STTCOMP RLE, FA Long
MC: $17.2M
Cash: $7.5M
EV: $9.8M
229m SOI
Real Energy are developing a Cooper Basin, basin centred gas play which has after drilling 2 wells been able book independently certified contingent gas resources of of 672 BCF and a Mean Prospective Gas Resources of 5,483 BCF in the Toolachee and Patchawarra formations within 100% owned ATP 927P. To date flows have been intermittent from the Tamarama well which has been the primary focus. Tamarama has been unable to maintain gas flow rates due to water loading issues, to address this the company have recently installed a plunger lift pump which is highly likely to dewater the well and allow for continuous flow. Nearby Cocos-1 well which is in the same formation flows at 3500mscf/d.
RLE have recently signed a MoU with Santos for gas processing at Moomba and transportation in the Cooper Basin gas gathering network as well as having signed another MoU with Weston Energy. Weston Energy becoming Real Energy’s foundation customer with a $6m prepayment as part of the key terms for a potential 3 petajoule per year offtake. With current gas pricing around $5/GJ this may represent a ~$75m deal over 5 years, importantly this also allows RLE to convert resources to reserves.
Since the installation of the plunger lift system there has been no updates given on the flow from the Tamarama well, this I believe has potential to bring a substantial rerate.
“Valuation: Our current valuation of A$0.16/share is based on RLE’s highly risked (15%) 2C contingent gas resource of 276 Bcf. As the company matures its 2C resource into reserves we believe the stock will re-rate with the valuation increasing to A$0.52/share on a 50% risk weighting. Significant further upside is available to the company should it mature its current 3C resource (672 Bcf, which we currently value at A0.38/share) to reserves. RLE has A$6m cash and nil debt.”
