UTSC - Monday 14th March 2011.Jupiter EnergyCOMPANY...

UTSC - Monday 14th March 2011.

Jupiter Energy

COMPANY DESCRIPTION
JPR is an oil company with a single asset in Kazakhstan. Block 31 in the
Mangistau basin is 100% owned and has drilled two successful oil wells to date.
Reserves for the first well have been independently certified by Senergy Australia
at 8.6mmbbl and certification is being prepared for the second well, which had
12.2mmbbl as a pre-drill estimate for the Mid-Triassic. JPR estimates that a
younger Z-sandstone may hold 9mmbbl.
The oil is mainly found in mid Triassic reservoirs of low to average quality, and
neighbouring oil fields show low recovery factors of the oil in place but long life,
low decline rates for these types of wells.

INVESTMENT STRATEGY
The company is expecting to enhance its first two oil wells through fraccing and
prepare a field development plan based on the results of these tests. The
reservoir appears well suited to fraccing which will maximise productivity and
reserves recovery. Further enhancements are possible through horizontal
production wells. Enhanced recovery factors from oil-in-place of about 100mmbbl
plus extensions of the existing license to the east represent future growth
options in the short to medium term.
Longer term, the company will use its cash flow from Block 31 to expand into new
licenses in Kazakhstan. The Board and management of JPR are very well
connected and will look to grow the company from the current modest base.

VALUATION
Our valuation of JPR is $0.18/share. This is based on the assumption of a
25mmbbl oil field worth $0.14/share plus resource potential of 85mmbbl currently
valued at $1/bbl or $0.06/share. Cash of $9m represents $0.01/share while
corporate overheads deduct $0.03/share.

RISKS
JPR faces normal oil and gas industry risks, and has some more specific issues:
? Prices for oil are inherently volatile, and strongly linked to the world economy
and market conditions. JPR is highly leveraged to oil prices.
? Project execution is always a risk, and to manage a project in Kazakhstan as
an Australian company presents some challenges. However, the local
operating office and staff appear very well qualified to do the job.
? Kazakhstan political risks exist although perception is much higher than the
reality. Regulatory and administrative issues such as procurement need to be
managed properly.
? Operational and environmental risks are high in the oil and gas industry, with
high safety standards required to avoid explosions, fires, oil spills etc. The
Mangistau basin is primarily an oil producing region with no competing land
use as it is a desert.
? Financing issues exist as JPR does not have the balance sheet or cash flow to
fund the development of Block 31. JPR is planning to list the company?s