expectations

As an owner of AOK for some years I've gradually curtailed my expectations of a big jump in share price and quick profits. My outlook is alot more pragmatic these days and my valuations conservative.

That said, I'm very optimistic about the next 6 months.

1) Value.
I've made a number of comparisons with RFE to highlight why I think AOK is much better value. Another good yardstick is Osage. Osage recently released their September presentation:

http://www.osageexploration.com/s/Presentations.asp

It shows a pure play Mississippian company which is broadly similar to AOK in size:
- EV $52M (USD)
It has about 3000 more acres but AOK has about 300 BOE more production and a much higher NPV 10. Given the low cost of acres, AOK is clearly in front.

2) Thresholds
To be taken seriously by many investment firms and brokers, O&G companies need 1P reserves, a proven rack record, and 1000 BOEPD production. AOK has the first two and is on the cusp of the third. It should then meet the investment criteria of alot more buyers. Those buyers should find it clearly better value than many of its peers.

3) Well economics
AOK has demonstrated that its well economics are better than many of its peers. This is demonstrated in its NPV10/1P ratio. Not only is it better value than its peers, but it is more profitable and less risky in a down turn

4) Leverage
Many of its peers have already taken advantage of a RBL facility. AOK is yet to do so. Once that happens, it should accelerate on all fronts. The above Osage presentation indicatdes thay have a $20 Million facily with a PV 10 of $30 Million. AOK has an NPV of almost $200 Million !

5) Focus
AOK has focused on revenue, profitability, and production growth. With the benefit of hindsight, this has been the better path to take. Many companies who have leased big land holdings and are throwing money into the HBP strategy, have not been able to learn location spacific issues or drill out sweet spots. Land has not gone up, and in some cases is going down. Big companies are reducing holdings rather than launching aggressive take overs. Shell just pulled out.

http://www.kansas.com/2013/09/19/3008861/shell-oil-pulling-out-of-kansas.html

6) Management
Say what they mean. Do as they say. Skin in the game.


I don't know when this stock will start moving, but for anyone with a medium term horizon its a very solid prospect.