org to fire up csg again, page-7

interesting note from one analyst this a.m.:

Conoco-Origin Transaction – Look-through valuations for other coal seam gas players



¨ ConocoPhillips’ agreement to pay US$8 billion for a 50 percent share of Origin’s coal seam gas reserves sets a new benchmark for the valuation of coal seam gas reserves in Queensland and northern New South Wales. The deal values Origin’s reserves at $4/Gj for 2P reserves, $1.88/Gj for 3P reserves and $0.22/Gj for gas-in-place (GIP).

¨ While the price being paid by ConocoPhillips is a new high for Australia, it is still comfortably below what is being paid for coal seam gas and share gas reserves in the United States and Canada.

¨ We have applied the Conoco transaction values to the listed coal seam gas producers in Australia and, not surprisingly, found that virtually all companies are trading on lower valuation multiples. The Conoco premium to the market reflects the certainty that Conoco can have in buying into Origin’s massive reserves that it will be able to develop a major LNG export facility. Origin’s current reserves base would support the production of up to 8 million tonnes of LNG annually, with an end market value of US$5.4 billion.

¨ Companies trading at the largest discounts to the Conoco deal values include Molopo, Metgasco, Eastern Star Gas and Sydney Gas (although there are questions about the latter’s ability to deliver).

¨ We believe that most of the smaller companies on the following list will be absorbed into larger players over the next two years. With Shell, Petronas, BG, and ConocoPhillips all now cemented into the Queensland coal-seam gas-to-LNG space, the only major players in the Asian LNG trade that lack a seat at the table are BP and Exxon Mobil. The only way either of these 900-pound gorillas could enter the game at this late stage and have sufficient gas for a stand-alone LNG development would be to launch a bid for Arrow Energy. Based on the Conoco deal, Arrow directors would need a bid of at least $5/share to roll over.