Ann: Testing and Seismic Operations Update, page-104

What another crazy week! Tough for anyone in the uranium space today - that includes me - ouch.

Thought I would just expand on my previous post (while I enjoy a can of coopers ale, thanks for the tip guys)... to explain in a little more detail around why I think NWE could be a billion dollar company... and sooner than people may realise. This will mainly be geared around the economics, commercial finance #s... as that's my background.

So... we have the Ukraine invasion highlighting how sensitive global energy security is, particularly in Europe. Russia supply over 110 million tonnes of gas to Europe... every year. That's a lot of gas. To put that in perspective, 1 TCF of gas is equal to approx. 20 million tonnes of gas. So we are talking 5+ TCF of gas being pipped from Russia to Europe... which could realistically be turned off at any moment. The Europe gas market will be craping themselves... and all possible alternative gas supplies globally will be canvassed. But there is only so much the likes of key LNG exporting nations Qatar and USA can fill the void. Same for Australia... we are at near capacity and any excess spot LNG cargoes are being snapped up - at a very healthy price I might add. From memory AUS exports approx. 85m tonnes of LNG per year, to give some context.

Specifically for AUS, the likes of WPL and STO would now be seriously re-evaluating mega off-shore gas projects like Scarborough, Sunrise and Browse. But these developments take time and a lot of capex... and Europe needs energy security as quickly as possible. We are talking within a 5 year window or less ideally.

Step in on-shore gas... such as our mighty Perth Basin. As we progressively discover and unlock multi-TCF fields, we can hopefully allow the majority to be exported as LNG (after statutory domestic requirements are met) and all this could be done in a relatively quick timeframe. BPT / Mitsui are leading the pack here and we just need the WA govt to change export legislation to allow others to enjoy it (or get buddy up with Mr Stokes it seems).

So to run some numbers... we currently have LNG spot cargoes to Asia being sold at approx. $US25 per million BTU. It was only in 2020, in the depth of the pandemic, that LNG cargoes were selling at $US2 per million BTU. What an incredible turnaround in fortunes. In fact some analysts are foreshadowing a potential spike in spot LNG prices to more than $US100 per million BTU in the event that Russian gas supplies to Europe were cut off.

So get your head around this... a 70,000-tonne+ LNG cargo sold at $US30 per million BTU would earn approx. USD$150 million... at $US50 it's USD$250m. AT $US100 it's $500m.... for 1 cargo!!! Now no one is saying gas prices or oil prices for that matter will stay this high as that is clearly unsustainable for the long term.... but AFAIK energy security is not going to be resolved overnight and the ramifications will be felt for years to come.

Just imagine what this could mean for MIN/NWE if they had the opportunity of exporting LD gas thru the NWS LNG... the numbers would be incredible. Now if a 2 TCF field at LD is proven up... that could potentially deliver 570 LNG shipments (I know it's not all going to LNG but just bear with me on this)... @ USD$100m per LNG shipment... $US57bn in potential revenue. NWE share is $US11.4b. Don't forget to convert to AUD...

These numbers are top line only and do not incorporate the cost of processing, transporting, and liquefying the gas which is considerable, but I am hoping you get my point about the economics of PB gas and how WA / Australia can benefit from providing energy security to Europe and indeed the world.

And that leads me to why I can see M&A / consolidation happening this year... the economics are that compelling... and very likely cogs are turning already... positions are being taken... we just haven't necessarily seen clear signs... yet.

That's it from me. Sorry for the long post, but really just wanted to give some of you an idea as to why I believe NWE (and the greater PB) is a real life-changing investment. Time for another beer.

hagwe