Substantially Undervalued, O&G Situation in play, page-127

Some people on the PANR BB's seem disappointed by the lack of share price movement in London on Thursday.

They shouldn't be, they are totally misreading the situation.

Today's VOS#1 announcement was good news but it's only the first step in proving the commerciality of the Eagleford/Woodbine sandstone in this location. Flow-testing will reveal far more important information about this mini-basin and its potential. Once that information is available expect a much larger movement in the share price.

The announcement gave no indication of gross or net pay (according to the criteria Vision want applied' ie saturation percentage, porosity & permeability cut-off's), nor are there any indication's of the pressure's encountered while drilling that formation.

The same applies to the Austin Chalk and the 12,600ft Wilcox formation.

It's worth going back to the pre-drill numbers, in old broker reports & presentations to get an overview of this mini-basin.

West Double A Wells pre-drill was being viewed as a 58mmboe prospect requiring 37 wells, it seems to have been upgrade to an expected 80+mmboe discovery, after the initial flow-test results. It had a pre-drill net possible value of U$140M on EUR's of 1.3 mmboe per well. This has been upgraded considerably due to the higher EUR's now expected & the much higher oil content than initially expected to @ U$300m.

The VOS#1 prospect had 2 elements pre-drill, 52-55mmboe requiring 32-35 wells for the Eagleford/Woodbine section and 42-44mmboe requiring 40-42 wells for the Austin Chalk.

The VOS#1 location was a considerable step-out from the old LP2 well (One I admit I wasn't particularly keen on, but happy to have been proved wrong) thus a considerable number of acres are likely to have been proved-up (assuming VOS#1 is commercial).

So these could well be the base case numbers to use given the VOS#1 announcement, added to which will be some upside for the 12,600ft Wilcox potential.

The oil/gas ratio should be close to that of LP2 for the Eagleford/Woodbine rather than the VOBM#1 ratio.

The Eagleford/Woodbine pre-drill expectations were close to those of VOBM#1 ie EUR's of 1.3 mmboe per well and an overall possible net value of U$130M.

The Austin Chalk, (which might be quite a while before a horizontal well is drilled in it) had pre-drill numbers with EUR's of 1 mmboe per well & an overall possible net value of U$80M.

So proving commerciality of VOS#1 in the base case scenario is going to add a lot of U$ to PANR bottom line.

If the expected EUR's come in higher then further upgrades to the cash value will be required.

AXT is going to be a very interesting cash shell very soon !!! and its current share price doesn't do it justice.

LOTM