baillieu target 95 cents plus

Westside adds new growth option in Galilee acquisition



¨ Coal seam gas explorer Westside Corporation has announced plans to expand its exploration acreage into the Galilee Basin in western Queensland through the purchase of two CSG permits from entities associated with Chairman, Mr Angus Karoll.

¨ WCL will purchase ATP 974P and ATP 978P, covering 14,480 square kilometres of the north west corner of the Galilee, through the issue of 3.5 million shares to Mr Karoll. In our view this is a sub-market deal that involves a potentially large transfer of value from Mr Karoll to WCL minorities.

¨ We understand that Origin Energy was the under-bidder for the two tenements to be acquired. Origin is known to be very selective on what CSG acreage it finds attractive, and it would not have bid for this land unless it thought it to be highly prospective. Origin owns the lease to the immediate east of the new WCL tenements.

¨ As this is a related party transaction, shareholder approval is required. An Extraordinary General Meeting has been called for October.

¨ The move into the Galilee further de-risks WCL as an investment as the company now has three highly prospective CSG projects where the company is the operator, a major equity owner (at least 50 percent) and the permits adjoin existing producers and gas infrastructure.

¨ WCL has estimated that total gas in place in the two new permits at 21 Tcf. After applying certain technical cut-offs and recoverability assumptions, we believe that recoverable gas could exceed 8.4 Tcf.

¨ Despite the large potential resource, we see the Galilee Basin as a slowly emerging story as technical and commercial issues need to be resolved before gas production in the basin can become commercialised. However WCL’s new acreage is attractive as it is located hear to the town of Hughenden, which sits at the end of Queensland’s 66Kv electricity trunk line distribution system. The presence of the electricity network creates opportunities for small-scale gas-fired power generation.

¨ The additon of the new Galilee play increases our WCL valuation range to between 95 cents and $1.40 per share. Our previous valuation range was between 83 cents and $1.35. We continue to recommend the stock as a BUY (high risk) to sophisticated and professional investors.