origin farm in to sexy, page-4

The following from Citi



THE EXPLORATION PUNTER

Ambassador (AQO) / Armour (AJQ) / Blue Energy (BUL) / Central Petroleum (CTP)

ACTION; Scattergun a basket, or buy the one the know?

- Originally I had pushed AQO and AJQ to mixed success but there are plenty of small companies that could become targets in the Cooper and NT.

- I added AJQ as obviously Steve Bizzell has done the billion dollar Arrow deal with Shell and now PetroChina control the assets.

- Given their lack of success this may not be a positive but the fact that a HOA was signed with APA to open up the NT leads me to believe that he is still “in the game.”

- I added AQO after a presentation from Giustino Gugliemo at the Melbourne Mining Club, he was the former CEO of Stuart Petroleum and the mix of tenements and balance sheet appealed…

- There are plenty of others to punt including CTP and BUL, I am happy to do some work on anything that appeals..


Cooper Consolidation

ACTION; Gladstone is still short gas… For APLNG and GLNG investors to profit, they need scale!

- The 1st thing to remember about Gladstone is that incremental returns of a 2nd or even 3rd LNG train boost the economics of the projects considerably…..

- PetroChina may buy more of the Arrow project from Shell, but I doubt that it will ever be for sale…. Therefore the reserves situated closer to the Gladstone projects are unavailable in my view, so this leaves us with politically challenged NSW CSG deals OR THE COOPER!

- In the Cooper we have already seen deals at the resource level, however a deal or two at the company level would see the market HEAT UP.

- STO; 2P and 2C resources for GLNG are insufficient to fill a 2nd train.

- From the latest STO result – 69% of 2P reserves remain undeveloped including 40% for politically sensitive NSW CSG.

- ORG; This morning increased their exposure to the Cooper through a farm-in agreement with SXY on top of an oil linked supply agreement with BPT which starts in FY15.

- The scale of the $252m 15 well + Seismic deal with SXY is impressive in lightly explored areas of the Cooper.



My Cooper consolidation portfolio FROM 2 YEARS AGO includes APA, BPT, AJQ and AQO, I see no reason why we need to change the components now BUT SXY must have merit.



THE YIELD INVESTOR

APA Group

ACTION; The only way to Gladstone is in the APA pipe….

- GAS to Gladstone…. In their latest result the Queensland revenue was +53%, EBITDA +69% and EBITDA margin +810bps and this only represented 3 months since consolidation of the South West Queensland Pipeline. This represented 27% of EBITDA so it needs to continue to expand at this rate to “move the dial”.

- Is it any wonder that they are looking for expansion initiatives to supply our export hub of Gladstone?

- APA announced expanded compression capacity and services at Wallumbilla in Dec 12. The committed capex is $125m which may increase to $200m.

- APA currently announced a feasibility study to connect the Northern Territory and APA’s East Coast grid, this includes a heads of agreement with Armour.

- This is a very strategic asset, if you want to sell Cooper Basin gas to Gladstone partners, there is only one way to get it there. We maintain a $6.24 target and the FY15 yield is an attractive 5.7%.