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Nexus Energy Limited
Last traded: $0.45 Sector: Energy Market cap: $454m
Buy Price target: $0.65
Summary of previous report dated 09/12/10
Principal activity: NSW invests in energy related projects, particularly in the exploration and
development of oil & gas. The company has stakes in a number of JVs in the exploration and
development phase.
Crux ? the Nexus big thing
We initiate coverage on Nexus (NXS) with a Buy recommendation and price target of AUD
0.65ps. The progress of the Crux Liquids project is the key to NXS? performance with 22-46%
upside to its valuation as the company resolves issues at the development. The government
requires Nexus to develop the field by February 2014. Nexus previously estimated a build time
of 30-36 mths. Based on FID in 2H11 an early 2014 start-up is a stretch. This represents a
major risk for the development and Nexus may look to negotiate an extension to the
development timetable. Shell?s Prelude FLNG requires Crux gas post-2025. Crux development
risk and government requirements continue to present uncertainties for Shell regarding Crux
tail gas when moving to FID on Prelude. Shell are therefore likely to be reviewing potential
options; a hostile takeover can?t be ruled out however this is unlikely to help the stretched
timetable.
Investment view
We believe Nexus offers material upside potential from the development of the Crux Liquids
project which has been significantly derisked as a result of the extension of the permit transfer
date. Further progress at the development will likely result in a re-rating of the stock