Sino Gas & Energy Holdings Limited (ASX: SEH)

In last three months (as at January 10, 2018), SEH stock has risen 66.7% but slipped over 8% in last five days. It clearly appears that the stock is trading on volatility with the rise of about 6.1% on January 11, 2018 post the recent fall.

Price Scenario at Sanjiaobei: Sino Gas Joint Venture Company, Sino Gas & Energy Limited in conjunction with its Sanjiaobei Production Sharing Contract Partner, PetroChina CBM, agreed to extend the current Gas Sales Agreement till December 2018 for all gas produced from Sanjiaobei. It is expected that the average sale price will increase from ~17% to US$7.70/Mscf (~A$10.05/Mscf) for the period from January to March 18. Gross pilot production recently reached a record rate of over 23 million standard cubic feet per day at the back of steady full production from the Linxing Central Gathering Station (CGS) and the ramp-up of the Sanjiaobei CGS. Production at Sanjiaobei also increased to ~6MMscf/d as new wells and the second compressor have been brought online. The group has submitted an Overall Development Plan (ODP) to its PSC partner PetroChina CBM for approval which represents an important regulatory milestone in the development of the Sanjiaobei PSC. Sino Gas continues to work closely with its PSC partner to plan its future drilling activity and production expansion in line with its approval processes. It is expected that the plan will be approved in the first half of 2018.

Looking at the financial performance, SEH’s net income for half year ending June 2017 was $2,448,163 against $(379,056) of prior corresponding period. Its loss also reduced by a significant percentage from previous year. On the other hand, the company reported for a negative cash flow of $2.49m for quarter ended 30 September 2017.

From macro standpoint, the stock might benefit from the surging demand for natural gas in China and Sino can leverage from its full field development parameters and progress on ODP approvals for SJB and LX. The group will provide production and capex guidance in the March Quarter.

At the current trading scenario, SEH seems to be moving at slightly high levels and any dip in the price can be evaluated for a buying opportunity.
 

Overall Development Plan (Source: Company Reports)

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