looks like they are finally pursuing the survival strategy and according to my calculations (see below) - this share may see 30 to 40 cents in around 6 months timeframe and maybe 50 to 60 cents come march/april 2009.
I have done some calculations based on the following assumptions.
1. AZZ follow thru with OUTLAR field. Assume each well produces 3 to 5 Bcf on average and they drill 4 more wells. Each additional well is drilled every three month from May 2008 onwards and costs US $1.3M to AZZ (as per AZZ announcement). Each well produces avg of 3 Mcf and 200 barrels per day for rougly 3 to 5 years.
2. AZZ again sticks with Harrison (Harrison 2 in drilling now and say one more Well on this patch). Again assumes it produces 3 Mcf and 200 barrels per day (some guesstimate based on Harris -1 results before it went pear shaped). Here the NRI for AZZ is approx 56%. I have assumed that it costs $2.5M to AZZ to drill this well.
3. I am assuming that AZZ has (after paying for Harrison-2) approx $4.5 Million - the figure confirmed by quarterly (they had approx $9.0 Million as at end Dec 2007).
4. I am also assuming that their expenses per quarter are approx $1.25 Million (around $500K for convertibles and $750K for staff and other things). The Quareterly points out that staff expenses may be only around 0.5M from July 08 onwards.
5. Revenue from drilled wells starts approx 2 months after expenses.
6. I am also assuming 100% success rate (am I dreaming here!!!!!)
- Based on above, my spreadsheet says that they will always be cash flow positive and will have approx $27M as at end Sep 2009.
So if they don't do anything with all other properties, they can pay all their convertibles and still have approx $7M and over $2.8 Million per month revenue.
AZZ Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
