Double up by xmas.... Red Fork Energy (ASX:RFE)Reserve upgrades...

Double up by xmas....

Red Fork Energy (ASX:RFE)
Reserve upgrades have just begun…
12mth target:

12 month target price upgrade to $1.15.

A reserve upgrade, earnings accretive infrastructure purchase and higher spot energy prices have underpinned an upgrade of our price target to $1.15.

2P reserves upgraded by 250%. An independent report has lifted Red Fork Energy’s 2P oil and gas reserves from 10.4Bcfe to 36.4Bcfe. Total reserves (3P) have risen from 37.6Bcfe to 62.2Bcfe. A busy drilling schedule in place for the year ahead means that further upgrades are in the pipeline.

Strategic infrastructure purchase is earnings accretive. Red Fork Energy has purchased additional gathering and pipeline infrastructure in Oklahoma for US$0.6m. This will enable natural gas sales at the full Henry Hub spot price, meaning that payback on this purchase should take less than 12months. The acquisition includes two low pressure gathering lines extending 16kms, three sales lines, a compressor equipped stripper plant and taps into two purchasing entities.

News flow galore to provide share price catalysts. Land acquisitions, drilling activity, potential reserve upgrades and higher production rates should all provide a healthy pipeline of news flow to drive a further share price re rating.

Oil and gas prices have risen. Geopolitical conditions in the Middle East have triggered a rise in oil and gas prices.

Projects are operating on schedule and within budget. Red Fork Energy remains on schedule to drill 50 new wells over the next 12 months. Our DCF valuation continues to be based on forecast drilling of 15 oil wells, 56 coal bed methane wells, and 57 shale wells over the next 3 years.

Investment view. Red Fork Energy remains an excellent exposure to the oil and gas sector thanks to a low risk drilling schedule, strong management team and experienced local operational team.

http://www.redforkenergy.com.au/documents/RFE_October_2007_Wise%20Owl_Upgrade.pdf
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