latest from euroz $5.23

Price Target: $5.23 /sh

Reason For Update: Jun Q?ly


here is a bit from the report

Marathon are due to assume operatorship from November and have already allocated at least 8 of 12 Eagle Ford rigs to the Sugarkane acreage; we expect final commitment for the CY?12 drilling programme on AUT?s ground to be 10 rigs.

This will greatly accelerate cash flow.

We reiterate our view that the upside to current share price will be realized by both horizontal and vertical well spacing.

We believe the scale potential for existing reserves highly probable noting that completions within the Austin Chalk have already been conducted with great success with the early Weston and Kennedy wells.

This should ultimately lead to a second layer of development through the Austin Chalk, and thus, at the very least, double existing reserves.

With successful appraisal of sub-80acre spacing over the next year, there is strong evidence for multiple increase to current inventories.

Investment Case:

The broader market sell-off is providing some great opportunities, AUT included. We believe that AUT should be rewarded for timely development execution and consistency of results. Additionally, investment in AUT remains a stand-out investment as it represents enviable low risk and scalable growth to production and earnings over the next 7+ yrs. We retain our Buy recommendation with a $5.23/sh valuation and price target driven by expected acceleration to field development and increases to reserves.