TPD - Walyering to launch Talon into a serious gas producer

Talon Energy is in the final phase of moving to FID on it's Walyering JV gas project in the Perth Basin gas project.

Production is expected to commence in Q1 2023.

Walyering is the first of four projects for Talon which, if successful, will transform Talon into a serious gas producer.

To date, two wells have been drilled, W5 and W6. Both have hit gas, W5 has been flow tested, and W6 flow testing is anticipated to be completed this coming week. Once complete, a maiden independent reserve will be released.

The W6 well is located approx. 100, from the Parmelia #3 compressor station, adjacent to the Parmelia pipeline. W5 is just 1600m from W6. This direct proximity to the pipleine and compressor station makes Walyering an incredibly low capex project. Talon's share of Capex costs are held by Talon following the recent $13M capital raise.

So what is Walyering worth?

Front end design will enable production of between 30 Tj to 42 Tj per day.
Domestic gas sales are anticipated to yield $5 - $7/Gj
Transmission costs are projected to be between $0.54 - $0.60/Gj

Using the above, my forecast net revenue to TPD from Walyering is as follows:-




Whether you use EPS or NPV, at a MC of $52M, it is evident that TPD is IMO currently significantly undervalued.

In anticipation of moving to production, Environmental approvals have been sought and received, refer post from @mir911:-

https://hotcopper.com.au/threads/ann-walyering-update.6829837/page-30?post_id=62477473

In addition to environmental approval, the application discloses a projected 10 year+ production lifespan and that production is expected to commence in February 2023. This would infer total projected net revenue at higher end to Talon of approx. $480M over the life of the project. See post from @rick23:-

https://hotcopper.com.au/threads/ann-walyering-update.6829837/page-35?post_id=62478620

In the first instance, the proceeds of gas are earmarked for future projects.

Talon MD recently announced that TPD and STX (a) will co-market Walyering gas sales, and (b) are in discussion regarding STX's Perth Basin "Ocean Hill" permit. He commented that projected cashflow from Walyering aligns nicely with forecast Capex costs to advance Ocean Hill. TPD holds a "first right of refusal" to farmin to Ocean Hill. Ocean Hill has a 2C contingent resource of 360Bcf of gas. On 6/4/22, STX announced a 5 year, 14.6Pj, Gas Sales Agreement with Perth Energy, this is likely to come from Walyering.

Talon also holds a 33% interest in a CSG project in Mongolia, Snow Leopard. The resource is currently classified as 2U 6Tcf risked. Exploration drilling is currently underway, 100% success rate, with thick, gassy, high permeability sections identified which have exceeded pre-drill expectations. The operator has commenced work on a pilot program to prove up the commercial viability of the project. This is scheduled for Q4 2022.

Talon also holds a 100% interest in the Perth Basin "Condor" permit. Condor has a 2U prospective resource of 408Bcf of gas. Condor is described as the best untested wet-gas prospect in the Perth Basin.

Both Condor and Ocean Hill also enjoy very close proximity to the Parmelia pipeline so they too represent very low capex projects if found to be commercial.

If the plan goes accordingly, cashflow from Walyering will enable Ocean Hill and Snow Leopard, cashflow from these in turn fund Condor. A very neat plan.

In addition to the market undervaluing Walyering, the Talon share price currently has zero enterprise values attributable to Ocean Hill, Snow Leopard, or Condor.

All commentary is sourced directly from company announcements except for (a) WA domestic gas price estimates which are anecdotal, and, (b) transmission costs (see link below).

https://www.apa.com.au/our-services/gas-transmission/tariffs-and-terms/

As always, DYOR, but IMO Talon is about to launch into becoming a serious gas producer.