Marco Polo Well drilling, page-2

Aussie, had a chat with Tim and Guy earlier today.

Queried a few points from the latest presentation with the timeline being one of them, as we know they are currently drilling flow testing will follow and is expected within 4-6 weeks.

My concerns on this one are primarily around funding and understanding the downside should the drilling turn out to be unsuccessful.

The management team appear to have done a great job of reducing the drilling and completions cost by doing the bulk of the work in house. They have essentially dry hired the rig and associated equipment and are running it themselves, they have significantly reduced overheads by reducing the headcount to which reduces administration costs therefore reducing non essential cash burn.

The expectation of being able to drill for $500k/well is on target and at the completion of drilling the cash on hand should be around $500k leaving them reasonably low on cash but the expectation is that they will be in a stronger position going forward due to increased production revenue.

As was earlier announced a large 790 ft oil column was intersected during the drilling of the first well which is obviously a very positive signal, albeit no guarantee. Neighbouring leases have had high strike rates (21 from 21) with the example in the presentation showing average IP30 production around the 130bbl mark and AKK ground has been shown to have a thicker potential payzone so this is a useful benchmark.

The company's low case projections show solid return from IP50 flow rates which I personally believe are achievable.

In summary I think that AKK is sitting on solid acreage and that the decisions being made to set them apart as a low cost producer bodes well for the future. If this area is successfully proven to be productive then look for a decent increase in acreage valuation.