The report was put together by Grant Samuels and Associates and concludes that the Medco offer is neither fair nor reasonable, but does not consider the rival offer from Williams and Hong Kong investment bank Crosby Capital Partners. Although with only a three cent difference it could be considered that the Williams offer is similarly unfair.

The valuation considered Novus' portfolio of gas producing assets, its exploration interests and the company's exploration plays in the United States and the Middle East which have the potential to generate substantial value.

Grant Samuels valuation ranges between $1.96-2.75 per share equaling a total equity value of $368-516 million, although the wide range of values reflects the uncertainty inherent in valuing Novus's developing and exploration assets. The valuation represents the full underlying value of Novus.

In Grant Samuels' view, the relevant issues to be considered in assessing whether the Medco offer is reasonable include: the Medco offer of $1.74 being below the valuation range of Novus of $1.96-2.75 per share; Novus' shareholders could realise more than the Medco offer price by selling their shares on Market and the increased Crosby offer.

Forecasts for the company's profitability in 2004 also point towards a stabilised share price above that of the Medco offer and are likely to be an improvement on the preliminary operating profit for 2003 of $28.4 million, itself a 35% improvement on the prior year of $21.0 million.

The forecast EBITDA for 2004 is $144.5 million, an increase of $46.6 million or 48% over the preliminary 2003 EBITDA. Forecast operating cash flow for 2004 is $118.8 million and represents an increase of $46.9 million compared with 2003.

Medco is still to release a report into its evaluation of Novus.