FORK ENERGY LTD
Reserve Upgrade = Long Dated Option on Gas Price
Red Fork Energy Limited (?Red Fork?, ?RFE?, ?Company?) has announced a large reserve upgrade related to its nonconventional shale gas and conventional oil and gas assets, located onshore USA. The Company?s
independently certified reserves now stand at 143.1 billion cubic feet of gas equivalent, approximately twice the previous reserve of 72.8 billion cubic
feet of gas equivalent (the Company has used a 20:1 ratio for converting oil reserves to gas equivalent).

This is an impressive achievement; however, we do not believe that the economics of Red Fork?s projects are attractive at current gas prices. It is
our view that gas prices will improve with recovering industrial demand and the onset of the northern hemisphere winter but the increase in production
from other shale gas projects is likely to cap the gas price for the foreseeable future.

This means that an investment in RFE is like a long dated option on higher gas prices in the future. A gas price around US$5-6 per thousand cubic feet
of gas is realistic as a long-term assumption, and in this range the Company?s assets are attractive. We have seen smart money investing in USA gas projects recently at what is widely considered the bottom of a cycle, such as the takeover of XTO Energy by ExxonMobil for US$42b.

Downgrade to Spec Buy on Low Prices and Lack of Flow Data
Red Fork has reported flow rates from its acquired asset at East Oklahoma South, with peak rates of 150 thousand cubic feet of gas per day. We are yet to see a flow rate from any well drilled and operated by RFE. Given this,
and the low gas price environment, we have downgraded our
recommendation from a Buy to a Speculative Buy until more visibility is obtained around flow rates from recently drilled wells.

The Company has stated that its aim is not increase production per se, but instead to
strategically drill wells in order to hold its large acreage position. Whilst we understand and agree with the strategy, without production and the associated revenue, RFE will not be able to fund its drilling program. We
estimate 6-9 months of remaining cash.

Corporate Potential Remains
The Company has an attractive acreage position with a large independently certified reserve and plenty of likely future reserve additions. Red Fork also owns significant gathering and pipeline infrastructure. Some, or all, of these assets may be attractive to a larger Company with a longer investment horizon and the ability to effectively hedge future production. Red Fork?s assets differ from most nonconventional shale projects as they are shallow
and can be developed relatively cheaply, which may increase the potential for interest. The Company?s production has also increased to a level where
some debt funding is possible.

Whilst we have downgraded our recommendation, we remain confident in the longer term potential of the Company. We rate Red Fork Energy as a

Speculative Buy with a 6 month price target of 78cps.