Samson building strength in US

THE market is failing to recognise Samson Oil & Gas' strong position in the US, where it has extensive landholdings with a mix of development and exploration projects and growing production, managing director Terry Barr told the Excellence in Upstream Energy conference in Sydney yesterday afternoon.
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"We have deliberately set up Samson to be a takeover target.

"Our current share price is 36 cents, but based on market fundamentals we should be valued at between 63 cents and $1.03 per share.

"We are undervalued on fundamentals and the market doesn't appear to recognise our upside."

Samson's main assets in the US are the Amber development field in Oklahoma, and the Greens Canyon and Hawks Springs projects in Wyoming.

The company is currently fraccing two wells at Hawks Springs where the company is hoping make a find that will mirror the deposit at the 10 million barrel Silo field 48km away.

Samson is targeting oil in the Niobrara Formation and some gas at this field, and wet gas and oil in the Cordell Formation, Barr said.

“The potential resource identified for the Niobrara is 20MMbbl recoverable (10MMbbl net to Samson), based on the assumption that the two observed resistivity anomalies represent two Silo look-alikes,” the company said.

A trap identified in the Cordell Formation showed the potential to recover between 95 and 140 million barrels of oil equivalent, being a mix of oil and wet gas.

Samson is now assessing its next move, having recently signed off on the acquisition of two producing assets in Wyoming, which have doubled the company’s existing reserves in the process.

Managing director Terry Barr said with a solid production base now ensured, the company was able to take the next step on the road to further expansion in the US petroleum industry, but he would not say exactly what that might be.

“We will be actively looking for opportunities to make further acquisitions but that will depend on whether the deal looks good for our shareholders,” he said.

At the centre of the recently completed acquisition were the producing assets of Stanley Energy – a 21% stake in the Jonah Field and a 16.65% stake in the Lookout Wash field. Both fields are in the Green River region where Samson already has exploration and production assets.

Those assets will add up to 25.8 billion cubic feet of gas equivalent to the company’s existing proven reserve portfolio of 24.7Bcfe, and take the proven and probable reserves to more than 60Bcfe.

Samson bought the assets from a private entity looking to settle his estate for what Barr considered a bargain price at $US36.3 million ($49.7 million).

Plans are in place to further develop the Jonah Field, which has a 1.3 trillion cubic feet production history and also the Lookout Wash play that is in its early stages of development.

Barr said the Jonah Field had ready production capacity, while Lookout Wash had strong exploration upside, giving the Samson portfolio greater balance.

Already in the company stable is the long-life, producing SE Amber gas project and several steadily advancing early-stage exploration plays.

Samson expects to produce 4 million cubic feet of gas equivalent per day between June and the end of the year. Production at that level would earn the company a $9.5 million profit.

Development drilling at the company’s producing assets over the remainder of 2006 will be funded by cash flow from the projects themselves and will increase output from the separate fields in 2007.

Cash flow from the acquisition will help fund exploration at Samson’s primary exploration targets - the Hawk Springs chalk oil play and Baxter Shale oil and gas play in the Greens Canyon project in Wyoming.

Samson said preliminary discussions have been undertaken with a major gas producer in the Flaming Gorge region in the southwest Green River Basin. These discussions are centred on a joint appraisal of this area to determine the productive capacity of the Baxter Shale.

A well three miles southwest of Samson's tenement, the Lone Star-1X, flowed at rates exceeding 1 million cubic feet per day without stimulation.

Given the proximity of this well to the Flaming Gorge acreage, these discussions are aimed at reaching a commercial arrangement, which would see an evaluation well drilled and the acreage base expanded from the existing 6400 acres in which Samson has a substantial interest (85% after farmout).

The exploration budget for 2006 is $13 million and nine wells have been planned, mainly across Greens Canyon and Hawk Springs. There will also be some drilling on the Amber, Gold Coast and Stage Coach Draw projects.

Barr has previously said that Greens Canyon and Hawk Springs had the potential to deliver major discoveries in the near future.

“The Baxter Shale is producing nearby and looks as though it may emerge as the next major shale play in the US,” he said.

He conceded that Samson had yet to show the market it could produce from the Baxter shale, but said there was no reason why it could not emulate neighbouring producer Questar.

"Questar are clearly ahead of us in experience and knowledge of this area, but they are not doing anything special in terms of fraccing," Barr said.

"There is no reason to assume we can't emulate their success."

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