AMU 0.00% 21.0¢ amadeus energy limited

oil & gas valuation for b2

  1. 396 Posts.
    Hi B2

    I reckon the value of AMU's oil and gas holdings are worth way more than its current market cap of around A$113 million (154m FPOs on issue X today's price of 73 cents).

    It seems a pretty easy conclusion to make.

    AMU has previously announced it has a total of 13.04 million barrels of 1P and 2P reserves - 1P reserves of 2.79 million barrels and 2P reserves of 10.25 million barrels respectively. (1P calculated at 1 June 2004, 2P reserves calculated as a 1 March 2004). The 1P reserves alone have been conservatively valued by AMU's bank at A$40 million.

    Since those estimates were made, AMU has clearly drawn down on those reserves with its ongoing production. But I consider their exploration success since then and the production history of new wells would have both easily offset that draw down and added substantial additional reserves. (The barrels of oil equivalent of the Scheinemann and Gerdes gas wells for example must be substantial).

    As a rough estimate, I reckon AMUs 1P and 2P reserves would now be closer to 15 million barrels.

    A year or so back (when oil was trading around US$27 a barrel, AMU's 1P reserves were conservatively valued at US$10 a barrel and the 2P reserves at US$8 a barrel. Since then oil has moved much higher and, longer term, looks like staying well above that $27 level. On that basis, and considering what the market in the US is currently paying for reserves, an average price of US$11+ seems a reasonable number to apply to AMU's reserves today.

    On that basis, I estimate that their likely current 1P & 2P reserves would be worth in the vicinity of US$165 million. That equates to about A$215 million at today's exchange rate.

    And that is just for reserves we can confidently attribute to AMU.

    If we move more into the realm of speculation (irrational optimism?), the potential blue sky looks very rosy indeed.

    For example, for those with memories that extend back to the original Red Creek acquisition, pre-drilling reserve estimates ranged from 20 million barrels at the low end, to 50 million barrels at the upper end. Of course AMUs share of that would reflect its 50% working interest. But the most recent listing of reserves has only a fraction of these levels attributed to Red Creek. So it looks like there is still plenty of scope to grow reserves from exploration drilling and production from this ground. The same logic applies to Raccoon Bend and likewise for potentially monster (gas) reserves from the Lavaca County ground (and down the track from the South Grosse Tete prospect - look at FAR's upbeat estimates of gas and oil in place in the bottom formation).

    In short, I reckon each AMU share has a reserve value asset backing of A$1.40. And that ascribes no value to the very real prospect of plenty more to come - based on evident drilling success at Red Creek, Raccoon Bend and more recently Lavaca County.

    Add to that some value for the bio-diesel business (where I reckon EACH plant will add 20-30 cents per share) and you can see why I consider AMU is still seriously undervalued.

    Hope this is of some help.

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