Gas industry gets international coverage
DD established an optimal value of zł.50.96 ($13.11) per common share. At press time, FX Energy shares were worth around zł.31.10 ($8).
Speaking from Milan, Pablo Serna, the analyst who authored the DD report on the firm, says: "FX Energy's greatest asset is its relationship with the Polish Oil and Gas Company (PGNiG). Provided they can maintain that, I see significant upside potential."
"FX Energy has a significant upside potential due to its different projects under development, which could generate as much as several trillion cubic feet of gas in Poland," the report states. However, it identifies key risks in the company's near-term future, namely the run of around ten drillings across Poland during the next one and a half years.
"There is no guarantee that these drillings will be successful, and FX Energy will need further capital to continue its operations," says the report. In addition, the analysts point out that gas prices are variable and out of FX Energy's hands, while Poland's implied political instability is also said to incur risk. "Although FX has been in Poland with three different governments without any problems, Poland has a communist background."
The fact that FX Energy has managed to make inroads into a still public-sector heavy Poland is seen as a great asset. Partnership with PGNiG creates a situation where "PGNiG is the main partner of FX Energy, but at the same time is the main competitor. They own all the areas next to the Fences projects, where they have had major successful drillings, like Lubiatow."
"PGNiG dominates Poland's gas infrastructure," added Serna. "While they may have a legal obligation to move FX Energy's gas, that relationship is crucial. FX were the first foreign explorers into Poland. They have had a ten-year relationship with PGNiG."
This year, PGNiG managed to raise its Q1 gross profit from zł.328 million in 2003 to a figure of zł.535 million.
Speaking from Milan, Pablo Serna, the analyst who authored the DD report on the firm, says: "FX Energy's greatest asset is its relationship with the Polish Oil and Gas Company (PGNiG). Provided they can maintain that, I see significant upside potential."
"FX Energy has a significant upside potential due to its different projects under development, which could generate as much as several trillion cubic feet of gas in Poland," the report states. However, it identifies key risks in the company's near-term future, namely the run of around ten drillings across Poland during the next one and a half years.
"There is no guarantee that these drillings will be successful, and FX Energy will need further capital to continue its operations," says the report. In addition, the analysts point out that gas prices are variable and out of FX Energy's hands, while Poland's implied political instability is also said to incur risk. "Although FX has been in Poland with three different governments without any problems, Poland has a communist background."
The fact that FX Energy has managed to make inroads into a still public-sector heavy Poland is seen as a great asset. Partnership with PGNiG creates a situation where "PGNiG is the main partner of FX Energy, but at the same time is the main competitor. They own all the areas next to the Fences projects, where they have had major successful drillings, like Lubiatow."
"PGNiG dominates Poland's gas infrastructure," added Serna. "While they may have a legal obligation to move FX Energy's gas, that relationship is crucial. FX were the first foreign explorers into Poland. They have had a ten-year relationship with PGNiG."
This year, PGNiG managed to raise its Q1 gross profit from zł.328 million in 2003 to a figure of zł.535 million.
