<山西省沁水盆地郑庄煤层气田石炭系太原组15 号煤层煤层气探明储量新增报告>Incident: On December 25, 2023, the company announced that Blue Flame Holdings recently received the “Reply on Review and Filing” from the Shanxi Provincial Department of Natural Resources, adding 4,066 billion cubic meters of proven reserves.
New reserves in the Zhengzhuang block were approved, and reserves increased by 9.37%. The company's Zhengzhuang block is located in Qinshui County, Jincheng City. In 2019, coal seam No. 3 of this block submitted coalbed methane to discover geological reserves of 5.110 billion cubic meters. According to the latest announcement, the Shanxi Provincial Department of Natural Resources passed the review and filing of the new proven reserves report of No. 15 coalbed methane in Taiyuan Group of the Zhengzhuang Block Coal Mine Methane Group of Shanxi Blue Flame Methane Group, a wholly-owned subsidiary of the company, adding 34.7 square kilometers of discovered gas content and additional discovered reserves of 4,066 billion cubic meters, an increase of 9.37% compared to the company's proven reserves at the end of 2022. Up to now, the Zhengzhuang block has accumulated proven reserves of 9.176 billion cubic meters, and the company's total proven reserves are 47.469 billion cubic meters.
23Q4 may confirm the government subsidy of 76.04 million yuan and the settlement of the 2022 subsidy advance allocation difference - 26.11 million yuan. Since October 11, the company has received a total of 82.8402 million yuan in government subsidies and confirmed profit and loss of 76.044 million yuan; on October 9, it received and confirmed government subsidies of 9.72 million yuan. Therefore, as of December 25, 2023, the company will confirm that the 23Q4 government subsidy is 857.64 million yuan. Furthermore, in December 2023, the Qinshui County Finance Bureau and the Qinshui County Energy Bureau issued the “Notice on Issuing Special Funds for Clean Energy Development in 2022 and 2023”, which determined that in 2022, Shanxi Blue Flame Coalbed Methane Group Co., Ltd., a wholly-owned subsidiary of the company, should allocate an advance reward amount of 131.2451 million yuan. The company used this to adjust current profit and loss after deduction of VAT - 26.1052 million yuan.
The peak natural gas consumption season has arrived, and domestic LNG prices have risen 9.65% month-on-month, and the company's performance in the fourth quarter can be expected to be flexible. In the context of the domestic government encouraging oil and gas storage to increase production and the rational return of international gas prices, in the first 11 months of this year, China's natural gas production was 209.59 billion cubic meters, up 6.0% year on year, and natural gas imports were 107 million tons (about 148.21 billion cubic meters), up 8.5% year on year; furthermore, according to iFind data, apparent consumption of natural gas reached 321.71 billion cubic meters in the first 10 months of this year, an increase of 7.26% over last year. Domestic natural gas demand showed high growth. At present, the natural gas industry has entered the peak consumption season, and demand is expected to increase further. According to Wind data, the average monthly price of domestic LNG has begun to gradually rise since September. In December (up to December 25, 2023), the average LNG factory price reached 5922.47 yuan/ton, an increase of 9.65% month-on-month.
Investment suggestions: The company lays out an integrated upstream, middle and downstream coalbed methane industrial chain, and is rich in coalbed methane resource reserves.
We expect the company's net profit from 2023-2025 to be 601/7.25/910 million yuan, EPS of 0.62/0.75/0.94 yuan/share, respectively, and PE corresponding to December 25, 2023, 11 times, 9 times, and 7 times, respectively, maintaining the “recommended” rating.
Risk warning: risk of falling coalbed methane prices; risk of gas well exploration and mining falling short of expectations; risk of insufficient policy support.