wilson's recom buy
Recommendation The conditional gas sales agreement with Wambo Power Ventures Pty Ltd has been amended to add 15 PJ p.a. of gas sales from 2008. This increases the conditional sales from the Tipton West project for 2008 from about 10 PJ p.a. to 25 PJ p.a. Production testing is currently in progress at Tipton West aimed at proving commercial gas flow rates and achieving certification of proved and probable gas reserves required to service the contracts associated with the project. We retain our Spec BUY recommendation.
Price Performance Feb 05 Oct 04 Jun 04 Feb 04 $0.45 $0.30 Security/Capital Details ASX Code AOE Market Cap $55.3 M Issued Shares 127.1 M Avg Mth T’over 12.8 M 12 Mth High – Low $0.19- $0.47 Key Points Arrow Energy NLO (AOE) announced the ammendment of its Heads-of- Agreement (HoA) with Wambo Power Ventures Pty Ltd (Wambo). It has increased the conditional supply of coal seam gas (CSG) from the previous 3.97PJ p.a. up to 18.97 PJ p.a. (for a 15 year period), to supply Wambo’s proposed gas fired electricity generation projects. The National Electicity Market manager (NEMM) has indicated that: (a) the stage-1 Braemar gas-fired power station (3x150 MW generators) is planned for commercial load in April, May and June 2006. Construction is to commence in February 2005; (b) a base-load gas-fired power station (480MW capacity) is also planned with a service date of 2008, subject to verification of adequate recoverable gas reserves and full project feasibility. The power plants are planned to be located adjacent the Braemar electricity substation 38 km SW of Dalby in SE Qld. These plants’ proposed locations are about 45km NW of the Tipton West project (AOE 80%:COI 20%), and 5km SW of Kogan North (AOE 50%:CS Energy 50%) and within similar distances of other AOE early stage projects. AOE plans to deliver ‘first gas’ from Tipton West, at a rate of 3.97 PJ p.a in 2006, subject to demonstrated gas delivery capability by AOE. Achivement and delivery of commercial CSG gas flow rates is key to successful contract performance with regard to over 10 PJ p.a. from 2006, with a further 15 PJ p.a. required from 2008. AOE is presently resuming pump-testing on its Tipton West project where a prior test of hole TWP #13 was interrupted by mechanical failure. The hole has since been worked over and has resumed pump testing. Two additional production wells are being drilled and completed in the pilot. The achievement of commercial flow rates from holes in the Tipton West project will be critical for the certification of proved and probable reserves that are required to meet the conditional sales contract requirements. We retain our Spec BUY recommendation. 10 February 2005
AOE Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held