Buru Energy might just have a lucrative opportunity in WA supplying gas to future gold mines as the gold price takes off. This company has cash reserves of $60mil, and its only capitalised at $40mil. Looks cheap to me! And based on a gas price at current costs, you would have to conclude that this stock has nothing but upside. The problem is that drilling of targets is not due until 2010. In the interim you can focus on gold. So for now I would just watch this one. I am more interested in the gas potential than the oil given the following economics and the history of discoveries from the basin.
Current production from Blina and associated oilfields:
Ultimate recoverable 2P reserves of all fields ~3 mmbbls
Discovered 1981 - first production in 1983 at ~1,000 bopd
Production of 30 bopd when Buru acquired the fields
Recent workover program increased production to +200 bopd
Field opex ~$10/bbl
Blina oil production facility
Trucking costs to Perth ~$25/bbl
Current A$ oil price ~$65/bbl
Projected annual net revenue at 100 bopd rates ~$2.4 million
This is hardly attractive, but you can readily see that if they have an oil or gas discovery, this company is shaping up as a positive play. The Blina field highlights the potential, and this field is relatively untested. One to watch!
Andrew Sheldon www.sheldonthinks.com