MPO - Molopo Gas

I don't think that you have missed the boat at all. MPO has a very experienced management team and has a lower price per resource unit than many competitors.

The Baillieu report (see link below) contains a very limited summary in that regard, but there has been progress since then. Its target price of .45 was being approached ( a high of .345 I think) and the stock suffered from the general international subprime problems from 9 August 2007. However, there appears now to be greater optimism that those can be contained.

Whether that is right or not (and we cannot really tell how deep the subprime problems are), it does now seem clear from the latest Chinese GDP / inflation / wealth statistics that Chinese growth and energy demands continue unabated, and Molopo is ver well placed with its Chinese JV partner and interest in the Liulin area to play a part in that. Even a minor role in the Chinese region can result in a $1 bil cap company (a 5 times increase over the curren cap).

In short the Baillieu report is conservative in its .45 estimate but does perhaps correctly call it a short term speculative buy, given the trading patterns re small cap companies. However, it is assisted by good fundamentals and that makes it a good mid / long term investment as well.

Baillieu considered the reserve / market cap ratio to be the lowest in the sector at .26. It is still in a similar position (now .21) and will stand to gain well from recovery and further interest in the Au. resource sector, a sector that is gaining increasing international interest.

Its board includes Ian Gorman from BHP, and an ability to make and exploit both international resouce connection and international investors.

In short, even if there are further subprime issues, this sector and company are well placed. I disclose shareholdings in this company.

http://www.molopo.com.au/broker_report_16_7_07.pdf

I might add, to fully evaluate MPO it is necessary to consider the importance of the CBM industry in China and the Shanxi province. Eg, see below from the China Daily (part article - it is two pages and you can go to the site)

CBM booms in Shanxi Province
By Wan Zhi Hiong (China Daily)
Updated: 2007-10-22 11:13


Several coalbed methane (CBM) pipelines are planned for North China's Shanxi Province, home to one-third of China's coal reserves. With a total investment of over three billion yuan (US$399 million), they will better utilize the province's vast CBM resources - a coal mine gas with components similar to natural gas.

China plans to build 10 CBM pipelines by the end of 2010, according to the 11th Five-Year Plan (2006-10) for the CBM industry. Nine of them will start from or go through Shanxi Province.

The 10 pipelines will have a length of 1,441 kilometers, with a total capacity of 6.53 billion cubic meters and require an investment of 3.09 billion yuan, according to the plan.

"We will start construction on four to five pipelines among the 10 during the 11th Five-year Plan period," Sun Maoyuan, general manager of China United Coalbed Methane Co Ltd (CUCBM), tells China Business Weekly. "Currently our company is planning for some pipelines in the eastern and central parts of Shanxi, and we are still considering locations and routes."

CUCBM, the nation's largest CBM firm, together with other companies, are also planning the first cross-province pipeline in the nation. The project will link Duanshi County in Shanxi with Bo'ai County in Henan, passing through the city of Jincheng in Shanxi Province.

The 120 kilometer-long pipeline has a designed capacity of one billion cubic meters. The project's total investment will be between 400 and 500 million yuan, Sun says.

The Duanshi-Bo'ai line will ease the natural gas shortage in Henan Province, which has seen increasing demand for energy in recent years. Some analysts estimate the natural gas supply shortage in Henan to be about one billion cubic meters each year.

"For example, a color TV tube plant located at Bo'ai County, which is also the end of our pipeline, needs 500 million cubic meters of CBM a year," Sun says. "The company is eager to get the gas resources from Shanxi."

CUCBM has developed Jincheng City, located in the Qinshui basin in the southeast of Shanxi, into a large CBM production base for the company. "Now together with the nation's largest oil company, PetroChina, we have built production facilities with a capacity of one billion cubic meters per year in the basin," Sun says.

According to industry insiders, some CBM pipelines will be connected with the nation's west-east gas pipeline, but Sun's company has no plans to link the CBM pipelines with the west-east line.

"The CBM pipelines are low pressure while the west-east line is high pressure. Linking the two pipelines will result in a waste of money and energy for us," he says.

Molopo, AJ Lucas advance CSM pilot

Thursday, 1 November 2007

COAL seam methane partners Molopo Australia and AJ Lucas plan to put the first wells at the Stratford pilot project, in New South Wales permit PEL 185, on production test over November and December.

See link:

http://www.petroleumnews.net/storyview.asp?storyid=121059&sectionsource=f21204

here my 2cents
maybe some1 with more experience can agree or disagree with me.

I think that the SP for MPO is holding to the Fibonacci retracement levels. Atm its using the 50% level as support and 38.2% as resistance

as the chart shows below, it seems to be abiding by the levels but..murphy's law...whenever i point this out, it usually goes the other way LOL

It is also holding up fairly well with that hefty drop from the DJ today.

Cheers

I think current levels have as much to do with the spooked international sentiment as anything else. The shares today will trade on a 1 for 5 consolidated basis, which the company says will give it greater credibility in contractual negotiaions at a government level. That is an intangible matter in the short term, that may lead to long term benefit.

Regardless, the fundamentals are good (see earlier posts) and the oil price volatility and spiking (which may become a feature in future) will only serve to reinforce the value of alternatives such as CBM, UGC etc, and the related companies, including MPO. It is, I think, to shore up reserve estimates over the next month or two and that will be interesting. It has an excellent team and I anticpate that they would have chosen their areas well. They did well having Fortune (UK) as a jv partner in China (it has good connections in China). (disclosure: very recent but medium term shareholder).

I bought some yesterday at 19 cents. From a TA perspective as long as 17.5 cents holds I'm willing to give it time. If it breaks above 22.5 then I'll probably add to my position. Agree with you james99 that the next 2-3 months could provide a lot of upside if they get some good results from production testing. Time will tell.

Well Rub the consolidated shares closed at today $1.00, so the equivalent of .20 pre consolidation, with reasonable volume of 733,789.

Yes, looks like support is holding, which is encouraging. Share consolidation should reduce volaltility a bit. Now patiently waiting for results from the pilot - hopefully good...

Well Rub, I see yesterday it announced positive and commercial gas flows were re-established from its Gloucester project with Lucas. It is making good on its desire to commercialise that early it seems. It should help re-rate it from a primary explorer to a explorer / producer. See link (ps disclose holdings).

http://www.asx.com.au/asxpdf/20071123/pdf/3160sjw52n2lv6.pdf

I see Gloucester has achieved 750,000 cfm, well in excess of a commercial low rate, and that an independent reservces certification is in progress and expected by year end. See link:

http://www.asx.com.au/asxpdf/20071211/pdf/316dwcfzp1rxrq.pdf

Well Rub, their reserve potential is quite astonishing, if the comments of the company in its latest announcment are correct, eg Queensland potential 448 pj at 3p, although only 12 pj at 1 p. At say $AU3.5 mil pj, the Queensland resource, if it can be proven, will be from $AU42mil to $AU1.568 bil., with MPO having a 30% share in part (there is insufficient easily accessible info to break down that to the licences with with MPO 30% vs that with MPO 100%).

That said, Stephen Mitchell etimated that the Queensland prospect could be up to 1,500 pj (AU$5.250bil, and even a 30% share would be $AU1.575 bil), and that is the most easily commercialised - a near term project.

It has always maintained its Chinese assets to be the largest, then Africa, and we will jsut have to await more detailed info. Given the team and its experience, it is likely to have chosen well. And of course, unlike many, it has sufficent cash reserves to meet its development plans. If even some of its resverves are proven, it will be seen to be grossly undervalued and be rerated I anticpate.

(I disclose holdings in MPO).


http://www.asx.com.au/asxpdf/2007121...43k6vs7pb5.pdf

Watching MPO this last month has been quite stimulating for me. From my point of view, I have noticed quite a bit of consolidation around the mid .80's ... with very low proportional volume traded. The stimulating part I was referring to, relates to my nervous anticipation for a sudden shift in share price sometime soon into positive territory. The upcoming independent reserves upgrade is due out shortly, is this what will push the sp or is there something else brewing?...



[I disclose holdings in MPO]...

I also have been watching MPO

hrmm think the consolidation has gone to a slight downtrend haha
I see where ur coming from on the consolidation but with the markets being very volatile if not being a bear market, MPO hasnt had alot of support for it. The buying depth has dried up.

2 points ... it has caused a descending triangle
and today (14th Jan) a hammer formed. Some indiciators are turning up due to the hammer.

But it is also at a support level and tested it today so this is nail biting stuff. The fundamentals seem good though. Maybe just bad timing with the market atm.

I do hold MPO and am also crossing my fingers haha

mu5hu: Yes, I agree. A prudent investor would await announcments and focus on fundamentals. One of the difficultes of small cap investing in volatile markets is that very small players, often short term traders investing from $1,000 to $50,000, will sell, thus both dragging the price down and realising their losses. They are then surprised that they have also missed on rapid re-rating (never quite appreciating that it is darn near impossible to determine when rerating will occur).

The fundamentals remain unchanged and, it seems from Chinese economic reports, its resource needs and energy demands will be unchanged for 2008. I see from reports that the US has, this January, decided to exploit coal reserves for energy (other than the traditional methods of using coal which it has used widely).

I disclose holdings.

Well, I hope that MPO is now beginning to trend up again. Up to .59 off lows of < .45; positive report and post report the purchase of 1.85 mil acreas in Quebec.

Following the Chinese storms, its government is stated to wish to move quickly to develop energy security and reduce reliance on transporting coal. UGC and CMB seem obvious candadites, and it seems are now being targeted for growth. So, lets hope MPO's Chinese play will benefit. amongst others. Any opinions?

I disclose long term holdings.

Well, I see that MPO has bought a substantial licence area in Canada: a 80% net revenue interest in 1.85 million acres, as under $2.00 per acre, with other sales as high as $150.00 per acre.

Further, the price is trending upwards, with a price of .62. I anticpate it (and other CBM / UGC companies) can only gain from oil price increases.

See:

http://www.asx.com.au/asxpdf/20080204/pdf/3178rf3jknbrnh.pdf

and for the open briefing:

http://www.asx.com.au/asxpdf/20080219/pdf/317j5sfh09f99x.pdf

The reserves certification is now out for Gloucester - potential recoverable 1, 2 and 3p reserves of > 500 bscf (and Gloucester is still a less important resource of MPO; albeit the one with immediate cash flow potential)

Further, excellent and increasing volume and price - .74 at the close today.

See link:

http://www.asx.com.au/asxpdf/20080225/pdf/317mj7bzps5xkn.pdf

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" One of the difficultes of small cap investing in volatile markets is that very small players, often short term traders investing from $1,000 to $50,000, will sell, thus both dragging the price down and realising their losses. They are then surprised that they have also missed on rapid re-rating (never quite appreciating that it is darn near impossible to determine when rerating will occur)."

Dear James99, I thought your posting of the 15thJan08(extract above) contained some wonderful truth well expressed. I hold some MPO and a little AJL. I doubt if most of BHP's CBM team went to MPO with their eyes shut! Their projects appear to have great potential if their releases are correct. From my experience their Gloucester Basin partners AJL they are the the masters of the conservative release. My sharemarket capital is fully invested at present, however my last transaction was to top up MPO 5/52 ago @.42. Lets hope we all make some dollars and that NSW gets a new "local"energy source . pointr

Cheer Pointr. One of the curious apsects of the sharp international drop of a few weeks ago was how indiscriminately stock was dropped. Even, for example, BHP shed to approximately AU$31.

I too like you treated it as a further purchasing opportunity - short term risk but with excellent medium term upside (I even bought some BHP, unusually for me because I generally pick just a few high opportunity stocks, rather than blue chips); and as it happens thus far the short term risk has not been realised and the upturn significantly quicker than I thought might occur). I entirely agree about the ex-BHP staff with MPO.

Of course, MPO, as with PNN and a couple of others, has a substantial advantage over many others in todays adverse finance market because it has substantial cash reserves, enough to fund all projects over the next 18 mths. I suspect that some other companies will fare far less well, a factor that is not properly priced in yet.

I see today MPO has reached AU$.80 so it seems to be consolidating an upwards trend. I agree AJL is an excellent partner; and both it and MPO tend to be conservative compared to several other companies when making announcements; further, Gloucester gives a cash flow and easily commercialistion that many other UCG / CBM fields lack.

MPO's Canadian prospect area is very impressive and I suspect could, in time, be worth more than all other licences. I was (but am not now) an investor in Statoil (Norwegian), which purchased, by acquisition of a company, Canadian oil-sands licences for over $1 bil. It is entirely reasonable for UGC / CBM licenes in good areas such as MPO's in Canada to, in the short to medium term, undergo the rerating that oil-sands licences have had over the last 18 to 6 months.

In short, MPO is, relatively, grossly undervalued IMO

Excellent announcement: A MOU entered into for the sale of the gas (which flows freely to the surface) in South Africa: See link below. One of the few stocks to gain today.

http://www.asx.com.au/asxpdf/20080303/pdf/317tlt088r1b8j.pdf