Ann: CSBP Commits To Gas Offtake, page-15

from euroz

CSBP 100PJPhase 1 West Erregulla Offtake Converts to Fixed Pricing

Key Points

· CSBP has agreed toconvert its existing 100PJ gas supply option to a firm offtake agreement;

· The 25TJ/day supplyagreement underpins STXs Phase 1 development of the West Erregulla gasdiscovery in the Perth Basin;

· The pricing mechanismhas been converted to a fixed price with annual escalation;

· The c.11yr term issubject to FID expected mid FY’21 targeting delivery of first gas in Jun HCY’22;

· Our 27cps Valuationassumes $4.50/GJ (escalated at 2% cpi) references the pricing bands of themajor gas consumers in the WA domestic market:

· Our Unrisked Valuationis 44cps;

· Our Price Target is30cps: STX remains a key pick on account of drilling momentum going into theappraisal drilling from next month;
i really like the next 2

· The first appraisalwell is testing upside risked recoverable volumetric estimate of c.500Bcf gross– it is a material well;

· In addition, weanticipate that the WA State Government is likely to review its recent decisionin enabling only the Waitsia development the capacity to export gas;

· Industry has alreadyresponded by withdrawing from planned onshore activity (refer BlackMountain’s recent cancellation of their Canning Basin campaign);

· Speculative Buyrecommendation remains.