i cant find any mention of todays astronomical rise in the financial press...
Gas for the Gold Coast METGASCO
There is no shortage of gas in Australia — take the abundant reserves on the North West Shelf of Western Australia for example. The main issue is a shortage of markets, or a shortage of gas located close to the potential market — look at the number of “stranded gas” projects on the North West Shelf, so called because they are too far away from the market to be commercially viable. That is where Sydney-based junior company Metgasco enters the scene. Metgasco, listed on the Australian Stock Exchange for just two years, has not only put its foot on the biggest gas reserves in New South Wales but is located just 70km from one of the fastest growing population areas in Australia — Queensland’s Gold Coast. Metgasco founder and managing director David Johnson describes the northern NSW area as being one of the last remaining energy “gaps” on the east coast of Australia. “If you get a map of Australia and look at the east coast pipelines you’ll find there is no gas that’s supplied anywhere between Newcastle and the Gold Coast,” he said. “You’ll find that that’s probably one of the last major urban areas on the east coast of Australia that is yet to have gas delivered to customers, either industrial or residential. Without an embedded energy supply the opportunities are numerous. “Exactly how we begin to make the most of these opportunities remains to be seen, but we do have a very significant reserve position now at our South Casino coal seam methane project and it gives us a lot of flexibility in being able to do long-term planning in terms of supplying gas to the region.” Metgasco’s initial ideas revolve around building a 30MW gas-fired power station, fed from its own coal seam methane gas reserves, which currently total 21 billion cubic feet, in the Clarence-Moreton Basin near Lismore in northern New South Wales. Metgasco is currently sitting on about half the reserves needed to power the planned 30MW power plant but has so far tested only the top 510m coal seam at South Casino. There are five other seams that occur below that have not had reserve classification so sufficient gas does not appear to be a problem. The public acceptance of gas coming from coal seam methane is also not a problem, given it already supplies about 30% of the gas consumed in Queensland. According to Johnson, Metgasco’s plan is to start design construction around January next year, which would require full financial funding to be in place shortly before. “So in the next six to nine months we need all of our approvals, which include land, petroleum production licence and development application approval, which we would hope to finish by December this year,” he said. “We have a lot of other related issues like network connection agreements, power purchase agreements that we would choose to deal with during that time. We also have to undertake the field This coal seam methane venture aims to tap into the potential of one of Australia’s fastest growing energy markets. By Michael Weir Metgasco managing director David Johnson: “The fact that we’re in one of the last energy gaps on the east coast of Australia is very significant because it means that we have an ability to sell virtually every gigajoule of gas we can produce.” Metgasco’s output could be a key energy answer for northern New South Wales and the Gold Coast. 90 RS june 2006 development which we would hope to commence around December this year too, although we are doing planning for that now. “Most immediately at the moment we have to finalise our front end engineering design, known as FEED, and our definitive cost estimates, which we hope to complete around September of this year.” What all this means is a rather substantial news flow in the next nine months and most likely a lot of stock market attention as investors recognise Metagasco’s positioning as one of Australia’s newest gas and power producers. “The fact that we’re in one of the last energy gaps on the east coast of Australia is very significant because it means that we have an ability to sell virtually every gigajoule of gas we can produce,” Johnson said. “The issue for us is that because there exists no pipeline, the quickest and most efficient way of generating cash to become a self-supporting company is to build, own and operate power stations to deliver power into the local grid. “To that end, we have an agreement with Country Energy to sell roughly 30MW depending on the final network configuration studies. We also have a heads of agreement with the Northern Meats Cooperative Company for a combined cycle unit for approximately 15MW. “If we can achieve that, it means that we can look forward to becoming a cash flow positive company and that limits any further equity dilution or more specifically, it aggregates value to existing equity holders. That is really our focus.” During recent reserve exploration drilling at South Casino, the first two horizontal wells have been drilled and dewatering is continuing, so in coming weeks the wells should start to show their true performance. The reservoir model developed by the company’s consulting engineers, however, is suggesting a peak rate of somewhere between 450mcf and 750mcf per day. Johnson is no stranger to the so-called Walloon Coal Measures which host the South Casino project, having identified the geological setting in 1997. He has spent a great deal of time looking at the measures and understanding the geology before settling on the project area in the Clarence-Moreton Basin. All up Johnson has 20 years experience in the minerals and petroleum sector. He is joined by some heavyweight support on the Metgasco board. Chairing the company is Dr Peter Power, who has more than 40 years experience in hydrocarbon exploration worldwide and has held senior management positions with major international companies. He was previously the managing director of Ampolex, one of Australia’s most successful independent oil and gas companies prior to its acquisition by Mobil. He is also currently a nonexecutive director of Petsec. Johnson said the company, and shareholders, were in for an exciting ride in coming months. “As long as we continue to produce results that demonstrate the underlying value of our assets — that is, recoverable gas — I think the equity market will stand up and take notice,” he said. “We are now beginning to make the transition from exploration to production, and I think once you get into that window, people can begin evaluating you on a financial basis, and I think that changes people’s perspective on what the company can do and what its potential is. “We’ve currently got 1 trillion cubic feet of gas in the 3P reserve category and 20 billion cubic feet in the upgraded category of 2P. Once we begin to convert a majority of the 3P reserves into 2P, I can see that there is potential for us to undertake some fairly dramatic growth. “Energy demand on the east coast of Australia, and in particular northern New South Wales and Gold Coast, is not declining. It is increasing at a rapid rate, and gas — especially that sourced from coal seam methane — is one of the key energy answers for the region. “So I think as long as we can continue to demonstrate that we are building reserves, and we are building production, there is no shortage of work to be done, and there is likely to be no shortage of interest from the markets and investors.” metgasco ... at a glance HEAD OFFICE Level 3, 32 Walker St North Sydney NSW 2060 Ph: +61 8 9923 9100 Fax: +61 8 9923 9199 Web: www.metgasco.com.au DIRECTORS Peter Power, David Johnson, Glenda McLoughlin, Rick Wood MARKET CAPITALISATION $26.5 million (at press time) MAJOR SHAREHOLDERS David Johnson 15.5% Glenda McLoughlin 7.3% T Woodhill 5.2% RS june 2006 91 RS
MEL Price at posting:
0.0¢ Sentiment: Buy Disclosure: Not Held
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