Brisbane, Mar 5, 2008 (ABN Newswire) - Integrated energy company Queensland Gas Company Limited (ASX: QGC)(PNK: QGSCF) today announced a net profit after tax of $22.1 million for the six months to 31 December 2007 - and unveiled a strategy to dramatically increase commercial gas reserves for the Australian Onshore LNG project with BG Group (formerly British Gas).
QGC Managing Director Richard Cottee and Chairman Bob Bryan said they were delighted with the company's maiden profit and strategic positioning to take full advantage of the growing demand for cleaner energy in Australia and offshore.
Mr Cottee said that following the success of QGC's Gas Acceleration Strategy 'GAS', the company had embraced Long-term Natural Growth 'LNG' with its new partner BG Group, a global energy company.
In February 2008 QGC and BG Group announced Australian Onshore LNG - a massive joint project to produce 3 to 4 million tonnes per annum of liquefied natural gas (LNG) for higher value international markets.
EBITDA (earnings before interest, tax, depreciation and amortisation) of $13.2 million for the half year represents the company's best-ever result. EBITDA of $13.2 million is an increase of 1,561 per cent over the figure for the six months to 31 December 2006.
NPAT of $22.1 million includes recognition of an income tax benefit of $14.8 million.
The earnings were achieved with total revenue of $35 million compared with $10.6 million for the corresponding period in 2006 - an increase of 230 per cent.
The results follow a period of enormous growth for the coal seam gas producer, now Queensland's third-largest company by market capitalisation (about $3.2 billion).
QGC's world-class 2P (proved and probable) gas reserves in the Surat Basin in Queensland increased to 1,317 PJ by 31 December - almost double the 695 PJ at the end of 2006.
The company's gas reserves and contingent resources topped 7,255 PJ in the six months to the end of 2007.
In addition to upgrading commercial reserves, independent certifiers Netherland Sewell and Associates Inc boosted QGC's contingent resources by 1,022 PJ for the company's highly promising tenement, ATP 621P (which covers an area six times the size of the current Berwyndale South development).
The alliance with BG Group will achieve LNG sales at double the price at which QGC currently sells its natural gas into the domestic market.
Mr Cottee said QGC's existing exploration programme would be ramped up to meet 2P goals for the Australian Onshore LNG project, which is set to ship LNG in 2013 from a terminal to be built in Gladstone.
QGC's published gas sales target for 2008 has been revised from 30 PJ to 23 PJ as part of the company's reallocation of resources for the accelerated exploration.
"We are committing ourselves to exploration goals which will see us realise significantly more value from our world-class acreage in the Surat Basin," Mr Cottee said.
"Our strategy will involve a record increase in the number of exploration wells drilled over the next two years as we prove up our contingent resources.
"From recent experience we know that on average our wells have Australia's best flow rates for coal seam gas.
"Our flow rates are up and our production costs are down. About 90 per cent of our one-year-old wells are free-flowing gas without pumping equipment.
"Our accelerated exploration efforts through 2008, 2009 and 2010 are expected to further demonstrate the outstanding permeability of our coals.
"We will continue to meet our domestic contracts for the supply of gas while focusing on a longerlasting and more valuable benefit - the supply of LNG to overseas markets at twice the domestic price."
Mr Cottee said he expected the company would drill more than 200 exploration wells over the next three years. Personnel would be boosted by the hiring of more geologists, geophysicists and reservoir engineers.
Mr Cottee said QGC and BG Group were working hard to achieve their shared objectives. He noted the comments of BG Group Chief Executive Frank Chapman, who told the Australian Financial Review (in an interview published on 4 March 2008): "QGC are actually a very, very impressive company. They have developed a technology which is world-leading. We have a very good working relationship with QGC."
KEY RESULTS
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Indicator 31 Dec 2007 31 Dec 2006 Increase
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Gas sales (QGC share) 10.6 PJ 4.0 PJ 162%
Total revenue $35.0 million $10.6 million 230%
EBITDA $13.2 million $0.8 million 1,561%
Net profit before tax $7.2 million $1.7 million 325%
Net profit after tax $22.1 million $1.7 million 1,198%
2P reserves (QGC share) 1,317 PJ 695 PJ 89%
Market capitalisation $2.4 billion $0.6 million 280%
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ABOUT QGC
Queensland Gas Company is a rapidly-evolving integrated energy business strategically positioned to meet rising demand for its abundant coal seam gas, cleaner power and ample water.
Since listing on the Australian Stock Exchange in 2000 QGC has become Australia's leading coal seam gas producer, Queensland's third largest company, and an award-winning business noted for nimble and innovative action to create greener energy.
Based on currently committed demand, the company's world-class reserves in the Surat Basin are projected to supply around 20% of the Queensland domestic gas market in 2009. QGC's robust domestic market is underpinned by Queensland Government policy and firm long-term contracts. Its commercial success in that market is sure to profit from Australia's move to cleaner, more efficient fuel sources and the advent of a national carbon trading scheme.
The quality and depth of QGC's assets and management has been recognised by Britain's BG Group (formerly British Gas), a global energy company seeking to partner with QGC to export gas to higher value overseas markets. In February 2008 QGC and BG Group announced a joint commitment of about $8 billion to enable the annual export of 3-4 million tonnes of liquefied natural gas (LNG) for 20 years.
The LNG project involves a significant exploration phase, targeting more than 7,000 petajoules (PJ) of 2P (proved and probable) gas reserves, construction of a 380 kilometre pipeline to the city of Gladstone, development of an LNG terminal, and several thousand new jobs.
Next year QGC will join the National Electricity Market. In February 2009 QGC will start supplying gas to the company's new gas-fuelled Condamine Power Station, which will produce 140 megawatts of electricity with minimal greenhouse emissions.
Large volumes of water yielded during the release of coal seam gas have the potential to help drought-proof communities, towns and farms in the Surat Basin.
