marcus padley, page-4

Guys

The number of listed companies in the ASX are in the thousands. The number of brokers employed in each broking company varies from low tens to hundreds and all of them have a select list of "safe" listed companies to reccommend to clients which will not lead to the firm being sued. Depending on the individual client's requirements, then his/her broker will cater for whatever that is required outside the "safe" list.

So your own broker will most probably be familiar with no more than 10% or 20% of the all listed companies. The broker sitting next to him/her may also be familiar with 20% of the listed companies. Most of companies they "research" will overlap especially the blue chip companies but outside the blue chips, their knowledge and list varies tremendiously. The brokers may all be working under the same roof and paid by the same boss but, like all of us, their knowledge of individual listed companies are very limited. Yes, extremely limited.

Marcus Padley is with Pattersons which also has ESG on buy reccommendation but that doesn't necessary mean that Marcus is familiar with his own company's report. I saw the Lateline Business report too. He was interviewed life and could also have overlooked mentioning ESG. Whatever it may be, next time any of you visit your broker, grab as many of the reports available from that particular broking company, printed with their own company logo, then ask for your own broker's assessment of any of the reports. You will be presently surprised by his/her ignorance on the number of the reports and his/her excuses given. They are not as well read as you may expect them to be, even on reports from their own firm.

You can also test the knowledge of other brokers when your own broker is not available. Write down a list of very unfamiliar listed companies, ask the replacement broker for his/her opinions. Just be prepared for the surprise. Try that list on your own broker as well. Be prepared to sack your broker and trade on the internet full time instead.

Towards the end of the Lateline Business programme, there was also a mention of AGL/AGK and CSG that will be in one of today's paper. I can't find the article but found this one instead. CSG is still very much alive after all.

More gas mergers in the pipeline MATHEW MURPHY
March 10, 2010
WOODSIDE'S Don Voelte is a sceptic. The Nebraskan-born oil and gas devotee has been one of the most vocal doubters of the potential of coal seam gas as feedstock for the liquefied natural gas export market.

Voelte believes the handful of projects proposed for the Queensland coal seam gas market will prove uneconomic. In his view, the low calorific value of the gas, which is 98 per cent methane, and the absence of oil and condensate, puts these projects at a comparative disadvantage to conventional LNG projects.

''Selling gas from Pluto or the North-West Shelf from Woodside is different than a newbie that has never proven themselves, and your sophisticated customers in Japan, Korea, Taiwan and other places certainly look for that,'' Voelte said last year.

''What I'm waiting for is the front-end engineering and economic analysis of this gas to get to the stage where a board of directors have to make $10 billion and $15 billion commitments to build. What are the economics of this lean gas? Where's the marketplace for it?''

PetroChina helped answer Voelte's question earlier this week when it announced it would join Royal Dutch Shell in a proposed $3.3 billion acquisition of Arrow Energy. The deal, which Arrow is considering, is a pure coal seam gas play, excludes Arrow's international assets, and appears to be all about Shell securing enough gas for its proposed 16 million tonnes a year Curtis Island development. Shell would provide the technical expertise while PetroChina's involvement creates a market for the gas.

It is an embarrassment for Voelte, who saw PetroChina walk away from a potential $45 billion deal to receive 2 million to 3 million tonnes a year of gas from Woodside's $30 billion Browse Basin development due to a project delay.

His view on coal seam gas is one that has been shared by many oil and gas veterans. For many years, coal seam gas was referred to by many in the industry as ''girly gas''.

US farmers, who discovered coal seam gas in the 1970s, had little understanding of how to extract it, or interest in doing so. But the subsequent oil crisis led to some crucial early work. In Australia, BHP was a pioneer in the 1980s and '90s but the gas proved uneconomic to extract. In fact, before Origin Energy started buying Queensland acreage in the Spring Gully and Fairview basins in 2002, total Australian production was about five petajoules and was not expected to increase.

But depleting oil reserves around the world and the ever-present focus on developing cleaner energy sources prompted a coal seam gas boom in 2008.

Graeme Bethune, chief executive of independent adviser Energy Quest, compares the flood of interest in coal seam gas two years ago to an ageing actor who becomes an overnight star.

''Now the whole sector is in the execution and implementation phase,'' he said.

''There is no escaping the fact that oil is getting harder to find and the national oil companies have a large chunk of those reserves.

''Remember, the Western oil majors have only about 10 per cent of the world's oil reserves,'' Bethune said. ''So we are seeing them diversify into gas. LNG is a market that is growing and it has the added environmental advantage for them as well.''

According to EnergyQuest's February quarterly report, coal seam gas production rose 31.4 per cent in 2009 to hit a record 178.4 petajoules. That will continue to increase as the Queensland coal seam projects advance.

Santos and Malaysia's state-owned Petronas are considered the front-runners to develop an $8 billion project on Curtis Island. Their joint venture has already signed an offtake agreement for the gas and is preparing to make a final decision on whether to invest in the first 3.6 million tonne-a-year train by midyear. Energy giant BG is a close second, striking a deal with China's CNOOC last year to supply 3.6 million tonnes of gas annually over 20 years.

Origin's Australia Pacific LNG joint venture with ConocoPhillips enjoys access to the largest coal seam gas reserves in the country, but despite its early mover advantage, it was the last of the big projects to be announced. Shell's proposal represents the final of the four projects slotted for Curtis Island.

Over the channel at Fisherman's Landing, Arrow is developing its much smaller project but is tipped to be the first to export LNG in 2012.

Deutsche Bank believes the Shell deal could catch the others off guard if its takeover of Arrow is successful.

''With the Fisherman's Landing site fully approved, Shell could leapfrog its CSG-to-LNG competition and be among the first to market with CSG LNG, with PetroChina as a foundation customer,'' analysts said.

Others, however, believe the hefty capital costs of advancing two projects will mean Shell will simply siphon the gas through to its larger-scale Curtis Island proposal.

There is little doubt the rapid rise of the coal seam gas industry will result in consolidation, with the consensus that one or maybe two projects will proceed.

Analysts at RBS Morgans say Shell could look to further consolidation even if the Arrow acquisition goes through.

''Shell may still be 12 months away from having sufficient uncontracted coal seam gas to feed a single liquefied natural gas train, and perhaps three to four years away from having delineated sufficient coal seam gas reserves for two trains,'' the analysts said.

''This may prompt Shell and PetroChina to evaluate the option of consolidating their reserves.''

Bethune says the global market for liquefied natural gas, even fed by coal seam gas, is growing.

He says a good test of the long-term viability of coal seam gas would be to look at Japan - the world's biggest buyer of liquefied natural gas.

''Some of the bigger buyers can take the lower value of CSG, so the question is 'are we going to see the Japanese and Koreans in there?' ? if they are persuaded, then it could change the view of coal seam gas in the eyes of many people.''

Source: The Age