reserve upgrade - worth a$90mill?

AMU announced yesterday a major upgrade in its 1P and 2P reserves (from 1.78mmbbls to 1.8mmbls and 1.7mmbbls to 5.33mmbbls respectively). While the 1P change is negligible, at least it is in the right direction. But that 2P upgrade adds enormously to the company's underlying worth.

Using the methodology in the recent Shaw report, the total value of the upgraded reserves looks like this:
1P = 1.8mmbbls X US$10bbl = US$18 million
2P = 5.33mmbbls X US$8bbl = US$42.6 million.

All up an amazing US$60.6 million. It is even more impressive in Aussie dollars - around A$90 million with a 0.68 exchange rate. And yet the company currently has a market cap of around A$35 million.

To that A$90 million add the value of the two impending bio-diesel plants that the Shaw report put at around A$50 million, and we see a junior with an asset backing of around A$140 million! On this basis it is easy to presume there is a lot more in store for AMU share price.

It must also surely raise the question whether there are some bigger oil companies in the US that would view such undervalued reserves as an appealing purchase.

My take of the situation is also that the full potential of Red Creek has not been uncovered. The company has previously announced it intends to poke holes into three undrilled prospects with the hope of proving up three new fields. Suggests to me that more reserve upgrades are down the track.

Surely with this sort of asset backing the market ( and brokers) will seriously re-rate the company.

And for AMU holders the prospect of ANZ giving the bio-diesel project the thumbs-up now looks like further icing on the cake!