don’t know if it has already been posted - an update today from Petra . FYI they also had a STX update 52c TP
Warrego Energy Limited (WGO) - West Erregulla 5, moving ahead at light speed The JV has made significant progress on the West Erregulla 5 (WE-5) drilling campaign, drilling the intermediate hole section down to 3,635m (73% complete) vs a final TD of ~5,000m. The well advanced ~202m per day since the beginning of WE-5 - which is a record for the Perth Basin and a significantly higher rate than rates achieved at WE-2, 3 & 4. To get date, the WE-5 drilling campaign has taken 17 days to drill and complete two sections. We maintain our BUY and TP A$0.70/sh, noting WGO is on the cusp of converting a large portion of its 2C Resource into 2P Reserves on the back of WE-4 & WE-5 testing.West Erregulla 5 – drilling advances stronglyThe JV has successfully cemented and completed drilling the intermediate section of West Erregulla 5.The well has now been drilled to 3,635m (73%) out of a targeted final depth of ~5,000m (Figure 1 & 2).The well has been drilled in record time, driven by a change in well design and by bringing in the Aztech drilling team, who are experts in the Perth Basin.The purpose of WE-4 & WE-5 is to appraise the reservoir distribution in the central fault block, which if successful, will help convert a large portion of existing 2C Resource into 2P Reserves (Figure 3).This is an important step as the company progresses towards FID for Phase 1 by Q3 2021.Investment case robustWe continue to highlight WGO as an undervalued player in the Perth Basin, and expect a re-rating as the Phase 1 Project gets de-risked.We expect a large amount of news flow over the next quarter including; flow rate tests of WE-4 & 5, the completion of WE-5, as well as the finalisation of the banking syndicate to progress the Phase 1 Project to an FID decision before Oct 2021.We model WGO on a sum of parts basis using a DCF methodology on West Erregulla Phase 1 at 80TJ/d with a 10% discount rate on a 12-month forward-looking basis (A$380m or A$0.33/sh). We also risk weight West Erregulla Phase 2 development at 65%, targeting an additional 170TJ/d (85TJ/d WGO share), starting approximately two years from Phase 1first gas at (A$363m or A$0.31/sh). The remainder of our valuation (A$0.06/sh) includes cash, exploration and corporate.
Don’t know if this has been posted / updated note from Petra
WGO Price at posting:
24.5¢ Sentiment: Buy Disclosure: Held
