STX 0.00% 30.5¢ strike energy limited

future of csg sector

  1. 618
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    http://www.theage.com.au/business/santos-bid-lights-up-coal-seam-gas-sector-20110720-1hnue.html

    "...The broker said that it was generally accepted that the carbon tax would increase the use of gas as a ``transition?? fuel for power generation.

    Assume that will increase demand for gas, and a case can be built that annual eastern state gas demand is set to grow from around 720 petajoules in 2011 to more than 1350 petajoules by 2020.

    But there isn?t enough gas to meet that sort of growth. Morgan Stanley reckons that existing conventional gas supply (mainly Bass Strait and the Cooper Basin) will be largely depleted within 10 years.

    The build-up in CSG resources was meant to flood the market. But there isn?t enough of that either as the multiple gas export projects being built at Gladstone in Queensland will soak it all up to chase the much higher export prices.

    Morgan Stanley says the end result of all that is obvious ? domestic gas prices are ``likely to escalate sharply to divert high-cost unconventional gas earmarked for export markets back to the domestic market??.

    ``We believe this will take effect after 2014 as existing long term contracts wind down and need to be replaced. A gap-up to export parity (about $7.50 a gigajoule) is the likely first step,?? Morgan Stanley said.

    That means those that own gas resources on the eastern seaboard are heading towards a golden era.
    It also means that we have not seen anything yet in home energy bill shocks.

    Investment in stocks with currently untapped gas resources is an obvious counter to all that. A bit like buying a bank stock to get back some of the banking fees rip-off..."


    Like I said before, PEL94/5/6 is still our long term crown jewel in my opinion, with EFS and Wilcox Slope play providing some short to medium term excitment. Having said that, it's nice to see they have continued to accumulate more EFS acreage (now to 5574 acres net). With Blackjack Spring IP result about to come, we could see massive substantial rerating of our acreage there.

    PS. I still think the concept of brokers issuing "target price" is a load of b*llocks. For example, it was 35cps back in June when STX had 3410 acres of EFS. It then fell to 34cps in July when the net acreage went up to 4950 - presumably on the delayed prod startup for Sadie. But is that really worth 1cps over the next 6 month period? It's basically their way of providing a guess price for those who focus on two pieces of information when reading broker reports - stock code and target price. Focus on the valuation number (59cps - which I believe is too low due to excessive risk discounting) and it provides a much better reflection of the value in the stock.

    618
 
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