Basics first ... STU has 60m shares and is currently selling for...

Basics first ... STU has 60m shares and is currently selling for about 75 cents, making it about a $40m company.

They own 75% of the Acracia oilfield (circa 1.4 mmbl) and 70% of the Worrior field (circa 3.4 mmbl).

They own 4 PELs in the Cooper Basin, holding 70-100% shares in each of them.

Their oil production is lower than I expected. Much lower. They quoted a number of 113 000 bbl for the third quarter, which is approximatly 1200 bopd.

Given Worrior was producing at 2000 bopd, and Acracia has 3 wells, this is lower than I would expect by 50%.

On the other hand, it is circa 25 grand a day net free cash flow, and given that Cooper oil wells cost about $1.2m to sink (if you hit, completion will put you back about $0.4m - and deeper gas wells cost more), that means they can fund a new well from cash flow every 2 months or so.

Their exploration program looks ... small. Note that the numbers they are quoting are 2P (probable) oil in place numbers, so to get available oil in place divide by three (for gas, reduce by 40%).

Most people are using NPV numbers of $12-$15 for Cooper Basin oil, and $1/bcf for Cooper Basin gas. Note that Stuart already own about 3 mmbo of 2P recoverable reserves.

Galillee was a swing and a miss (but 25% Beach funded).
Derrilyn is 2 mmbo 2P OOIP, so that could turn into a 0.7mmbl discovery ... but is 65% on Santos' dirt.
Saintly is 1.7 mmbo, for 0.7 mmbo recoverable.
Hyperno is 1.9 mmbo, for 0.7 mmbo recoverable.
Doremius is 10 bcf, for 6 bcf recoverable.
Arwon is 4 mmbl, for 1.4 mmbo recoverable.
Worrior#2 is a stepout of Worrior.

OK, so we have 4 100% Stuart wildcats, one stepout well, and one 65/35 STO/STU joint venture.

Stuart looks to be committing to about ummm $8m worth of drilling by August, so if they hit two from that list, it should be OK.

Arwon is to the east of Worrior, and in my opinion is as close to a sure thing as you get in the industry.

Doremius will probably hit (there is gas all over the show in the Cooper).

The other three I'm not so sure about, so if they miss I'd be thinking long and hard about buying Stuart on a subsequent dip, because Arwon especially is a very very nice bet.

Finally, note that Stuart have not negotiated an actual farmout deal in the Cooper since the Cooper Energy deal over Karbine and Worrior. I suspect they are asking in excess of what the market as a whole will bear - there seems to be very little interest in the sort of single-well deals Stuart seems to want, and they dont appear to be willing to drop their price enough for any of the IPOs to get involved (given Enterprise's collection of acreage, I think they'd have been willing to pay 2.2:1 for at least soem of Stuart's dirt...).

Me, I'd assume Stuart is going to have to sole-risk their entire forward program. And they bid a lot of wells to win that acreage. It;s gong to be an interesting 2005-6 for them ...

Ian Whitchurch