According to Empire's release of 17th June 2016, the diagnostic testing (via current well completion to confirm hydraulic communication between C and D sands) is "planned to occur in early Q3 2016" and the remedial cementing process (removal of completion from well using workover rig, a remedial cement squeeze, running of logs, re-perforation of sands, and retesting of C and D sands) is "planned for late Q3 early Q4 2016 subject to completion/rig equipment availability and government approvals".
By the end of this week (by 31.07.2016 at latest, per ASX Listing Rules) we are due to receive the Quarterly Report. Given that we have received no additional update or information on this matter, it is likely that the report will either (a) comment about a delay in the diagnostic testing, (b) comment about progress, or (c) provide some commentary regarding the results of the testing. At a guess, most likely "b" as Aztech have already been contracted for this purpose, and given that the outcome of RGN has a major impact on the future of EGO it would be improper for the company not to make some remarks.
As to the current share price: Volume is low and patchy, and certainly not of the [convincing] type seen when the SP rallied from low 30's to around 40c on the first run (in this cycle). In the past week we have seen range trading between 40 and 45, but the VWAP is circa 41/41.5 so to see the SP around 40 cents is not alarming. Realistically, to break through the "MIN Barrier" (45 cents) may take some news, or at the least some positive comments within the QR. But it is likely that the company will remain "mum" about things until post 31st August (so they don't have to line ERM's pocket's with gold), and we may then see a September rally as activity around RGN picks up (that "late Q3 early Q4 2016" period). But that's only 5 weeks away, so who knows whether one or two keener investors may jump the gun whilst the SP is languishing around these high 30's / low 40's numbers.
Longer term, Empire has already noted their reserve estimates for RGN-1 at 7.5 PJ of 2P contingent gas resources, with high condensate production yields and a short, low-cost tie-back to the Red Gully Processing Facility.The company has revenue at around $4.9m per quarter (the best we have ever had, with expectation for Q2/16 at around $4.4m), and plans to drill Lockyer Deep later in 2016 (most likely Q4, due to the delays experienced at RGN - although the March QR mentioned RGN-1 and did not revise their expectation on Lockyer as the two are relatively-unrelated, except for ownership). Recent activity at adjacent Waitsia (AWE and Mitsui going all-in on that one) bode well for EGO, and will improve the availability of farmin partners to make this a free-carry prospect for EGO (if so desired).
Add to this recently-upgraded valuation and outlook from Hartleys (putting the current risk-based valuation at around 75 cents), with the possibility of further upside (once RGN-1 is de-risked to 100%, assuming success) and it will be interesting to see how long MIN will be a passive investor. They have already taken a punt on RGN (with their latest purchase) and wouldn't want to have the market totally de-risk the price else they could end up paying over the odds, or, worse still, engage in a bidding war with some other party (Chris Ellison must be getting sick of such fights by now, and you would think he had learnt his lesson: strike early, strike hard).
For now though, we are back to waiting for the QR. But with only 5 weeks until September I personally think it is just a matter of time before the lid is lifted.
Best regards to all.
EGO Price at posting:
40.0¢ Sentiment: Buy Disclosure: Held
