They seem fairly insulated from current oil prices and gas ......and therefore grossly undervalued.....
SIGNIFICANT HEDGE POSITION
AusTex has substantially hedged its current production at oil prices well in excess of the current spot market. In keeping with the requirements of its Term Loan, the Company actively hedges its oil and natural gas production for at least 2 years. That hedging activity is designed to provide increased certainty on pricing of the sales of approximately 80% (and must be between 70% to 90%) of the Company’s expected production from currently producing wells as they naturally decline over that period. As such, AusTex does not hedge the roughly 25% of its production attributable to royalty owners and production taxes. The Company’s current hedge position is as follows:
Q1’15 Q2’15 Q3’15 Q4’15 Q1’16 Q2’16 Q3’16 Q4’16
SWAPS
Oil Price $91 $94 $95 $94
Percent of Protection 43% 84% 60% 67%
Gas Price $3.81 $3.59 $3.64 $3.78 $3.98 $3.76 $3.80 $3.93
Percent of Protection 100% 100% 100% 100% 100% 100% 100% 100%
PUTS
Oil Price $80 $80 $80 $80 $80 $80 $80 $80
Percent of Protection 57% 16% 40% 33% 100% 100% 100% 100%
Importantly, AusTex has worked to retain much of the potential upside in an oil price recovery (particularly in 2016) should such event unfold via its purchase of puts.
AOK Price at posting:
11.5¢ Sentiment: Buy Disclosure: Held
