TRANSCRIPTION OF FINANCE NEWS NETWORK INTERVIEW WITH AUSTEX OIL LIMITED
(ASX:AOK) MANAGING DIRECTOR, DANIEL LANSKEY
Clive Tompkins: Hello Clive Tompkins reporting for the Finance News Network. Joining me for the first time from junior oil and gas producer Austex Oil is Managing Director, Daniel Lanskey. Daniel welcome to FNN.
Can you start by introducing Austex Oil, where do you operate, how long have you been going?
Daniel Lanskey: Austex Oil Limited is listed on the Australian Stock Exchange, our code is AOK. We listed in January 2008 just as the world went into a global financial crisis, so it wasn’t the best timing. We’re operating onshore in the USA in the States of Oklahoma and Kansas. We currently have a footprint of 70,000 acres that we have interests in. Last quarter our average production was 160 barrels of oil a day, which resulted in a 100% growth of revenue to $1.4 million Australian dollars for the quarter.
Clive Tompkins: While you’re coming off a low base, is this sort of growth sustainable and if so, for how long?
Daniel Lanskey: The growth we’re seeing is coming from our field activity and flows thirty days behind our drilling activity. At the moment we’re continuing drilling operations at the rate of two wells per month. We’re seeing our base rate of production grow consistently quarter on quarter and we currently have a pipeline of fifty locations in Oklahoma to drill out. So we’ve got at least another twelve to eighteen months, at least of continuous drilling which will bring that growth in revenue.
Clive Tompkins: Is there anything that could derail plans?
Daniel Lanskey: At the moment we are seeing oil price trade between $70 and $85 a barrel which makes our operations very profitable for a small company like ours. I don’t believe we’re going to see the consumption of oil drop, so I think we are in the right place midcontinent USA. The cost of doing business there is stabilised in the oil patch. The only other issue that’s happening which will, I believe grow value in our acreage, is that many large companies are coming back on shore with the moratorium down in the Gulf. So we are seeing some of the bigger players bringing their crews back onshore, which may lead to an increase in drilling and completion costs of the wells.
Clive Tompkins: You operate in Oklahoma and Kansas, what acreage do you command?
Daniel Lanskey: We currently have a footprint of 70,000 acres. We have two very distinct asset types. In Oklahoma our acreage is a smaller holdings and they’re proven producing oil fields that we are developing.In Kansas our acreage positions are large acreage positions. Our Cooper project up there is 26,500 acres which is 40 square miles. Its wild open country exploration projects - we’ve got a new discovery up there. They will shrink back to smaller footprints of oil fields once we’re successful.
Clive Tompkins: And is it becoming more difficult to secure new acreage given the problems in the Gulf?
Daniel Lanskey: The large acreage positions, it’s becoming more difficult. However, in the US the property rights to the minerals underneath them are owned by the property owners. So there’s a lot of fragmented ownership. We may see a 40 acre farm that owns the mineral rights underneath it next to a 640 acre farm that owns the mineral rights next to it. The large majors are not interested in dealing with multiple land owners; they’re trying to build a portfolio of large acreage area. We’re in a position where we can deal with the individual farmers, build a 1,000 acres - build it to 1,600 acres, then it becomes attractive to a larger operator. So when you look at our 70,000 acre footprint, we believe the value in that acreage that we’ve acquired at an average of $15 an acre has been increased considerably, because we’ve put together tracks of lands that now average a 1,000 acres in Oklahoma at a time.
Clive Tompkins: Daniel turning to your financials now, are you profitable?
Daniel Lanskey: Last quarter with the revenue at $ 1.4 million for the quarter, we covered our operating expenses of fixed costs such as salaries, office rents, ASX listing fees, we went through the audit process and we were cash flow positive on the operating level. Each month we are drilling new wells which we bring contractors in and we’re investing between $200,000 and $300,000 on top of our operating expenses. So we are just short of a break-even to where we cover both our fixed costs per month and our exploration and development. We see achieving that in the December quarter as a real goal and if Mother Nature’s kind to us, we may see that a little earlier.
Clive Tompkins: So how much cash do you have?
Daniel Lanskey: June 30 we had 5.4 million cash at bank. We have revenues coming in on top of that every month - we’re paid monthly. We see that the cash burn this quarter may be $400,000 to $500,000, so we’ll end the quarter just short of $5 million cash.
Clive Tompkins: And will you now need to raise additional capital this year?
Daniel Lanskey: In the short term we don’t see the need to go back to the market for additional cash. We are maintaining in excess of $4.5 million cash at bank with growing revenues.
Clive Tompkins: Last question, what makes Austex Oil different from other junior oil and gas producers operating in the US?
Daniel Lanskey: I think the key difference is that in Oklahoma we have 100% working interest in our leases and an 80% or better net revenue interest, which means for every barrel of oil we sell, we get to keep 80% or better of the revenue in our pocket.We maintain control of our field operations with very tight budget constraints on our field staff who now work for us. Since we became our own operator, we have actually halved our development costs. That is a very key difference to many other junior oil companies operating in the USA. We are our own operator, we have our own people on the ground who are very good at what they do and they deliver inside budget constraints that we put on them, and the oil is flowing into the tanks.
Clive Tompkins: Daniel Lanskey thanks for introducing Austex Oil.
Daniel Lanskey: Thank you.
