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Barry Fitzgerald Juniors... 24/10/2016, 20065997

  1. OilyMan

    3,702 Posts.
    Barry Fitzgerald

    Juniors spot fertile ground amid oil price slump

    Established producers are only just starting to recover from the collapse in the oil price.
    The oil price collapse knocked the stuffing out of the established producers. And they are only just starting to recover as oil works its way upwards from the smashed level of $US26 a barrel earlier this year to more than $US50 a barrel.
    Driving things along is the prospect of joint action by OPEC and Russia on supply cuts, and the more telling supply/demand rebalancing that kind of happens when $US100-a-barrel oil becomes $US26-a-barrel oil for a time.
    While the pain from the shakedown continues, it is proving fertile ground for the more the nimble ASX-listed juniors able to strike deals that just weren’t available to them when oil producers didn’t have a care in the world thanks to $US100 a barrel prices.

    Melbourne’s American Patriot Oil and Gas (ASX: AOW) is the latest to benefit, securing a deal with private interests for oil reserves and production, plus pipeline interests and a gas plant, spread across Utah and Texas.
    In a nutshell, the company has acquired self-funding assets which include 90 barrels a day of existing oil production (from certified reserves of 4.3 million barrels, which is good for $US90 million ($118m) of future revenue at $US45 a barrel oil), with the ability to grow to 800 barrels a day by mid next year, and potentially 1000 barrels a day by year end.

    The restart of currently shut-in wells thanks to the improvement in oil prices, and expectations by most that $US60 a barrel-plus prices are just around the corner, accounts for a big part of the upside in the deal, which came at a cost of 139 million shares to the vendors, or about 40 per cent of AOW’s expanded issued capital.
    AOW chief executive Alexis Clark is as excited as they come on the importance of the deal to AOW, which last traded at 9.6c for a market capitalisation of $18 million ($31m on an expanded capital base).

    “This is a once-in-a-generation opportunity for AOW.’’ He also revealed that the acquisition is the “first of many and we have a number of target assets in the pipeline, as we look to deliver on the strategy of aggressively building a significant producing conventional oil business with well over 5000 barrels a day of production.’’
    Clark’s task now is to convince the market of that upside. Having said that, a couple of new board appointments of US oil men, and plans for a dual listing of the stock in the US, is set to deepen AOW’s exposure to the most important oil market of them all — the US.

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