Compelling frontier shale gas play

We re-initiate coverage on Questerre Energy Corp (QEC NO) with a Buy recommendation and target price NOK 23 per share.

· The Utica play appears to be one of the most promising emerging shale plays in North America, and Questerre should be located in the sweet spot.

· The upside from today’s share price is tremendous, with a blue-sky potential NAV/share of NOK 170.

· However, downside potential is also very much present. QEC traded at NOK 2/share prior to the Utica discovery. Should Utica prove un-commercial, it is not impossible to see the share returning to its old lows.

· The company will need capital to develop the Utica if test pilots are sufficiently promising, and we estimate a CAD 500m capital need, or approximately 70% of Questerre’s market capitalization.

· Near term triggers include results from the first two horizontal Utica pilot wells currently being drilled and tested. Results from the first well are expected towards the end of February, and the second in 2Q. We would regard an initial 30-day rate of 1.25 mmcf/d as on-track for the first well.

---------------------------------------

30cdn could be 1Tcf at current NG-price or about 6cdn divided by number of shares.

I think about TLM. They should know that they make a good deal.

The analyst begin to see:) Our own analyst from Frazier Mckenssie had 41.50cdn.

Yes, it all depends. Is the play that commercial, but I dont think the sp will go to 2nkr.

Dont you think 1.25mmcf/d will be vey possible??