Antrim Energy Inc.

2 April 11, 2007

Antrim Energy Inc.

AEN-TSX/AEY-AIM: $5.34
Target Price: $7.50 (from $6.00)
Recommendation: BUY

COMPANY BULLETIN 2006 a Pivotal Year; 2007 Looks Even Better

April 11, 2007
During 2006, Antrim established a significant reserve base offshore of the
United Kingdom, with Ryder Scott assigning 12.3 million probable barrels
Overview equivalent to the three fault compartments at Causeway, and 9.2 million
• After a successful 2006, we see an acceleration probable equivalent barrels at the Fyne & Dandy fields. These were the
of Antrim’s growth.
first steps in the development of these fields and particularly at
• Antrim has established a significant reserve
base offshore of the U.K., with Ryder Scott Causeway, we expect to see substantial reserve additions as development
assigning 12.3 million probable barrels
continues. The North Sea accounts for about 95% of total Company
equivalent to the three fault compartments at
Causeway, and 9.2 million probable equivalent reserves.
barrels at the Fyne & Dandy fields.
• Some additional value is also likely to be added Last year’s reserve additions resulted in extremely low finding costs of
from the Argentinean assets; however, the bulk
of the asset growth is likely to be the North Sea.
$2.59 per equivalent barrel, and after adding in an estimate of future
• Substantial value creation is underway, causing development costs, there is still a very respectable $19.56 in finding and
us to increase our target to $7.50 (from $6.00).
• We maintain our BUY recommendation.
development costs for the current reserve base, shown in Exhibit 1. As
drilling resumes later this year at the fourth fault compartment at
Causeway and at Fyne & Dandy, successive reserve additions could bring
Price $5.34 Market cap. ($mm) $ 465.1
Shares O/S (mm) 87.1 Net debt (55.4)
down these average costs.
Avg. daily vol. 203,258 Enterprise Value $ 409.7
2005 2006 2007e 2008e Production from the North Sea fields is expected to come onstream in
EPS (basic) (0.07) 0.02 0.01 2.90
CFPS 0.06 0.06 0.07 4.06 2008, when we expect to see substantial cash flow – approximately $2.00
Production/mm shares 25.2 16.5 212.0 212.0
per quarter basic or $1.70 diluted (if the Company maintains its current
P/CF n/a 95.7 73.3 1.3
EV/DACF n/a 109.8 64.6 1.2 balance sheet). Companies usually trade on a multiple of the 12-month
Revenues (mm) $10.0 $13.9 $19.5 $432.0
Cash Flow 2.5 3.7 6.3 353.7
forecast cash flow, meaning the market could begin to price Antrim’s
Net earnings (3.2) 1.3 0.8 252.5
stock on the North Sea financials later this year. Annualized cash flow
Oil & NGLs (bpd) 562 550 1,000 17,469
Natural gas (mmcfd) 2.2 3.3 6.0 6.0 could be $8.00 basic by Q3/08 ($6.80 diluted), and even using a low
Equivalent (6:1 boed) 931 1,105 2,000 18,469
Quarterly CFPS (basic)
multiple of 2x to account for some additional dilution or farming down of
Q1 $0.01 $0.02 $0.01 $0.04
Q2 0.01 0.00 0.02 0.04
interests implies significant upside to the current stock price.
Q3 0.02 0.02 0.02 1.94
Q4 0.01 0.00 0.02 2.04 Ryder Scott valued Antrim’s 24.3 million barrels of equivalent reserves
(economic conversion) at $119 million, or $4.90 per barrel (Exhibit 2), a
relatively low figure reflecting the probable nature of most of the reserves.
Once a development plan has been approved for the North Sea fields,
these reserves can be classified as proven, with a subsequent increase in
value that could be as much as three times the probable amount. There is
still the potential for over 50 million barrels to be added in the North Sea.
Ultimately, the best-case scenario indicates the potential for some
75 million barrels equivalent, which, if valued at $15.00 per barrel, could
be worth $1.1 billion, or over $11.00 a share. (Production in 2008 could
peak at almost 35,000 bd; at $50,000/bd, the producing assets could be
worth $1.8 billion).

Analyst: Warren Verbonac · (403) 750-0497· wverbonac@octagoncap.com

Antrim Energy Inc. 2 April 11, 2007

Some additional value is also likely to be added from the Argentinean assets; however,
the bulk of the asset growth is likely to be the North Sea.

The next series of high-impact drilling is expected to commence at Causeway by the

third quarter, with three locations to be followed by connecting the producing wells to a
nearby platform for production next year. Later this year, a location at East Kerloch and
another at the Fyne & Dandy Fields are also expected, both of which could add
production in 2008.

We expect the stock to begin to react to the upcoming drilling program, and the
anticipation of large production volumes and cash flow in 2008. As these potential
events are becoming near-term, we are raising our price target to $7.50 and are
maintaining our BUY recommendation.

Exhibit 1: Finding and Development Costs

Net Reserve Changes 2004 2005 2006 3 Year

Weighted Average
Oil, mmb - Proven 0.314 0.9 0.6
Probable (0.287) 0.2 22.3
Gas, bcf - Proven 0.181 17.2 7.3
Probable (0.061) 6.2 20.7
Total, mmboe 0.051 1.6 23.7
Finding and Development Costs, mm $6.4 $18.0 $61.20
Finding and Development Costs per boe $124.75 $11.20 $2.59 $5.47
Future Development Costs, Proven plus Probable, mm $4.9 $401.5
Finding, Development and Future Costs, per boe $14.25 $19.56

McDaniel & Associates to 2005, Ryder Scott thereafter, Constant Pricing, Before Royalty (Argentina 12%, U.K. 0%)
Gas converted to oil at economic equivalencies, in 2004 at 5.0:1, 2005 at 49.9:1, 2006 at 38.5:1
Source: Company Data and Octagon Capital Corporation

Exhibit 2: Asset Value

Constant Forecast
2006 2006
Oil and Gas, P+P, PV 10% $34.1 $119.2
Working Capital $55.4 $55.4
Net Asset Value $89.5 $174.6
Shares Outstanding, Basic 87.1 87.1
Asset Value per Share, Basic $1.03 $2.01
Proceeds of Dilutive Instruments $36.3 $36.3
Shares Outstanding, Fully Diluted 101.0 101.0
Asset Value per Share, Fully Diluted $1.25 $2.09
Ryder Scott, After Taxes
Forecast Pricing Includes Causeway and Fyne & Dandy Fields
Source: Company Data and Octagon Capital Corporation

Analyst: Warren Verbonac · (403) 750-0497· wverbonac@octagoncap.com

 TORONTO CALGARY MONTRÉAL
181 University Ave. 606 – 4th St., S.W. 1 Place Ville Marie
4th Floor Suite 1400 Suite 2821
Toronto, ON M5H 3M7 Calgary, AB T2P 1T1 Montréal, QC H3B 4R4
Tel: (416) 368-3322 Tel: (403) 750-0475 Tel: (514) 875-9339
Fax: (416) 368-3811 Fax: (403) 750-0499 Fax: (514) 875-2868

Chairman President & Chief Executive Officer IMPORTANT DISCLOSURES

David McLeish (416) 306-2518 John Palumbo (416) 306-2511
Stock Ratings
dmcleish@octagoncap.com jpalumbo@octagoncap.com
Speculative BUY: The stock is in a high growth sector where
Vice Chairman price patterns are more volatile and of inherently greater risk.
Peter Winnell (416) 306-2517 BUY: The stock is expected to exceed the average total return of
pwinnell@octagoncap.com the industry sector, on a risk-adjusted basis, over the next
twelve months.
RESEARCH
HOLD: The stock is expected to be in line with the average total
return of the industry sector, on a risk-adjusted basis, over the
Consumer Products Base Metals next twelve months.
Robert Gibson, CFA (416) 306-2544 Hendrik M. Visagie, MBA (416) 306-2519 SELL: The stock is expected to be below the average total return
rgibson@octagoncap.com rvisagie@octagoncap.com of the industry sector, on a risk-adjusted basis, over the next
twelve months.
Energy Media & Telecom
Distribution of Ratings
Jeffrey J. Fiell, CMA, CFA (403) 750-0481 Marianne Godwin (416) 306-2515
jfiell@octagoncap.com mgodwin@octagoncap.com Out of approximately 32 stocks in the Octagon Capital
Corporation coverage universe, the ratings distribution is as
Warren Verbonac (403) 750-0497 Associates follows:
wverbonac@octagoncap.com Tracy Nong (416) 306-2549 Speculative BUY 12.5%
BUY 56.3%
tnong@octagoncap.com HOLD 25.0%
Industrial Products SELL 3.1%
Under Review 3.1%
Abid Mukhtar (416) 306-2512 Nancy Turner (416) 306-2538
amukhtar@octagoncap.com nturner@octagoncap.com Distribution of ratings is updated the first of every month.
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Annie Zhang, CFA (416) 304-7792
Analysts are compensated based on their performance. Some of
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