peeler efs 1h test, page-6

Re the value of the EFS acreage: TXN estimates 41mmboe NRI (90 locations). They do not offer an NPV10 on their web page, presumably because there is no drilling plan. However, to get a feel of what that might be worth if an aggressive drilling plan is pursued, AUT's 3P reserves at 20 March 2012 are 91.092 mmboe and the NPV10 figure for that is $1.285bn. That figure is estimated on '80 acre' spacings also but includes a bit for the Austin Chalk.

Using that valuation as a basis for valuing reserves (which might not be totally correct), TXN's reserves might have an NPV10 approaching $600m. That is, something over $85k/acre. This will be discounted (AUT paid $68k/acre for the additional Sugarloaf WI) but $40k/acre does not look outrageous and represents a significant discount on the likely NPV10 valuation of the reserves that can be booked by the purchaser.

Both companies are flagging up the possibility of closer spacing.