Canadian Coalbed Methane Stocks 7 Things to Know Before Investing
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Canadian Coalbed Methane Stocks: 7 Things to Know Before Investing
Summary
Dr. David Marchioni, a leading Canadian petrogeologist, advises investors on what to consider before investing in Canadian Coalbed Methane (CBM) stocks. He outlines seven key factors for a successful CBM investment. Despite some CBM stocks being mature and expensive, interest remains high. Dr. Marchioni also shares his top stock picks.
Understanding CBM
Coalbed Methane (CBM) is gaining attention among investors, much like uranium did in early 2004. Historically, methane gas in coal seams posed dangers to miners. However, as natural gas prices rise, CBM is becoming a valuable resource, representing about 9% of U.S. natural gas production.
CBM is essentially methane gas found in coal seams, used for home heating, electricity generation, and industrial fuel. Unlike conventional gas, CBM is often purer and extracted from shallower depths, with wells potentially lasting over 40 years.
Key Insights from Dr. Marchioni
1. Coal Seam Thickness
The thickness of coal seams is crucial, as it determines the resource's extent and the possibility of horizontal drilling.
2. Gas Content
Gas content is measured in cubic feet per ton of coal. Both thickness and gas content are required to assess the resource's size.
3. Maturity Level
The maturity level of coal impacts methane content. Coal ranks range from peat to anthracite, with each stage affecting gas potential.
4. Permeability
Permeability is vital for gas flow. Without it, gas cannot be extracted efficiently, impacting production.
5. Water Management
Coal seams often contain water, which must be managed to reduce pressure and release the gas. Regulatory considerations may apply.
6. Funding
Initial drilling and exploration require substantial funding. The cost varies depending on the location and existing infrastructure.
7. Infrastructure
Infrastructure determines feasibility and cost-effectiveness. Consideration of transport and access to markets is essential.
Market Potential
CBM plays are becoming more attractive due to rising energy costs. Successful cases in the U.S. inspire exploration in Canada, China, and India. With numerous unexplored coal basins, the potential for growth is significant.
Investors should also consider the management quality of CBM companies, as experienced teams can effectively push projects forward and secure necessary financing.
Coalbed Methane presents a promising opportunity, but careful evaluation of these factors is essential for smart investing.
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