presenting in sydney tomorrow, page-5

From another poster on another site:

Until someone who has a clue chimes in here are my views of the presentations. Fairly long but just thinking aloud to crystallise my conclusions as I go.

The first presentation was an industry overview by Rohan Gillespie who heads a consultancy to the csg industry (Energy Infrastructure and Resources). Four big picture things stood out: how this industry locally has come from nothing in 2000 to being a monster on the eastern seaboard and is only now starting to take off; how the US has the most advanced csg industry but Australia is not far behind; that regional csg players are starting to emerge but there are no global players yet; and that the local industry is very Qld-centric, in no small part because the Qld government set up a very good regulatory regime early (NSW still has nothing in place).

The following companies presented: Lucas Energy (north of Newcastle), Eastern Star Gas (around Narrabri), Sapex (SA), Metgasco (around the Tweed), Molopo (in with Lucas and ESG plus others) and Central (NT).

My impression was that both Sapex and Central are very much at explorer stage and both will struggle with the tyranny of distance.

I thought that Lucas (which intends to split its csg business away from its pipeline / drilling / construction business withiin the year) ESG and Metgasco are all single project plays, and all appear to be about at the same stage of devopment. Lucas and ESG are talking about commercialisation from around 2010 and whilst Metgasco did not talk about their timeline they are at MOU stage (with BP and CS Energy with gas into Brisbane) and need to build a pipeline up to Ipswich so I suspect that 2010 may be right for them as well.

MPO as such was the only multi-field player presenting and my impression was the most advanced projects were those they share with Lucas and Metgasco. MPO's MD was pushed for time so he skimmed through their overseas interests, and although I thought that particularly their South African interest sounded promising (given how stuffed the energy supply in SA is - typical bloody socialists were underpaying for energy and now wonder why they don't have enough power stations), everything os seems to be very early days. Don't know much about what they are doing in China, I thought the MD indicated that results have not been ideal, but I have read elsewhere that some of the US csg companies have also tried their hand in China and none have made much of a go of it.

Even though the first presentation was very upbeat and clearly there is a screaming opportunity for companies to take advantage of the huge coal reserves in NSW and the big current and huge potential gas demand in NSW (from greening up power stations and from NSW's heavy industrial base) I came away feeling a tad underwhelmed.

Sorry not a political statement but I just cannot believe NSW voted Labor back in last time. I thought the bloody highways and hospitals were bad enough but please compare the csg industry in Qld with that in NSW - the only difference, a government that early on set the parameters for an industry to develop (as an aside Qld did it with the management rights industry too). For that reason, and given its MOU's to supply gas into Qld and its stage of development, I thought Metgasco was the most impressive presentation. So MPO gets some referred kudos I supppose.

But what worries me about all of the companies on show yesterday is that all of them seem to be years away from positive cash flow (Lucas has a 15% piece of Sydney Gas which is fart arsing around with production). Given the times we are in, with development proposals falling over all around, I think the risks of all of these companies stalling may be rising faster than the industry is developing. At least Lucas has alternative sources of revenue. I really think that the big cash flow positive players in the industry - Origin, AGL, QGC, AOL - will be able to pick off some of the smaller players at their leisure in the next couple of years.

Happy for people to tear my theories and conclusions apart.