ESG - Eastern Star Gas

[kingbrown]

Tanks will check it Jim

Heres some news on the Linc Sapex takeover

UNDERGROUND coal gasification group Linc Energy has snapped up just over 5 per cent of gas explorer Sapex -and the companies are believed to be in merger talks.

http://www.news.com.au/heraldsun/story/0,21985,23843835-664,00.html

 

[kingbrown]

So what happened today have we seen the top for these gas stocks ?

I know it was a hard day for gas stocks
but ESG dropping to 70 then closing about 10% down at 79 C'mon

Any body have any ideas what caused the sell off ?
Maybe it was all those bnb punters out there ?

I know its had a great run but imo ESG has a great future

Still hold and will for quite some time yet

 

[bassmanpete]

I think the Arrow/Shell & Origin/BG Deal/No Deal gave the sector a lot of publicity & probably brought in a lot of new investors. After the initial enthusiasm the prices have dropped back, helped no doubt by the general fall in the market.

I wouldn't panic, kingbrown, barring some absolute disaster CSG has a long way to go yet. It's barely out of the starting blocks in Australia. The only problem I can foresee is the coal being of the wrong type & not holding enough gas but that doesn't seem to be the case at the moment. And I reckon Shell & BG have looked into this in a hell of a lot more detail than I have!

When I first heard about CSG 4 years ago I researched the US experience. What I discovered there persuaded me to invest. I recently read that CSG provided 7% of the USA's energy needs last year. That 7% represents more than Australia's total yearly requirement for natural gas. There'll be more ups & downs in the industry but there are good days ahead, just be patient

 

[Julia]

Agree, bassmanpete. And then there's also likely to have been some profit taking after such a good run up.

 

[Jimminy]

So what happened today have we seen the top for these gas stocks ?

I know it was a hard day for gas stocks
but ESG dropping to 70 then closing about 10% down at 79 C'mon

:

Quite simple:

1. Morgan Stanley on Thursday in the US said to short energy and buy financials.

2. Babcock & Brown (which is looking like a sinking ship) has an MOU for 40pj/pa with ESG....the market panicked yesterday. Well some panicked anyway.

3. Yes, CSG has had a good run up of late also.

 

[pointr]

To quote the most sucessful trader I know personally " for every movement there is always a retracement". I think there is a good fundamental story here. The gas supply events of the past few weeks in WA must surely have NSW government people considering the benefits of multiple projects supplying the industry and homes of this state. Not sure what the short term price movements of this stock will be. Only time will tell whether the sellers or the buyers were the smartest yesterday, or maybe they were all equally smart but each with a different time frame in mind

 

[grace]

Well, per interview the other day, Dewhurt 4 drilling news is out this week. Not out yet, so perhaps today is the day. Hope it's good!

 

[grace]

Well, per interview the other day, Dewhurt 4 drilling news is out this week. Not out yet, so perhaps today is the day. Hope it's good!

There you go, comes in in the monthly drilling report. Good news though - nice thick coal seams with good permeability. Just what the Doctor ordered!

As at this report date, Dewhurst 4 had reached a depth of 1026.6m within the Bohena coal section.
The well has intersected approximately 19.46m of coal within the Black Jack Formation, including 7.00m of coal in the Hoskissons seam and 28.73m of coal within the Maules Creek Formation,
including 15.57m of coal in the Bohena seam.

After reaching total depth and wireline logging, a number of Drill Stem
Tests will be conducted to evaluate the permeability of the Hoskissons
and Bohena coal seams. After testing all significant seams the well will
be suspended pending use as a observation well for future lateral drilling
in the area.

This confirms the extension of the field 4km south.

 

[grace]

Project update out today. Looking at p16....total coal thickness 41.3 to 48.2 metres.

Permeability (important to enable extraction) average range from 45 - 50 millidarcies (with some as high as 100). This is right on the money! Can't see any problems there.

http://aspect.comsec.com.au/asxdata/20080709/pdf/00858791.pdf

I disclose holding.

 

[YOUNG_TRADER]

Hey Grace

ESG is an excellent story,

They look to be the next QGC,

My brokers were all over QGC when it was 25c and for the last few months they have been all over ESG

I should have just backed their judgement with these CSG things but I didn't silly me

From looking at the presentation their main resource/project is in PEL 238 which interestingly enough is next door to Santos permits (take over value for Santos here?) and also holds the Wilga Park power station


So excellent excellent location


It really does look good, the only thing that holds me back is the fact is its mkt cap is $450m-$500m, I'm not commenting on whether its fair value but rather as most would know I play the $5m - $50m end of the mkt

Will do some more digging

 

[grace]

Hey Grace

ESG is an excellent story,

They look to be the next QGC,

My brokers were all over QGC when it was 25c and for the last few months they have been all over ESG

I should have just backed their judgement with these CSG things but I didn't silly me

From looking at the presentation their main resource/project is in PEL 238 which interestingly enough is next door to Santos permits (take over value for Santos here?) and also holds the Wilga Park power station


So excellent excellent location


It really does look good, the only thing that holds me back is the fact is its mkt cap is $450m-$500m, I'm not commenting on whether its fair value but rather as most would know I play the $5m - $50m end of the mkt

Will do some more digging

Tripled my holdings in this recently because I not only like the look of John Anderson (Chairman), but the Company has Casey at the wheel, who knows his stuff when it comes to csg!

Remember that it is relatively easy to convert 3P to 2P.

QGC MC = $4 billion
they have 80% of the following reserves (Petajoules)
1P 609
2P 2415
3P 7163
$4000mill / 7163 x 0.8 = $0.45mill per PJ.


By the time ESG really start to fire up their reserves, we shoud have a pipeline in place which will connect from Gladstone, right through to Newcastle, and run right through ESG's holdings. That will be a major infrastructure bonus! Possibility of LNG export via Gladstone, power to NSW, or who knows what could happen if Santos find enough, exporting from Newcastle LNG.

Back to market cap....SP 56c MC = $430 mill
ESG PJ's (petajoules)
1P 21
2P 185
3P 1300

On current 3P reserves = $0.33 million per PJ. (Recent takeovers are up to $3mill per PJ, but they have more infrastructure in place).

2008 will drill 20 wells (3 done already)
3675 PJ expected from this years drilling.
That's 2.8 times current reserves. Share price should go 2.8 times going on $ per PJ if all drilling this year goes to plan.
Current sales in Asia $11 - $14 million per PJ from what I read.

Gas in Place 17 TCF, which is about 17 000 PJ. Looks like they shouldn't have any trouble with the 3675 PJ. Above this, we are looking at big figures.

I don't think they are overvalued at all based on my figures, and there is plenty of room for growth in the share price this year.

 

[YOUNG_TRADER]

Hey Grace,

Just so there's no confusion, I never meant to say ESG are overvalued or anything, its just as you know I play the more spec end of the mkt but ESG has me fascinated because I didn't listen to my boys on QGC and well look at that now and I kinda ignored them on ESG when it was 30c

Interesting, when compared to QGC ESG looks cheap on a 3P comparison but then I think QGC looks better on a 2P comparison, so maybe once ESG firm up/move their 3P to 2P a re-rating will be had?

Also I agree David Casey does sound like a bit of an expert in this whole CSG field, here's what I got on him

David Casey graduated with Honours in Geology from the University of Sydney in 1991 and in the same year joined specialist coal seam gas company In Situ (Australia) Pty Ltd. In 1996, he formed his own coal seam gas consultancy business, and subsequently was a founder of Multiphase Technologies Pty Ltd, a provider of coal seam testing services. David has over 15 years experience in the management and evaluation of all aspects of coal seam gas exploration and appraisal, from initial reservoir characterisation and fairway identification through to drilling, testing and production operations. Between April 2001 and October 2005 he was a director of Molopo Australia Limited. He was previously Executive Director - Operations and is presently the Managing Director of Eastern Star Gas Limited.

and

Joined ESG in September 2005 with responsibility for all operations. Appointed to ESG Board in July 2006 as Executive Director (Operations) and became Managing Director in November 2007
Previously Executive Director of ASX-listed CSG company Molopo Australia Ltd and General Manager of In-Situ (Australia), a company specialising in CSG consulting and appraisal
Key figure in establishment of Australian CSG industry
Active CSG industry participant with over 15 years’ technical and management experience in Australia and overseas
Honours graduate of Sydney University


p.s. so you like the look of the ESG Chairman huh? I'm telling your husband lol

 

[grace]

Coverage of Hillgrove Resources in Smart Investor mag this month, who own 22.5% of esg. Hillgrove's Archer says "the shares aren't up for grabs".

Even though Hillgrove is looking for $130 mill to finance Kanmantoo copper mine, and the sale would fit the bill.

I'm glad they are not up for sale....kind of lets ESG get on with business knowing they have substancial s/holder support, and Hillgrove hold a blocking stake. Although, they say, everything is for sale at a price. Perhaps though, Archer thinks more gain in holding esg, than the copper mine.

BTW, Hillgrove mc = $100 MILL (less than holding of esg shares). No value on copper these days? I don't hold, only esg.

 

[YOUNG_TRADER]

Hey Grace,

Another presentation from the main man Mr Casey over in London and New York, very active man,

Also got this pic from Santo's latest CSG presentation, I'm assuming the light Blue is CSG accumulations

Santos reckon they have 40 TCF in the Gunnedah region which is where ESG's main PEL 238 is, as I have said all along makes ESG look strategically important to STO

 

[chops_a_must]

Santos reckon they have 40 TCF in the Gunnedah region which is where ESG's main PEL 238 is, as I have said all along makes ESG look strategically important to STO

You're a bit late to the party YT.

It's proably about right given the stage in its development, but plenty of room to move if all goes well. As always, the problems with ESG remain its potential production costs and potential for things to go wrong. But the potential is certainly there as well.

Just hurry TFU already! :

 

[YOUNG_TRADER]

Hey Chops, am definately late to this party, hence why I haven't bought any yet

But it does present excellent value I think for Santos, I mean they just got $2Billion + cash from petronas for selling a 40% stake in some of their Qld Gladstone area projects,

Now their targeting up to 40 TCF in Gunnedah, why not take out ESG and get the 20TCF they are targetting too,

A $1 bid would be $800m or so for STO given the $2billion they're getting from Petronas I reckon it makes sense,


Will be interesting to see what happens

 

[grace]

Hey Chops, am definately late to this party, hence why I haven't bought any yet

But it does present excellent value I think for Santos, I mean they just got $2Billion + cash from petronas for selling a 40% stake in some of their Qld Gladstone area projects,

Now their targeting up to 40 TCF in Gunnedah, why not take out ESG and get the 20TCF they are targetting too,

A $1 bid would be $800m or so for STO given the $2billion they're getting from Petronas I reckon it makes sense,


Will be interesting to see what happens

I personally would hate to see esg taken out for $1, after all, the sp was nearlly $1 not so long back.

I hope to hold this for a couple of years, which should see the sp in the couple of dollars given successful wells.

 

[Jimminy]

I personally would hate to see esg taken out for $1, after all, the sp was nearlly $1 not so long back.

I hope to hold this for a couple of years, which should see the sp in the couple of dollars given successful wells.

Only people who will take it out are Santos imo, and they are probably inclined to wait for the PEL238 project to be de-risked over the next year or two.

They also would need to have discussions with Archer at HGO. He is just making sure they get a premium for their stake by saying it is not for sale. Good strategy, but very transparent.

But in saying this, QGC has not waited around on Roma petroleum.

IMHO, ESG won't be touched at all for some years. The coal measures around the Gunnedah area need to prove their permeability, saturation, etc.

ESG have an excellent technical team together - agreed Grace; hold for a couple of years at least.

 

[grace]

Project update out today. Looking at p16....total coal thickness 41.3 to 48.2 metres.

Permeability (important to enable extraction) average range from 45 - 50 millidarcies (with some as high as 100). This is right on the money! Can't see any problems there.

http://aspect.comsec.com.au/asxdata/20080709/pdf/00858791.pdf

I disclose holding.

Jimminy, I think permeability is fine based on these figures, but perhaps you know more than me. Average commercial csg wells are 40 millidarcies.

ESG have 2 x multi-lateral wells this month, so we might have some more news just around the corner.

 

[YOUNG_TRADER]

Hey Jimminy,

In addition to what Grace said I think the fact that Santos seems to making Gunnedah its major focus is very telling

Also while I don't think a $1 bid would be enough to win the prize of ESG at least it would get the company back towards more reasonable levels when compared with say AOE or QGC

Now don't have a heart attack Grace, or Kenna for that matter, but for the first time ever I'm considering buying a company with a mkt cap over $200m.

Time will tell if I pull the trigger and buy

Hey Chops, am definately late to this party, hence why I haven't bought any yet

But it does present excellent value I think for Santos, I mean they just got $2Billion + cash from petronas for selling a 40% stake in some of their Qld Gladstone area projects,

Now their targeting up to 40 TCF in Gunnedah, why not take out ESG and get the 20TCF they are targetting too,

A $1 bid would be $800m or so for STO given the $2billion they're getting from Petronas I reckon it makes sense,


Will be interesting to see what happens