Comet Ridge Limited (COI) - Mahalo North exceeding expectations...

Comet Ridge Limited (COI) - Mahalo North exceeding expectations ( Petra 31/5/22)

COI has concluded a one-week workover at its 100% owned Mahalo North 2/1 appraisal well to install equipment designed to cater for larger than expected water and gas volumes. A steady reduction in bottom hole pressure (0.8psi per day) with steadily increasing rates of gas to 85Mcf/d indicates a successful test to date. We expect gas rates to accelerate toward 2MMcf/d following the workover. Upside success to appraisal can reduce capital costs on development via a reduction in the number of wells required for full field development. We maintain our BUY and PT of A$0.35/sh (A$1.80/sh at spot).

Mahalo is a strategic asset

• COI’s Mahalo partner STO is short gas. STO operates the US$20bn GLNG facility in Gladstone which is currently, and consistently, 20-25% shy of nameplate capacity (Figure 4). STO needs production of ~250TJ/d to fill this void, significantly more than the 90TJ/d development we assume for Mahalo.

• The spot price for east coast gas (QLD) is A$35/GJ (Figure 5). This is 3-4x historical levels and contract prices. In time, an elevated spot price is likely to flow through into higher realised contract prices. COI is perfectly placed to capture the upside with marketing expected over the next 12 months.

• Our modelling is based on a long-term contract price of A$9.50/GJ. At spot gas, our valuation increases 414% to A$1.80/sh (8.5x current share price).