AOW joins the ranks of other ASX listed US-focused oil/gas plays such as Aurora, Sundance and Lonestar. The $1.8bn takeover of Aurora earlier this year is a clear demonstration of the potential to unlock the oil and gas riches in the USA.
American Patriot has 3 wells planned over the next 12months with drilling on the first well commencing in the next few months focussed on the prospective higher margin oil play of Northern Star in Montana.
AOW's business model in many ways mirrors the approach of Aurora and many other successful juniors - to pass the exploration risk to JV partners through farm-ins - thereby preserving cash and adding value to the land position.
AOW's JV partner is successful US-based Treasure Exploration part of a successful private Denver group. Management of Treasure have a successful track record of building and selling US oil and gas assets. AOW is free carried on up to 4 wells by Treasure, drilling over the next 18 months with no cost caps - a spend of up to $24m on the acreage at no cost to AOW.
The metrics really say it all. Aurora was taken out for over $100,000/acre and producing acreage in Montana/North Dakota is being acquired for over $20,000/acre. On the Northern Star project in Montana, AOW's exposure is to 36,800 gross acres so the upside for AOW is significant in the event of success.
AOW starts its ASX life at just under $800/acre for its 25,000 net acre land bank and importantly it will incur no cost to unlock the value of this acreage as the business model calls for JV partners to cover the cost of exploration.
The founders & major shareholder of AOW have a track record of closing JV deals and delivering value and were also founders of Ambassador Oil & Gas currently subject to a bidding war by Drill Search/Magnum Hunter.
AOW Price at posting:
17.0¢ Sentiment: None Disclosure: Unspecified
