Eureka Energy’s Board is Rejecting Aurora Oil & Gas’ Offer

Eureka Values Sugarloaf at More Than $87,000 Per Acre

Sugarloaf Map | Click to Enlarge

Eureka Energy is advising shareholders not to accept the US$110 million offer that was made for the company by Aurora Oil & Gas on Monday.

Eureka asserts the offer is lower than their valuation of the company’s flagship asset in the Sugarloaf Field and does not attribute any value to its Pan De Azucar/Black Jack Springs, or Bioche assets.

Eureka owns a 6.25% working interest in 24,743 gross (1,521 net) acres operated by Marathon Oil in Karnes County. In U.S. dollars, the offer is for $0.46 per share and Eureka believes the Sugarloaf field alone is worth US$0.56 per share or US$132.7 million.

If I’m doing the math correctly, that’s $132,700,000/1,521 net acres = a valuation of $87,245.23/acre.

Read the entire recommendation at eurekaenergy.com.au

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R.T. Dukes

R.T. Dukes

Managing Editor at EagleFordShale.com
R.T. is the managing editor of EagleFordShale.com. In prior roles, he advised major oil companies on strategy, the macro business environment, and opportunity screening. 2503 Robinhood, Houston, TX, 77005, U.S.A. | Telephone: 832.429.4790

Comments

  1. Mike Shellman says:

    Thank you, sir, but I fear I have little to offer in the way of contribution to any of this as I have no earthly idea where these kinds of numbers come from; 35 dollars per BOE at 65% liquids and 2.00 NATGAS and $200,000.00 per producing barrel… I would sell everything I had in a Yoakum second then go hide somewhere in Bolivia for two years to make sure the buyer did not change its mind later. I cannot believe anybody would turn that down? Those boys down in Perth are some tough traders.

    None of any this shale stuff makes much sense to me, my only point in my comment is that per acre values touted by media outlets (and my industry itself!!) simply creates doubt and mistrust among doubtful, mistrustful mineral owners that do not understand that production income is included in the sale, nor wants to understand. If CHK sells EF acreage to CNOCC for 10K an acre, thats what mineral owners generally believe they should get in the way of lease bonus.

    That needs clarification and you are exactly the man to do it.

    Mike

  2. Mike Shellman says:

    Mr. Dukes, I appreciate your work.

    I know nothing about this Aurora/Eureka thing except that it appears by the press releases and the map you have published that Eureka owns interest in 22 producing wells in Sugarloaf. What then is the point in placing a per acre value on this transaction when clearly it involves some undisclosed discounted PV of producing wells, in-place infrastucture, tons of land and title work, and probable proven reserves offsetting known production? This practice erks me a great deal as it means absolutely nothing in terms of predicting “value” to people in the industry and is very, very confusing to mineral owners who read that bunk and then believe their unleased minerals, with no producing well within 10 miles, should also be worth 87,249 dollars an acre. Read your own mineral forums and tell me it ain’t so. I simply do not understand what those kind of acreage evaluations mean, should mean, to anyone.

    • R.T. Dukes RT Dukes says:

      I appreciate your feedback Mr. Shellman. We’re working hard to make sure everyone is up to date on the latest and the greatest in the Eagle Ford. Your comments and feedback will only help. Keep it coming.

      I’ve added a few additional metrics for you below:

      The article was in no way meant to imply that mineral rights are worth that much per acre. Both flowing barrel and reserve metrics are both skewed very high as well (detailed below).

      For reference Eureka is projecting production of 200,000 boe this year. They report that reserves are 50% oil, so I assumed production is close to the same.

      Using the offer price:

      $110,000,000/547 b0e/d = $200,000 + per flowing barrel based on projected production. I assume current production is lower, which would make the actual flowing barrel number even higher.

      On a reserves basis:

      $110,000,000/(3.1 mmboe 1P reserves)= $35 per boe of proved reserves

      $110,000,000/(8.1 mmboe 3P reserves) = $13.58 per boe of possible reserves

      In regards to mineral owners, my hope is professional contributors like yourself will help them use the various forums and information sources to quickly get up the learning curve.

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