igas and dart energy advance as investors hail

IGas and Dart Energy advance as investors hail UK shale
By Jamie Ashcroft June 14 2013, 2:54pm

City broker Canaccord explains that the Centrica deal is a strong signal of commitment to the Bowland Shale.City broker

The US$160mln deal between privately owned Cuadrilla and British Gas owner Centrica has led to fever pitch excitement among small cap investors.

The major UK gas supplier’s move into Britain’s nascent shale industry has put the spotlight on other companies with prospective nearby acreage.

IGas (LON:IGAS) and Australia-listed Dart (ASX:DTE) both have UK shale projects of their own and investors have moved quickly to avoid missing out should another major come calling – brokers have already pointed to the likes of Total, Exxon, Statoil and Chevron being ‘interested parties’.

As one stockbroker said, “the biggest risk is not being in it.”

IGas shares have gained around 20% since the rumours first surfaced – and it confirmed its own 102 trillion cubic feet (tcf) resource estimate – meanwhile Dart has gained around 50% in recent days.

According to a recent independent audit IGas’s ‘most likely’ shale potential currently amounts to 102tcf.

Meanwhile Dart, which has seven licences spanning 300 square miles in the Bowland shale, is currently thought to have about 60tcf - although this estimate reflects the earlier stage nature of the acreage.

Indeed, both IGas and Dart are still lagging behind Cuadrilla in terms of the amount of work carried out on their respective properties.

But, City broker Canaccord explains that the Centrica deal is significant for the whole area as it is a strong signal of commitment to the Bowland Shale. In the coming years Centrica will help drive the basin forward, the broker says.

“The scale of the investment will provide the backbone of a proper appraisal of the Bowland Shale potential,” analyst Charlie Sharp said in a note.

“We think that the partners will now be able to drill, frack, and test, 6-8 wells over the next two to three years, and carry out a whole raft of technical studies.

“This should provide the information needed to extend the programme to the 20 or so wells that we anticipate will be required before large scale commercial development could be considered.”

According to Sharp, the deal implies the project is worth a total of £340mln which in turn points to a valuation of £1.7mln per tcf.

This, when totted up on the back of an envelope, loosely values the IGas assets at £174mln and would suggest the possible 60tcf on Dart’s property could, at this stage, be worth about £100mln.

Clearly, though, must more work will be need to better define both the scale of the resources as well as their commercial value.

http://www.proactiveinvestors.co.uk/companies/news/58020/igas-and-dart-energy-advance-as-investors-hail-uk-shale-58020.html