Austin achieves important milestone in progressing Pathfinder to production

By Trevor Hoey. Published at Feb 9, 2017, in Energy

Austin Exploration (ASX: AKK), a group which has strategically situated oil and gas assets in Colorado, Kentucky and Texas has released its Maiden Reserves and Resources estimate for the Pathfinder project located in Colorado.

The first oil and gas reserves assigned to the Pathfinder project located in Colorado only represent 1800 acres of the company’s 15,773 acre tenement.

Assigned oil and gas reserves of 1.148 million barrels of oil and 451 million cubic feet of gas implies a net present value of approximately US$16 million.

However, extrapolating this valuation to account for all of the acreage indicates the net present value will be well north of US$16 million, potentially resulting in a share price rerating given the company’s market capitalisation is only $10 million.

Colorado acreage estimated to hold more than 30 million barrels of oil and 187.4 bcf of gas

Independent Oil and Gas Resources estimates the Colorado acreage to hold more than 30 million barrels of oil and 187.4 billion cubic feet of gas P90 (90% probability).

While this is definitely an inflection point in terms of progressing Pathfinder from exploration to production, it also leaves Austin much better positioned in terms of raising capital to develop the assets and fund further exploration.

On this note, Chief Executive Timothy Hart said, “This significant development gives Austin the ability to pursue project financing for large-scale and long-term field development for Pathfinder, the first time the company has been able to source such funding lines which today are attractively priced due to historically low interest rates”.

Resources and reserves to grow as Austin replicates adjacent oilfields

A significant proportion of oil and gas resources should convert to reserves as further drilling and development occurs over the remaining 13,973 acres, potentially providing share price momentum.

In terms of prospectivity, the Pathfinder project is situated directly adjacent to the active Florence oilfield that has produced 16.4 million barrels of oil.

Oil reserves show potential at Pathfinder

These results support management’s exploration strategy which was founded on the view that an active petroleum system extended to the west from the established Florence oilfield.

Furthermore, it has been proven that the formation is deeper and thicker and more prospective than the existing oilfield, a factor that will be taken into account as exploration aimed at growing resources and reserves is undertaken in the near term.

It is worth noting Austin also has interests in producing oil and gas wells in Colorado, Kentucky and Texas. The company finished 2016 debt free, as well as expanding its flagship property in Colorado and achieving first production success with its Colorado drilling campaign.

While 2016 could be considered a transformational year for AKK, the next 12 months is likely to see projects further de-risked and the company’s balance sheet strengthened by the injection of cash from producing assets recently brought on stream.

However, AKK is a speculative stock and therefore investors should take a cautious approach to their investment decision and seek professional financial advice.

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S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

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