usual sunday ramp, page-5

Jocam9,

after reading the report I believe the upside may prove greater than the downside. It depends on what they find both in Vermillion & China.

here is my summary of the situation based on their figures.

First I should add that I bought into this stock when it dipped after
its last failure. It was brought to my attention by your consistent posts , some investigation on my part and now like you I believe this company has the potential to increase in value between 2-4 times based on the facts from last weeks presentation material released by the company. Even at today's increased prices.

First you should download the material from their web site. The link is
below( right mouse click if it is hyperlink and save to your PC)

http://www.petsec.com.au/html/press/031210psaactreview2.pdf

Current producing assets
from slides 7-8 have produced cash of 30 Million AUD and 18.9 million profit for 9 months 2003. Extrapolate this using these figures and you get revenue 40 million for 2003 and profit of around 25 million.( CDE
forcast)

This equates to PE of 4.625 Note I don't know if Petsec have hedging policy but like Oxiana their current production costs are in USD and their US holding company has large losses and they are planning some
large investments in US ( ie Vermillion)so the money is needed in the US or China so bringing it back to Australia may not happen any time
soon.Hence hedging may not be needed.

When you look at 2004/2005 you can guess why you and now me are excited.

On their current producing assests you can appoximate their average cashflow for coming years using the figures in their slides.

slide 11 - using middle of their estiamtes for lifetime of these assets ( ie 2.75years) you get average cashflow of 23.38 cents ( in AUS dollars) per share per year. This assumes smooth revenue production over the entire period. Now some interesting bits, first they use a figure of 4.7 USD per mcf to get this figure but in 2003 the actual is 5.95 USD per mcf so if you assume equal average price of gas for 2004 as 2003 then you should multiply this figure by 5.95/4.7 which now makes
cashflow 29.6 cents per share per year or about 31 million , when compared with my 2003 forcast of 40 million I guess they much be allowing for decling production rates with these forcasts and higher
AUD. Additionally when looking at december 2003 the current monthly average for Henry hub is 6.21 USD per mcf v's 2003 november average of 4.813. From this you might conclude that my estimates may still be on
the lower/ conservative side especially if you look at the current 2004 futures prices.

Future producing assets 2004 ( Vermillion 258 30 BCF)

slide 12 - againg going midpoint with assets life 4.75 years this equates to average of 0.32 cents per share per year commencing in the 2nd half of 2004 ( again this assumes even cashlow which actually won't
be the case). Again the average price assumed is 4.7 USD per mcf if you use the 2003 average it increases the cash flow to 40.5 cents per year.

hence using this is the higher end of the scale ( although I still believe it could be somewhat conservative) you get 2004 average cashflow
of between ( 23.3+16 cents per share to 29.6+20.25cents per share)so between 40-50cents per share cashflow 2004. This makes no allowances for
further discoveries but these will only come into production in 2005.Using these cashflows you get between 42 to 52 million cashflow in
2004 which again points to profit of between 25-30 million in 2004.

Looking at China assuming production of 6 years you get another 0.35 cents per year from mid 2005 so 2005 might increase the cashflow to between 57 to 67 cents per share in 2005.

whats left not accounted for in my numbers

Vermillion B location drilled later 2004
High Island - mno drilling dates

If they are successful in their current drilling I believe that the short term upside in price might be around 2 dollars but longer term
assuming they can replace their current assests with other producing assests + their current drilling( possible successes) then their cash
flow for next 5 years won't fall below 50 cents share = 2.50 over 5 years. In my books that makes the current price exciting notwithstanding
the risks associated with both China & Vermillion.
anyway thats my view