The Faraj List of Exploding Stocks-Part 6.07

mel,

salamander doing well today....smdr and ceo may be of interest in 2007...

Coastal Energy And Salamander Energy Turn On The Taps In Thailand
With first gas flow from Thailand’s Phu Horm field last week, Coastal Energy and Salamander Energy - both equity partners in the onshore project - set out their stalls as serious E&P contenders. With a bit of production under the belt, these two AIM-listed juniors will appeal more and more to investors looking for tangible results. After all, nothing sounds better than hearing the cash register ring out.

Phu Horm is not a small field either. The gas will supply the Nam Phong power plant with over 500 billion cubic feet of gas, plus condensate, under a 15-year sales agreement with PTT Public Company Ltd. It is a big leap forward for Coastal, formerly PetroWorld Corporation, which is also listed on the Toronto market.

Initial production from two wells is approximately 60 million cubic feet per day, though this is due to climb to 100 million cubic feet per day during 2007 as new wells enter service. Other partners in the venture include US supermajor ExxonMobil and operator Hess Corporation, underlining the appeal of the region.

Coastal’s 12.6 per cent net share in Phu Horm in Thailand’s north-east region is held through Apico LLC, which holds a 35 per cent interest in the gas field. This entity also holds exploration rights in two adjacent blocks. Collectively, gas reserves across the area could be as high as 6.3 trillion cubic feet, according to some estimates.

“First gas from Phu Horm is a major milestone for the company,” says Coastal’s chief executive Frank Inouye. “The long term gas production will provide significant cash flow and a strong basis for the further development of what we believe could be a major natural gas resource for Thailand.”

Exploration in surrounding areas is to get underway sooner rather than later. The L15/43 block - in which Coastal holds a 36.1 per cent net interest - will be evaluated early 2007 with a well that could extend the southern limit of the Phu Horm field.

Drilling is also planned next year in the L27/43 block which contains the undeveloped Dong Mun gas field. Elsewhere, a seismic shoot this December is planned on Coastal’s wholly-owned offshore block, G5/43, in the Gulf of Thailand.

The advances made by Coastal in the past year are mirrored to some degree by its Phu Horm and Apico partner, Salamander Energy, which took its place on AIM only this week in fairly dramatic fashion. Gas production from Thailand started the same day it announced market pricing details, while full share dealing commenced 5 December. The flotation raised about £98 million.

In less than two years, its daily working interest production rate has jumped to 6,600 boepd, about two-thirds of it oil and the rest gas. This should rise to 8,000 boepd in 2007. Salamander holds 9.5 per cent in Phu Horm, as well as a fair whack of various other Apico blocks including the two jointly held by Coastal.

Unlike Coastal, however, Salamander has already branched out aggressively into neighbouring territories following a series of 2006 acquisitions.

In Indonesia, it holds 5 per cent in the BP-operated Offshore North West Java PSC and the CNOOC-operated South East Sumatra PSC. It also has 70 per cent of the Bontang PSC which encompasses the Tutung discovery.

In Laos, Salamander is negotiating a PSC for the Vientiane and Savannakhet blocks.

James Menzies, Salamander’s chief executive and a former Lasmo executive, says the money from the AIM listing will boost the firm’s “financial firepower” to develop its growing south-east Asian portfolio. By mid-2006, this portfolio had 2P reserves of 40 million boe. But with massive upside potential, not least around Phu Horm, it should be enough to sustain interest long after the AIM debut celebrations have died down.