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Coal seam gas explorers find favour

COAL seam gas explorers were quick out of the box on the back of Monday's agreed takeover of Eastern Star Gas by Santos, with Bow Energy and Metgasco yesterday reporting new moves to entice investors.

COAL seam gas explorers were quick out of the box on the back of Monday's agreed takeover of Eastern Star Gas by Santos, with Bow Energy and Metgasco yesterday reporting new moves to entice investors.

Bow Energy upgraded its reserves and Metgasco's recently installed managing director picked up a swag of shares in his company, while the board extended the deadline for its capital raising.

A number of stockbrokers have "buy" recommendations on explorers in the coal seam gas sector, with Monday's $900 million takeover bid by Santos for Eastern Star Gas refocusing attention on a sector that has been out of favour for a time.

"About 18 months ago, sentiment shifted from finding reserves and being re-rated, to investors wanting to know how the resource would be commercialised," Wilson HTM analyst John Young said.

His firm has buy recommendations on a number of companies in the sector, such as Bow Energy, Comet Ridge and Dart Energy, although better prospects may be had elsewhere in the oil and gas sector, with stocks such as Beach Energy, Drillsearch or Sundance Energy.

"The Santos bid is more of an early indication that coal seam methane stocks have come down far enough. Metgasco stands out as the cheapest," Warwick Grigor, director of BGF Equities, said. His firm also points to Bow Energy as another stock in the sector which is trading cheaply.

"All of these stocks will have a revival, if for no other reason than the impact of the carbon tax," Mr Grigor said.

Metgasco said its new managing director, Peter Henderson, yesterday bought 300,000 Metgasco shares through the sharemarket, paying 30.5? a share.


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