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Josh Young is the Managing Partner of Young Capital Management, which is a registered investment advisor in the State of California. He is a value investor primarily focused on energy stocks, natural resources stocks, and companies trading a low multiples to earnings, cash flow, or book value. ... More
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  • Mississippian Stock Up 25% In 3 Days, More To Come

    When investors think of the Mississippian play, they generally think of Chesapeake (CHK) and Sandridge (SD), which have amassed the largest positions in the play. Or they think of Range Resources (RRC), which has drilled some of the best wells in the play, or Shell (RDS-A), Devon (DVN), Petroquest (PQ), or other well known companies amassing large positions in the play. Or they might think of Red Fork (OTCPK:RDFEF) and Osage Exploration (OTCQB:OEDV), which are Mississippian pure-plays that earned some of the highest stock returns in the past year.

    But few investors have heard of Austex Exploration (OTC:ATXDF), which is up 25% in the past 3 days. Austex has the most leverage to the play (enterprise value/acre), some of the best results (over 1000 boepd horizontal well and 100 boepd vertical wells), and enough running room to grow production over 1,000% over the next few years.

    Austex has two core areas. The first, 5,500 acres in Southern Kay county, is adjacent to Range's position, and is in one of the most productive and oil saturated areas of the play. Austex participated in a horizontal well drilled by Range that, at 45 days in production, was still producing over 1,000 barrels of oil per day! And Austex has drilled several vertical wells in the area that have been coming on at over 100 boepd (I've been cautioned to only expect 50 boepd per vertical well, but each well to date has IP'd at over 100). This 100 boepd IP rate is impressive considering it only costs $500k per well, and that Austex is drilling two wells per month. In fact, there are 7 wells currently either drilling or in completion, which should be coming online soon and should rapidly increase production. And there is lots of running room, with 150 vertical or 35 horizontal drilling locations on the property.

    Austex's other core area is 17,000 net acres in NW Kansas. This area had been considered fringe until Apache (APA) leased over 550,000 acres surrounding Austex's position. The land value of Austex's position surged on that news, and Apache's interest in the area is a validation of the concept Austex is pursuing there and increases the chance of the field being economic.

    In summary, as Austex continues to grow production by drilling highly economic Mississippian wells, it will gain a higher profile, and it becomes more likely to follow Red Fork's path to becoming one of the best performing stocks in the market (Red Fork was up from 34 cents last year to a high of $1.18 in May). Up 25% in the past 3 days on meaningful volume, Austex is on its way.

    Disclosure: I am long OTC:ATXDF.

    Jul 20 12:56 PM | Link | Comment!
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