All the recent QGC/STO jostling is great for the industry imo...

All the recent QGC/STO jostling is great for the industry imo and has got me thinking again ... I have extracted parts of the following post from an earlier post of mine on 1/1/07.

Russia is to supply 30 bill cubic metres (1060 bill cu ft) of gas into Europe this next yr ... thats close enough to 1,060 PJ.

The original Lorraine permit area of 460 sq km has GiP of about 980PJ within just the current study area of just 69 sq km ... Enron previously estimated the total permit area to have GiP of over 6,000PJ ... factoring up for the recent Lorraine southern extension of another 528 sq km there could be pro rata a GiP over 13,000PJ for EPG's Lorraine permits.

In the original ASX announcement in 2005 (as KBO) at the start of applications for the Lorraine southern extension (just granted) and Lons le Saunier (not yet formally decided), management stated Lons le Saunier likely to contain at least as much gas as the Lorraine basin (I am not sure what exact area this refers to).

So, being conservative, I would expect Lorraine plus Lons le Saunier to have GiP of around 20,000PJ. EPG management has oft stated that they expect about 50% of the original Lorraine study area GiP of 980PJ to become recoverable reserves. Based on the recent Diebling results, management has given strong guidance that they expect to upgrade Lorraine GiP prior to booking reserves.

Look at the relativities:

. Gazprom will will sell 1,060PJ of gas into Europe over the next 12 months.
. In just 2 French projects, EPG may have GiP of over 20,000PJ.
. If just 20% of the GiP is recoverable, EPG could be sitting on 4000ish PJ reserves, sufficient to supply the equivalent of Russia's gas exports into Europe for 4 yrs ... or more realistically, sufficient to replace the eqivalent of 10% to 15% of Russia's gas exports into Europe for 25 to 30 years.

The most recent info I can find on QGC here in Australia includes an original GiP17,750PJ. Based on exploration to date of only 20% of their acreage considered to be prospective they have 3P reserves of about 2500PJ and 2P reseves of about 700PJ. They are on an accelerated program to prove up 1,000PJ of 2P reserves and they have a 90% success rate converting 3P to 2P.

The above QGC numbers are pretty similar to the not quite proven numbers noted above that could be potentially attributable to just EPG's Lorraine Permits. The STO $1.26/share bid valued QGC at $660mill (I recall), which means there are prob abt 550mill QGC shares on issue. After the Heritage merger is completed, there should still only be about 200 to 210 mill EPG shares on issue.

The new STO offer for QGC seeks to strip out essentially the 3P and 2P reserves from one proven field (cant recall the name) and leave all ongoing exploration targets for a new QGC to explore and develop.

Without getting too fancy, an equivalent value for EPG's Lorraine Permits could be 550/210 (to factor for shares on issue) x $1.30/share (STO's cash offer to QGC for proven reserves), which would be $3.40 per EPG share, which allowing for a conservative long term gas sales price difference of 2 between Australia and Europe would be $6.80 per EPG share ... then there is additional long term value attributable to Lons Le Saunier (if secured) and all other French and Italian Permits plus any further application successes.

Is it just me or are EPG prospects eerily similar if not better than for QGC? I have thought for some time now that a proven Lorraine Field could be on sold rather than developed in-house. I'd take $6.80 a share to divest Lorraine ... provided EPG retained all other assets of course lol. Its not beyond belief imo.

Cheers
Poyndexter

PS ... there has been a drought lately and in the absence of anything concrete from management/press releases, this is the best my furtile imagination can come up with at the moment lol.

PPS ... it took about 10 mins to think up a catchy subject title to attract readers to a currently sleepy thread lol.



Cheers all
Poyndexter