thinking the thoughts over a jamaica numba one

This is Mr Lincoln Augustus, first second cousin of Holymagiman.

Another bright dreamy Monday morning breaking over the waves in Jamaica, and the day that follows looks to a most interesting one. The fishing was great and we just got back and I must say that we caught a few little ones, which we let go to get away to their mummies for a bit of fattening up.

And we caught a few bigger ones, which we kept for Baboo Runchik to sell in the marketplace. He sells the bodies and gives us our money and keeps the heads for himself for his famous fish head soups in Shantytown.

And we caught a really big one that we didnt really expect to catch, but that is what fishing is all about, with sometimes nothing and sometimes everything all coming up in the draw up of the net.

And even when the net nets nothing, it is good to know that there is always something swimming along that is going to be caught by and by, as sure as night follows day and just as sure as a fine Jamaica Numba One helps meld the brain into a plasticine pathway of lucid thoughts.

And as we wait for the fish to cook, baking in the banana leaves on its way to providing a tasty morning repast, I find that I am cast my minding to recent thoughts the family had and how things went and what we are thinking now.

And of course, the Jamaica Numba One has cleared my mind and sharpened it to such a degree that it can shave itself of all manners of distorted thoughts cleanly and easily.

We thought we would refresh you of Uncle Tobias thoughts that he had on 6th December 2009 under the heading "Musings of a Jamaica Numba One Rampermon" and they were as follows:

Uncle Tobias first pointed out to us that Metgasco has the best 5,930 sq km acreage of the Clarence Morton in New South Wales. One has to remember that the Clarence Morton Basin's area is about 26,000 in total, with about 16,000 sq km in NSW and the rest in Queensland.

Metgasco has taken full control of PEL 13 and PEL 426 by buying out Molopo's interests in these leases. So now Metgasco has 100% of PEL 16, PEL 13 ad PEL 426, and these are right smack bang in the middle of the Clarence Morton Basin.

As Uncle Tobias pointed out, it is noted on page 14 of the Managing Directors review on 26 Nov 2009 at the AGM that Metgasco has now identified 21 prospects for conventional gas in these 3 leases, with a total p50 of 1,355 bcf.

Interestingly, Uncle Tobias reminded us, in page 14 it states that 13 of these leads are in PEL 13 and PEL 426, with a total P(50) of 882 Bcf. So it appears, that Molopo sold itself very short indeed, and for that we can only blame it on the moon, for the moon has a peculiar way of bringing out the zombies.

On the same day, Uncle Tobias reflected on the size of the gas field thus:

On 30th November, Metgasco announced that there had been a major gas discovery and that a minimum of 32m of gas bearing sands have been identified.

However Uncle Tobias noted on page 8 of the managing director's report that in the Gatton Section alone, 49 metres of gas bearing sands were identified.

No information was made of the depth of the gas bearing sands in the Ripley Road Sandstone Formation below the Gatton Sandstone, but we will have to assume that there was a column of gas bearing sands in this formation, especially as Metgasco stated that further gas zones are likely to be present at greater depth given evidence of gas at the base of the well.

So it would appear that the next report out from Metgasco may well be to announce a doubling of the amount of gas bearing sands that have been identified.

So, could that mean MEL has a potential gas field of:
* 49 metre gas column down to approx 1400m
* 49 metres gas column between 1400m and 1942m
* plus a surprise beyond 1942m
* plus more CSG over a 25km2 area

Those were Uncle Tobias's thoughts.

**** Well, it appears that Uncle Tobias was not too far wrong in his projections, for the final figure came out at 30.3 metres of total net pay and a total of 138.3 metres of potential gas pay.******

Refreshing your memory again, we had some thoughts on 01/12/2009, when we wrote under the heading "Can't see it coming, won't see it going" the following

So, all in all, the Kingfisher Well is just icing on the cake. But what a thick bit of icing it is, being almost as thick as the cake itself.

Of course, as you all know, the success of this well is dependent on the flow rates being adequate, and we in the family feel, from the initial flow rate of 900,000 scfd at 1270m, and crudely extrapolating that to the gas bearing intersections that have been encountered, that the well should produce at least 4,000,000 scfd per day, and that should make it a very good well indeed.

****Well, so far Kingfisher has flowed 2.97 million scfd from only 5.3 metre interval of total net pay of 30.3 metres********

Now we go back to John Pierres "Random Thoughts" on 12 Feb 2010, where he calculated on the back of an envelope that:

Calculations on back of an envelope:

"In Kingfisher E1, the lowest 5.3 m is producing 2.97 million scfd. Bear in mind that this interval represented the lowest accessible zone identified from the wireline logs. So one would expect an extension of this gas bearing zone on deeper drilling.

"That leaves another 25 m of net pay plus another 105 m of gas bearing interval.

"Then read between the lines that that Mr Johnson has stated that Kingfisher is a major new gas discovery. This is the first significant conventional gas discovery in over a century of exploration in the state of NSW.


"One would therefore be hopeful that the remaining depth of Kingfisher E1 would produce at least another 7 million scfd.

"This would translate to a yearly gas production from Kingfisher based on a flow of 10,000,000 scfd will be 3 PJ....3 PJ from one well per year.

"If further wells were drilled with deeper depth, this figure could possibly be surpassed in subsequent wells.


"The PURITY of the gas produced is excellent = 95.8% methane Unfortunately, it has not been given the publicity it deserves. Please note the very low water content, which makes everything even more exciting..

"The Clarence Morton Basin appears to be justifying Mr David Johnsons confidence in it being a major gas bearing province. Perhaps the good news is more covert than overt at the moment.

****The family feels that a flow of at least 10,000,000 scfd, if not more, is not a dream, and that, as JP has calculated, would be 3 PJ from the one well. We feel that there is not long to wait.*******


On 16 Feb 2010, the Jean Pierre continued his "Random Thoughts" and I reproduce it here in its totality:

"It is Metgascos view that several areas within the tenement, that are currently undrilled, contain similar coal seam gas resources to the areas where we have currently booked 2P reserves.


"This reserve upgrade is solely focussed on coal seam gas.

"MEL expect to provide further information to the market on potential gas reserves at the Kingfisher gas field in the future as well as further updates on results from production testing.

"Metgasco is currently engaged in a sell down process for PEL 16 with a view to bringing in a like minded partner to assist with the exploration and development of this tenement. A lot of conjecture here, and we are probably totally wrong, but our bet is on Arrow.

"Kingfisher flows 2.97 million scfd from only 5.3 metre interval of total net pay of 30.3 metres, and total of 138.3 metres of potential gas pay.


"Kingfisher drilling depth was constrained by limitations of drill rig used.

"Therefore expect next well drilled to use a better drill that can drill to a total depth that will better resolve and show the true net pay depth deeper in the Ripley Road sandstone.

"As stated previously, we are of the opinion that there is potential here for possibly 10 million scfd from Kingfisher. Perhaps overly ambitious, possibly not.


"Seven additional conventional leads and prospects in PEL 16. If Kingfisher is anything to go by, there is a lot to be looked forward to...with excitement.

"During the last quarter Metgasco has secured 100% ownership of the exploration permits PEL 13 and PEL 426.

"PEL 13 and PEL 426 cover approximately 4,900 km2 and are prospective for BOTH coal seam gas AND conventional hydrocarbons.

"Metgasco has recently completed detailed mapping of the Walloon Coal Measures in these blocks (PEL 13 and PEL426 ) and has identified a number of potential coal seam gas sweetspots.

"Seismic reprocessing and interpretation has continued during the quarter with the focus of activities being on mapping prospects and leads in all permits and planning for additional core holes in PEL 13 for reserves development purposes. Once the inventory of prospects and leads is finalised, Metgasco will prioritise these opportunities with the view to acquiring additional seismic data over high grade leads.

"Metgasco is currently finalising planning to conduct an accelerated exploration strategy to evaluate these areas and commence booking reserves.


"Metgasco is continuing to investigate gas commercialisation opportunities and is currently in discussions with several prospective customers. This is apart from sale of 50% of PEL 16

**** It is the family's opinion that this could mean sale or tendering of the Lions Way Pipeline, which is a profitable way of getting the gas to market without having to spend money on building the pipeline that could otherwise be spent on upgrading reserves.*****

**** It has been the familys long held view that Arrow would be the obvious party to come in with Metgasco in a JV. If we were right in our thinking, then now the cat has been well and truly thrown amongst the pigeons, becauseit is our understanding that the target in a take-over can itself go into into JV ventures whilst the take-over battle is in process....see below:********

"In giving its formal reasons, the Review Panel added some important qualifications. These are:

The target cannot simply act to defeat or delay a takeover bid by entering into a transaction of dubious benefit subject to shareholder approval. If the circumstances were clear enough, the Panel could declare such a transaction to be unacceptable even if the target offered to refer the matter to shareholders.

There could be exceptional circumstances where the Panel may be satisfied that approval of shareholders need not be sought despite an action triggering a bid condition. For example, where the transaction was clearly for the commercial advantage of the company and so motivated. If it were far advanced when the bid was launched, it may be contrary to the interests of target shareholders to require shareholder approval (particularly where that could jeopardise the transaction going ahead at all).

Another circumstance where approval may not be required, is where the bid conditions are so far reaching and constraining that they would exceed what would be commercially reasonable under the circumstances. It should not be expected that a bidder should be able to stipulate conditions that interfere with the normal and ordinary course of conduct in the target's business.

These qualifications are intended to ensure the right balance is struck between the restraining unfair defensive manoeuvres by the target while not interfering unreasonably with the ordinary and proper conduct of the target's business during a takeover bid.

And now Shell has entered the picture.

And the interesting thing for Shell or Arrow would be the capabilities of the Lions way Pipeline to send gas from Casino to Ipswich, where the gas could either be used for gas swaps as a replacement for other gas that could be sent to Gladstone, or else this Metgasco gas can go to Gladstone direct via Arrows Dalby to Gladstone pipeline.

There are pipelines connecting Roma to Gladstone.

There are pipelines connecting Gladstone to Brisbane passing through Dalby.

The Surat Gladstone pipeline will connect gas from Dalby to Gladstone

So there is no problem for Metgasco coal seam gas and conventional gas to be piped direct to Gladstone.

We note that BOW increased 3P reserves by 60% today to a total net 2318 PJ and experienced a 27.5% share price rise to 1.25. Good for them, very good. They also have 2P reserves of 55 PJ. So BOW has 55PJ of 2P and 2318 PJ of 3P net

Compared to this Metgasco has 397 PJ of 2P and 2239PJ of 3P....and conventional gas. Something is wrong here, very wrong, and if you cannot see it coming, you will certainly not see it going.

So, to summarise,

1. the family feels that a 10,000,000 scfd flow from Kingfisher appears extremely possible to us,

2. and we feel that the Shell takeover offer for Arrow has deeper significance for Metgasco than would meet the eye

3. and we are of the opinion that long term planning and programming (think 2014, not tomorrow or next week or even the next six months) makes the piping of Metgasco gas to Gladstone a very viable proposition.

4. And companies like Arrow and Shell and BG are in for the long haul and the big profit, not for a few cents profit here and there on a day to day basis, that so besots the mind of some day traders....but then again, the good Lord must have had some purpose in mind when he produced these small minded people...

5. And we believe that any so called gas glut, a term so freely bandied about now, will disappear by 2014, when the PNG trains get going and the re is a bigger world population with greater perceived needs. Analysts have thrown this red herring around, and we all know how the analysts and economists called the financial future in 2007 and 2008 and 2009...

6. And we believe that there could well be sale of the Lions Way pipeline rather than further assets to raise money for further proving up of reserves

7. And finally, the family has a very good feel of the present board of Metgasco, who have consistently and progressively produced results that can only be described as outstanding. Of course, we will consider them even more outstanding if they manage to reach our optimistic expectations of the flow rates of Kingfisher, and there is not too long a wait for that.

So, all is well, very well, as far as we are concerned.

Blessing of the Lord
MLA