ferret's stock to watch: ch4 gas limited

Ferret's Stock to Watch: CH4 GAS LIMITED
07:29, Wednesday, 15 September 2004

COMPANY BECOMES THE SOLE GAS PRODUCER FOR TOWNSVILLE


Sydney - Wednesday - September 15: (RWE)
****************************************

OVERVIEW
********

CH4 Gas Limited has started to deliver gas into the Moranbah to
Townsville Pipeline as the Moranbah Gas Project with BHP Billiton easily
meets its schedule.

Traders have gone quietly ahead and bought more shares on the
strength of it.

The joint venture partner have just announced the supply of first
commissioning gas under their Gas Sales Agreement with Enertrade the
Queensland power station.

First gas was supplied to the Moranbah gas processing plant at
the beginning of the month and was subsequently introduced into the
Moranbah to Townsville Pipeline last Wednesday week.

The commissioning process will continue during the period until
February 2005 when contract sales are scheduled to commence.

Commenting on the fast track progress, CH4 chief executive
officer Louis Rozman said "This represents the culmination of much hard
work on the part of our employees, contractors, and alliance partners".

CH4 Gas's first major milestone last week didn't attract a great
deal of attention other than better than usual buying support.

Commissioning was only about one week behind initial budget so
management say they are delivering to schedule.

Full gas production is forecast for February, with the next six
months being project ramp up phase.

2005 contracted volume is currently 13.2PJ.

Shaw Stockbroking says, "We believe MGP will have
capacity to reach 30PJ relatively quickly (some more capital expenditure
but expected to be funded from cashflow and debt facilities).

"We remain attracted to CHX due to its Qld tenement position
which is capable of providing enough coal seam gas to see production
continue to climb throughout the decade.

Insitu gas resources throughout the lease holdings are
likely to be several thousand PJ's.

Reaching 45PJpa to Townsville is a distinct possibility during
the later part of this decade (our forecast currently assumes 30PJ).

Selling gas from a new separate project (of potentially similar
size to MGP) into the southern markets is also a strong possibility over
the medium term.

"We maintain our speculative buy, outperform recommendation on
CHX.

Speculative relates to the fact CHX is the first company to use
1.2km horizontal wells from which to extract the gas and as yet there is
insufficient industry history to commit to a straight buy.

"However we remain confident the new process will more than meet
expectations and hopefully upon full commissioning 'peculative' is
removed from the recommendation.

CHX remains a FY06 & FY07 play with NPAT forecasts of $4m and
$12m for PE's 22x and 7x, based on MGP volumes of 31PJ’s.

Further upside is anticipated post 2007.

SHARE PRICE MOVEMENTS
*********************

Shares of CH4 Gas yesterday eased 1c to $1.02 after touching a
high of $1.05 on larger than normal turnover. Rolling high for the year
has been $1.33 and low 69c. Since listing last April shareholders have
been on a roller coaster ride. The shares were snapped up at $1.25 in the
float but faded to 72c or 42 per cent by June 30. But after that the
stock rocketed along after confirmation of a joint venture with BHP
Billton and moving off an MOU.

CH4 Gas Limited signed and completed its joint venture agreement
with BHP Billiton in relation to the Moranbah Gas Project in August.

As outlined in the company's February Prospectus BHP Billiton had
been operating under a detailed Memorandum of Understanding with CH4 Gas.

It now completes the only significant Condition Precedent to
drawdown under the RMB Resources Limited Project Finance Facility that
was completed in late July 2004.

BACKGROUND
**********

CH4 Gas was listed on the Australian Stock Exchange on April 7.

The Group holds a number of exploration and production leases in
Queensland covering approximately 7,500km2, centered around the Northern
Bowen Basin coalfields.

The Company's first significant development and construction
project, the Moranbah Gas Project, a 50:50 joint venture with BHP
Billiton, holds a 15 year contract to supply up to 290 PJ of gas to
Enertrade, a Queensland Government power corporation.

Enertrade is constructing a 391 kilometre pipeline to transport
gas from the Moranbah Gas Project to Townsville, where it will be used
for electricity generation at Transfield's 220MW Townsville Power Station
and by other industrial customers.

The Moranbah Gas Project is currently under construction and due
to deliver contracted gas sales to Townsville in February 2005, initially
to Transfield's Townsville Power Station at Yabulu.

When production commences, the Moranbah Gas Project - with CH4
acting as operator and marketer for the project - is expected to be the
only significant supplier of natural gas to the Townsville market.

ENDS

Copyright © 2004 RWE Australian Business News. All rights reserved.

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Cheers,

Fig Jam