will we see 30 cents by friday, page-2

I want BionicBoy's 40-50cents.

Based on LNC, MEE et al's recent performance, its highly probable.


I will be surprised if 30cents isnt hit and cleared this week - ie, by friday


As you can see from the below Tim Treadgold article, the sector is hot


This will be one to watch closely this week and over the next month from here

http://www.eurekareport.com.au/iis/iis.nsf/pages/4393DA01F6D506EDCA25745E00150328?OpenDocument


Coal gas, the new flame
By Tim Treadgold
Print this article

PORTFOLIO POINT: What had been unwanted pollution in coal mines is suddenly hot, and a string of local stocks offer access.


If you’re confused about values in the red-hot coal seam gas business you’re not alone. Even the people running the companies involved, and the predators – such as British Gas – slapping multi-billion dollar bids on the table for a slice of the action, don’t really have a clue.

Take BG's offer for Origin Energy as an example. A week ago, Origin was perfectly happy to seriously consider accepting an offer of $14.70 (and later a revised bid of $15.50) a share from BG Group for the entire Origin business, which includes a swag of electricity production and gas distribution assets.

Today, because of a deal involving a totally different business (the Santos joint venture with Malaysia’s Petronas, where the offshore partner is kicking in more than $2 billion) it appears there's a new value on Origin's coal-seam assets. In fact those coal seam assets alone are supposed to worth $18 a share – with everything else tossed in free.

Sure, it's possible that BG tried to snaffle Origin with a low-ball bid. But, it is equally likely that its original $14.70 offer was generous given that it was pitched at a 47% premium on Origin’s pre-bid price of $10.

Some critics slammed the offer as an attempt to “steal” Origin, but most were left scratching their heads because so little is known about coal seam gas, which is an asset class in transition from being a dangerous and unwanted form of pollution in coal mines into a potential money-maker either as a product pipelined to energy-hungry east coast Australian cities, or as a new export industry as liquefied natural gas (LNG).

So what is coal seam gas? And can it overcome the geological, not to mention political, hurdles that loom ahead.

First things first. There are the serious players with abundant coal seam gas reserves in Australia. What's more, some of these players have deals with oil majors to back-up their claims of future growth.


nThe Coal Seam XI
Name
Code

Open at Jan 2, 2008

Close at June 3

Return over period
AGL Energy
AGK

$13.32

$14.41

8%
Arrow Energy
AOE

$2.70

$3.88

44%
Eastern Star Gas
ESG

$0.43

$0.77

79%
Incitec Pivot
IPL

$117.00

$177.64

52%
Metex Resources
MEE

$0.31

$0.74

139%
Origin Energy
ORG

$8.83

$15.70

78%
Pure Energy Resources
PES

$0.70

$2.50

257%
Queensland Gas Company
QGC

$3.25

$5.69

75%
Santos
STO

$13.95

$21.77

56%
Sapex
SXP

$0.23

$0.61

165%
Sunshine Gas
SHG

$1.79

$2.58

44%


At the top of that heap are Queensland Gas (already with BG), Arrow Energy (with Shell since last week) and a company better known for its conventional oil and gas assets, Santos. These companies have been dramatically repriced in recent days because they have gas in the ground, and they have attracted big-name LNG-specialist partners projects.

It is the big-ticket deals that have thrust coal seam gas into the world investment spotlight, largely because it’s impossible to ignore the BG bid for Origin, or Petronas handing Santos $2.6 billion for a minority (40%) stake in its proposed LNG development, or Shell investing $776 million in Arrow’s assets.

The dollar figures are big, but the fact remains that coal seam gas is a new business. No one, anywhere in the world, has even tried to build an export-focused LNG business using coal seam gas as a feedstock.



Less well known, but starting to make a mark are a number of smaller coal-seam hopefuls such as:

* Sunshine Gas, which is proposing to build a small gas export project, Sun LNG, in a joint venture with Japan’s Sojitz Corporation. Early-stage work is under way on the project’s gas processing site at Gladstone in Queensland with a final investment decision scheduled for December and first gas delivered in early 2012. On the market, Sunshine shares have soared from a 12-month low of 65¢ last August to recent trades at $2.58, valuing the company at $775 million.

* Pure Energy, which is in the early stages of exploration, but which has its foot on the critical asset: a big tenement position with the potential to yield large volumes of gas. Pure also has a joint venture with Arrow, which could expose it to the higher gas prices on offer through LNG development. On the market, Pure has risen from 32¢ in August to recent trades at $2.50, valuing the company at a modest $157 million.

* Eastern Star Gas, once a producer of conventional natural gas but now a pure coal gas play. Key assets include a large tenement position over well-known coal seams in northern NSW, and an existing small electricity power station that has been running on conventional gas. Potentially a player in Queensland’s emerging LNG industry, Eastern Star is more likely to be a winner from the re-pricing of domestic gas sold into the Sydney market.


After those three comes a long and growing list of interesting stocks trying to capitalise on coal seam gas in some way. They include:

* Sapex, which is exploring with Eastern Star, for coal gas in South Australia’s Arckaringa Basin, a remote location made interesting by big potential power customers such as BHP Billiton’s Olympic Dam copper and uranium mine. Sapex shares have risen from 13¢ a year ago to recent trades at 61¢, valuing the stock at just $39 million.

* Metex Resources, a business once best known as a nickel and gold explorer, but now in the process of changing into a coal gas business, with a variation on that theme, including a name change to Carbon Energy. With the big fertiliser maker Incitec Pivot as a partner and using a technology partly developed by the CSIRO, Metex proposes to “gasify” entire coal seams underground by “burning” them in-situ, and then capturing the gases. On the market, Metex has risen from 9.5¢ last August to 74¢, a price that values the company at $201 million.


To further help with this introduction to coal seam gas, it’s worth considering a few thoughts from Eastern Star’s David Casey, who has worked in the US coal gas industry as well as playing a role in pioneering the Australian industry.

Casey’s snapshot of what to look for in a coal seam investment is to start with the size of a company’s tenement position, a point that recognises that this is a classic early stage resource stampede where it is more about snatching ground position than in actually doing much drilling.

“The thing to look for is the acreage position,” Casey told EurekaReport. “That’s because you do need to drill quite a few wells to achieve significant production rates. The prediction for the LNG opportunities in Queensland is for at least 3000 wells.”



To put that drilling effort in perspective, while also noting that most of those wells will be no deeper than 1000 metres (and most a lot less), Australia’s first LNG project on the North-West Shelf started production with six deep and highly productive conventional gas wells.

Casey says the technology to extract coal seam gas is developing rapidly. (By the way the coal seam gas companies only have rights over the gas, the coal rights are separately leased by the Crown) One significant improvement in coal seam gas is the ability to drill wells that start vertically and are then diverted laterally to follow the coal seam to maximise methane capture.

“After the acreage, you need to understand that all coals are different,” he says. “You need to know that to get a feel for the gas in place.”

As a general rule (but not absolute) the best coal for gas production is black coal.

“The higher the rank, the more the coal has been cooked, the more gas it can hold, but there is a trade-off,” Casey says. “Everything in coal seam gas is about trade-offs.”

“Some of the lower-ranked coals do not hold as much gas, but their permeability (capacity to flow) is much higher. The higher ranked coals might have more gas, but it doesn’t mean you can get it out.”

“Anthracite (the highest-grade coal) has the maximum ability to hold gas, but it has zero permeability.

“It’s a compromise with every project, which is why it is taking so long to get the industry going. That’s why it’s very difficult to compare project with project.

Casey says no one has really been able yet to put an accurate figure on the potential reserves of coal gas along the eastern seaboard, but a number of 250 terajoules (much bigger than the North-West Shelf) is being used within the industry.

For the final question of why has coal gas burst on the investment scene so suddenly, Casey’s answer is for a novice investor (or journalist) to not feel too bad about his ignorance. This is a new industry,” he says. “Even a few months ago most people didn’t understand it, or believe in it. That’s changing fast.”