ESG 0.00% 86.5¢ eastern star gas limited

patersons research note

  1. 220 Posts.
    Patersons research note

    - Gas production at the Bibblewindi West tri-lateral production pilot is reported to have reached in excess of 2.0mmscf/d.
    - Water production continues at a solid 3,500bbls per day with over 550m head of water pressure to be removed.
    - The ramp-up in production has been achieved over a period of only 1-month.

    - The early flow rates considerably de-risk ESG, indicating that the targeted Namoi coal seams are highly productive, in addition to the previously tested Bohena seam. This suggests that future development of the project will be augmented by the Namoi seam with no reserves to date attributable to this seam.
    - Confirmation of production from Bibblewindi West also provides an indication of the potential performance of the Bibblewindi multilateral pilot and further development pilots.
    - The results support previous production guidance and suggest that ESG has made strong progress towards technically de-risking the project.
    - We maintain our BUY recommendation with a price target of $1.32/sh. The recent decline in share price due to wider gas market and onsite production issues provides a low entry point for what we believe should be an eventful 2010. We foresee an improvement of conditions in the market for CSG in the new year, driven by progress of key CSG to LNG projects and should support key catalysts as ESG achieves progress towards production, reserves and commercialisation targets.

    Disclosure: Patersons Securities was the Lead Manager to the rights issue in 2005, Lead Manager for a $10M Share Placement in Feb 2007, Lead Manager for a $28.85M Share Placement in Sept 2007 and Lead Manager for a $50m placement in March 2009. It was paid a fee for these services.
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