Australis Oil and Gas (ASX: ATS) released its Q2 2021 activities report last week. The Company advised that
- It continues to generate positive operating cash flow from its Tuscaloosa Marine Shale (TMS) assets located in Mississippi and Louisiana, onshore in the USA.
- Having raised A$10m in equity during Q1 2021, the Company has commenced its lease maintenance program that seeks to safeguard the large 170 million barrel recoverable resource that has been independently certified on its acreage.
- Discussions continue with potential partners for further field development in an improving business environment.
Australis holds over 100,000 net acres within the TMS core that has been delineated by over 90 wells drilled in the play. This large contiguous acreage position has been accumulated at a low cost and remains largely undeveloped with an inventory of approximately 400 net wells. Historical well production demonstrates compelling base case economics for each future well with multiple routes to further upside through the application of new technology and industry best practice that have not yet been applied to the TMS.
The Company produced 109,600 bbls of oil and generated revenue of US$5.8 million and an EBITDA of US$0.5 million. Australis is therefore financially self-sufficient, meeting all corporate overheads, interest payments and with a net debt position of US$7.8 million and our existing production carrying an NPV(10) of US$67.5 million, comfortably within covenant requirements.
The Company’s business strategy has always been to find a partner to contribute to the early phase capital needed to commence development of the large strategic position it holds. The Company continues discussions with potential parties and will provide further updates if those dialogues lead to binding commitments. A rising oil price and increased confidence in the medium term is leading to an improved confidence in the industry, important for potential partners considering entering a new play.
The Company continues to believe that the TMS Core represents one of the last quality unconventional oil plays located onshore in the US lower 48 that is largely undeveloped. The field’s proximity to market and long-term production history generates a unique opportunity for an incoming party and Australis remains confident in finding a partner in due course.
About Australis and Gas
Australis Oil and Gas is a US unconventional oil shale-focused company whose management has a strong track record of creating and monetizing value for shareholders.
Following a clearly defined strategy from IPO the Company has targeted the Tuscaloosa Marine Shale (TMS) in Mississippi and has focused on a core area, proven by previous operators and long term well production history, which is now one of the last high-quality but undeveloped oil shale plays in the USA.
Australis is ideally placed with existing profitable production covering all corporate costs and importantly holding a large strategic undeveloped acreage position from which it has been independently estimated at 170 million barrels of oil recoverable net (after royalties) to Australis.
In an environment of improving market sentiment, increasing competition for limited remaining quality inventory of future onshore drilling locations, Australis is seeking a partner to deploy capital in our position and commence field development. With a share price that reflects less than the value of the existing production and therefore has no value ascribed to the undeveloped oil resource position, Australis offers investors an entry point with significant leverage to the oil price.