mro highlights, page-7

I found this on the Deutsche Bank site. Nothing new but good to hear yet another supporting voice.

July 9, 2012
Deutsche Bank initiates coverage of Aurora Oil & Gas

Deutsche Bank (XETRA: DBKGn.DE / NYSE: DB) has initiated coverage of Aurora Oil & Gas (ASX: AUT), with a Buy recommendation.

Research analyst John Hirjee said, “Aurora offers a large pure-play exposure to the Eagle Ford Shale ‘sweet spot’ in southern Texas One of the key thematics in oil and gas is the emergence of shale oil production and Aurora is strongly leveraged to this theme given its leading shale acreage footprint.

Deutsche Bank analysts forecast an average 56% Internal Rate of Return (IRR) for Aurora’s base case development, representing the highest IRR amongst development projects in their coverage space.

“Aurora’s acreage has one of the highest liquid yields in the condensate window and covers one of the most highly pressurised sections, driving strong well recoverability. Their superior return profile should enable Aurora to fund an accelerated development program.” said Hirjee.

In 2H2012, operator Marathon Oil will begin a pilot program to reduce spacing between wells from 80 acres to 40-60 acres. The economics of downspacing are likely to prove compelling and will serve as a key catalyst for highlighting the significant upside to Aurora’s reserve position.

There is also further upside to well recoverability as operator Marathon Oil undertakes ongoing improvements to drilling and fraccing techniques and improved well design. Downside risks include execution risks, infrastructure risks and timeline delays. Aurora has a 76% liquids ratio so is only minimally impact by low Henry Hub prices.

Aurora Oil & Gas holds 19,300 net acres in the Sugarkane field in Texas operated by Marathon Oil. Established and listed in 2005, Aurora has recently been included in the S&P/ASX 100.