daytrade diaries... october 22, page-60

Apologies in advance for length of post but there are many questions on PEP 11 , MMR, BUY etc. I have tried to summarise the case for PEP 11 and MMR objectively, and as always pls DYOR.

The board – I provide snapshots of two members and suggest punters refer to MEC website for more details on the others.

Chairman Goh Hock was President of Schlumberger Asia - Hock was responsible for US$800 million in revenue and more than 2,000 employees spread across 17 countries. In his 25 year career with Schlumberger, Hock held several other field and management responsibilities in the oil and gas industry spanning more than ten countries in Asia, the Middle East and Europe. Hock started as an oil field service engineer in Indonesia in 1980 before moving to Australia where he worked on the rigs in Roma, Bass Strait in and the Northwest Shelf.

About Schlumberger: FY 08 $27.16 billion operating revenue; 79,000 employees of 140 nationalities, operating in approximately 80 countries.

Mr Ding Guiming - Chairman of Advisory Panel was former Head of Exploration for the China National Petroleum Company (CNPC), directed the exploration activity of more than 20 oilfields all over China. Was President of the Daqing Oilfield, one of the largest and enterprises in China and has 34 years of extensive successful oilfield experience.

Fairly tightly held - According to Commsec MMR market cap is $47m comprising of 108m shares (not inc options) and the top 20 shareholders account for 40% (MMR annual report).

History of PEP 11 – lots of research done on the permit area over 20 years from the likes of Ampolex, Santos, CSIRO amongst others. A good place to get a snapshot is presentation released today, see http://www.mecresources.com.au/newsroom/announcements.html and click on Advent Eco presentation. Other Advent presentations earlier this year have much more detail.

Recent progress – number of important milestones:
o May, tender cycle for drilling rig suppliers commenced
o August, Pareto Securities (Oil/gas expertise, Oslo) was engaged as lead broker to source Advent’s capital needs
o Capital raising conducted in September to raise funds for initial PEP 11 expenditure
o Today announced that Dept of Environment approved next step being site survey

Upcoming announcements – broad dates per releases and enquiries
o Recent CSIRO report has been received and awaiting CSIRO approval before summary highlights are released, likely in next week or so.
o Awaiting approval for initial drilling approval. Application was lodged 21 September, see below, Dept Environment questions been answered and now await decision.
o Final negotiations with rig suppliers underway pending Dept Environment approval

Expect there will be some activity offshore NSW coastline in the next month or so hopefully including first drill rig, if not early 2010. So what are the challenges?

Environment – The recent applications can be read see http://www.environment.gov.au/cgi-bin/epbc/epbc_ap.pl?name=current_referral_detail&proposal_id=5093 re site survey and http://www.environment.gov.au/cgi-bin/epbc/epbc_ap.pl?name=current_referral_detail&proposal_id=5094 re drilling and are very compelling, especially if you consider the need to reduce dependence on coal energy. They also address the environmental considerations, e.g. every species of fish, bird, shark, dolphin etc in the permit area.

Economic – No brainer if proved commercially viable and expect both state and federal governments will be supportive.

Finding the stuff and viability – Who knows whether the supposed resources will be retrievable commercially? But we’re going to find out and in the meantime there will be a lot media coverage and interest in this project. By the time we find out, present holders will have sold along the way and hopefully free carried.

The biggest carrot – MMR has pdf status which means that capital gains and hopefully dividends are tax free. Not only very attractive but some indication of the strategic value placed on the project by the government.

The operating structure is fairly complex, but suffice to say MMR is majority shareholder of Advent, see yesterday's preso for breakdown and Advent will increase interest in PEP 11 to 85% once they drill the first well, while Bounty Oil BUY will have 15% interest.

Yesterday's Advent presentation also mentions a couple of other permits which are fairly promising, and I copy post on HC yesterday from Jazzasax “noticed Exoma Energy EXE have asked for a trading halt... have the 100% working interest on Perth Basin. "EP 419 covers 559km2 on the north eastern side of the Perth Basin about 10km east of the Beharra Springs Gas Field. Advent has retained a 3% royalty on future profitable production from EP 419."

Pls do not rely on above and DYOR.