WOOD & Co downgrades Poland's PGNiG, citing shale fracking setbacks

29 January 2013 14:52  [Source: ICIS news]

LONDON (ICIS)--WOOD & Company has downgraded its rating on the stock of Polish gas exploration and production company PGNiG to 'Sell' from 'Hold', citing concerns that the commercial viability of exploiting Poland's shale gas reserves is not yet proven, the investment bank said on Tuesday.

“We do not attribute any value to the shale gas resources, as commerciality is yet to be proved and exploration has been slow and non-conclusive thus far,” said Robert Rethy, an analyst at the Prague-based bank.

Prior to issuing the rating downgrade, WOOD & Company also noted that PGNiG has confirmed a shale gas hydraulic fracturing (fracking) setback at its well in Lubocino, near the Baltic Sea coast of northern Poland.

PGNiG was attempting to complete its first ever horizontal fracking at the well, but one section did not work and two others offered contrasting results, the company said.

Given the outcome, PGNiG has slowed down its work at the well, but will instead accelerate work at other wells.

The lack of progress at Lubocino was “not good news, because this fracking operation was one of the most widely watched events for shale gas operators in Poland,” Rethy said.

He added: “It also adds worries that the geological features of Polish shale formation may make fracking more complicated than in the US, and that it may need different technology."

In his report on PGNiG, Rethy also stated that he believed any meaningful impact from the ongoing gas market deregulation in Poland will be delayed to 2014, and that regulated tariffs would continue to dominate pricing until then.

By: Will Conroy
+44 20 8652 3214

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