Daily ShareChat: L&M Energy

L&M Energy's oil and gas programs have each moved strongly and, to date, successfully forward, says John Kidd, an analyst at McDouall Stuart.

The company's A$7.1 million (NZ$8.9 million) share placement, which was managed by McDouall Stuart, ensures it has funding to complete its coal seam gas (CSG) pilot in late 2010, Kidd says.

Since March 1, L&M has drilled three of its six CSG permits, the first successfully intersecting an extension of already known Ohai coal deposits in Southland and two wells in the South Waikato permit encountering coal while a third well did not. Two wells at the Ohura River (which flows into the Whanganui River) permit did not intersect any significant coal seams.

Kidd says developing Ohai is L&M's primary focus and drilling there “adds significant further detail to L&M's understanding of the extent of its Ohai resource.”

The next major technical milestone lies in establishing a production pilot, he says.

While the CSG industry in Australia has matured rapidly, the New Zealand industry is still in its infancy, Kidd says.

Our view is that the isolated and otherwise stranded nature of L&M's Ohai CSG has the potential to work strongly to L&M's value advantage. We conclude this primarily because of the potential strength in the effective gas price that L&M could realise for Ohai SCG.”

Recommendation: Buy.

Daily ShareChat articles report how the main experts in the market might view a certain share and we provide this commentary as a useful resource for investors. Content on this site does not in any way constitute a recommendation to buy, hold or sell any particular share. Investors should always seek professional advice before making any investment decisions.

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