Energy & Environmental Services Inc. (EESE)

[cavan]

Starting buying back in Nov.03 Scoot Shaw used to post over on S.Investor web site. His expectation is for a couple of bucks a share sooner than later. http://www.siliconinvestor.com/profile.aspx?userid=2104998 Energas Resources Inc. (OTCBB: EGSR) has recently acquired 31 producing gas wells, 148,000 feet (approximately 28 miles) of pipeline, 2 compressor stations and approximately 23,000 leased and 8,500 optioned acres located in the Appalachian Basin of eastern Kentucky. Annual revenues from the producing wells and pipeline exceed $500,000. The properties were acquired from three private corporations for $3,000,000 in convertible notes (20 year 8.5%). Furthermore, we believe these properties have exciting development potential and our three-year goal is to drill 600+ shallow Devonian Shale natural gas wells in this area.

Along with the acquisition of these assets, Energas has teamed up with petroleum engineer Mark Holbrook whose ideas and technical expertise are invaluable to the development of these properties. His past experience includes 3 years as Senior Regional Engineer for Coastal Oil and Gas Corporation, Houston, TX working in the Eastern United States Region and 3 years as Senior Engineer for American Natural Resources (ANR), Jackson, MS where he managed the administrative and technical activities relating to a successful $100 million dollar Appalachian Basin development project in Southwest Virginia. There he exercised management responsibilities over 147 company and contractor personnel including 26 drilling, completion, production, and pipeline supervisors and engineers.

The acquisition of this property marks the beginning of a new direction for Energas Resources. The reserves are predictable and long-lived. As well, the drilling of the Devonian Shale is low risk, cost effective and has a high commercial success rate.

So, what could this project do for shareholder value?
During the research phase of this acquisition, we projected income and expenses for the next three years and the results were very exciting. Our projection shows that Energas can potentially earn a net income, after 40% income tax, of almost $1,500,000 per month for an annual net income of approximately $18,000,000 with a potential to continue development after the first 36 months. Using a future estimated figure of 45,550,000 shares outstanding, Energas would have a projected earnings per share of $0.395. At a PE ratio of 10, Energas stock would be trading at $3.95 and this does not include any other projects that Energas is currently working on or might be involved in.

Is this projection as good as it looks?
We ran these numbers using an average production rate of 20 MCF of gas per day, but the typical Devonian Shale well in the area of interest averages 44.88 MCF per day for the first 5 years and 31.89 MCF per day over the first 10 years. We also used a three year weighted average of $5.93 for a gas price, which we think is a conservative future price for this area. Additionally, Energas has an approximate $5,000,000 tax loss carry forward.

If this project is so good then why hasn’t it been done already?
A lot of the Devonian Shale has been drilled but certainly not all of it, AND you have to remember that gas has not always been around $5.00 per MCF. Also, the Devonian Shale in the area that Energas will be drilling is not as thick as the well known Big Sandy Field, which is to the east of our project, but at $5.00 per MCF it can be very lucrative. Honestly, we believe the Devonian Shale in this area can make good money at $2.50 per MCF.

What else is Energas Resources working on besides the eastern Kentucky project?
Energas is also working on exploration and development projects in the Arkoma Basin, Oklahoma, the Wind River Basin, Wyoming and in southern Kansas. Energas just recently reached an agreement with Devon Energy (AMEX: DVN) to explore 27,000 acres in the Wind River Basin, Wyoming. In Kansas, Energas is hoping to drill a well in Harper County by 4th quarter 2003. In the Arkoma Basin, Oklahoma, Energas just drilled and completed a well with an announced initial production rate of 1,250 MCF of natural gas per day! We are always looking for good oil & gas development and acquisition opportunities that will enhance Energas Resources’s shareholder value.