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December-quarter production increased 33 per cent during the previous quarter to hit 1.3 million barrels of oil equivalent.
A key driver was the resumption of production at a project in the Bass Strait after a 10-month shut-in. BassGas contributed 389,000 barrels of oil in the past quarter, making up about 29 per cent of total production for the period.
AWE is a 46.25 per cent shareholder in BassGas and the joint venture will decide timing for the next stage of the project in the middle of 2013.
Production at the company's shale gas project in Texas was also higher. Output at the Sugarloaf AMI project increased from 118,000 to 145,000 barrels in the December quarter, as 12 additional wells came online.
Outlook AWE is seeking partners for its 100 per cent-owned oil project off Indonesia. Ande Ande Lumut was acquired in February 2012 and management estimates there are gross recoverable resources of 76 million barrels.
With plans for a final investment decision on the project in the second half of 2013, AWE is seeking to sell down its interest by up to 50 per cent. This will reduce its share of capital expenditure should the project go ahead. Management appears confident there will be plenty of interest in the sale.
The company also has a 50 per cent stake in the Senecio tight gas project, in Western Australia's Perth Basin. The company estimates resources for its 50 per cent stake in the project at 4.4 million barrels equivalent, or about 50 billion cubic feet of wet gas. A feasibility study is being conducted and AWE might be able to use nearby infrastructure.
Price AWE's stock price has been in the doldrums, down 18 per cent during the past six months, due mostly to the well-documented productions hiccups at BassGas.
But since the company released its quarterly report in January, its stock has surged as the market has become more comfortable that problems at the BassGas project are behind it.
Worth Buying? The stock trades at well above 20 times earnings estimates. However, we are encouraged by the production resumption at BassGas, as well as the progress of AWE's other assets.
We believe the collective value of these assets is not adequately reflected in the stock price, which is trading at a 15 per cent discount to its net asset value.
Greg Smith is head of research at Fat Prophets sharemarket research.
Frequently Asked Questions about this Article…
AWE reported a 33% increase in December-quarter production versus the prior quarter, reaching 1.3 million barrels of oil equivalent. A key driver was the resumption of production at BassGas after a 10-month shut-in (BassGas contributed 389,000 barrels, about 29% of the quarter’s output), and higher output at the Sugarloaf AMI shale project in Texas as 12 additional wells came online.
BassGas is material to AWE’s production: it supplied roughly 389,000 barrels in the December quarter (around 29% of total production). AWE holds a 46.25% interest in BassGas, and the joint venture planned to decide timing for the next project stage in mid‑2013.
Ande Ande Lumut, acquired in February 2012, is 100% owned by AWE and management estimates gross recoverable resources of about 76 million barrels. AWE is seeking partners, plans a final investment decision in the second half of 2013, and intends to sell down up to 50% of its interest to reduce its share of capital expenditure if the project proceeds.
Output at the Sugarloaf AMI project rose from 118,000 barrels to 145,000 barrels in the December quarter after 12 additional wells came online, contributing to the company’s overall production growth.
AWE holds a 50% stake in the Senecio tight gas project. The company estimates resources for its 50% interest at about 4.4 million barrels of oil equivalent, or roughly 50 billion cubic feet of wet gas. A feasibility study is under way and AWE may be able to use nearby infrastructure to support the project.
AWE’s stock had been down about 18% over the prior six months, mainly because of production problems at BassGas. After AWE released its quarterly report in January confirming production resumption, the stock surged as the market grew more comfortable that BassGas issues were behind the company.
The stock is trading at well above 20 times earnings estimates, which can look expensive on a pure earnings multiple basis. However, the article notes the stock is trading at about a 15% discount to its net asset value, and the research view is that the collective value of AWE’s assets may not be fully reflected in the share price.
Key upcoming milestones mentioned include a joint‑venture decision on the next stage of BassGas around mid‑2013 and a planned final investment decision for Ande Ande Lumut in the second half of 2013. For Ande Ande Lumut, AWE is seeking partners and may sell down up to 50% of its interest to limit its capital expenditure. The Senecio project is undergoing a feasibility study that could influence timing and infrastructure use.
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