DTEMorning Star: Large targets in a small companyBUY...

DTE

Morning Star:

Large targets in a small company

BUY Rating

Valuation 75c

DTE is an emerging global coal seam gas (CSG) explorer and producer. International assets are being spun off via a Singapore listing. It aims to delineate 150-500PJ of proved, probable and possible reserves (3P) in Australia and 500-750PJ internationally by end 2012. Corporate activity is a feature with acquisitions of Australian based CSG hopeful Apollo in late 2010 and European based Composite Energy in early 2011. Prospective CSG resources of 51Tcf net to DTE are substantial with upside from shale gas. Appeal from proving up and commercialising substantial gas resources. Management draws heavily from the successful parent Arrow Energy, which spunout DTE during its takeover by Shell in 2010. DTE is speculative and not for conservative investors. It carries exploration, development, regulatory, single commodity and commercialisation risk. The company is pre-production and does not yet have cash flow. The company has no debt and cash at end 2011 of $100m.