(MENAFN - ProactiveInvestors - Australia) Daniel Lanskey, managing director of AusTex Oil, presented to over 140 investors in Sydney this week, and answered questions from the audience.
AusTex is targeting a light oil sweet spot on the Mississippi Lime Play.
To access the presentation - CLICK HERE.
Question: John Phillips, chief operating officer for Proactive Investors
With technology driving advanced oil recoveries, what are the costs involved and is there a different break-even price per barrel produced?
Answer: Daniel Lanskey, managing director of AusTex Oil
What has happened is - and it's easy to forget - that not that long ago oil was at US10 a barrel (current price about US85 a barrel).
The advancements in technology with hydraulic fracturing are seeing that of the US3.4 million spent on a horizontal well, up to half of that is spent in the completion - or the multi frac completion and the down holes pumps.
So there is a lot higher cost upfront, but the recovery rates are increasing.
Also electronic submersible pumps actually use a lot of electricity, and so our example of running costs per barrel is between US10 and US11 lifting costs - so at US85 a barrel - net back to us is over US40 a barrel (after listing costs and royalty's).
There is a margin in it - and it's quite good economics.
Question: John Phillips, chief operating officer for Proactive Investors
AusTex is targeting production of 800 barrels a day by the end of 2012, what is the likelihood of reaching these targets - and are you able to increase up to 1000 barrels a day in the near future?
Answer: Daniel Lanskey, managing director of AusTex Oil
We are confident with the wells that we have already drilled we will see an increase in production coming in to the end of December 2012.
We currently have 7 producing wells out of 13 drilled, and with the averages that we are seeing of 80 barrels of oil equivalent in the first 30 days - and with the additional six already drills wells brought into production by Christmas - we should see an increase in production towards our target.
With the funds we have two vertical wells per month, and participation in additional horizontals coming up over the next six months. There is every reason we are going to see an increase in production towards the 1000 barrels of oil equivalent sometime in calendar 2013.
Question: John Phillips, chief operating officer for Proactive Investors
How will the increase in production impact profitability, and if the oil price remains steady - what could we expect?
Answer: Daniel Lanskey, managing director of AusTex Oil
Our production cost per barrel is currently running at about US10.50, our net revenue position on these leases is currently around 80% after royalty's to the land owners or mineral right owners, and we pay 7% tax.
So we get a net back of about US40 per barrel as a contribution margin on a barrel basis.
With fixed costs of less than US300,000 per month, which can be covered by producing 288 barrels of oil equivalent per day.
Clearly as we get to 1000 barrels - which is a nice round number - is US40,000 a day multiplied by 30 days - and if you achieve those numbers that's US1.2 million a month after royalty's and tax.
However - we are a development company and the cash will continue to go into development, and we are excited to have the capital that we have behind us of 40 million odd dollars, plus a positive cash flow on an operating basis, which allows us to continue developing at our current rate.
