January 2022...a hell of alot since then!EMPIRE ENERGY GROUP...

January 2022...a hell of alot since then!

EMPIRE ENERGY GROUP (EEG)
BEETALOO GAS - THE UPSIDE CASE IS REAL
Analyst

Garry Marsden

We say Price Target
SPEC BUY $0.34 $1.10
Empire Energy Group Limited (ASX: EEG) continues to pursue its exciting shale gas opportunities in the Beetaloo Sub-basin.
Drilling and testing results at Carpentaria have added confidence that the permit is host to a sizeable wet gas resource with substantial economic potential.The Pangaea assets may realise added upside beyond our base case value.Given the large prospective resource base and a modest chance of success,these assets could add a further value of $1.20 per share.

COMPANY DATA & RATIOS
Enterprise value $203m
Market cap (fd) $220m
Issued capital (fd) 646m
Free float 70%
12-month pricerange $0.27 – $0.40

IMPLIED RETURN
Implied all-in return 224%
UPCOMING CATALYSTS
 Upcoming NSAI resourcesreview
 Testing of the adjacent wellsat Tanumbirini-2H and -3H.
 Scheduled fracturestimulation and testing ofCarpentaria-2H in Q2 2022. Early-stage progress oncommercialisation options.
 Strong uptick in global
energy prices.
COMPANYSCORECARD
 Experienced board andmanagement team.
 Highly prospective acreage,with active offset appraisalactivity
 Large scale gas and liquidsresource potential
 Low CO2 gas which leaves alight Carbon footprint
 Value entry into the strongenergy market
VALUE UPSIDE
Commercial production rateshave been reported from theBeetaloo Sub-basinFurther drilling and testing arelikely to see even higher rates
being reportedThe Pangaea assets providehuge upside within its 27TcfProspective Resource.
Exploration on the Pangaeaground to restart in late 2022.

INTRODUCTION
Empire Energy Group Limited (ASX: EEG) is advancing the appraisal activity on its exciting
shale gas opportunities in the Beetaloo Sub-basin in the Northern Territory.
The Carpentaria-1 well (EEG: 100%) was drilled in late 2020, and subsequent testing has
highlighted the upside potential. Further recent drilling at Carpentaria-2H has confirmed our
view of the scale of this commercial opportunity.
We expect an upgrade of the gas resource by internationally renowned experts Netherland
Sewell and Associates Inc. (NSAI) when they release their review in early February.
Current appraisal activity in adjacent permits by Santos and Origin will further reduce
development and commercial risks.
Early-stage well testing at Amungee (ORG and Falcon) has reached commercial flow rates,
with further testing set to confirm the flow potential of the basin across a large area. Further,
testing at Tanumbirini (Santos and Tamboran) is also underway, with initial flow results
expected around the end of January,
The offset activity by substantial oil and gas companies highlights the premier position of
Empire, which will benefit from this regional success.
INVESTMENT THESIS
Empire is a key player in the momentum of the basin, representing a leveraged play on
the economic potential of the Beetaloo.
The drilling and testing programs in the Beetaloo Sub-basin continue to enhance the prospects
for a large-scale commercial development in the region.
Significant contingent gas resource estimates have been reported in the region to date, with
Empire likely to report an upgrade in gas resources at Carpentaria. We believe that this
could be upwards of 300 Billion cubic feet (Bcf) of low CO2 gas.
Our valuation modelling indicates that the Carpentaria asset has an unrisked value of
over $1.1 billion in comparison with Empire’s current enterprise value of approximately
$200 million.
The Pangaea assets (27,625 Bcf) have been valued in our base case at the acquisition
cost. Given a modest COS (10%), speculative values could add a further $760 million
($1.20 per share) to our base valuation. Appraisal activity is in planning for late 2022.
Empire is valued conservatively at 108 cps. Value upside is seen as risks reduce on the
Beetaloo gas projects, and work commences on the transformational Pangaea assets.
Our risked valuation derives an implied return of 224% from current prices.