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continues. Completely wrong predictions. initial shale gas test holes will not be drilled until later this year.....no date given. This is a shame but maybe it really does take many months to get the final approvals to begin drilling. Also on the negative is that forecasts for gas production with the new pumps (that will be fully installed by end of June this year) will be the same as 2018 production, ie around 19.6mcf/d. This needs some clarification. The wells may perform better throughout the year to march 2020 in which case production will rise above 19.6mcf/d but we need more details on well performance.
On the positive side, new pumps will increase production in the FY 2020, sales gas is rising, debt is falling (maybe all paid down in 3 to 4 years time if no investment in further wells occurs) and the company trades on around 9x p&l earnings or around 5x cash earnings.
Undoubtedly things are moving much slower than previous expectations however the fact remains that there is a large pipeline about to be linking raniganj to Kolkata providing a huge market into which to sell their gas. There is also potentially very large quantities of gas to sell if the shale drill holes prove commercially viable extraction. The company has low gearing, is cash generative and is rated as a low growth company. India is on track to meet its 2 degree Celsius plan with gas planned to be a key transition solution as the economy weans itself off coal. ANd the government is highly supportive of domestic gas production. GEEC are also working in cooperation with Essar (who own the other large block on raniganj, which will make it easier to deal with GAIL and could potentially save some operational costs.
I guess we just have to wait. Things will move slowly but the shares still have the potential to be many times the level they are today without becoming more expensive. Clearly there are still risks. Shale may not be commercial and there may be some worrying variability in field flow rates that we are about to find out about, but I suspect these are largely priced in. As long as production and sales continue at the current rate then the debt has gone in 4 years time max and then cash can be distributed if there are no expansion plans. That would mean around maybe £10m £15m dividends a year to shareholders. With a market cap of £60. that would be a 17% to 25% dividend yield as long as current wells continue to produce gas at current rates.