12 month outlook

Everybody (me included) is expecting a strong interim result on thursday. But i am more concerned about the next 12 months. Exploration drilling in NSW and QLD has been strong with the sub-company Mcdermadt doing esp well. But most of it has been exploration drilling proving up reserves for CSG owners such as ESG. (did you see their blockbuster increase in reserves posted last week!!)

As you know the advantage CSG drillers have over natural gas/oil drillers is that new wells have to be drilled continously as each production well has a limited lifespan. But until either a new gas-fired power station is built and more importantly a LNG plant (most likely in Gladstone is commissioned) further exploration drilling is likely to taper off. Similar for AJL pipeline work. Down the track both sectors will be very strong but until the above projects are completed work in hand for AJL will slow.

Fortunately AJL has sold some key resources at top of the mkt and is almost debt free. It has no huge capex requirements and rigs can be put on hold while waiting for CSG prod to ramp up. Meanwhile i'm holding my shares and expect decent divs and share buyback to underpin the SP.