MEL - Metgasco Limited

[chops_a_must]

And it keeps getting better with Arrow!!....

Interesting that MEL have set a 660PJ target within 12 months for 2P reserves. If they do this will move this along. Should be one to watch closely.

Yes, but I have made about half as much (in percentage terms) on MEL as I have on AOE in about a 16th of the time. You can't beat that! And it has an absolutely tiny market cap, so it is better to look at for trades IMO.

Plus, the depth is coninuing to look ridiculous on this thing:

EDIT: Sell side thinned even further, 1.04 long gone.

 

[Jimminy]

yeah well done Chops.... you and I chatted about this one a few weeks ago and your prediction was correct. You should have a tidy 30% + profit from 2 weeks ago. Nice pick buddy.

As I said the 600 pj 2p reserves within 12 month is a pretty significant statement to make. ESG only have a 18 month target on a similar 2p rserve target - hence the market liked MELs ann.

 

[ormond]

I think MEL represents an excellent buying oppurtunity at 0.94c as i believe this company is the cheapest mkt cap/2p res.
2p res 113pj with a target of 660 2p res. 3p res currently in excess of 1000pj.
Any thoughts as to why this co. appears to be so undervalued compared to its peers?

 

[chops_a_must]

I think MEL represents an excellent buying oppurtunity at 0.94c as i believe this company is the cheapest mkt cap/2p res.
2p res 113pj with a target of 660 2p res. 3p res currently in excess of 1000pj.
Any thoughts as to why this co. appears to be so undervalued compared to its peers?

I don't know.

It appears to have lagged its peers as long as I've followed it. But me, I really do like this stock, have traded it many times. It's very whippy and you can make big gains quickly. I guess the problem being it is rather capital intensive. Seemingly more than others. But yes, for 2p to mk cap, there aren't many better. Much better value than MPO for instance IMO.

Any more to the downside and this becomes a no-brainer for me, if it respects support, just like ESG.

Just a warning though... it does look like heading to 80c again. I will look at it again then...

 

[TheAbyss]

Bollingers point to this moving shortly. Does anyone know when they are due to release some news? No guarantee MEL will go up however looks to have found a floor at the high 70's so looks to be a good entry point to me.

 

[joelc]

Has anyone noticed that in both September and December 2007 Quarterly Reports that MEL only detail their net 2P reserves and don't cleary state anything about confirmed 1P reserves.

Now to my understanding 1P=Proven. 2P=Proven + Probable. 3P=Proven + Probable + Possible..

Does this mean MEL is a company that only has a 'probable' amount of gas, which has yet to be proven? From what I can understand yes.

Check out MEL's Investor Presentation announcement on the 15/01/2008, page 18 clearly states that MEL has 0 (zero) certified 1P reserves. (I know the data in the graph says 'as at 14/01/07' but to me (confirmed via a quick look back at historical share prices) thats an error and should infact be 'as at 14/01/08'.

Is this something to be concerned about?

It's all good aiming for xxx amount of 2P reserves by xxxx timeframe but are we forgetting about 1P certification?

 

[TheAbyss]

I suspect MEL may be due for a rating upgrade after the upcoming Oil & Gas conference. Mel have done a lot of work on proving resources with not a lot of market recognition compared to some others in the CSG sector.

Working on their proven (2p) 257 PJ to their market cap undervalues them when compared to others imo.

Some of the highlights for MEL who are hold the largest certified gas
reserves in NSW are below (straight form their preso).

In addition MEL have MoU to sell gas to the Casino Power Station and to the Swanbank power station (total 390 PJ) already.

► Substantial reserve upgrade program underway
► Exploration is now beginning to reveal additional
conventional gas resources
► Access to energy resources is key; MEL is close
to markets and infrastructure
► A fundamental structural shift in the eastern
australian energy market is underway
► Well defined gas commercialisation strategy
► Experienced management and board

 

[Bushman]

Reserve upgrade:
2P - 264 Petajoules *
3P - 1,419 PJ *

Note *: MEL interest.

Aiming for 2P target of 640PJ. Continue to hold the mantle as the 'largest CSG holding in NSW...

DYOR.

 

[Wysiwyg]

MEL is one of my juniors that has excellent growth opportunity on the east coast of Australia with coal seam gas wells.

From their latest presentation.

"The majority of east coast gas will be exported as LNG within 10 years."

"Metgasco has a large scale resource and has already established the largest certified 2P gas reserves in NSW."

* Close to markets and infrastructure
* Relationships with key customers - CS Energy - BP
* Development projects well advanced - Richmond Valley Power Station - Lionsway Pipeline
* Focus on domestic market in the short term.Ability to access export markets in the medium term.

2P (proven/probable) reserves now at 298 Petajoules which is equivalent to 312 billion cubic feet.Yes that is a solid reserve on paper.

One thing to note is the extraction process in some gas structures,

- This requires trial and error, but allows for a “manufacturing” style production process in drilling wells which can deliver continuous productivity improvements.

Share price is still going down so I`m looking forward at this, what I term, excellent opportunity.

 

[big sal]

potential is huge so plenty of upside for metgasco. from high of around $1.50 presently sitting around .40 so represents a great buy in opportunity, for that matter anywhere in the .40 to .60 range. have bought a few more at this price because it will hopefully only go up from here, although a bit quiet today with others doing better

 

[Dukey]

Anyone thinking about MEL recently?? I certainly am...

After the recent T/o action in PES and QGC - I've been checking out whats left of the smaller-mid CSG players. The one that stands out for me as being next in line and extremely undervalued is one I've watched for a while, but not bought before - MEL....here's why

2P reserves = 284PJ
3P res = 1460PJ
current MC = $48M
Shares - 132Mill; Options = 24Mill.
$ / 2P PJ = 48 000000 / 284 =~ $ 170 000.
So at Market cap of $48Mill, MEL is currently valued at 0.17Mill$/PJ.

Compare that to some others mid tier CSG-ers ...

PES - current MC (during takeover) of $480Mill, on 2P reserves of about 400PJ. - this is around $1.2Mill per 2P PJ.

ESG - current MC of about $345Mill, on 2P gas of 336PJ.
= $1.02MIll per 2P PJ

QGC at the takeover - MC of about $5.5Bill on 2P of 2500PJ (I think)
= over $2Mill per 2P PJ !! obviously so high due to QGC's more advanced stage of development, projects etc.

But the trend is obvious... MEL has a fair swag of gas, close to some big markets, with plenty of expansion potential (MEL state that current reserves are from only 5% of their land.)... and EXTREMELY undervalued by recent standards...

The only down side is they aren't swimming in cash and therefore a cap raising may be in order sometime soonish - I think I recall reading about $5mill in cash ... but I could be wrong there.

Either way - I've convinced myself enough to buy in last week. down a bit since then - but these are long term holdings for me... at least until some fat cat swallows them up like QGC or PES.... ...

- anyone else watching these guys???

-duke-E

----------
and yes - I know that analysis on 2P alone is overly simplistic... but anyway you look MEL is undervalued to hell as far as I can see...? somethings gotta give sometime??

 

[pan]

The only down side is they aren't swimming in cash and therefore a cap raising may be in order sometime soonish - I think I recall reading about $5mill in cash ... but I could be wrong there.

G'day Dukey nice bit of research,

I believe you are correct, the cash is around 5 mil and the company close to debt free.

Also looking to buy,

cheers

 

[Dukey]

thx pan.
It seems from comsec research that hartleys have a buy on them... but then they probably have a buy on everything. still would be interesting to see what they think - does anyone have access to a hartleys report on MEL?

The recent investor report from the new MEL company website here (I think - let me know if it works or not) is a pretty good summary.
http://www.metgasco.com.au/files/678561.pdf

following attachment is from there... looks even better than my effort!...you'll notice the lowest figure for 2P resources ... from mid 2007 (!) is more than double the current valuation of MEL's 2P gas reserves.

need I say more.... I will anyway ! - the highest 2P valuation is almost 30 times the current 2P valuation on MEL!.

# Some rough conversions necessary -
- Gas valuation - roughly - $1 per Gj = $1Mill per Pj.
- generally – 1 Bcf = 1 Pj = 1 Mill Gj

- please correct me if I've messed up here anywhere!

- good luck anyone onboard.

 

[beerwm]

AGL/Molopo Gloucester Basin Deal - $2.75/Gj

to add another one.

regarding 2 previous takeovers,

SGL - had joint ventures with AGL in there tenements, lookinng at their reports possibly huge reserves [25,000PJ + in one tenement alone]

PES - Surrounding acreage near AOE, large amount of acreage in general, large potential.

so the recurring things in these takeovers seem to be, location, and potential.

although regarding pes, once the 2P reserves were announced there was massive price increases, so im not saying 2P reserves dont matter, but there is more to the equation in my opinion.

I'm not exactly sure of the surroundings of MEL, but i didnt think they had huge acreage compared to some other csg plays.

note- my information is just from memory so someone might wanna check it


based on 2P reserves though, massively undervalued even compared to ESG

 

[pan]

MEL is meant to start production in 2011..

When is ESG meant to start?

Dukey do you have a target price?

 

[Dukey]

Price targets are not allowed here as far as I know - and in this kind of market you won't get a target from me! ...apart from the obvious - that someone has to start looking at these guys soon and wonder "why is MEL gas worth only a fraction of someone elses gas???????????" (size of fraction depending on who you compare them to).

- but here is a comparison closer to home (NSW) ...from the ESG thread...

Based on the AGL acquisition of PEL285 in the Gloucester Basin, NSW, from AJL Lucas and Molopo MPO, the price was $2.05/GJ of 2P. This would value ESG's current booked 2P reserves at $448m or $0.58/share and 12 month targeted reserves 1,300PJ (845PJ net) at $1,730m or $2.28/share. The $2.28/share will be the upside for ESG if the target is achieved in 2009.

[from phong_? on the ESG thread]

Only my opinion - but unless someone knows something about MEL that is holding them back big time - then I'd expect some kind of rebalance sometime.... how soon - is anyones guess, though PES, QGC, and Origin proved to me that big deals can still happen in crappy markets.

I know 'Chops' has been watching ESG and MEL for a long time... any comments on possible reasons for their current valuations chops??

-duke-E!

 

[pan]

putting that into ev terms

284 * 2.05 = 582000000

shares= 148000000

582000000/148000000= 3.93

wrong?

 

[Dukey]

putting that into ev terms

284 * 2.05 = 582000000

shares= 148000000

582000000/148000000= 3.93

wrong?

The numbers are the numbers are the numbers and Those numbers look fine to me pan...(think i had 156mill shares fully diluted - but whats a few mill betw friends?!) . nothing wrong with your maths that I can see though einstein I'm not ...

(speaking of which... read 'einstein - a life' - a great biography.)

PS - I should maybe be mentioning that i do hold MEL.

 

[surfingman]

I haven't looked at MEL is a while now but was thinking about if and when the pipeline gets approved will they be able to get funding in this climate to build? If yes, will that mean a dilution of interest in the projects.

Just a thought on why the share price is lower, apart from the general market.

My reasoning for it being cheaper is the infrastructure isn't in place at the moment, unlike alot of the QLD CSG plays which are relatively close to local and international sized projects.

Don't get me wrong i really like MEL, it has great potential, just putting it out there.

 

[Dukey]

Yep - thats a good point surfingman - I need to look more closely at the development side of MEL. Generally I'd estimate they are maybe a year or two behind the likes of ESG as far as devel and infrastructure deals.
I kind of figure that the resource is there - close to the east coast - so it will get used one way or the other. I presume (hope) that the Qld pipeline will be built as long as it is viable - and I should think it would be as industrial consumers could only benefit from ensuring some competition in the Qld gas market, plus the added security of supply. They have a 15PJ per year MOU with BP to start with there. Once the pipeline is built it would be a huge asset for MEL and any partners.
Even without the pipeline - they will still have a major gas asset, which could be marketed a number of ways... power plants, LNG, even fertiliser I think!... and who knows what will happen in NSW gas market in the next year or two - it seems early days there w.r.t. CSG and maybe some more consolidation is on the cards between ESG, AGL, MEL... who else... STO and of course the international interest in Qld could eventually extend further south to NSW....
-e