Ann: Investor Pack update June 2019, page-20

OIL & GAS: Cooper Energy Limited – COE-AU: A$0.56 | BUY, A$0.67 Target

James Bullen │ Analyst │ Canaccord Genuity (Australia) Limited │ +61 2 9263 2728 │ [email protected]

Source: FactSet

Company Statistics

Financials current as of 01-Jul-2019

Price A$0.56

52-wk High A$0.58

52-wk Low A$0.35

Ave. Daily Vol. (M) 4.2

Market Cap (M) A$900

Shares Out (M) 1618.6

Dividend (A¢ps) 0.0

Return to Target % 21%

Yield % 0.0%

Source: FactSet, Canaccord Genuity

Company Description

Cooper Energy is an oil and gas exploration and development company. The company's exploration tenements include Cooper basin, Otway basin and Gippsland basin in Australia. The company is headquartered in Adelaide, Australia.

Source: FactSet

Cooper Energy Limited

Bear↓ – Base – Bull↑Target Price Scenarios

Bear: Our target price could be negatively impacted by: i) Gas prices falling ii) Drilling failures iii) Project delays Base Valuation: Our $0.67ps target price is based on our DCF valuation using a 10% WACC. Bull: Our target price could be positively impacted by: i) Gas prices increasing ii) Drilling successes iii) Sector M&A

FYE JUN 2018A 2019F 2020F 2021F

Revenue (A$m) 67.0 81.0 283.0 292.0

EBITDA (A$m) 32.0 38.0 182.0 181.0

NPAT (A$m) 10.0 14.0 72.0 71.0

EPS (adj. A¢ps) 0.7 0.9 4.5 4.4

PE (x) 79.4 61.8 12.4 12.6

EV/EBITDA (x) 27.6 23.3 4.9 4.9

Dividend (A¢ps) 0.0 0.0 0.0 0.0

Yield % 0.0% 0.0% 0.0% 0.0%

Source: Company reports, FactSet, Canaccord Genuity Australia estimates

Investment Highlights

COE is on the cusp of delivering its flagship Sole project which will result in EBITDA increasing ~4-fold towards $180m. Importantly, with an under-geared balance sheet, COE has more than enough financial firepower to progress additional organic growth projects including 1) Otway drilling: 2) Minerva gas plant acquisition and cut-back; 3) Sole debottlenecking; and 4) Manta appraisal.

With the stock trading at ~5x EV/EBITDA and $17/boe of 2P, we continue to believe that the earnings stability (gas contracted at fixed price), low sustaining capex and growth potential is not being fairly valued by the market.

Potential Catalysts

1. i) Otway drilling – offshore drilling is expected to commence in July. The two well program is targeting 170PJ of gas (50% net COE). On an unrisked basis, this has the potential to add over 10cps to our valuation.

2. ii) Sole start-up – the upstream work is essentially completed, and APA has indicated that it is set to complete the gas plant in the SepQ.

3. iii) Sole debottlenecking and refinancing – while unlikely to occur in the SepQ, these events are highly likely, in our view, and should start to find their way into consensus numbers.

Performance Metrics

COE’s share price is up 25% in the calendar year 2019 compared to the S&P/ASX 200 Index which is up 18%.