huntleys recommendation, page-3

sorry should have mentioned the rec's go back a fair way, here are some,


Mosaic Oil NL (MOS)
Previously Reviewed:21/3/07(SCG11)


Recommendation: Speculative Buy Price: $0.16

Sector
Oil & Gas Producer & Explorer
Market Cap
$80.1m
52 Week High/Low
$0.24 - $0.14

2 Year Price Chart



Note: Marker indicates price of $0.16 at publication date.
Risk
Business Risk: High Pricing Risk: High

Year 6/04(a) 6/05(a) 6/06(a) 6/07(e) 6/08(e)
NPAT ($m) -1.1 1.1 2.0 3.6 2.8
EPS (c) -0.3 0.2 0.4 0.7 0.6
% Change -183.0 -- 81.3 87.6 -22.1
DPS (c) 0.0 0.0 0.0 0.0 0.0
Franking (%) -- -- -- -- --
Dividend Yield (%) 0.00 0.00 0.00 0.00 0.00
PER -53.33 80.00 40.00 22.86 26.67

Source: Aspect Huntley analyst estimates

Avge Annual Growth Rates 10yr 5yr 1yr
Earnings per Share 31.0% -4.0% -52.5%
Dividends per Share -- -- --





Hurricane Approaching


Drilling of the long awaited Hurricane-2 well on the North West Shelf is in two weeks. Partners will investigate the possibility of an oil leg below Hurricane-1's 76m gross gas column. Hurricane-2 has potential for 40-50mmbl of recoverable oil worth 12-15cps net to MOS. Several other leads upgraded by the Hurricane-1 discovery provide an additional combined unrisked potential of 220mmbo with MOS' share 13.2mmbo. Hurricane-2 is expected to take 20 days. While by no means a certainty, supporting data does indicate good potential. A doubling in share price is possible if successful.


Our Speculative Buy recommendation is retained. Hurricane-2 could be just what the doctor ordered. Our valuation is unchanged at $0.20ps. Long term assumptions remain a US$60/bbl oil price, A$/US$ exchange rate of 0.76 and a 10% discount rate.


We upgrade our FY07 earnings forecast from 0.6cps to 0.7cps on a strong 3Q07 revenue result. Our 0.6cps FY08 forecast increases from 0.5cps. At last count MOS said it was on track to deliver record annual revenue in excess of $17m and EBITDA in excess of $4m. The strategy to maximise production from existing facilities impacting positively.


Group net cash at end March was little changed at $5.0m. This may improve if the 28.6% Kimu gas field interest in PNG is monetised early. Operator Oil Search is to conduct 2D seismic at Kimu to appraise for LNG potential. It could take several years and significant capital commitment for first production and MOS might look to realise value earlier if an opportunity presents. Kimu is carried on the books at around A$0.5m. Contingent P10 resources, implying 10% chance, are 386Bcf net but a sales multiple would likely apply to a more assured one tenth of that figure. Contingent resources, project isolation, the requirement to build a pipeline 200km to Port Moresby, risk and time value of money could encourage an early exit but might also limit a sale price. Regardless, cash in the hand would be welcome for exploration, development and/or new projects.



3Q exceeds expectation


MOS recorded 3Q07 revenue of $4.6m, the third highest ever and ahead of expectations, but down 13% on the record $5.3m of 2Q07. The output fall reflected lower gas demand during the Christmas period, natural field decline and maintenance and installation shutdowns at Churchie. In all, group production fell 8% to 100kboe. The oil price, up $1.08 to A$82.15/bbl, was only a partial offset. The oil equivalent average price fell 6% to A$46.11/boe.


Churchie West-1 was brought on production late in March, contributing only one week's worth to the quarter. Downlands-4 was connected on April 23 with sales from May 1.


Combined these new wells add daily, 1.5TJ of gas and 30bbls liquids, or just under 25% of prior group output. This into a strengthening eastern Australian gas market!


MOS hopes to drill 3-4 Surat Basin wells before the wet in October. Bow Energy is to kick off in mid 2007 earning 50% of Jawsone-1. Canadian company Avery Resources could drill two wells in the Taylor Oil and Gas Field to earn 50% in a program of over $5m to be spent within a year. MOS is also hopeful of third party funding for two horizontal wells to further develop the Waggambah gas field.


QUARTERLY RESULT
2Q07
3Q07
% CHG

Liquids (bbls)
19,817
18,167
-8.3

Gas (GJ)
509,206
465,173
-8.6

LPG (tonnes)
999
976
-2.3

TOTAL (BOE)
108,584
99,766
-8.1


Revenue (A$m)
5.3
4.6
-13.2

AVERAGE PRICE (A$/BOE)
48.81
46.11
-5.5






Mosaic Oil NL (MOS)
Previously Reviewed:15/11/06 (SCG44)


Recommendation: Speculative Buy Price: $0.16

Sector
Oil & Gas Producer & Explorer
Market Cap
80.1m
52 Week High/Low
$0.20 - $0.14

2 Year Price Chart



Note: Marker indicates price of $0.16 at publication date. 21/03/2007
Risk
Business Risk: High Pricing Risk: High

Year 06/04 (a) 06/05 (a) 06/06 (a) 06/07 (e) 06/08 (e)
NPAT ($m) -1.1 1.1 2.0 3.0 2.4
EPS (c) -0.3 0.2 0.4 0.6 0.5
% Change -183.0 -- 81.3 55.0 -21.5
DPS (c) 0.0 0.0 0.0 0.0 0.0
Franking (%) 0.0 0.0 0.0 0.0 0.0
Dividend Yield (%) 0.00 0.00 0.00 0.00 0.00
PER -53.33 80.00 40.00 26.67 32.00

Source: Aspect Huntley analyst estimates

Avge Annual Growth Rates 10yr 5yr 1yr
Earnings per Share 31.0% -4.0% -52.5%
Dividends per Share -- -- --





Focus on existing wells yields dividends


Headline 1H07 NPAT doubled to $2.3m compared to the pcp. There were no exceptional items. Record 1H07 revenue grew 7% to $9.6m, continuing a trend of increases since 1H04. Average prices jumped 18% to $34.6/boe to sweeten relatively steady production on the pcp. Higher oil production offset lower gas output and amplified the 7% oil price rise to US$65.70/bbl. Operating costs dropped dramatically and EBIT more than doubled to $2.2m. No tax was paid – MOS had $4.8m of tax benefits at end June due to carry forward losses. Operating cash flow of $1.8m compared favourably with the losses of the pcp. As expected there was no dividend.


Steady production overall reflected increased contribution from the Waggamba wells and the pumping wells in the Taylor and Tinker areas offset by natural decline in the Churchie field and a customer’s maintenance shut-down in December. Net cash halved to $3.3m after development expenditure of $5.1m relating mostly to successful drilling at Churchie West-1, Waggamba-1H and Fairymount-7H. Both development and exploration expenditure is expected to be substantially lower in 2H07.


MOS says it is on track to deliver record annual revenue in excess of $17m and EBITDA in excess of $4m. The strategy to maximise production from existing facilities is positive. The successful Churchie West-1 and Downlands-4 wells will be connected by March. Pump installations should continue to increase oil and gas production. We lift our FY07 earnings forecast from 0.4cps to 0.6cps on the stronger outlook. Our 0.5cps FY08 forecast increases from 0.3cps. Our valuation lifts from $0.18ps to $0.20ps on the strong result. Long term assumptions remain a US$60/bbl oil price, A$/US$ exchange rate of 0.76 and a 10% discount rate. Our Speculative Buy recommendation is retained.


While some comfort can be taken from the positive earnings trend, the quantum is not sufficiently large to be overly meaningful. Exploration is key and MOS has increasingly farmed out acreage to better manage risk and accelerate programs. Farm-outs have attracted more than $10m of expenditure net to MOS for the cost of seismic acquisition and drilling at least six wells. The most recent deal is a program of over $5m from Avery Resources to be spent within a year. Several parties are also reviewing additional farm-out proposals. The aim is to complete 10-12 wells annually mostly at third party expense. MOS retains operatorship in all cases. Existing infrastructure has capacity to support increased production.


Immediately identifiable targets have the potential to deliver in excess of 20cps of value to the company. Around $5.4m in addition to the budgeted $8.3m FY07 exploration/development program will be contributed by third parties. The Brynog-1 well will immediately follow Downlands South-1 as part of the Ausam Energy Stage 1 farm-in. MOS cites net unrisked Brynog potential of 9.1BCF or 1.2mmboe worth either 2.5cps or 8cps.


Drilling of the long awaited Hurricane-2 well on the North West Shelf is set for June 2007. Partners are investigating the possibility of an oil leg down dip from Hurricane-1’s 76m gross gas column. H2 has 40-50mmbl of recoverable oil potential worth 12-15cps net to MOS. The well is expected to take 20 days and supporting data indicates good potential for a hit. Several other targets also within the permit account for an additional combined unrisked potential of 220mmbo with MOS’ share 13.2mmbo. Net contingent recoverable gas of 386BCF at Oil Search operated Kimu in PNG is also being considered for development.