Non Conventional Oil & Gas: Developer / Producer

Transcription

1 SSN.asx Buy Non Conventional Oil & Gas: Developer / Producer Samson Oil & Gas Ltd SAMSON OIL & GAS LTD Bakken Deal Elevates SSN to New Level Samson Oil and Gas Limited ( Samson, SSN, Company ) has announced that it has entered into an agreement to acquire up to 60,000 acres in the Bakken Shale play in Montana. The agreement is with the Fort Peck Energy Company ( FPEC ) and consists of three phases. FPEC is jointly owned by Fort Peck Nation s holding company and Quantum Energy Partners subsidiary, North American Resource Partners ( NARP ), which specialises in development of traditional owner landholdings. Under the first phase, SSN will acquire 20,000 acres (subject to a 33% back-in by FPEC) for an undisclosed amount plus a commitment to drill 2 wells. We estimate the total cost of Phase 1 to be US$15-$20m (based on the cost of two wells and maximum per acre cost of $400). Two additional phases (detailed later), will allow SSN to acquire up to 60,000 net acres in total. The project has been coined Roosevelt after the county in which it is located. 6 Months Work plus Serendipity Highlight Opportunity Samson has been working on Roosevelt for over 6 months, ever since it became aware of distressed acreage sales (not FPEC) in the region late last year. The Company picked up these acres for option value at very low prices and through the transaction was introduced to FPEC. SSN embarked upon an initial geological and engineering evaluation of the area (all leases are located within the Fort Peck Reservation), which had encouraging results. More detailed studies were then commissioned, using both Samson s in-house technical team and that of Halliburton (SSN s partner in its Hawk Springs Project). The result of the technical evaluation was that a potentially significant commercial opportunity was identified to which end Samson and FPEC agreed to a deal that would see two horizontal appraisal wells drilled later this year. Bakken Extension Indicated by Technical Work All of the technical evaluation work done suggests that there is good potential for a commercially viable development over the Roosevelt acreage. This includes porosity, permeability, vitrinite reflectance, thermal maturity and oil saturation analysis. The acreage is not in the centre of the play; however, leasing activity in the area suggests that other majors, who are active in the play, believe that the area has potential. The nearology argument is strong as evidenced by the map on page 3. There are three wells into the Bakken within 10 miles that have produced initial rates of 642-1,013 barrels of oil equivalent per day. The leasing pattern is in part due to the perceived edge of the play fairway but mainly due to a reluctance of many US companies to deal with the extra level of bureaucracy associated with developing within a Native American Reserve. This has created an opportunity for SSN that has enabled this potentially lucrative transaction. 6 High Impact Horizontal Wells Before Year End 24 Jun 2011 Share Price: $0.14 6mth Price Target: $0.28 Brief Business Description: Oil and gas developer / explorer with core assets in the Niobrara and Bakken Shale onshore USA. Hartleys Brief Investment Conclusion Early success by other companies in the Niobrara. Samson drilling in Q Chairman & CEO: Dr Victor Rudenno (Chairman) Mr Terry Barr (Managing Director) Top Shareholders: National Nominees Ltd (7.8%) Macquarie Bank Ltd (2.1%) Flush Nominees Pty Ltd (0.9%) Company Address: Level 36, 2 The Esplanade Perth, WA, 6000 Valuation: Issued Capital: - fully diluted Market Cap: - fully diluted Cash Equiv (31 March '11): Debt (31 March '11): Valuation Summary# $ m m $241.9m $292.5m $60.0m $0.0m FY10a FY11e FY12e Prodn (mmboe) Op Cash Flw -$1.2m -$20.7m $50.6m Free Cash Flw -$7.2m $38.9m -$19.8m NPAT* (A$m) $0.8m $4.5m $56.9m EPS ($, bas)* 0.0x 0.3x 3.4x P/E (basic)* 285.1x 51.2x 4.2x EV / EBITDA -42.3x 27.7x 2.5x DPS ($) Franking 100% 100% 100% Dividend Yield 0.0% 0.0% 0.0% N.D. / equity 18% na na Net Cash End -$5.4m $36.0m $18.6m Prospective Shale Acres 16,003 EV / acre $ 14,529 Resource (mmboe) 36.0 EV / Resource ($/mmboe) $6.46 Source: Hartleys Research, *normalised # financial forecasts are unrisked Samson Oil & Gas Ltd A$ 80.0M Jun-10 Oct-10 Feb-11 Jun-11 Volume - RHS Source: IRESS SSN Shareprice - LHS Sector (S&P/ASX SMALL RESOURCES) - LHS Authors: Dave Wall Oil and Gas Analyst Ph: E: david_wall@hartleys.com.au As part of its farm-in, Halliburton will free carry Samson on the drilling of a horizontal well into the Niobrara, which is expected to spud in early-mid July. Samson has chosen to drill at its sole risk a conventional target in August that has been identified by the recent 3D seismic. Chesapeake is also planning to drill two wells in Wyoming in the near term (estimated spud September 2011) on acreage in which SSN has an interest. With the additional appraisal wells on the Hartleys has provided corporate advice within the Roosevelt acres in the Bakken, this represents the culmination of many months past 12 months and continues to provide corporate advice to Samson Oil & Gas Ltd. See of work, which could result in a substantial re-rating of the Company. We disclosure on back page for details. The analyst has a benifical interest in the shares of Samson recommend SSN as a Buy with an increased price target of 28cps (prev 18cps). Oil and Gas Ltd. Page 1 of 14 Hartleys Limited ABN (AFSL ) 141 St Georges Terrace, Perth, Western Australia, 6000 Hartleys does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

2 CONCEPTUAL SUMMARY MODEL THE FORECASTS BELOW REPRESENT THE UNRISKED CASHFLOW POTENTIAL OF THE BUSINESS. THESE HAVE BEEN SIGNIFICANTLY DISCOUNTED FOR VALUATION PURPOSES # Samson Oil & Gas Ltd Share Price June 2011 SSN $0.140 BUY Key Market Information Directors Company Information Share Price $0.14 Dr Victor Rudenno (Chairman) Level 36, 2 The Esplanade Market Capitalisation $242m Mr Terry Barr (Managing Director) Perth, WA, Week High-Low $ $0.03 Mr Keith Skipper Tel: Issued Capital m Fax: Issued Capital (fully diluted inc. ITM options) m Web: w w w.samsonoilandgas.com Options 361.8m@$A0.02 Yearly Turnover/Volume $272.8m/3,103.1m shares Top 10 Shareholders (as at 30/08/08) m shares % Valuation and Price Target 1 Top 10 Shareholders Shares (m) % Discounted Cashflow Real $ National Nominees Ltd Month Price Target $ Macquarie Bank Ltd Flush Nominees Pty Ltd Financial Performance Unit FY2010A FY2011E FY2012E FY2013E FY2014E 5 NEFCO Nominees Pty Ltd Citicorp Nominees Pty Ltd Net Revenue A$m Sacrosanct Pty Ltd Opex A$m (10.9) (2.1) (10.3) (29.9) (58.1) 8 Gascorp Aust. Pty Ltd Secondary Tax Expense A$m Paesler C B & A Total Costs/Writeoffs A$m (10.9) (2.1) (10.3) (29.9) (58.1) # HSBC Custody Nom Australia EBITDA A$m (5.5) Depreciation/Amort A$m (1.1) (1.1) (5.3) (9.2) (23.2) EBIT A$m (6.6) Net Interest A$m (1.4) (0.4) P Reserve as at 30/06/2010 Liquids (mmbbl) Gas (bcf) Total (mmboe) Pre-Tax Profit A$m (5.5) Tax Expense A$m 6.3 (2.4) (30.6) (84.9) (152.9) USA NPAT A$m Abnormal Items A$m Total (mmboe) Reported Profit A$m Financial Position Unit FY2010A FY2011E FY2012E FY2013E FY2014E Production Summary Unit FY2010A FY2011E FY2012E FY2013E FY2014E *Attributable Cash A$m Liquids mmbbl Other Current Assets A$m Gas bcf Total Current Assets A$m Total mmboe Property, Plant & Equip. A$m boe/d ,559 9,399 17,091 Exploration & Dev. A$m Investments/other A$m Price Assumptions Unit CY2010 CY2011 CY2012 CY2013 CY2014 Tot Non-Curr. Assets A$m Total Assets A$m Gas Price US$/mcf Liquids Price US$/bbl Short Term Borrow ings A$m Exchange Rate A$/US$ Other A$m Total Curr. Liabilities A$m Long Term Borrow ings A$m Hedging Unit CY2010 CY2011 CY2012 CY2013 CY2014 Other A$m Total Non-Curr. Liabil. A$m Total Forw ard Sales - Oil mmbbl Total Liabilities A$m Forw ard Oil Price US$/bbl Total Forw ard Sales - Gas mmbtu 230, ,000 Net Assets A$m Forw ard Gas Price US$/mcf Cashflow Unit FY2010A FY2011E FY2012E FY2013E FY2014E Sensitivity Analysis Valuation ($/s) NPAT EPS ( ) CFPS ( ) Operating Cashflow A$m (2.5) Base Case Income Tax Paid A$m - (25.2) (14.5) (34.2) (75.2) Oil Price +10% Interest & Other A$m 1.3 (0.4) Oil Price -10% Operating Activities A$m (1.2) (20.7) Gas Price +10% Gas Price -10% Property, Plant & Equip. A$m (4.3) (20.4) (70.4) (172.4) (241.0) Exchange Rate +10% Exploration/Development A$m (1.6) Exchange Rate -10% Investments A$m Proceeds From Sale (0.1) *N.B. NPAT, EPS, CFPS forecasts are for FY2012 Investment Activities A$m (6.0) 59.6 (70.4) (172.4) (241.0) Repay / Draw Debt A$m (5.7) (11.3) Share Price Valuation (NAV) $m $/share Equity A$m Financing Activities A$m 11.4 (11.3) Haw k 10%* %* Net Cashflow A$m (17.5) North 10% Niobrara Royalty* Ratio Analysis Unit FY2010A FY2011E FY2012E FY2013E FY2014E Other Assets Cash Cashflow Per Share A (0.1) (1.2) Debt Cashflow Multiple X (192.3) (11.2) Corp Admin (16.3) (0.01) Earnings Per Share A Options Price to Earnings Ratio X Dividends Per Share A Total Dividend Yield % Interest Cover X na na 10% real discount rate used for DCF (~13.3% nominal) Return on Equity % 3% 59% 32% 40% 37% *DCF Valuation further discounted by 50% to reflect development risk Analyst: David Wall Phone: Last Updated: 24/06/2011 Sources: IRESS, Company Information, Hartleys Research Page 2 of 14

3 Cashed up and with large acreage positions in two of the hottest liquids rich shale plays in the USA Niobrara and Bakken. 6 high impact wells expected before year-end. Any success could significantly re-rate. HIGHLIGHTS Samson is an oil and gas development and exploration company with assets located in the USA. The Company is listed on the ASX and is the only ASX listed junior energy company listed on NYSE AMEX market. Approximately 50% of its shares are domiciled in the US. Both markets trade with the stock code SSN. Samson s core assets are in non-conventional oil rich shale plays in North Dakota / Montana (Bakken Shale) and Wyoming (Niobrara Shale). The Company retains net acreage of >21,000 acres in the Bakken and ~15,000 acres in the Niobrara, known as the Hawk Springs Project. Interpretation of 3D seismic over Hawk Springs was recently completed. The Company will be free carried through the first two Niobrara test wells by Halliburton, the first of which is scheduled for mid July The Company recently completed a potentially transformational deal, increasing its Bakken acreage by 20,000 acres initially and up to 60,000 net acres ultimately. The deal is described in more detail below. Roosevelt Bakken Acquisition Samson has recently increased its exposure to the Bakken Shale through a large acreage acquisition in Roosevelt County, Montana. The project is named after the county in which it is located and involves a deal with the Fort Peck Energy Company ( FPEC ) for up to 60,000 net acres for SSN over three phases. Fig. 1: Surrounded by Majors SSN in Yellow Up to 60,000 net acres secured as part of the transaction. Surrounded by majors, strong nearology argument. Source: Samson Oil and Gas Ltd ROOSEVELT BAKKEN SHALE, MONTANA The acquired acres are in Roosevelt County, Montana and reside within the Fort Peck Reservation. The figure above outlines the location of the Phase 1 and Phase 2 lease area and its proximity to acreage held by majors such as Brigham, EOG, Continental and Whiting. The project is also nearby to the prolific Elm Coulee field (directly to the south), which is expected to ultimately produce 500 million barrels of oil. Page 3 of 14

4 Acquisition details 20,000 acres for two wells and an undisclosed acreage price. We assume that the acreage price is competitive as FPEC are more interested in a partner who will drill. Acquisition Details Under Phase 1 of the deal, Samson has bought 20,000 acres for an undisclosed amount as well as agreeing to fund the drilling of two appraisal wells into the Bakken. FPEC can back-in for 1/3 of the Phase 1 acres and the two wells by paying its share of the costs. In Phase 2, an additional 20,000 acres can be bought, also subject to a 1/3 back-in. Finally, Phase 3 involves heads up leasing over a predefined area of mutual interest in which SSN may acquire 33,333 net acres. Assuming that the project is commercial, SSN may acquire up to 60,000 net acres. Fig. 2: Deal Summary Source: Samson Oil and Gas Ltd Significant technical due diligence done by Samson team and external consultants, including Halliburton. All parameters indicate strong potential for a commercial development. Technical Analysis Samson has undertaken extensive technical due diligence in relation to the acreage over the last 6 months. The Company has analysed logs from over 24 wells in addition to core analysis. The technical work was undertaken by Samson s internal team as well as Halliburton included: Thermal Maturity analysis using vitrinite reflectance and Quality of organic matter using Hydrogen Index. Porosity / Permeability from well logs and core data. Porosity is low, as with all shales, but within the range required for storage of commercial quantities of oil. Oil Saturation oil saturation over the acreage is interpreted to be lower than the core Bakken (58% vs 75%) areas so increased water handling will need to be factored into any long term development plan. Regional Geology including depth structure and analysis of 2D seismic for potential of structural and stratigraphic features that may enhance productivity. Core Samples taken from the Tribal well (within the Reservation see Fig. 5) confirm porosity, rock characteristics and the presence of hydrocarbons within the Bakken. The Company also spent an extensive amount of time understanding the differences to the operational framework associated with developing within the Fort Peck Reservation. There are additional stakeholders regulatory bodies to consider, such as the Bureau of Indian Affairs; however, oil and gas development on the Reservation is evidenced by 18 currently producing oil fields so this is not new ground. FPEC, along with NARP (see Fig. 4 below), has proven to be a Page 4 of 14

5 sophisticated partner that recognises Samson s alignment with its goal of maximising value from the Fort Peck Tribe s natural resources. There is also a precedent in the North Dakota Bakken, where over $1.8b has been invested in Fort Berthold, which is also located on a reservation. Key parameters similar to other producing areas of the Bakken. Potential for these metrics to improve as more data is acquired from upcoming wells. Fig. 3: Comparison Between Ft Peck and Producing Fields Source: Samson Oil and Gas Ltd The figure above summarises some of the key characteristics of the Roosevelt project that are required for a commercial development as compared to existing fields. We believe that there is potential for the comparative metrics to improve as more data is acquired, particularly from the drilling of the first few wells. Quality partners with strong alignment of goals. Partners Samson s partners in the Roosevelt Project are high quality and are detailed below. Fig. 4: Partners in the Roosevelt Project Two wells to be drilled prior to calendar year end. Halliburton contracted for well services and drilling supervision. Source: Samson Oil and Gas Ltd Forward Plan Samson has committed to the drilling of two wells as part of the acquisition. The wells are to be drilled as horizontal multi-stage fracture stimulated wells into the Middle Bakken Formation. The Company has already engaged Halliburton to undertake well construction planning, drilling and completion supervision. Page 5 of 14

6 It is expected that these two wells will spud prior to the end of the calendar year. Two wells within five miles have initial production rates of ~1,000 boe/d. Further supports the nearology argument. Nearby Activity Whilst there have been no horizontal Bakken tests within the reservation, several wells nearby have flowed at encouraging rates as shown below including Continental s Rognas 2-22H well, which had initial production of 1,013 barrels of oil equivalent per day. This well is located ~5 miles from the boundary of Samson s acquired acreage. Fig. 5: Nearby Activity to the Phase 1 and 2 Land Package 5 miles 5 miles Up to $500m valuation based on only first two phases of the acquisition. Our risked valuation is $200m still high but nearby production and technical work done increases confidence. Source: Samson Oil and Gas Ltd, Hartleys Valuation We have modelled a notional valuation of ~A$500m for Samson s share of the Phase 1 and 2 acreage positions using the following assumptions: Estimated ultimate recovery of 310,000 barrels per well Initial production of 600 barrels of oil per day Well costs of US$6.5m 320 acre well spacing Given the early stage nature of the asset we have discounted this valuation by 60% to arrive at a risked valuation of $200m or 10cps. This is not a small number; however, we believe it appropriate given the amount of technical due diligence and the proximity to existing production. We have not included any value for the conventional targets, which could add >$1b if successful. Page 6 of 14

7 Not to be forgotten 15,000 net acres in the Niobrara. First well imminent to be drilled by Halliburton as part of its farm-in. Two additional wells to be drilled on SSN acreage by Chesapeake in September. Analysis of the 3D has confirmed the geological model and the existence of natural fracturing. HAWK SPRINGS NIOBRARA SHALE, WYOMING Samson has ~15,000 net acres in the northern DJ Basin in Wyoming that are prospective for oil production from the Niobrara Shale. The Company, in joint venture with Halliburton, has recently completed 3D seismic processing and interpretation. The first horizontal test of the Niobrara is scheduled for spud in July Additional conventional targets have also been identified on the seismic, the first of which will be tested in August Technical Analysis The recently interpreted 3D seismic has highlighted key features required for a successful horizontal shale well. The Company had interpreted that natural fractures should occur on the acreage due to proximity to two lineaments and the 3D seismic has confirmed this, also indicating the areas where the fracture swarms are likely to be most intense. The other key feature identified is fracture orientation, which determines the optimal direction that the horizontal well should be drilled in. In addition to this, Samson has previously conducted extensive technical work that identified a resistivity anomaly over its acreage. Samson has also identified large potential in conventional reservoirs below the Niobrara, in the Permian and Pennsylvanian sections. These reservoirs are productive elsewhere in the basin. Samson s first target, which it will drill sole risk, may contain up to 10 million barrels of oil with a further million barrels of follow up potential. Fig. 6: Samson Acreage with Resistivity Contours & 3D Outline Icing on the cake could be million barrels of conventional potential also identified by the seismic. To be drilled in August considered high risk. Source: Samson Oil and Gas Ltd Page 7 of 14

8 Drilling by Halliburton imminent. Conventional target high risk / high reward but low cost. A good equation but not factored in to our valuation. Locality of the SSN wells one horizontal Niobrara test in July and one vertical conventional test in August. Forward Plan Halliburton will drill the first horizontal test of the Niobrara in this area of the DJ Basin, with the first well expected to spud in early-mid July Once the vertical well has been completed, further analysis of a core will determine the orientation of the horizontal section. This will assist with calibration of the 3D seismic for direction of future wells. Fracture stimulation of the well should occur sometime in August, with flow rates reported by the end of August or early September. Samson will drill a conventional target at its sole risk, for a dry hole cost of ~$1.8m. The well is scheduled for spud in August and a result should be known sometime in September. The vertical well bore may be used to kick off a horizontal section in the Niobrara in the event of a failure. Chesapeake has also indicated that it is planning to drill two horizontal tests on acreage in which SSN has an interest. The spud date for the first of these wells is likely to be September. Fig. 7: Permitted Well Locations* State H and 10-1H to be drilled by Chesapeake, possibly in September. SSN has 12.5% and 25% working interests in these wells. Strong results nearby continue to be reported indicating that the play is likely to be commercial. Still lessons to be learned but progress is continuing. Source: Wyoming Oil and Gas Commission,* each square is 1 mile x 1 mile Nearby Activity There have been several wells reported since our last update, including 3 by EOG Resource Inc, which have averaged 463 barrels of oil per day on a restricted rate and 2 wells by PDC Energy, which have flowed at >500 barrels per day for the first ~10 days of production. This brings the total that we are aware of to 37 wells at an average of 652 barrels of oil per day. We are also aware that Chesapeake has drilled several wells on the acreage that it bought from SSN last year. The results from these wells remain confidential and it is Page 8 of 14

9 not clear how many of the wells that have been drilled are fracture stimulated and producing. Chesapeake did not have the benefit of 3D seismic to optimally place its wells but we believe that it is experimenting with different completions in order to unlock the play in the region. Samson will benefit to some extent from Chesapeake s work to date by participating in the wells that spill over into its acreage. Valuation Our base valuation for Hawk Springs is based upon discounted cash flow modelling. We have used assumptions taken from recent well results in the play, which have been discussed previously in this report. We have used conservative modelling assumptions to reflect the uncertainty that exists around the technical parameters. Still results in a large unrisked valuation of 35cps. Fig. 8: Hawk Springs Assumptions Metrics Cost per Well Operating Cost per bbl Assumption US$3.5m US$10 Royalty 12.5% Severance Tax 5% Corporate Tax 35% Initial Production (boe/d) 85% oil 700 Decline b factor 1.1, initial decline 90% Estimated Ultimate Recovery (mmboe) 300 Well Spacing (acres) 160 Source: Hartleys Using these assumptions results in a discounted cashflow valuation for Samson s Hawk Springs project of A$737m or 35cps. This equates to average NPV per well, over time, of ~$6.6m. This is an unrisked valuation and does not take into account significant risk associated with the lack of wells on Samson s acreage. Given this, we have discounted this significantly for our base case valuation by 80% to arrive at a valuation of A$140 or 7cps for the project. Once additional information is obtained, we will look to adjust our risk discount. We believe that, based on the success already achieved by others, that the risk is weighted towards the upside. Samson also has an overriding royalty interest on the Chesapeake acreage, which may be worth >$40m by our calculation. NORTH STOCKYARD, BAKKEN SHALE Samson has a small, but meaningful, position (1,120 net acres) in the Bakken Shale in North Dakota. The acreage is located in the core area of the Bakken and is nearby to wells that had initial production ( IP ) in excess of 3,000 barrels of oil per day. Its recent Gene 1-22H and Gary 1-2H wells have had comparable performance to this, with IPs of 3,000 and 2,780 barrels of oil equivalent per day, respectively. The Company s average working interest across the six 640 acre sections is ~30%. The Company recently fracture stimulated its Rodney and Earl wells, achieving good flow rates from the Earl well despite issues with drilling out of the frac plugs. Based on the projections, Earl may be the Company s best well to date despite not having achieved the headline initial production rate due to the operational issues. The frac plugs at Rodney will be drilled out any day, with flow rates to follow soon after. In addition to this, the Company has drilled its Everett well, which will be fracc d in September. There are another 3 locations to be drilled into the Middle Bakken on Page 9 of 14

10 SSN s acreage as well as 9 Three Forks locations. The Three Forks lies below the Bakken and is productive elsewhere in the region. Fig. 9: Samson Bakken Acreage Additional upside possible from downspacing of drilling, cost optimisation and increases in ultimate recovery. Source: Samson Oil and Gas Ltd SUMMARY VALUATION Our Base Case summary valuation is listed below. Fig. 10: Base Case Valuation Asset Value ($m) $ps Hawk 10%* $442.4 $ %# $201.5 $0.100 North 10% $27.7 $0.013 Niobrara Royalty $27.2 $0.015 Cash $60.0 $0.029 Debt -$0.0 -$0.000 Overheads -$16.3 -$0.008 Options $5.00 $0.003 Total $772.1 $0.370 Source: Hartleys, *DCF discounted by 40% for risk, #DCF discounted by 60% PRICE TARGET Our price target is a qualitative and quantitative adjustment of our valuation based predominantly upon liquidity, market capitalisation and perception of any takeover premium. For Samson, this results in a discount to our valuation by 25% giving a price target of 28cps. We anticipate that, as more industry results are made public and the drilling date approaches, significant share price appreciation will occur. If Samson can achieve a Page 10 of 14

11 positive outcome from its Hawk Springs and Roosevelt projects, then the upside valuation potential of >66cps comes into play. Still has risk associated with appraisal of Hawk Springs Niobrara and Roosevelt Bakken but is a Buy due to the strong results to date nearby and to the technical derisking of the projects. INVESTMENT THESIS & RECOMMENDATION There is considerable risk to the Samson upside valuation due to the fact that there has been no drilling to date on its Hawk Springs or Roosevelt projects, where we perceive most of the value in the Company. Despite this, we recommend SSN as a Buy due to the amount of technical due diligence undertaken and the lower risk profile associated with development of continuous oil plays as compared to conventional oil and gas exploration. This Company has a strong balance sheet, with over US$60m in net cash. Significant positive catalysts exist for the Company in the near term, including: Drilling of two wells at Hawk Springs, including a high risk conventional test and a horizontal into the Niobrara Shale starting in July. Result from Rodney and Everett in the North Stockyard Bakken project. Drilling by Chesapeake on the boundary of SSN s acreage, in which Samson is likely to participate, possible in September. Drilling of two wells on the Roosevelt Project into the Bakken Shale, scheduled for October / November RISKS There are several risks worth noting for Samson: There has been negative press associated with the fracture stimulation technology used in the type of wells proposed on Samson s acreage. To our knowledge, there is no evidence to date to show that there has been contamination of any aquifers in the DJ or Williston Basins due to fracture stimulation technology. We believe that this risk is largely mitigated by best practice standards in industry and the distance of the Niobrara from any potential drinkable water source. Since there are no wells drilled to date on Samson s acreage, it is possible that unforeseen geological circumstance may have rendered its acreage uneconomic. We believe that the geological evidence points to the contrary; however, this risk cannot be discounted until a number of successful wells have been completed. Access to drilling rigs and fracture stimulation services is becoming tight due to a large increase in demand. In particular, fracture stimulation can be delayed by several months. This risk is mitigated by its partnership with Halliburton. Samson s balance sheet strength may also serve to mitigate this risk through its ability to lock in longer term contracts, if deemed appropriate. Page 11 of 14

12 HARTLEYS RESEARCH COVERAGE LIST Hartleys Research Coverage Hartleys Hartleys Nam e Ticker Last M. CAP Status Research Nam e Ticker Last M. CAP Status Research Resources Gold Price* (A$m) Recommendation Price* (A$m) Recommendation Oil & Gas Page 12 of 14 Conventional Oil & Gas 1. Intrepid Mines Limited IAU Explorer Speculative Buy 1. Woodside Petroleum Ltd WPL ,284 Major Buy 2. Beadell Resources Limited BDR Developer Accumulate 2. Nexus Energy Ltd NXS Developer / Explorer Speculative Buy 3. Gold One International Limited GDO Producer No Rating 3. Tap Oil Ltd TAP Producer / Explorer Buy 4. Integra Mining Limited IGR Producer Speculative Buy 4. Carnarvon Petroleum Ltd CVN Producer / Explorer Accumulate 5. Silver Lake Resources Limited SLR Producer Buy 5. FAR Ltd FAR Explorer / Producer Speculative Buy 6. Catalpa Resources Limited CAH Producer Buy 6. Cooper Energy Ltd COE Producer / Explorer Buy 7. Tanami Gold NL TAM Producer Speculative Buy 7. Otto Energy Ltd OEL Explorer / Producer Buy 8. Focus Minerals Ltd FML Producer Buy 8. Amadeus Energy Ltd AMU Producer / Explorer Neutral 9. PMI Gold Corporation Limited PVM Developer Speculative Buy 9. Hawkley Oil and Gas Ltd HOG Producer / Explorer Buy 10. Papillon Resources Limited PIR Explorer Speculative Buy 10. WHL Energy Ltd WHN Explorer / Producer Speculative Buy 11. YTC Resources Limited YTC Developer Speculative Buy 11. Sun Resources NL SUR Explorer / Producer Neutral 12. Ausquest Limited AQD Explorer Speculative Buy 13. Cortona Resources Limited CRC Developer Speculative Buy 1. Aurora Oil and Gas Ltd AUT ,356 Producer / Developer Reduce 14. Emmerson Resources Limited ERM Explorer Speculative Buy 2. Samson Oil & Gas Ltd SSN Developer / Producer Buy 15. Canyon Resources Limited CAY Explorer Speculative Buy 3. Oilex Ltd OEX Explorer / Producer Speculative Buy 16. Geopacific Resources NL GPR Explorer Speculative Buy 4. European Gas Ltd EPG Producer / Explorer Speculative Buy 17. Southern Gold Limited SAU Explorer Speculative Buy 5. Strike Energy Ltd STX Explorer / Producer Buy Iron Ore 6. Entek Energy Ltd ETE Producer / Explorer Speculative Buy 18. Atlas Iron Limited AGO ,021 Producer Buy Sub-Total 39, Centaurus Metals Ltd CTM Explorer Speculative Buy Industrials Coal Resource Services - Capital Intensive 20. Riversdale Mining Limited RIV ,109 Developer No Rating 1. Ausdrill Limited ASL ,048 Contract Drilling Buy Base Metals 2. NRW Holdings Ltd NWH Contract mining Accumulate 21. Independence Group NL IGO ,248 Gold, Ni, Zn, Cu Buy 3. Mermaid Marine Ltd MRM Oil & Gas Services Accumulate 22. Aviva Corporation Limited AVA Explorer Speculative Buy 4. Fleetw ood Corporation FWD Accomodation Hold Other metals 5. Matrix Composites & MCE Oil & Gas Services Buy 23. Kasbah Resources Limited KAS Tin Developer Buy 6. Imdex Ltd IMD Drilling Supplies Buy 24. Shaw River Resources Limited SRR Manganese: Speculative Buy 7. Macmahon Holdings Limited MAH Contract mining Neutral 25. Hazelw ood Resources Ltd HAZ Tungsten / Developer Speculative Buy 8. MACA Ltd MLD Contract mining Buy Uranium 9. Pacific Energy Ltd PEA Remote Pow er Buy 26. Peninsula Energy Ltd PEN Developer Buy 10. Swick Mining Services Ltd SWK Contract Drilling Speculative Buy 27. Impact Minerals Limited IPT Explorer Speculative Buy Resource Services - Labour Intensive Source: IRESS, Hartleys Research. * 7 Jun 2011 Non Conventional Oil & Gas Sub-Total 10, Monadelphous Group Limited MND ,638 Construction Buy 12. Decmil Group Limited DCG Construction Buy 13. RCR Tomlinson Ltd RCR Engineer. & Constr. Buy 14. Lycopodium Limited LYL Engineer. & Constr. Accumulate 15. LogiCamms Limited LCM Engineer. & Constr. Speculative Buy 16. VDM Group Limited VMG Engineer. & Constr. Speculative Buy Other Industrial Companies 17. Seven West Media Limited SWM ,245 Media Accumulate 18. Austal Limited ASB Civil and Military Buy 19. iinet Limited IIN Telecommunications Buy 20. Cash Converters Internat. CCV Unsecured Finance Neutral 21. Amcom Telecommunications AMM Telecommunications Buy 22. RedHill Education Ltd RDH 'For profit' education Neutral Sub-Total 12, GRAND TOTAL 62,324

13 HARTLEYS CORPORATE DIRECTORY Research Trent Barnett Head of Research Mike Millikan Resources Analyst David Wall Energy Analyst Peter Gray Analyst Janine Bell Research Assistant Corporate Finance Grey Egerton- Head of Corporate Finance Warburton Richard Simpson Director - Corporate Finance Paul Fryer Director - Corporate Finance Dale Bryan Director - Corporate Finance Ben Wale Senior Manager - Corporate Finance Ben Crossing Senior Manager Corporate Finance Stephen Kite Senior Manager Corporate Finance Scott Weir Corporate Finance Exec Registered Office Level 6, 141 St Georges Tce Perth WA 6000 Australia Postal Address GPO Box 2777 Perth WA 6001 Australia Contact Details Telephone: Facsimile: Website: info@hartleys.com.au Note: personal addresses of company employees are structured in the following manner: firstname_lastname@hartleys.com.au Hartleys Recommendation Categories Buy Share price appreciation anticipated. Accumulate Share price appreciation anticipated but the risk/reward is not as attractive as a Buy. Alternatively, for the share price to rise it may be contingent on the outcome of an uncertain or distant event. Analyst will often indicate a price level at which it may become a Buy. Neutral Take no action. Upside & downside risk/reward is evenly balanced. Reduce / Take There is unlikely to be further gains over the profits investment time horizon but there is a possibility of some price weakness over that period. Sell Significant price depreciation anticipated. Institutional Sales Carrick Ryan Justin Stewart Simon van den Berg Steven Boyce Nick Wheeler Wealth Management Nicola Bond Bradley Booth Adrian Brant Nathan Bray Sven Burrell Simon Casey Tony Chien Travis Clark David Cross Nicholas Draper John Featherby Ben Fleay John Georgiades John Goodlad Andrew Gribble David Hainsworth Neil Inglis Murray Jacob Gavin Lehmann Shane Lehmann Steven Loxley Andrew Macnaughtan Christian Marriott Scott Metcalf David Michael Damir Mikulic Nicole Morcombe Jamie Moullin Chris Munro Michael Munro Ian Parker Ian Plowman Margaret Radici Charlie Ransom (CEO) Elliott Rowton Conlie Salvemini David Smyth Greg Soudure Sonya Soudure Dirk Vanderstruyf Alex Wallis Marlene White Samuel Williams No Rating Speculative Buy No recommendation. Share price could be volatile. While it is anticipated that, on a risk/reward basis, an investment is attractive, there is at least one identifiable risk that has a meaningful possibility of occurring, which, if it did occur, could lead to significant share price reduction. Consequently, the investment is considered high risk. Page 13 of 14

14 Disclaimer/Disclosure The author of this publication, Hartleys Limited ABN ( Hartleys ), its Directors and their Associates from time to time may hold shares in the security/securities mentioned in this Research document and therefore may benefit from any increase in the price of those securities. Hartleys and its Advisers may earn brokerage, fees, commissions, other benefits or advantages as a result of a transaction arising from any advice mentioned in publications to clients. Hartleys has provided corporate advice within the past 12 months and continues to provide corporate advice to Samson Oil & Gas Limited, for which it earned fees and continues to earn fees. Any financial product advice contained in this document is unsolicited general information only. Do not act on this advice without first consulting your investment adviser to determine whether the advice is appropriate for your investment objectives, financial situation and particular needs. Hartleys believes that any information or advice (including any financial product advice) contained in this document is accurate when issued. Hartleys however, does not warrant its accuracy or reliability. Hartleys, its officers, agents and employees exclude all liability whatsoever, in negligence or otherwise, for any loss or damage relating to this document to the full extent permitted by law. Page 14 of 14