Last Patersons valuation had Hawkville at 20cents per share, or...

Last Patersons valuation had Hawkville at 20cents per share, or 16 cents risked at 25% on 10K an acre. They anticipated 94 wells.

Today's statement from AZZ is that there are up to 110 wells to be drilled. So you can add 15% to that Patersons valuation of 20cents.

Then expect newsflow from a dozen wells to be drilled in the next 24 months to retain acreage leases (640 acre spacing, should be about 2 years left on the lease). That should provide steady newsflow and plenty of upside for those investors concerned about the 'now what'.

AZZ already have an 8000ft lateral waiting in the wings to be fracced. Each well will de-risk this acreage and shore up the valuation.

What hasn't yet been revealed is the working interest, Paterson's have it as 50%. If it is anywhere near that it would be huge upside on good flow rates, the first well was 20% higher flows than Paterson's modelling as DH 457 acheived "an IP of 563boped and 3,628mscf/d (1168boepd), which is well above the mid-case assumed IP of 484boepd." http://www.gtp.com.au/antaresenergy/inewsfiles/2010_09_09_Patersons_Sales_Commitment_Mitigates_Uncertainty.pdf

So you can add potential another 20% onto Paterson's valuation for Hawkville if other wells flow in this manner and declines are in order. And with an 8000ft lateral to come next it would be hard to imagine low flows.

The working interest will probably become evident in future quarterly cash flow statements, once the well costs are paid back AZZ earn their share. Petrohawk said DH 457 was earning 67K a day, the decline rates seem in order from the TRRC (16000+ barrels for August, around 14500 barrels for September), I can forsee this well paying back a cost of $6M or so within 5-6 months. Then you will see the AZZ Working Interest hitting the books and the market can have a full appreciation.

The DH 457 flow is coming on a highly restricted choke of 16/64. That means they are really holding it back and ought to provide real confidence in the future numbers.

So, with an excellent cashed up operator, good flows, free carried drilling of 110 wells, it is not hard to imagine a future where AZZ Hawkville is valued in line with the other Aussie players like AUT, say around $30K per acre. At 4500 net acres (assuming WI is 50%) that's $135M, almost equal to today's market cap!

Easy to see why with 150M in the bank and upside of 135M on current Hawkville assets why tomorrow's open should be significantly higher than the last close of 47cents.

Well done to AZZ management and holders.

------------
always DYOR