Great Equity research report from MST Financial - Analyst Stuart...

Great Equity research report from MST Financial - Analyst Stuart Baker.

Investment Thesis
The gas resource is big. From the Canyon drilling program in CY2023,maiden 2C contingent resources were booked of 1.5Tcf of gas and 69MMbblsof condensate, with an upside 3C figure of 4Tcfe. The value opportunity is~A$4B at current gas prices, in a production mode. High gas prices andproject location enhance economics if commercial flow rates are established.Data from wells drilled have identified very thick, liquid rich formations,but in low permeability reservoirs. Commercial production will requirehorizontal wells and fracking. In the USA, these techniques are routine andare gradually being successfully applied in Australia.Omega is an undervalued entry into the east-coast gas market. The 2Cresource is priced in the equity market at 3.6c/GJe. With gas prices in the$12-20/GJ range there is huge upside from commercializing the resource.Valuation: A$0.64

Investment case summaryBig resource, with geology broadly understood from a network of recent and historic wells.Advantageous location to meet gas-short east coast gas market or Gladstone LNG plant ullage.Small but deeply experienced management team that have made substantial progress since IPO.Omega has a large gas resource in Queensland's Surat Basin, at the Canyon Project, targetingPermian reservoirs in the Taroom Trough. The location is ideal to supply the gas-short easternAustralia or export LNG plants from Gladstone, with major pipelines within 50 km. Figure 2 shows thelocation and nearby gas pipeline infrastructure.The company has 1.7Tcfe of gas and liquids (2C) and a 3C estimate of ~4Tcf, backed by well data.At current peer EV/GJ for production, the value opportunity of Omega's 2C resource approximatesA$4B. This is a very large opportunity in context of the company's equity market value. Refer tovaluation section for analysis.Valuation: A$0.64.We value Omega's 2C gas and liquids resource at 8.5c/GJ and A$1/bbl respectively, which is in linewith a peer group average, for pre-production companies. At the current share price, Omega is pricedat 3.6c/GJe. If Omega's strategy is successful, then booking reserves and moving into productionwould catalyse a re-rating, as detailed in the valuation section of this report.

The value opportunity in a production setting
At this juncture in Omega's progression, we believe peer group multiples are reasonable to apply.However, figure 12 is instructive as it provides insight to what the future value opportunity is, if Omegacan progress to a production phase.Production companies are priced in the equity market at ~$2.20/GJ, and oil producers are priced at~A$10/bbl.If we apply these metrics to Omega's 2C gas and liquids resource, then the arithmetic works out to beapproximately $4B. To be clear, this is not our base case, but informs the size of the opportunity, ifOmegas is successful. It does not account for financing, and partnering, which will be required forOmega to enter into production, and the dilution along that journey.

OMA Equity Report.pdf