AusTex Oil has announce its first half 2014 result, and in doing so has reported very impressive results. Confidence in the Snake River field is boosted with a reserve upgrade for the half year. While the strong growth trend we have seen in production, remains a key feature of the result for the month of July. Revenue for the first half to 30 June 2014 was a record US$13.3 million, which was 103% higher than the corresponding half in 2013. The following chart shows first half revenue (note the company changed its reporting cycle to June/December from September/March):
Source: AusTex Oil
Revenue was impacted by the surge in production for the half and higher realised oil and natural gas prices. Gross production for the half was higher by 102% on the corresponding 2013 half, at 199,210 barrels of oil equivalent (boe). There were 44 wells in production in the reported half compared to 16 in the same half for 2013.
The revenue surge flowed to the net income line which moved from a loss in the first half 2013 of US-$0.6 million to the reported US$2.3 million to 30 June 2014. No dividend was declared for the half.
A total of 74% of total production was liquids, of which 75% was oil and 25% was liquid natural gas. Liquids are high profit margin commodities, with oil carrying the best profit margin of the two. Product mix would certainly have had a major positive impact on net income.
Reported net cash flow from operations also surged to US$4.8 million, representing a rise of 232% over the same half in 2013. Higher revenue and contained cash costs, especially financing costs, were behind the result.
The strong financial result allowed the company to further strengthen its balance sheet to 30 June 2014. Debt in the balance sheet fell to US$254,913 from US$4.4 million at 30 June 2013. Due to the company’s rigorous drilling programme and other infrastructure commitments, cash was lower at US$10.7 million down from the US$17 million at 30 June 2013. We certainly have no issues with the current structure of the company’s balance sheet.
In ground reserves for the Snake River field were also given a boost to 1 July 2014. The following figure shows the location of the company’s Snake River blocks:
Source: AusTex Oil
The company has continued to improve its understanding of and confidence in the Snake River blocks through the ongoing vertical well development programme. As a result the 1P (proven) and 2P (proven plus probable) reserves for the Snake River blocks have experienced a significant upgrade. Over the half-year to 1 July 2014, Snake River’s 1P and 2P reserves increased by 71%, to 25.7 million boe. The company indicated that the new reserve calculation includes only those blocks owned by the company within the Snake River precinct.
Snake River’s upgraded 1P reserve was calculated at 18.9 million boe, up from the 14.0 million boe at 31 December 2013. The 2P reserve was upgraded to 25.7 million boe from the previously reported 16.8 million boe. These increases are significant and indicate the productive nature of the Mississippi shale play.
The monthly production update for July 2014 shows the company is continuing to improve its production profile. The following chart shows monthly production:
Source: AusTex Oil
Boe production for the month of July was 69.5% higher than the same period in 2013, at 38,888. This equates to an average daily production rate of 1,254 boe per day. Snake River now has 38 operating wells with three new wells tied-in during the month of July. The company also has four operating wells where it is not the operator.
Five wells at Snake River are being flow tested and will be tied-in on completion and added to the pool of producers. Ten wells are drilled and fracced, and are waiting flow testing, while eight wells are at the drilling stage. This is an exciting inventory of wells and bodes well for a continuation in the company’s growth trend. The company plans to drill four to five vertical wells during August 2014 that will added to the company’s growing number of Snake River producers.
Over recent months, the company has experienced an infrastructure bottleneck, especially in the northern part of Snake River, in getting product to the market. The bottlenecks have been addressed, with the company expects a surge in production in the months ahead as some 18 wells that are waiting to be tied in; can be.
AusTex Oil is a junior oil and gas producer and explorer, holding blocks in the pedigree Mississippi Lime Play oil and gas regions of Oklahoma and Kansas. With production growing rapidly, we remain very encouraged by the prospects for the company’s well development programme at Snake River. We believe the continued re-rating of the stock will be a key feature in the share price going forward.
We believe AusTex Oil will continue to de-risking further in the months and years ahead; as its production profile grows. We premise our belief on the delivery of higher oil and gas production levels, as wells are successfully rolled out across its Snake River blocks. As a consequence of our belief, we continue to reiterate our recommend for AusTex Oil as a buy for Members with no exposure to the stock in their portfolio.
AOK Price at posting:
26.0¢ Sentiment: Buy Disclosure: Held
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