An independent assessment of existing discoveries in CRD's 100% owned Aceh PSCshas yielded a gross 2C contingent resource estimate of 214Bcf (161Bcf net entitlementto CRD) easily exceeding CGe of 100Bcf. We consequently upgrade our DCF-based pricetarget to $2.76 (from $2.60) and retain our SPECULATIVE BUY rating.
A highly valuable gas resource...
The assessment ascribes an NPV of US$88mn to the Aceh PSCs net to CRD on itsnet attributable resources of three of the discovered resources. The fourth discovery,Keudapasi, has very limited seismic data (two lines) and was not included in theContingent Resources at this stage. It is estimated that Keudapasi has a P50 EstimatedUltimate Recovery of 30Bcf. The gas discoveries were made in the 1970s and have all been successfully flow testedat potentially commercial rates of almost pure methane. These gas discoveries were notpreviously developed due to prevailing low gas prices and immature markets a situationwhich has clearly changed with LNG imports now required.
We have upgraded our valuation of these resources to $50mn ($25mn prior)....
with substantial upside in the shallow water CRD intends to acquire 500 square km of modern 3D seismic data in 2024 across itsexisting discoveries seeking to delineate near field, low risk drilling opportunities as wellas evaluate the host of other targets in the shallow water areas. Given historic successrates in these permits are over 66% when targeting Upper Miocene Carbonate reefs webelieve that the current 161Bcf 2C resource estimate could grow materially.
Multi-TCF potential in the deeper water
Several large structures with multi-TCF potential have already been identified in thedeeper water of the PSCs. These structures have gas chimneys and flat spots displayedon seismic data, indicating evidence of the presence of potential hydrocarbons. Webelieve these massive structures could capture attention from super majors. Indeed, wenote that CRD has already received dataroom requests, and we expect this interest toramp up as exploration budgets and rigs are increasingly allocated away from Australia
75% increase in net attributable resources
Combined with its flagship Mako gas field in the West Natuna Sea, the two Aceh PSCsgive the company total 2C of 578 Bcf (376 Bcf net attributable to Conrad) acrossits offshore Indonesian portfolio and represent a 75% increase in net attributableresources.With the stock now trading on an EV/2C of $0.48/GJ vs recent transactions in the PerthBasin of $2.0/GJ of 2P+2C we see the investment case as highly attractive.The next potential catalysts for CRD are: 1) conclusion of a gas sales contract at Mako;and 2) a potential sell-down of Mako.
CRD Price at posting:
$1.66 Sentiment: Buy Disclosure: Held
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