Bell Potter issue buy recommendation target 23c, page-4

From Bell Potter report:

Key investment points
• CTP has a portfolio of producing and greenfield projects capable of delivering
increased gas supply.
1. Mereenie Oil and Gas Field (50% owned and operated) in the Northern
Territory’s Amadeus Basin will re-establish production rates of up to 45TJ/day
(gross) from mid-2021, a 60% uplift on 2020 production levels;
2. Exploration programs in CTP’s producing Amadeus Basin fields have the
potential to further increase gas Reserves and near-term production potential;
3. Over 2021 CTP expect to appraise and progress its 50% owned and jointly
operated Range coal seam gas project in Queensland’s Surat Basin for a FID in
early 2022. This project is similar in scale and expected producing coal measures
as Senex Energy’s (ASX: SXY, Buy Target Price $0.46/sh) Atlas gas project. IPL
is CTP’s joint venture partner in the Range project; and
4. Longer term, exploration and appraisal across CTP’s significant Amadeus Basin
tenement position has the potential to add material gas Reserves and production.
• A proposed Amadeus to Moomba Gas Pipeline would improve the competitiveness of
Amadeus Basin gas delivered into Australia’s east coast market by significantly
reducing the distance to market. CTP has executed a Memorandum of Understanding
with Australian Gas Infrastructure Group (AGIG) to facilitate becoming a foundation
customer for pipeline capacity.
• The ACCC’s ongoing assessment of Australia’s east coast gas market continues to
identify significant uncertainty with respect to longer term supply. Recent reports have
highlighted that supply shortfalls from 2024, particularly in the southern states, will have
to be increasingly met by undeveloped, and therefore higher risk, gas Reserves. The
reports have also noted recent delays to projects following volatile energy markets in
2020.
• At 31 December 2020, CTP had cash of $38.5m and a $69.8m finance facility with
Macquarie, maturing on 30 September 2022.
• We expect production growth from 2021 to drive significant earnings and cash flow
growth. In 1H FY21, CTP’s gas sales were 5.11PJ (equivalent) for operating revenue of
$29m, implying an average gas price of $5.66/GJ. 1H FY21 EBITDA was $11.5m. CTP
is currently trading on lower earnings and Reserves multiples compared with its peers.