what does it take?, page-16

There are 4 wells to be drilled in AUT's other acreages and AUT's recent presentation stated that they will be drilled this year.

Morgan was expected to take 6 weeks and it is looking quite possible. So, say that rig is mobilised in 2 weeks time. Allowing for mobilisation, that rig could possible drill 4 wells. The rig about to be used at Rancho might be used to drill a further 3 wells.

The two rigs could drill 3 wells beyond the free-carry this year unless re-deployed elsewhere. But would they be re-deployed? Hilcorp has shown no reluctance to drill our acreages. It is anyone's guess where they might drill the 3 additional wells postulated but I would guess that at least 1 would be in the Sugarloaf.

As to marketing - give them a bit of a chance. Let them drill and test flow at least some of the free-carry wells first. Then they can agree a forward drilling programme.

So far as I have seen from the TRRC permit search, Hilcorp has very little other new well drilling to do. Most of the permits appear to be re-completions. The company has raised masses of cash and, in any case, this project is expected to become self-financing very quickly - that's what AUT said in its presentation and it has to pick up 25% of Longhorn drilling costs and 30% of Ipanema costs after the free-carry wells. ADI will pick up only 10% and it has a nice little cash buffer in place. What's to stop them from continuing to drill away if they have a rig available?