Here it is...
With 2P of 45PJ, a standalone gas processing plant was out of the question given contracted gas price was around 7.50/GJ. There simply isn't enough volume to justify a decent return on capital. With the peaker plant, it will work because of the high margin, with capacity credit helping to underpin the invested capital in case overall utilisation is extremely low.
Without the peaker plant, the valuation was previously 32cps - comprising of 17c DCF and 15c risked NAV. With the inclusion of the revenue stream from the peaker plant (+6c) as well as Walyering field life extension which is reflected with the increase in the exit production rate for Walyering (+1c), the overall valuation increases to 39cps.
While it is great that we are able to extract a really high margin for the SE gas and commercialise that gas, the issue is that it is at a relatively low volume of around 4TJ/d (annualised at 1.3PJ), the expected revenue and FCF is still much lower than if SE2/3 were successful because we would have been looking at a revenue profile of around 90mn for Phase 1 and 180mn for Phase 2.
Anyway, it is what it is. At least we can extract a decent amount of value (6cps) for our SE gas from the peaker plant rather than for that gas to be stuck in ground for the next 10 years before being used as a filler when WE goes into decline.
As mentioned before, OH will make the biggest difference to our valuation if successful because the gas should be very pure and therefore can be developed quickly and cheaply like Walyering, with condensates to boost margins. Just to give you an idea, if OH is successfully proven up and developed to produce 50TJ/d by 2027, it will boost STX's valuation to 53cps...
As always, this is for information sharing purpose only and it's not financial advise. DYOR.
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