latest from td

Exit 2011 Activity Levels and Volumes In Line With
Expectations

We are maintaining our BUY recommendation and $4.50/share target price.
In addition, our current suite of 2012 assumptions remains unchanged. This
includes a 2012 production estimate of 11.7 mboe/d (relative to 2011 volumes
of 2.9 mboe/d) and capex of $278mm.
We continue to recommend AEF on the basis of 1) its pure-play nature
(should continue to command a premium multiple, in our view), 2) a superior
growth profile (we are anticipating a greater than tripling in exit-to-exit
production volumes over the coming year), and 3) potential upside via a)
down-spacing (to 60 acres over time, and potentially 40 acres) and b)
development of the Austin Chalk longer-term.
Impact
SLIGHTLY POSITIVE. AEF’s year-end activity levels were in line with
prior guidance. In addition, we believe that AEF remains a) very well
capitalized through its existing cash balance and the recent establishment of a
$300mm credit facility (with minimal draw-downs during the quarter), and b)
well-positioned to more than triple pre-royalty production on a exit-to-exit
basis in the coming year. Lastly, it bears mentioning that the planned 2012
drilling program of 158 gross wells (35 net) remains unchanged from prior
disclosures.

Exit production not disclosed, however, it was likely close to its prior target of 5.5 mboe/d
- Q4/11 net of working interest, pre-royalty production was up 19% over Q3/11 volumes and averaged 4.3
mboe/d including NGLs. December production averaged 4.8 mboe/d but was impacted by work-over
operations on 10 producing wells in the Excelsior AMI and 5 producing wells at Longhorn.
- There was no mention of the 2011 exit rate although we suspect it was relatively close to its formal target of
5.5 mboe/d.