wcl in the news, page-16

At $8 gj WCL could earn around $30 million allowing for opex of 1/3 or $2.64 per gj.

Using a forward p.e of 15 that is a shade over a $1 a share.

Your opex cost is probably reasonable given their last few quarterlies but you're only using gross profit there - revenue minus opex.

You need to consider capex, D&A, royalties, tax, debt (and/or equity dilution to get there) and of course overheads and admin.

Also I think a forward PE of 15 is too high for a small company in O&G. 8 to 10 is much more usual.

WCL is in an interesting position because their opex and development costs are already high due to the low flow rates per well (currently far higher than their revenue, hence why they're running such a loss). One thing the Qld CSG industry has taught us is that when you try to scale up, costs go through the roof. Small companies can make Meridian work, larger ones couldn't (hence IMO why nobody has bought out WCL's obviously significant resource).

So upgrading to 30 TJ/d shouldn't be a problem, but once they start true brownfields expansion it's going to be very expensive. The average production per well seems to be quite low, less than 200 Mscfd - they only have 10 wells out of the 100-odd production wells making more than 250 Mscfd. That is pretty low for well costs >$1.5M each. To get to 60 TJ/d (their pipeline capacity) they'd need an extra 30 TJ on top of their original 30, which at 250 Mscfd (assuming they target sweet spots) would be an extra 120 wells. Even if they get the well costs down under $1.5M that's still a very expensive development.

They might be better to stick to the 30 TJ/d limit using their existing wells. Because the great thing about Meridian-style wells is that once you've drilled them they'll basically never run out of gas.

I will be interested to watch what happens anyway. I think that having infrastructure already in place in a high gas price environment is going to be a blessing for WCL compared to BUL, COI and MEL. Stranded assets will stay stranded in this high cost environment, and WCL can sell directly into the market.