Sino Gas Tips Production Growth in 2018
Australia-listed China-focused Sino Gas said February 5 it is expecting an average annual gross production of 22-27mn ft3/d in 2018, up from about 17mn ft3/d last year, as it commissions and ramps up production at its Linxing North coal seam gas (CSG) project.
“Commissioning of the new Linxing North facility is expected by Q3 2018. Its initial processing capacity will be 17mn standard ft3/d and will be expandable up to 34mn ft3/d in the future. All modules for the facility have been fabricated and installation and equipment hook-up will commence one site preparations are completed,” Sino Gas said.
RBC Capital Markets analyst Ben Wilson said the guidance fell short of RBC’s forecast as it had been expecting an earlier start for the Linxing facility.
“The mid-point of CY18 production guidance of 24.5mn standard ft3/d is in line with the current nameplate capacity of 25mn standard ft3/d, implying that there is not much upside factored in from the 2nd Linxing processing facility commissioned in 3Q18 and the variability in the CY production guidance due to the eventual timing of LX2 start up,” he said.
“We had factored in an earlier start-up of LX2 (from start of 3Q18) leading to our higher production forecasts which in hindsight looks a bit optimistic,” he said.
Meanwhile, Sino Gas’ guidance for capital expenditure of $60-$70mn gross ($30-$35mn net to Sino Gas) was higher than what RBC’s forecast of $56mn.
“Capex guidance is slightly ahead of our expectations as Sino expands drilling (40-50 wells expected in CY18 from 28 in CY17) and the extra capacity is installed at Linxing,” Wilson said.
He added that RBC sees Sino Gas “as one of the most compelling, deeply discounted, big resource plays in our coverage universe”.
“A combination of surging Chinese natural gas consumption and strong in-field performance underpins our unrisked A$0.71/share valuation,” he said.