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Investment Case

Our recent site visit confirms that Marathon has clearly taken full control of project now and is now actively seeking to optimise productivity and lower costs: Strong improvements have been seen to date. This is translating to meeting production targets: At 10.7kbboepd as at Jun 30, AUT is tracking its targeted 22kbboepd exit rate. The market will be increasingly unable to ignore such an exceptional growth profile as data continues to build, Q-on-Q, yr-on-yr. Buy: Price Target remains at A$6.00/sh.

Key Points

Our site visit confirms that Marathon has taken full control of AUT’s Sugarkane assets: 50% of Marathons budget capex to be spent on Eagle Ford development.

To date, key initiatives include: drilling longer laterals for increased flow performance; lowering spud-to-spud drilling times (drill times are up to 40% faster than under previous operator and this is for 40% longer laterals).

Key areas of future improvements have been identified as:

1) Pad Drilling

2) Horizontal and Vertical Down-spacing

3) Multi-lateral completions

4)Infrastructure and Commercialisation initiatives to maximize profitability

AUT’s Jun Q production of 559.4kbboe (75% oil-cond) represented 75% increase on the Mar Q; for a total of 880kbboe for the Jun H (EZL forecast 850kbboe).

Jun 30 exit pre-royalty production of has grown 10.7kbboe, maintaining run-rate for yr end guided exit of circa 22kbboepd (inc. of acquisitions).