Been doing a bit of a health check on my holdings and have tried to research reasons why I hold a stock.
After looking at FUT...I thought it may be worthwhile posting some thoughts.
The Situation:
The Lakes Project has a planned 12 wells in 2010 from lake and land rigs with FUT's share of drilling and completion costs at Hawg Pen (1st of 12 wells in 2010) were approx $US175,000.
The break up is as follows...$US 96,000 for FUTs cost for drilling the 1st hole and $US 77,000 for FUT's share of bringing the well into production.
The economics going forward are as follows:
FUT has an indirect 25% ownership of leases and all equipment through its 50% owned PLX Inc (PYM owns 50%, FUT owns 50%) . PLX owns 50% of the leases and equipment. (the state takes 20.5% of revenue as they are the mineral owners)
20% of all production goes in Taxes and State royalties so basically FUT has an 18.165% Net revenue interest in ex tax and royalty production.
Hawg Pen produces at 30bopd which then FUT earns net 7.3 bopd and equates at current oil price ($US75) revenue of $US 127,000 pa.
The way I see it...the first well is paid for in 14 mths and then free cash flow for up to 21 years...given this is the average well life in the lakes area.
FUT then has 11 more of these wells to drill this year. With an expectation that each well is 50bopd to 60 bopd with a well success probably of 60% to 70%.
For the subsequent holes the drilling costs should be around 25% of $US250k per hole and add 25% of $US 100-150k on top for a successful well. The price is now lowered because FUT own the rig so FUT pays no rig rental costs.
Assuming FUT completes the JV in all 12 wells and 65% are successful and the successful ones produce the average of the lake then the NET REVENUE by the end of the year could be $US1.75M and the cost of the these 12 wells would have been approx $US1.65M.
Therefore...and I erred on the conservative side...FUT could have free cash flow from 2011 to 2032 of $US1.75M - $1.95M AUS per annum.
Now with $1.95M pa free cash flow it would be a while before a small company like FUT would need to come back to the market again to raise cash unless its for a possible BIGGER target!!!!
Financial position:
FUT has $A3.5mn cash at bank and is paid up on all costs for Hawg Penn well and Rig refurb(Tick).
FUT has 25% of rig and drilling equipment/barges/boats with a value of over $US10M.
FUT's next cash spend will be at the start of drilling the 2nd well on the lake and then completion of the well if successful.
With 2.8B shares on issue and a share price of .04c FUT has a market cap of $11.2M.
Its fair to assume as each well is drilled and FUT cash flow increases this stock is going to go up!!
Please DYOR...and as always your comments are encouraged!!
Good luck guys!!!
FUT Price at posting:
0.3¢ Sentiment: Buy Disclosure: Held
