STRONG buy even at this level

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news in reverse chronological order nov to sep 07
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Net Accrual to Assam Company shareholders works out to Rs 248 per share on the low end, Rs 1069 per share on the higher end and Rs 740 per share on the Best Recoverable Estimate basis, over the course of Oil Production from the Amguri and AA-ON7 Blocks.



This is against the current market price of Rs 25.60 per share of Assam Company.



A. Amguri Development Block 53 sq kms

Oil discovered



Amguri 5 588 bbls/d



Amguri 6 405 bbls/d



Amguri 10B 1000 bbls/d



Amguri 11 4100 bbls/d



Amguri 10B and Amguri 11 will be put on Commercial Production in the Q4, CY2007.



B. AA-ON7 Development Block 1445 sq kms



Drilling Operations are continuing



C. Summary of Exploitable Reserves and Share accruable to Assam Company



Amguri & AA-ON7 Prospective Resources-Gross



Probabilistic Estimate of Resources



Production Sharing Contract



60 per cent participating interest, & operator for Amguri



40 per cent participating interest-Assam Company



65 per cent participating interest and operator AA-ON7



35 per cent participating interest-Assam Company



World Oil Prices paid



25 Year Term plus optional extensions



100 per cent cost Recovery



Royalties $ 3.95 per bbl and gas 10 per cent



7 Year Tax Holiday from initial production



Unrisked report prepared by Sproule International
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Assam Company-Amguri Oilfields Shaping Up As An Exciting Find

BSE 500024, CMP Rs 22



Assam Company and Canoro, the Canadian Oil field operator for the Amguri Oilfields in Assam announced on Wednesday that they had met success in the Amguri 11 Oil Well, with the Oil/Gas flow at the tip head of 3100 boe/d.



Earlier this year, Assam Company had informed the BSE that it had met success at the Amguri 10B well, with tip head Oil/Gas flow of 1000 boe/d. Put together the 2 wells can produce well over 4100 barrels of oil equivalent or roughly 1.5 million barrels of Oil per annum, worth approximately Rs 478 crore per annum. (That is 4100*365*80* 40).



If the Amguri fields last for another 15 years, we are roughly talking of Oil equivalent reserves worth $ 1.5 to $ 2 bn or Rs 8000 crore.



This is the contribution from just the Amguri fields, that apart Assam Company has joint operatorship with Canoro, for the AAON7 Block that stretches from Assam to tracts well inside Nagaland, where testing and drilling operations continue. Here 2D and 3D Seismic studies and geographic mapping services are being carried out by Asian Oilfields on behalf of the Assam Company-Canoro combine.



Further to Amguri and AAON7 blocks Assam Company is refurbishing the Laxmijan Oil fields discovered by Ongc and given over to Assam Company for the work over, which too could result in additional oil finds.



The North East, cradle of the first onshore Oil finds in India has access to the Bongaigaon and Numaligarh Refineries of IOC and Oil India, which can process gas and crude produced by Assam company.



Gas supplies are already being made to these Refineries. If the Amguri prospect shapes up well, then Assam Company would made an equally significant Oil discovery as Cairns has made in Rajasthan.



What about the market cap of Assam Company?



Investors must note that Assam Company as a standalone entity fetches a market capitalisation of a mere Rs 484 crore (22 crore shares at Rs 22 per share), which represents essentially its Tea plantation business in Assam. The Tea business generates about Rs 200 crore in Annual Revenues and brings in marginal profits.



The Oil business thus comes for free.



Agreed there will be development costs for the Oil fields in Assam, but apart from the initial money put in by Canoro, the Canadian concern has raised an additional $ 10 mn to fund drilling of new wells and Assam Company has raised $ 46 mn through FCCBs for carrying out the Exploration and Oil Field development work.



Amguri 10B update



Assam Company Ltd has successfully completed testing operations of the Amguri 10B well. The upper portion of the zone was perforated to determine the hydrocarbon potential of the zone. The flow from the total completion interval confirmed the presence of a gas-condensate reservoir throughout the entire zone of 32 meters.



Due to difficulties in establishing stable flow rates in high pressure gas-condensate

situations and having regard for testing equipment limitations and safety precautions,

the well was not tested to its full potential.



The well had a tested tubing head pressure of 2,500 psi with an 18/64 inch choke from

both intervals.



Management believes that the 10B well could produce in excess of 1,000 boe/d once connected to the production facilities.



With existing well site facilities located at Amguri 6, approximately 200 meters from the surface location of Amguri 10B, new production from Amguri 10B is expected to be on stream during the fourth quarter, generating increased cash flow and production to the Company.



The existing purchaser of the natural gas has recently indicated that they will be able to handle the additional supply from Amguri 10B. Drilling of the next well, Amguri 11, is expected to commence during the second week of August 2007.



Development of the Laxmijan field



Assam Company had been awarded the Laxmijan Field in April 2004 which was a discovered field by ONGC. The well number 1 A available with the Company, after reprocessing of old logs and due diligence, was taken up for work over job.



Latest state of art technology was deployed during cased hole logging. Three promising Zones between 3100 m and 3520 meters have been identified to hold potential Oil & Gas.



The first Zone at around 3500m has been taken up for cement squeeze and under balanced perforation after correct diagnosis. Around 40 ft of sand has been perforated.



The well has established the commercial flow of oil and gas.



All necessary prerequisites are being mobilized to put the well under sustained oil production where expected Oil rate is likely to be good as the pressure indications at surface are encouraging.



Funding In Place



Assam Company has successfully raised US$ 46 million through zero coupon unsecured Foreign Currency Convertible Bonds (FCCBs). The Bonds will be convertible into equity shares at a conversion price of INR 28.75 which represents 19% premium to closing price of November 23, 2006. The bonds have a tenure of 5 year and 7 days, with yield-to-maturity of 8.25%.



Silverdale Services Ltd, London, was the Sole Lead Manager for the offering.



A Rs 2000 crore Hydrocarbon Park in Gujarat alonwith GSPC



Assam Company has signed a Memorandum of Understanding (MOU) with Gujarat State Petroleum Corporation Ltd (GSPC) tor development of SEZ (Special Economic Zone) Hydrocarbon Park. The salient features of the MOU are as follows:



1. The estimated project cost would be about Rs 2,000 Crores.



2. SEZ to be made operational by January 2010.



3. The said Joint Venture would be through SPV (Special Purpose Vehicle) route.



4. GSPC shall be entitled to nominate the Chairman of the Board of SPV.



5. Joint Working Group to be formed and both the parties would nominate two members each to the Joint Working Group.

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Five leading foreign institutional investors have bought 3.83 per cent of Assam Company in the two weeks between August 10 and 24.



“We believe the FIIs have invested with a long term outlook on our oil and gas business. We have already commenced drilling at Amguri block 10B and struck hydrocarbon. We are in the process of linking the block to our production process,” said Abhay Chowdhry, chief financial officer of Assam Company Limited.



In August, Goldman Sachs Investments (Mauritius) bought 29.78 lakh shares or 1.33 per cent of the company’s equity capital. Global Asia Fund’s Global Proprietar picked up 26.23 lakh shares or 1.17 per cent in the company.



Merrill Lynch Capital Markets Espana purchased 10.93 lakh shares, Credit Suisee (Singapore) 9.80 lakh shares and Citi Global Markets Mauritius bought 8.85 lakh shares in the same month.



Other leading FIIs such as Quantam (125 lakh shares or 5.61 per cent) and Macquire Bank (65.4 lakh shares or 2.92 per cent) together held 190.4 lakh shares or 8.53 per cent of the equity shares as on June 30, 2007.



Assam Company has already started drilling at Amguri block 5, 6 and 8A. It is extracting 250 barrels of oil equivalent per day from 5 and 6, generating Rs 2-2.5 lakh per day.



courtecy:- Dr udaybhaskar sana (UAE)