re: profits up price up, good news to come Hi HotsYes, nice to...

re: profits up price up, good news to come Hi Hots

Yes, nice to see the market finally waking up to what AMU has to offer. Profit foreshadowed of A$2.7m for FY2002-03. Not bad for a company with 84.3m fully paids out there. Simple division yields 3.2 cents profit per share. (And another Red Creek step out on the way down too - announced today also).

Although as more investors delve into the prospects of this company and realise what excellent prospects it has, the share price is likely to travel north of 20 cents. That will bring the Nov 2003 options into the money and add a few more shares to the register. (27 million if all are converted).

However, before existing owners of the fully paids bemoan the dilution, this will also mean an extra 20 cents per option as the option holders convert. And on the basis of their recent track record, I am sure the good folk at AMU will be able to very productively put that A$5.4million extra to work.

What those new to AMU may not realise is that FY2003-04 is already shaping up to deliver a production increase of at least 25% up on last year. Profitability will presumably be commensurately higher with some allowances for oil prices and exchange rates.

Just average the past four months production of the last financial year and extrapolate that over 12 months and it gives you around 250,000 boe (ie 25% up on 2002-03).

But now add to that the most recent Red Creek success not factored into FY2002-03 profits (some 30bopd by 350 days), an allowance for the boe from the Lagos gas success, and a bit of reasonable success from the 8 to 10 wells likely to be drilled before end 2003 (and any others in 1H 2004) and it is not too hard to believe that 280,000 boe is readily achievable.

All of this is evidence that AMU is now starting to gather a serious head of steam. Or to mix metaphors, a snowball just starting to gather mass rolling down the hill.

With its increasing free cash flow, AMU is now very well placed to bid for more leases and expand its production base. History has shown it has a bunch of very canny operators on the ground in the US, and the future should be no different. Seems it will just go from strength to strength now.

And according to the latest research report on the AMU website by Shaws, it looks like the bio-diesel project is close to delivering some good news too. With each plant likely to deliver plenty of cash flow to AMU, this too looks a bright star in the AMU firmament.

(Each plant rated at 40 million litres, with margins at 20 to 25 cents per litre - so AMUs share with 56% of each plant amounts to around A$4+ million in cash flow. Impressive!)

By the way, that Shaw's report also raised the prospect of AMU paying a dividend from some of its impressive free cash flow. Now wouldn't that set this micro-cap apart from the ruck of junior oilers.

Good luck and fortune to all those who sail on the good ship AMU.

I hold so I'm biased (and check out my previous posts if you are interested).