In today’s daily we have covered stock research on AWE Limited (BUY).









 
The S&P 500 was up by 7.33points or0.35% on Monday to 2077.98 points. U.S. stocks rose on Monday, putting major indexes on track for a fourth straight daily gain, with gains in large-cap tech shares giving an outsized boost to the Dow. Energy shares continued their recent downward trend as crude oil sank 3.3 percent on the day after Saudi Arabia's powerful oil minister said OPEC would not cut production at any price. 

Tech shares lifted the Dow, with Intel Corp up 2.2 percent to $37.16 and IBM up 1.7 percent to $161.19. Cisco Systems rose 1.4 percent to $28.17. Biotechnology Index slumped 2.4 percent as Gilead Sciences Inc. sank 13 percent after a drug-benefit manager blocked the company’s $1,000 hepatitis treatment. Chevron Corp. lost 0.8 percent as energy companies were the worst performers in the S&P 500.
 



IBM Daily Chart (Source – Thomson Reuters)
S&P ASX 200 was up by 103.4points or 1.9%on Monday and closed at 5442 points. Santos shares surged 6.4 per cent to $8.50, Oil Search shares lifted 5 per cent to $8.06 and Origin Energy shares rose 3.3 per cent to $11.89. Among the big miners, BHP Billiton finished 3 per cent stronger at $29.84, Rio Tinto jumped 2.6 per cent to $57.73 and Fortescue Metals surged 5.5 per cent to $2.69.
Fairfax Media shares added 1.8 per cent to 84.5¢, after the company announced it would merge its radio network with Macquarie Radio’s and announced the sale of of 96FM to APN News & Media. APN shares lifted 5.4 per cent to 78¢. All sectors were up on Monday; energy surged 4.1 per cent and materials rose 2.6 per cent. SPI futures are down 7 points.  Iron ore is down $US1.27 at $US67.90 a tonne. No stocks will trade ex dividend today.

Oil Search Daily Chart (Source – Thomson Reuters)
 
Top Performers on the ASX 200 were :-


 
Stock of the Day - AWE Limited (BUY)
 
Today we focus on AWE Limited (AWE), the energy company that very recently released updates on Perth Basin exploration and appraisal activities. The updates specifically deal with said activities in permits L1/L2, EP320, EP413 and EP455 in the Perth Basin. For Permit L1/L2 (AWE 50%, Operator in joint partnership with Origin Energy), there is good progress by the Company on preparations for conventional flow testing of the Senecio-3 well to further appraise the recently discovered Waitsia gas field. Flow testing which is planned to start in late January 2015 is subject to regulatory approvals and the arrival of equipment, and will take about six weeks to complete. Drilling of additional appraisal wells on Waitsia gas field in 2015 is also planned. Depth mapping has led to identification of four potential appraisal locations, out of which two are planned to be used for drilling. The first appraisal well is planned to commence in 2Q of CY15 subject to various approvals. Gas marketing strategy is also underway.

Perth Basin (Source – Company Reports)

Progress at Permit EP320 (AWE 33% with 67% of Origin as Operator) entails preparations for the Irwin-1 exploration well which AWE will Operate under an agency agreement with Origin. The Irwin prospect straddles EP320 and L1 (AWE 50%, Operator) and is a tight gas prospect targeting the Dongara/Wagina formations. Drilling at Irwin-1 is planned to commence towards the end of the 1Q of CY15 and will be following the success of the Senecio-3 appraisal. Drilling of an exploration well in the Trapdoor prospect, located near the Beharra Springs gas facility, in financial year 2015-16, is also under consideration.


Oil and Gas in the Perth Basin (Source – Company Reports)

Permit EP413 (AWE 44.25%) operated by Norwest Energy is progressing well with Norwest planning to acquire a 3D seismic survey over an area of approximately 110km² around the Arrowsmith-2 well. The survey is expected to be undertaken in 1Q of CY15, subject to receiving regulatory approvals.


Production (Source – Company Reports)

Development at Permit EP455 (AWE 81.5%, Operator) includes drilling of the Drover-1 exploration well in July 2014 and successful intersection of all target formations before reaching its planned total measured depth of 2,356 metres (m). The Company collected logs and a range of well data in addition to ~21.5m of core taken from the Kockatea Shale and sidewall cores from the Carynginia Shale, the Irwin River Coal Measures and the High Cliff Sandstone.


Forward Work Plan for the Perth Basin (Source – Company Reports)

Initial results from the studies reflected that a 700m interval in the Kockatea Shale lies within the optimum wet gas generation window consistent with the elevated gas shows observed when drilling; and a 250m section of the Beekeeper Limestone and Carynginia Shale is mature for dry gas generation. The Kockatea Shale thus represents a good source potential, including condensate, but has high clay content and consequently low rock strength. As a result, the majority of the Kockatea section in Drover-1 is unlikely to have sufficient natural fracturing or propensity for hydraulic fracturing to achieve a commercial flow rate. However, three Kockatea intervals have been identified to contain lower clay content and could be targets for future exploration or appraisal. Accordingly, the Company may undertake a Diagnostic Fracture Injection Test (DFIT) over one of these in early 2015 for further assessment.


Performance Indicators (Source – Company Reports)

Another latest highlight is the announcement by Origin, the Operator of the BassGas Project, about the successful completion of the heavy lift stage (Phase 1b) of the Bass Gas Mid Life Enhancement (MLE) project. The heavy lift crane vessel, the “Sapura Acergy 3000”, successfully installed the gas compression and condensate pumping modules onto the Yolla platform. Tie-in and commissioning of the modules is scheduled to commence in mid-2015 once the planned development drilling activity is completed. The modules are expected to be commissioned in FY 2016-17.  The BassGas asset which was shut-in since 24th November for planned maintenance etc., is due to start production in late December and will remain in operation until development drilling activity commences in 1Q of 2015. This is one of the AWE’s keystone assets. The Company will now focus on final stage of the MLE project that entails drilling of two development wells, commencing in early 2015. The wells are expected to increase production from BassGas to between 60-70 TJ per day, up from the 40 TJ per day average achieved over the September quarter.


AWE Leveraged to Rising Gas Prices (Source – Company Reports)

During the AGM in November 2014, AWE reported its financial and operational highlights for the 12 months to 30 June 2014. These involved exceeding operational goals for the year, e.g. production, revenue, etc.; accelerated drilling, increased production and increased reserves and contingent resources at Sugarloaf; selling of 50% of AAL oil project for US$188m while exceeding market expectations; selling of 11.25% of BassGas and 9.75% of Trefoil for $85m; and major discovery in Perth Basin subsequent to year end.


Quarterly Production and Sales Revenue (Source – Company Reports)

Other key developments include increased Tui production expected in CY15 in view of Pateke-4H development well completed and suspended, and production likely to commence in 2Q CY15; good progress in Indonesia with the Lengo Gas Project and East Java Sea etc., and Ande Lumut Tender Plan for FPSO approved       by Indonesian government; sugarloaf production expected to increase in view of more wells coming online; and so forth. The Company also reported cash of $56 million, net debt of $9 million, and undrawn debt facilities of $234 million at 30 September 2014, as per its quarterly report for September 2014. AWE aims to double production to 10 mmboe and triple field EBITDAX to more than $500 million by the end of 2018.


AWE Daily Chart (Source - Thomson Reuters)

Given the above, we reiterate a BUY recommendation for this stock at the current price of $1.27.
 



 
Disclaimer
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people.
Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376).
The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation.
Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product.
The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide.