entry price is better now.

I have entered PSA (on ASX) today at 33.5 cents (although they look like they could test 32-33 again shortly)

PSA is my next 'Amity' with a very similar story line. 18mcf a day of gas sales in Louisiana at US$5 per '000 cubic feet will mean US$90,000 a day of gross sales (which apparently comes to US$75,000 a day net after costs) which is approx A$125K a day coming to them. This production is not long lasting, perhaps 2 yrs worth in the discovery at present, but with loads of cashflow coming and and loads of other drills to do very nearby in the same licence, one more (evem smallish) GAS discovery and they are away laughing.

Maths:

revenue at A$125K a day = A$45M p.a.

Shares on issue = 105,736,401
Share price = 34 cents
market cap = A$36M

Approx PE = 45/36 = 1.25 (for the next 2 yrs anyway)

Comments:

1. PSA shares were once $5-6 etc, so there are a lot of p1ssed off people out there who will sell into rallies.
2. The PE of 1.25 or similar is only for next 2 yrs, but a another even smallish gas discovery will extend that PE over several years.
3. PSA are supplying gas into the southern US market, a market which guarantees continued demand. This is a tight market and gas consumption in USA has far outstripped discoveries in recent years. Gaps in supply contributed to the California energy crisis 2 yrs ago. High prices for gas in USA are likely to continue but even at US$3.50 - $4 a barrel, still highly profitable.
4. Their gas wells are offshore and this carries a risk of things going wrong. Having said that, they are only in 20M of water, so not deep water so are more easily accessible than normal.
5. Whilst the gas prices are not directly connected to oil prices, indirectly a rising oil price will drive gas consumption over time as people seek alternative energy sources (ie idiot Bush factor)

In my opinion, despite some risks, the fundamental potential of the earnings for this one make it a strong buy for me. It will be a patience job, a 12-18 month play.