Australian Worldwide AWE
Wednesday, 6 August 2008
Fourth Quarter Solid
AWE joined the ranks of serious oil and gas companies in 2006 with production
at Casino, Cliff Head and BassGas. Production from the fourth centre, Tui in NZ,
began in July 2007. A key value creation strategy is to develop discoveries
adjacent to installed infrastructure – like Henry and Trefoil near Casino and
BassGas. Expect production to decline from heady 9.9mmboe FY08 levels as
Tui's prolific oil flows fade in NZ. Still reserve life of 10 years based on FY09
production forecasts is well ahead of the 7-8 year average for ASX listed peers.
A suitable energy exposure for investors comfortable with medium risk. Strong
management, low sovereign risk, a conservative balance sheet and exploration
On the 5 August 2008, ARC Energy shareholders approved the merger with
AWE and the demerger of Buru Energy.
BassGas resumed full production after March quarter maintenance
• 4Q08 sales volumes fell 15% to 2.5mmboe, marginally ahead of expectations
thanks to Tui oil. Tui volumes fell only 21% to 1.6mmboe, a better than
anticipated outcome. Tui guidance is for 9mmbls in FY09 compared to
14mmbls in FY08 due to natural field decline. This is a 25% increase on prior
• BassGas resumed full production after March quarter maintenance.
Associated liquids reached design later by end June. Cliff Head oil output
dropped 17% on natural decline - a workover to increase volumes has begun.
Sales revenue fell 2% to $254m, again ahead of predictions thanks to volumes.
The average achieved price rose 16% to $102/boe, higher oil price offsetting the
lower volumes. Despite this our adjusted FY08 earnings forecast declines 8% to
84cps after an increase in exploration write-off. AWE has penciled in $80.5m of
exploration write-offs for FY08 compared to FY07's $28.9m. Our adjusted
earnings figure excludes petroleum resources rent tax and Australian income