ferrets stock to watch: ch4 gas limited

Ferret's Stock to Watch: CH4 GAS LIMITED
08:55, Monday, 26 June 2006

IT'S ALL GAS AND WINNERS WITH NO APPARENT LOSERS

Sydney - Monday - June 26: (RWE Aust Business News)
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OVERVIEW
********

The merger of CH4 Gas Ltd (ASX:CHX) with Arrow Energy NL (AOE),
is molding together an emerging Australian energy group which has already
established a strong competitive advantage and is well positioned to be a
key player in the Queensland, and potentially the Australian (east coast)
energy industry.

Until recently CH4 and BHP Coal were equal owners in the Moranbah
Gas Project, which is operated by CH4.

Extensive drilling and pilot production has proven the CH4
reserves.

An experienced management team and board of directors have been
assembled to ensure that CH4 and the Moranbah Gas Project are
professional, environmentally responsible and profitable undertakings.

CH4 Gas has noted the recent announcement by The Australian Gas
Light Company (ASX:AGL) is to acquire a 50 per cent interest in the
Moranbah Gas Project (MGP) and related assets from BHP Billiton.

AGL is intending to acquire, subject to financial close, a 50 per
cent interest in MGP for $93 million plus further currently undisclosed
contingent amounts.

CH4 is the operator of the MGP and already holds 50 per cent of
the project.

In addition it has 50-year exploration, marketing and development
rights to the broader area of ATP364P, which comprises in excess of 6,000
square kilometres of the Bowen Basin coalfields in Queensland.

On completion of the current merger between Arrow Energy and CH4,
this will be owned by the merged company, which will continue as the
operator of the MGP which is the largest operating coal seam gas project
in Australia with annual production of 16 petajoules.

The merger between Arrow and CH4, announced on May 4, will see
the combined entity become Australia's largest independent coal seam gas
company in terms of market capitalisation and contracted gas sales.

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

Shares of CH4 on Friday sold steady at $1.25. Rolling high for
the year has been $1.63 and low $1.25. The company has 101.1 million
shares with a market cap of $126.4 million.

Commenting on these developments, CH4 chief executive officer
Andrew Purcell said "CH4 sought to acquire the additional 50 per cent
interest itself as we believe that the MGP is a great project and that
the ATP has enormous potential.

"Subject to the completion of the transaction, we look forward to
AGL's active participation, using the extensive technical and marketing
experience within AGL, in further developing the substantial
Bowen Basin assets for the joint venture.

"CH4 shares AGL's enthusiasm about the growth potential of the
Queensland gas market," the CEO said.

"This investment by AGL further substantiates the growing
contribution of the coal seam gas industry to future energy supplies in
Queensland."

The sale of the 50 per cent interest by BHP to AGL is subject to
review of relevant documentation, including in relation to compliance
with the relevant pre-emption arrangements, and the giving of formal
consent by CH4 to the transfer of the joint venture interest prior to the
sale being able to be completed.

The review and consent is currently in process.

Arrow Energy last week acknowledged that AGL is likely to be a
joint venture partner in the merged group.

Nick Davies, Arrow's chief executive officer, said AGL would
bring extensive operating experience and marketing expertise to the
Moranbah Gas Project which is the largest operating coal seam gas project
in Australia with current annual production of 16 petajoules.

The merged entity will be able to tap into coal seam gas
operating experience from the Surat, Bowen and Sydney Basins, said Mr
Davies.

"The addition of AGL will boost the merged entity's growing list
of quality joint venture partners, which already include CS Energy, Beach
Petroleum and, potentially, GAIL (India) Limited, as the merged entity
ramps up its portfolio of coal seam gas projects both in Australia and
internationally," he said.

"Whilst, Arrow and CH4 recently made an offer for the BHP
interest, we regard the sale to AGL as very positive for the future
development of the Moranbah Gas Project."

The project is the sole supplier of natural gas into the
Townsville market, with significant potential to supply the expanding
Gladstone market in the future.

AGL's entry into the project has the potential to enhance the
joint venture's gas market opportunities with AGL's proposed 370MW
gas-fired Townsville Power Station and possible joint initiatives
targeting the central north Queensland region where there are significant
future industrial developments planned such as new metals processing
industries".

Mr Davies also noted that Arrow shares AGL's enthusiasm about the
growth potential within of the Queensland gas market and this investment
by AGL, in addition to other previous acquisition activity within the
Queensland coal seam gas sector.

It represent a further positive statement about the future of the
coal seam gas industry, he said.

BACKGROUND
**********

CH4 Gas was formally established in 2000 and listed on the ASX in
April 2004.

The company was established to explore and develop coal seam gas
(CSG, that is predominantly methane) in the Bowen Basin region of central
Queensland, which contains extensive black coal resources. CSG is a form
of natural gas, a high value energy source.

CH4 takes its name from the most important component of natural
gas which is methane (chemical formula CH4).

The company's corporate office is based in Brisbane, with
production and exploration operations based at Moranbah in central
Queensland.

CH4 has achieved numerous significant milestones:

* Secured CSG exploration and development tenements in the Bowen
Basin

* Established agreements with BHP Coal to explore and develop CSG
in the Bowen Basin tenements;

* Developed leading edge proprietary know-how in coal seam gas
drilling and development;

* Identified 2P reserves of 382PJ (petajoules) within the
Moranbah Gas Project tenements. 3P reserves are estimated by CH4's
independent consultants as 1,700PJ;

* Established a 15-year gas sale agreement with Enertrade for
electricity production in Townsville;

* Formed a 50/50 joint venture relationship with BHP Coal to
develop the Moranbah Gas Project;

* Successfully built and commissioned the Moranbah Gas Project;

* Reliably delivered gas to Enertrade since September 2004.

ENDS