Po Valley Energy (PVE) has a conventional hydrocarbon gas asset...

Po Valley Energy (PVE) has a conventional hydrocarbon gas asset in Nothern Italy. They have 70mill shares on issue and are capitalised at today's $1.51 closing price at about $105mill. Today they announced an increase in 2P reserves to 104PJ. I presume they will sell their gas into existing nearby distribution infrastructure.

European Gas (EPG) is an emerging coal bed methane explorer with strong ambitions to become a producer. Their gas assets are in France and Italy. The current GiP estimate for a structurally prospective area totalling just 15% of the Lorraine permit in France is 980PJ. Based on current data the company expects recoverable reseves of about 50% or 490PJ. There are abt 138mill EPG shares on issue.

A conservative valuation by MPSecurities rates EPG at 91c per share based on comparison with Australian peer methane explorers/producers and acknowledges that that valuation places nothing on the advantages of having their gas assets in the ground in Europe where gas prices can range north of 6 to 8 times higher than in Australia and domestic energy souces are sparse.

I presume that petajoules are petajoules whether the gas is methane or sourced from conventional hydrocarbon resevoirs. So, based on 104PJ reserves and $105mill mkt cap for PVE and estimated reserves of 490PJ and 138mill shares on issue for EPG, an equivalent sp for EPG would be abt $3.60, not todays closing price of $0.47.

The above valuation is below but in the same ball park as a $5.00+ valuation for EPG established by comparing reserves and mkt cap of QGC/SGL here in Australia and assuming gas prices in Europe of just twice that in Australia.

EPG management have flagged that they expect to increase GiP estimates for Lorraine, probably imo based only on the 15% of the permit area yet being considered. No other value has been attributed to to the other French permits or the existing and recently acquired Italian permits.

One final point is that imo methane gas is nowhere near as hit and miss and conventionally sourced hydrocarbon sourced resevoir gas. Coal is sedimentary and laid down in horizontally extensive seams and multiple seams. Simply, it probably extends under 100% of the area of each permit or nearly so. Secondary features such as depth of overburden, groundwater, fracturing and bedding do have some impact on connectivity to recover the gas.

In summary the sp of PVE based on current 2P reserves may be approaching fair value imo but EPG is significantly undervalued at the current closing of $0.47. I am looking forward to a stunning few yrs with EPG.

Cheers to all that got to the end of this post lol.

Poynsexter