RE: Questions and assumptionsIs there a difference in values with coal-bed methane vs natgas? if so what is it? Does CBM get a lower value then NG??
CBM usually command a premium than conventional NG.
I see they have been very active in drilling to date. How many of these wells end us dry wells as a percentage?
Ask the management.
They say on the website that they drilled and or re-activated 90+ wells and have 50+ online. Does this mean that the other 40 are dry???
No. A re-activated wells may not be online yet, and may be taken offline for repair and/or adjustment. From what I know, they can find NG if they can locate coal. So, the risk is not that high.
As of July 2005 they produce 1200MCF;
I think that number represent the max output, and some wells are offline for repair recently.
however they barely showed any revenues in last quarter, as they only started to sell the gas. This quarter their revenues should grow several times, giving a nice kick to the share price. Right now, at this production level they would show an “operational profit” of 1200mcfgpd x 365 x $4.95/mcf = $2,168,100 per year
Targets------
2006-150 wells = OP$16M / 62M shares FD equals $0.26sh x 18multiple = $4.72/sh I expect the stock could reach this level by mid 2006
2007-300 wells = OP $32.5M / 62M shares FD = $0.52/sh x 18 multiple = $9.44/sh I expect the stock could reach this level by mid 2007
2008-600 wells = OP $65M / 62M shares FD = $1.05/sh x 18 multiple = $18.87/sh I expect the stock could reach this level by mid 2008
However these very optimistic targets perhaps it would be more realistic to expect 25-30% less.
These are certainly very encouraging numbers, the issue is whether the company can deliver that kind of progress. ADB has a series of setback in the past, including failure in Mexico silver project, and then the Canadan NG project, and now they are basically in the US CBM projects. They have revised their numbers downwards several times in the past. Hope that they can meet their revised target in a timely manner.