Sino Gas & Energy should receive a filip today as it has closed a deal with Hong Kong listed MIE Holdings Corporation where it will invest USD 100 million to acquire 51% of Sino Gas subsidiary that holds the Sanjiaobei and Linxing PSCs in Shanxi Province, People’s Republic of China.

MIE which has a market cap of HKD 5.32 billion will progressively invest USD 90 million in Sino Gas subsidiary Sino Gas & Energy Limited that holds the Sanjiaobei and Linxing PSCs. It will also acquire USD 10 million of existing shares in SGE from Sino Gas at closing at a closing price of AUD 0.078 on July 6 and invest USD 90 million in the Sanjiaobei and Linxing CSG production sharing contracts.

The deal that will allow it to progress development of two Chinese coal seam gas projects in the Ordos Basin with 3.7 trillion cubic feet of gas resources.

Sino said the USD 90 million investments are enough to take both projects through the Chinese Reserve Reports and Overall Development Plan stages.

1. Sanjiaobei and Linxing

The two CSG projects are located in a region with extensive pipeline coverage as well as attractive Provincial gas prices that are expected to be maintained if not increased over time.

Lifting costs are expected to be about USD 2 per thousand cubic feet against the current gas price of about USD 7 per thousand cubic feet.

The current resource of 3.7 trillion cubic feet of gas is assessed over just 40% of the more than 3500 square kilometre area, leaving room for more potential upside.

Sino plans to complete 17 wells this year and start pilot production around mid-year.

Source - Proactive Investors

(www.coalguru.com)