Exposure to Utica Shale Should Benefit Junex, Gastem and Questerre Energy

Wellington West analyst Kim Page initiated coverage on three junior explorers with exposure to the Utica Shale natural gas play this week, giving Gastem Inc. (GTMIF.PK)  Questerre Energy Corp. (QTEYF.PK) and Junex Inc. (JNEXF.PK) the thumbs up to reflect the massive resource potential waiting to be unlocked in the St. Lawrence Lowlands of Quebec.

In the case of Junex, Mr. Page becomes the first Canadian analyst to pick up coverage on the company.

In a strategy report to clients, the analyst said:

We believe the Utica, if proven commercially viable, has the potential to be one of the largest resource plays in Canada.

He said investors should be encouraged by other notable shale trends in Western Canada, including the Bakken in Saskatchewan and the Doig/Halfway/Montney in Northeast B.C., which have proven highly economic thanks to the evolution of drilling and completion technology. 

In total, Mr. Page said the most prospective area of the Utica shale play encompasses over 500 square kilometers, with recent estimates suggesting the potential for approximately 25 trillion cubic feet of recoverable resource.

With 1.2 million net acres, Junex is by far the largest landholder in the St. Lawrence Lowlands, the analyst told clients, noting the company has three key properties in the heart of the play and boasts several joint-venture arrangements including one very important partnership with Denver-based Forest Oil Corp. 

He wrote:

Junex has a 15% working interest in 143 million acres at Becanceour and a 40% working interest in 55 million acres at Contreceour, both to be operated by Forest Oil. 

Based on his "even tempered" estimates, he believes the company could be sitting on up to 1.25 trillion cubic feet of natural gas valued at more than C$19 per share. 

For now, he rates Junex as a "speculative buy" with a C$9.50 price target. His valuation does not include the company's approximately five million acres in the Gaspe Peninsula.

As for Questerre and Gastem, Mr. Page tagged both  with "speculative buy" ratings and price targets of C$8.75 and C$4.25, respectively.  The analyst said Questerre is well positioned in both core blocks in the heart of the play with both majors, Forest Oil (FST) and Talisman Energy Inc. (TLM). Meanwhile, Gastem's diversified portfolio base of  assets in Quebec and Upper New York State "provide more avenues for success in the Utica play. 

Comments

[davids35:]

Analyst targets applied to Panterra Resource Corp. [PAN.V] should be multiples of $10.

Wellington West analyst Kim Page initiated coverage on a shale gas play who has 1.2 million net acres (Panterra has 1.1 net acres),. "Based on his "even tempered" estimates, he believes the company could be sitting on up to 1.25 trillion cubic feet of natural gas valued at more than C$19 per share. ". "..."speculative buy" with a C$9.50 price target.". seekingalpha.com/artic...

That's a total of 1.25 trillion in place (not recoverable). PAN has 60 trillion cubic feet of natural gas! Even at only a 10% recoverable rate, they would have 6 trillion recoverable gas. At even a 50% recoverable rate for the other company, they would have only 250 billion cubic feet!

Sounds pretty unbelievable, but it is what it is. Data from the PAN website:

PanTerra has three such Permits for a grand total of 1618 sections
To date PanTerra has drilled a total of 36 wells on all of its three properties
TerraTek indicates that as much as 22 bcf gas-in-place per section could exist on our Foam Lake property and up to 62 bcf gas-in-place per section could exist on our Moose Jaw property and 31 bcf per section on our Shell Lake property

Because I don't know how many sections each property makes up of the whole 1618 sections, I'll use the lowest end estimate of 22 billion cubic feet of gas, and apply it to all 1618 sections. Total gas estimate is:


35,596,000,000,000
(Panterra has 35.59 trillion cubic feet of gas!)




Consulting Engineers: Sproule Associates Limited

Technical Advisors, TerraTek Salt Lake City, USA

Do the math. What do you figure PAN's target will be? Also, you need to factor in the flow rates for PAN will be lower, but have a longer reserve life. Also, the Quebec gas is deeper, with nowhere near the infrastructure PAN can ping off of. There are major economies of scale which Panterra can take advantage of. The Alliance Pipeline runs right through the middle of their property. It is currently the largest gas Pipeline in Canada which delivers gas into the United States (into Chicago).

2008 May 30 04:36 PM