Antrim Energy (AEY) – Net Asset Value

Following the recent spate of good news, which has effectively confirmed the farm-outs at Causeway & Fyne, I have decided to revisit my valuation for AEY.

Shares in issue: 183,981,544

Current share price: 73p (*$1.6) = $1.168

Market Cap: $214,890,443

Key Assets

Fyne - $98,160,000

• Gross 2P reserves of 23.3 mmbbls
• 35.1% Working interest
• Net 2P reserves of 8.18 mmbls

Scenario	Value per barrel	Value
Low	$10.00	$81,800,000.00
Mid	$12.00	$98,160,000.00
High	$14.00	$114,520,000.00

I have used the mid-case scenario as this is the price that recent takeovers have attributed to 2P reserves. Given the current oil price and the quality of oil at Fyne, it could be argued that the high-case scenario is most suitable. Alternatively with the recent fiscal changes, one could also argue that the reserves are now less valuable and as such the low-case scenario is most appropriate.

Please note I have valued the reserves as 'developed reserves' as much of the finance is in place via the recent farm-out arrangements.

Causeway - $68,160,000

• Gross 2P reserves of 16 mmbbls
• 35.5% Working interest
• Net 2P reserves of 5.68 mmbls

Scenario	Value per barrel	Value
Low	$10.00	$56,800,000.00
Mid	$12.00	$68,160,000.00
High	$14.00	$79,520,000.00

I have used the same mid-case scenario for Causeway as for Fyne. I have also valued the reserves as 'developed reserves' as much of the finance is again in place via the recent farm-out arrangements.

Cash - $73,000,000

Total Core NAV = $239,320,000 / 81.29p per share

Exploration

I have decided to only include the 2 prospects (Carra & West Teal) that are scheduled to be drilled in Q3 2011 as there are too many variables to realistically value any other prospects.

West Teal – 16 mmbbls (P50 Gross)

Unrisked - $48,000,000

Risked (50%) - $24,000,000

Scenario	Value per Barrel	25% W.I	50% W.I	100% W.I
Low	$5.00	$20,000,000.00	$40,000,000.00	$80,000,000.00
Mid	$6.00	$24,000,000.00	$48,000,000.00	$96,000,000.00
High	$7.00	$28,000,000.00	$56,000,000.00	$112,000,000.00

Carra – 23.5 mmbls (Gross) – Middle Tay target (excluding 9 mmbbls Cromarty target)

Unrisked - $70,500,000

Risked (50%) - $35,250,000

Scenario	Value per Barrel	25% W.I	50% W.I	100% W.I
Low	$5.00	$29,375,000.00	$58,750,000.00	$117,500,000.00
Mid	$6.00	$35,250,000.00	$70,500,000.00	$141,000,000.00
High	$7.00	$41,125,000.00	$82,250,000.00	$164,500,000.00

As the current working interest is yet to be confirmed, I have proposed 3 different scenarios where AEY retains 25%, 50% & 100% equity in the asset. Given the option exercise at Fyne, I have assumed in all likelihood that Premier Oil will also participate in the Greater Fyne Area. The 50% equity is therefore most suitable in my opinion. As the prospects will require finance to be developed, I have valued them on a similar basis to the Causeway & Fyne transactions, using a mid-price of $6 per barrel.

Unrisked upside - $118,500,000 / 40.25p per share

Risked upside - $69,250,000 / 20.13p per share

Exclusions

I have excluded any value from Argentina at present due to the low net-back received. A quick look at the annual accounts shows that the revenue received vs the depletion charge is negligible and as such of little intrinsic value to the company. Should AEY secure Gas Plus or Oil Plus status on the new production, then the valuation will change quite dramatically and should be added to the core NAV.

No value has been attributed for Tanzania operations as the prospective resource is unknown.

Tax losses of $232 million have not been attributed any value.

Conclusion

AEY is currently trading at a 10% discount below its core NAV (based on fairly conservative estimates). Given that I have discounted production and exploration assets in Argentina and a 30% free carry in exciting Tanzanian acreage, I believe significant upside exists.

The exploration upside is largely risk free if Premier Oil exercise their farm-in rights as Antrim will have a free carry. Given the low-risk nature of the exploration targets in Q3, I anticipate a price of 120p-140p is achievable over the next 6 months. AEY offers the prospect of near 100% returns with very little downside risk.