AKK 0.00% 0.3¢ austin exploration limited

article from the australian investor

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    Cover Story

    Austin Exploration Begins to See Results that Reflect the Benefits of its Strong Board and Strategic Positioning that will Enable it to Capitalise on the Rapidly Growing Oil and Gas Sectors
    Austin Exploration listed on the ASX in July 2006 as an Adelaide-based explorer with the aim of identifying suitable development prospects, conducting thorough geological and engineering evaluations and then identifying suitable farm-in partners for long term development of these prospects.
    Reflecting the Company's strategic positioning with the oil and gas sector and its solid management, Austin Exploration has recently announced that its Malcolm and Melvin Doyle 2A well within the Park City field in the US state of Kentucky is naturally flowing heavy crude oil and natural gas to the surface.

    In other exciting news within its Park City gas field project, Austin Exploration reported that a third well, Harlin Stice 1A, has been spudded. It is expected that drilling will be completed in about 10 days, subject to clearance of some inclement weather currently in the area.

    I had the opportunity to speak with Mr. David Schuette, Austin Exploration's Managing Director, and Mr. Kenny Hill, the Company's Chief Information Officer. These gentlemen gladly took the time to explain the key attributes of Austin Exploration that have contributed to its development and which will aid the future growth and potential success of the Company.

    "Austin Exploration is an oil and gas development company with assets in Australia and the United States," Mr. Schuette informed the Australian Investor, "The Company was founded to make the most of investments in exploration of unexplored onshore gas/oil prospects."

    The Company's Australian assets include the PEL 105 - an area of 437 sq km located within the Cooper Basin. This prospect is surrounded by producing fields, some of which are the largest in the Copper Basin.

    Austin Exploration's second prospect in Australia is PEL 73, which covers an area of 625 sq km and is within the Stansbury Basin, which has been subject to both onshore and offshore oil and gas exploration since the 1930s.

    "While we are moving forward with out exploration in Australia, our initial focus is on the Park City Gas Field, which is located in the U.S. state of Kentucky," Mr. Schuette explained to the Australian Investor, "This is part of the Illinois basin which is a large, well known hydrocarbon producing area that covers part of Indiana, Illinois and Kentucky."

    This is an area that has previously recovered million of barrels of oil and was founded by John D. Rockefeller.

    It is part of the Devonian Antrim and New Albany systems, which are more organic-rich than the Mississippian Barnett Shale. These Devonian systems typically have more mass of organic carbon per unit of rock at equivalent thermal maturities. Thus, original TOC values are higher.

    "There are a number of large companies that have taken an interest in this area," Mr. Schuette told the Australian Investor, "Especially due to the steadily increasing gas prices, which is largely a result of the increase in the demand for natural gas and the dwindling supply. This is a trend that has been forecasted to continue in the future."

    As such, Austin Exploration has decided to take a long term approach towards developing its prospects in this region.

    "One of Austin Exploration's unique attributes is its philosophy to not dilute its shareholding," Mr. Schuette explained to the Australian Investor, "We raised capital from our IPO to get the Company started, but for additional funds we have turned to private investors."

    Mr. Hill elaborated on this approach, "Bringing in this private investment is at the heart of Austin Exploration and particularly for this Kentucky project. Other companies that use private investment tend to give away a substantial amount of interest in their projects, which decreases the value of the projects for the company and its shareholders.

    "We, on the other hand, aim to get private investors to invest in Austin Exploration as a company so that the value of the projects is retained by Austin Exploration and benefits both the private investors and our shareholders."

    For example, Mr. Schuette used money from his private company to do the initial work at the Kentucky prospect. This work included the due diligence process and putting the money into the first well. This work demonstrated the potential of the project without putting the shareholders of Austin Exploration at risk. The project was then put before Austin Exploration's board and was optioned, reimbursing Mr. Schuette for the work done.

    Mr. Hill mentioned that another advantage for Austin Exploration is its position within Kentucky, which provides the Company with a unique opportunity for long term growth.

    "There is substantial infrastructure already in place in Kentucky," Mr. Hill told the Australian Investor, "Additionally we have developed strong work relationships with companies that have the common goal of bringing resources, contributing both intellectually and financially so that operators can drill faster and bring leases into production in a timely matter."

    According to Mr. Hill, Kentucky also has a scientific appeal for Austin Exploration. The Illinois basin is approximately 3,304 sq km, with the gas under ground being amazingly pure. Mr. Hill noted that the gas can go straight out of the ground and into the pipeline. Another important aspect is the shallowness of the wells, which significantly decrease the drilling costs.

    "We use air rotary drilling, which uses trucks as opposed to setting up drill rigs," Mr. Hill informed the Australian Investor, "The process utilizes air and water to drill holes in an efficient, environmentally friendly method."

    Mr. Schuette added, "We also have fixed drilling costs for this process. The wells at Kentucky won't cost us more than US$200,000 per well as opposed to the average cost of around $3 million."

    Mr. Schuette noted that the Company is also in a strategic position to capitalise on the increasing awareness of the opportunities represented in shale plays. They are one of the first companies who have moved into Kentucky, which has a significant shale position.

    "It is important to note that in Kentucky the focus is not rock shale, it is a much easier process than this type of excavation that is being used in the Rocky Mountains," Mr. Hill commented.

    Austin Exploration has an initial 24 month drilling focus at the Park City Project. They aim to develop 2-5 wells per month, depending on the weather. Currently the US has been experiencing severe ice storms. However, Mr. Hill and Mr. Schuette commented that traditionally 8 months out of the year have perfect weather for drilling wells.

    In regards to the recent developments at Park City, oil pump equipment and storage tanks have been ordered for Malcolm and Melvin Doyle 2A and will be shortly connected to local processing and distribution networks as the weather patterns allow.

    These developments and the spudding of Harlin Stice 1A are part of Austin Exploration's planned drilling of 44 production wells at the field this year with the opportunity to drill more than 200 wells at Park City by the end of 2011.

    Mr. Hill noted, "We have created a solid business strategy that has established a sound foundation so that we can capitalize on the rapid growth in the oil and gas sectors, but at a pace that is manageable and long term for Austin Exploration and in a manner that always puts the interest of our shareholders first."

    Mr. Schuette concluded, "We have a broad industry network that has been developed from over 30 years of noteworthy investment and acquisition experience by our executive team. We aim to utilise this expertise to grow Austin Exploration into a major, long term player in the oil and gas sphere."
 
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