AXT is only valued at $5 million but this oil/gas play will likely be successful due to the carefull planning in getting the correct drill rig. The well will be the vertical then horizontal technique which is proving very profitable in Texas.
Suite 304, 22 St Kilda Road St Kilda Vic 3182 Ph: +61 3 9692 7222; Fax: +61 3 9529 8057 ASX/Media Release 29 December 2009 Argo invests in Pantheon Resources Plc Highlights Key strategic investment in East Texas oil and gas opportunity Argo secures 6.86% stake to become largest shareholder in Pantheon Resources Plc Proven oil and gas development project Two target reservoirs - primary target in Austin Chalk and secondary target in underlying Woodbine Sandstone Up to 50 well development Average Gross reserve per Austin Chalk JV well estimated at 8 Bcfe. Such a well is estimated to have a PV10 of US$6 million net to Pantheon (after drilling and operating costs, royalties and production taxes) Potential reserves of 400 billion cubic feet gas equivalent (Bcfe) from Austin Chalk formation; additional upside potential in separate and independent Woodbine Sandstone Typical Austin Chalk wells exhibit high initial production rates, recovering 50 55% of reserves per well in first year, delivering rapid payback Potential for project to become self funding Established local/regional infrastructure and market Melbourne, 29 December 2009 - Argo Exploration Ltd (Argo; ASX Code AXT‟) announced today that it has acquired a 6.86% strategic stake in AIM listed oil and gas exploration and production company, Pantheon Resources Plc (Pantheon; AIM Code PANR). The investment comprises 7 million shares at 0.1325 per share for a total of 927,500 (AU$1.7M) and represents a potentially low risk, high reward opportunity in an onshore oil and gas play within a world class, producing hydrocarbon area. Argo has previously reported that it has been actively evaluating commercial opportunities aimed at generating cash flow without recourse to the market and views this transaction as an opportunistic investment in high quality assets to create value for future company expansion. The investment was part of an over-subscribed placement by Pantheon which raised 7.3M (AU$13.1M) and has delivered an initial uplift of c.60% based on the placing price of 0.1325 per share. Pantheon‟s market capitalisation at placement was a modest 5.8M (AU$10.5M) and currently stands at 22.5M (AU$40.5M). Chairman and Managing Director of Argo, Dr Hugh Herbert, said, The project meets essential investment criteria in terms of geological and commercial risk and reward with significant upside potential. It offers favourable financial terms, managed risk, low subsequent capex requirements and excellent existing infrastructure. As an onshore US oil and gas opportunity, the project has low sovereign risk. Managing Director of Pantheon, Mr Jay Cheatham, said, "I am delighted to welcome Argo Exploration Ltd as the new largest shareholder in Pantheon Resources Plc. I am incredibly excited about the potential for the Tyler County project which is estimated to commence drilling in late January 2010, following the very significant results obtained in 2009. Pantheon is a small company with a material stake in a material project with partners of an extremely high calibre and offers potential for very material value accretion in the event of success." Pantheon has a 25% working interest in the joint venture (JV). The operator, Vision Resources LLC has a 37.5% interest, Kaiser Francis Oil Company 25% and WR Huff, 12.5%. The JV comprises c.30,000 gross acres in Tyler County, East Texas, and is considered by the operator as proven as a development play. Located in the Brookeland Field north-east of Houston, the JV project involves the development and exploitation of wells within two separate and independent reservoirs: (1) the Austin Chalk reservoir (the primary objective), and (2) The Woodbine Sandstone reservoir (the secondary objective). The JV acreage is located immediately adjacent to the highly successful Austin Chalk projects drilled by Anadarko Petroleum and Ergon Oil & Gas, who enjoyed a 98% success rate at the time Pantheon entered into the JV. Importantly, the JV acreage is known to host production from the Woodbine zone from a pre-JV well, the Vision Resources LP-2 production well. The first well in the program, estimated to spud in late January 2010, is designed as an offset to the Vision Resources LP-2 Woodbine production well. This well will also access the overlying Austin Chalk primary reservoir. The JV plans to drill up to 50 wells delivering expected average gross reserves of 8 Bcfe per well from the Austin Chalk formation. The separate Woodbine zone offers potential for material additional reserves, if successful. In the event of success, a rapid payback is anticipated, due to very high initial production rates, with Austin Chalk wells typically producing 50% to 55% of reserves in first year of production. An average 8 Bcfe Austin Chalk well is estimated to have a NPV10 net to Pantheon of c.US$6 million per well (after costs, royalties and production taxes). A 50 well program would therefore be expected to provide material upside potential*. Dr Hugh Herbert commented, The investment provides Argo with immediate exposure to the burgeoning US domestic gas sector and is expected to benefit from current acquisition activity by the integrated oil and gas majors as they continue to secure US domestic gas assets. This bodes well for additional uplift to Argo‟s investment. Due diligence, including legal and commercial advice together with internal and external technical assessment of the project, was conducted prior to the investment decision. Argo advises that Mr Justin Hondris, Executive Director of Pantheon is also a Director of Argo. Mr Hondris was excluded from all discussions, analysis and voting on the Pantheon investment by Argo and will continue to be excluded from such matters in the future. Mr Hondris is a minor shareholder in Argo with no control‟ or influence at shareholder level. * Key Assumptions - Austin Chalk success case only. Includes corporate overheads, operating costs, production tax and royalties (21%). Bullseye modelled on existing wells. Excludes Woodbine. Pantheon working interest 25% (NRI 19.75%) in Austin Chalk. Gross reserves of eight Bcfe per well drilled. Production of natural gas 55% in year one with liquids yield 15 barrels per million cubic feet of natural gas. Gross cost per well US$7.5 million. Back costs of US$4.5 million incorporated for wells 2 and 3 only. No external financing beyond Dec 09 placement. 45 well programme over five years. Excludes revenues beyond 5 years. . Forward pricing (Oil $/bbl) = $79.50 (2009), $75 (2010), $80 (2011), $85 (2012), $90 (2013+) Forward pricing (Gas $/mcf) = $4.50 (2009), $5.50 (2010), $6.50 (2011), $7.00 (2012), $7.30 (2013+) 10% discount rate used for NPV calculations. NPV10 net to Pantheon after drilling and operating costs, royalties and production taxes. -ends-
AXT Price at posting:
6.3¢ Sentiment: Buy Disclosure: Held
