prelim. look at established american cbm producers

I was googling for a few hrs over the weekend and found 4 American companies producing substantial coal bed methane ... Consol Energy (NYSE: CXG), Devon Energy (NYSE: DVN), Western Gas (NYSE: WGR) and the recently taken over Prima Energy (formerly Nasdaq: PENG). Others like Phillips Petroleum, Burlington Resources and BPAmoco produce more coal bed methane but even more oil and gas liquids and so I didnt look too hard at them.

Consol, Devon and Western are capitalised at US $3B, $28B and $3.75B respectively and in 2005 produced 48.4PJ, 827PJ and 63PJ respectively of mostly methane gas (as far as I can tell) and net incomes of US $102.2M, $970M and $203.8M respectively.

Direct comparisons are difficult as for example Devon also produced 88 mill barrels of oil and gas liquids for a total energy production (including gas) of 226 mill barrels of oil equivalent (mboe) against reserves of 2112 mboe. Other complications are that Consol currently buys in abt half of all gas sales from a related entity (Chevron I think at no operational gain) but planned production increases through to 2008 should replace those sales with inhouse gas.

What does all this mean for EPG? Firstly it means that coal bed methane is BIG business in America, providing abt 7% of all gas sales. Companies with essentially comparble reserves to the probable 450 PJ for just 15% of EPG's Lorraine permit in France (say 484PJ for Consol and 630 PJ for Western assuming a ten yr life at current production rates) have mkt caps of US $3B and $3.75B respectively. I suspect both companies are on target for annual net incomes of US $250 to 400 mill within a few yrs.

At todays close, EPG has a mkt cap of abt A $74 mill. Imo, there is good reason to expect a substantial increase in the EPG share price lol. Would anyone care to follow up on this valuation approach ... annual reports for Consol, Western and Devon can be downloaded with ease and may mean a lot more to others if looking at cold hard financials.

One thing I did notice is that gas sale prices for the above US companies ranged from abt US $6 to $7.20 per 1000 cf against total acquisition, development and production costs of abt US $2.70 to $2.90 per 1000 cf which seems a healthy margin to me. I suspect the margin is a lot lower for Australian companies like QGC and SGL.

All views welcome.

Regards
Poyndexter