I decided to dig a little deeper into the company and here's my conclusion:
Morningstar forecasts EPS of $0.12 for FY14, & $0.08 for FY15. I rang Morningstar this afternoon and they told me that these forecasts were done by an independent analyst. With 446.1M shares outstanding, a FY14 EPS of $0.12 would imply that the company will earn a FY14 NPAT of approximately $53.5M. In contrast, if the company produces around 420,000 BOE for FY14 (this is my best forecast), at an average realised price of approximately $66.40/BOE (average FY13 price), then FY14 gross revenue would approximately range anywhere from $28M - $32M - all other variables permitting. This broker is then saying, that FY14 NPAT would exceed gross revenue by almost double, which is obviously impossible.
If i've lost you by this point i do apologise! IMO, there's too many variables at this early production stage such as depreciation, impairments, exploration costs and one-off charges to forecast the FY14 EPS with any accuracy whatsoever. What we can say is that in my forecasts, BOE/day would have increased roughly 70%-100% or more by FY14, which is an extremely high rate of production growth. To put a value on the shares though would be fraught with difficulty! What we can do is say that production is almost doubling, and hopefully we will get some more rock-solid guidance with regards to production later on in the year. I think once the company turns profitable (could be this year or next), they have the team and the resources to go all the way, so it's a speculative buy from me
AOK Price at posting:
19.5¢ Sentiment: Buy Disclosure: Not Held
