re: Ann: AusTex delivers record Quarterly Rev... I am not a...

re: Ann: AusTex delivers record Quarterly Rev... I am not a expert but since you asked (not sure why you asked me) but this is my theory only PDYOR, not financial advice and the usual disclaimers:

Cash flow positive on operating basis.

$12m in bank to drill something like another 12 to 15 vertical wells at $600k each, leaving some cash for horizontal wells at smaller WI%. Excluding any increasing cash flow from increased production.

Spending $2.9m next quarter. They had $1.6m in inflows last quarter. December 12 quarter revenue was $2.3m (oil price now around $US95)

They have had 9 vertical wells averaging around 65BOPED over 30 days. They have 6 verticals awaiting completion to some stage. If the 6 are similar to the last nine, I would think production conservatively would increase somewhere between 750BOPED to 800BOPED taking into account declines.

Drilling 2 a month and will participate in some more horizontal wells at lower WI% but lower cash burn.

As stated by the company in the last announcement:

"We are confident that revenue will continue to grow each quarter given our aggressive vertical well development program at Snake River, our horizontal well participation program with Range Resources, and the planned ramp-up in drilling activities in Kansas. As such, AusTex has multiple avenues to grow its revenue.”

Their last reserves report 15/6/12, P1 Reserves $96.7m, P1+P2 is $158.90m and P1+P2+P3 $388.80m. New report due March, I believe. Note this report based on $100 oil price and $2.75 per mcf but prior to some of the new wells above.

As the company stated at the time of the report 3/7/12:

“This Independent Reserve Report confirms the substantial
unrealised value of AusTex’s assets in Northern Oklahoma and Kansas. It also highlights the potential uplift in value we can achieve by delivering more wells into production. With a number of new vertical wells expected to come on stream in the coming weeks at our Snake River Project, and with an ongoing well development program occurring through to December, we expect a significant increase in reserves and oil production from this point onwards"

Some of the wells have performed above expectations.

They have 432m issued shares, $7.5m convertible notes which could be converted to 50m shares at some point.

So using a base of 482m shares my first target would be to see the market value somewhere between the P1 and P2 reserves NPV Value i.e. 20cents.

Options around 130m most at 15c (some at 20c) so say around another $22m in cash if converted but the first lot does not expire for another year or so (doubt the 3m at 40c will be converted in June 13, but would be nice, have excluded these).

At 20c x 610m shares would be $122m market cap less the cash received would see a EV of some where between current P1 and P2 reserves.

Finance could also be used against the reserves, if cash gets a little tight or may have another capital raising, just depends on future lease purchases and the amount and timing of these.

As stated by the company in last announcement:

“We have a very active well development program underway and we committed to our program of drilling two or more vertical wells each month. Participation opportunities and developing our Kansas assets offers further upside and will
unlock additional value for shareholders.”

Big companies around land holding so who knows.

So since July to now they seem to be doing what they said they would and while they do that I will hang around and assess as we go. That is my theory. PDYOR.