(MENAFN- ProactiveInvestors) Toronto Venture exchange-listed Primeline Energy’s () value has risen by 25% in the past month as investors have latched onto the cash flow potential its Chinese gas production growth story.
Primeline’s position is underpinned by premium pricing and its partnership on the LS36-1 gas venture with China’s state oil company China National Offshore Oil Company () CFO Stuart Joyner told Proactive Investors.
which operates and owns 51% of LS36-1 officially began commercial scale gas production from the field in the East China Sea at the start of December.
This followed a period of trial production which produced ahead of original expectations.
Output currently averages about 26mln cubic feet per day and Primeline Energy expects revenues around US$50mln from LS36-1’s production this year revenues that are not as affected by crude price movements as peers given the bulk of them are gas at fixed price Joyner added.
Gas produced at LS36-1 is sold at around US$14 per million British Thermal Units (roughly equivalent to one thousand cubic feet) a hefty premium to the benchmark prices around the world - in North America for example the ‘Henry Hub’ benchmark is currently around US$3.
Primeline is also looking to expand significantly through exploration in the high potential 6000 sq km licence it holds surrounding LS36-1.
This large acreage position holds 1.4 TCF of upside resources -14 times current reserves - and as discoveries are made they can tie in to spare capacity in the infrastructure. Primeline now has access to a high margin gas market in Zheijang province China's 4th largest economy where gas penetration is set for high growth from just 3 per cent penetration currently. Commerciality on new finds could be rapid.
“In the future when we find any more gas we don’t need to spend five years developing we are going to benefit a lot from the infrastructure that we’ve built with ” chief executive Ming Wang said in a recent interview.
Having risen C$0.11 or 25.27% in the past month Primeline now trades at C$0.57 which values the company at C$65mln - yet this is barely 1x the 2015 cash flow.
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