I think our minnow XST has aspirations of becoming a Mid Cap one day based on what has transpired over the last six weeks. I say this for three reasons;
1) Oil Project Acquisitions
- announced a 15% interest in the Red Earth oil project. The Operator has estimated that the infrastructure alone would cost $100's millions of dollars to replace.
- announced a 10% interest in the Alberta Plains oil project. The Operator has estimated that the infrastructure alone would cost $150m to replace.
- from these two acquisitions alone XST now has 1.5m of 2P oil reserves on it's books with further development potential
- have advised that they are also currently considering some extremely attractive oil investment opportunities that have been made available in recent weeks
All of this is at a time of a rising oil price.
2) Borba
- drill is now fully funded and working interests have been finalised
- XST took the strategic step to increase its interest to 33.33%
- multi TCF well. Independent resource assessment due any day.
- nearly two kilometres of prospective interval
- 16 stacked target zones
- GJ has said it is the most anomous piece of seismic he has seen in the basin to date etc.
- 3D seismic shows that Borba is 'significantly' larger than Alvares on 2D seismic. Alvares has been estimated at 2.4 TCF.
- spud expected within a week or two
- XST has a 24% interest in other areas along trend from Borba which could be part of a new 'fairway'.
All of this at a time of a rising gas price.
3) Relentless Buying
As i have posted previously approx 2bn+ shares have been bought in the last 6 weeks, the buying in XST has been relentless and demand insatiable since mid December. There was even another 113m shares bought on Friday worth approx $1.2m. A massive super soak has been taking place imo.
Now if a fair proportion of those shares have gone into 'tight' hands, and with alot if newsflow expected which could be company making over the next few months we all know where XST could be headed, the upswing could be parabolic imo.
I believe this is big players that have been getting set due to the first two points that i have raised and also what i raise further below.
If you are in doubt that a significant rerate is possible, consider the following three companies as an example;
1) Paladin (PDN) - have the Langer Heinrich mine, was around 0.006c at one stage and shareprice ended going to around $10
2 ) Oxiana (OXR) - was trading under 1c, purchased the Sepon copper gold project in Laos from Rio Tinto, shareprice went to around the $1.50 mark.
3) Independence Group (IGO) - floated at 20c, purchased the Long Nickel mine from Western Mining at a time of rising nickel price. Share price went to around $9.
If you had asked any of the shareholders of these three companies at the time if they believed their shareprice would go to their lofty heights, i am sure most if not all would have said no. I am sure the PDN shareholders who bought at 0.006c would have been happy to get out at 2c and make a 250% profit, not realising that the share price would one day hit $10 !!
The key point that i am trying to get across is that all three of these companies had producing assets which generated cashflow, backed by large reserves, at a time of rising commodity prices. When you have these key ingredients the upside is endless, and you come on the radar of fund managers and institutional investors.
XST has these key ingredients - it recently picked up two oil producing assets with reserves and development potential, are currently on the look out for further oil production assets, are about to drill the multi TCF Borba which has a pipeline nearby to hook up to for production, and all of this is at a time of rising oil and gas prices.
I am not saying that XST are going to do PDN and hit $10, but with the developments that have transpired over the past month, and with further acquisitions in the pipeline (pardon the pun), there is nothing stopping the XST shareprice from hitting 10c, 20c, 50c and even $1 if all the stars align, especially if a decent flow rate is achieved at Borba. Future cashflow (years worth) from the oil production assets and Borba would be factored into the shareprice.
There was a great post from dpbear recently in which he said that "We only have to look at O&G companies on the ASX for the potential XST is sitting on. Almost 100% of producers on the ASX have a MC over $1 billion, many in the tens of billions. The luck with Borba is that infrastructure is already in place and pipelines on the doorstep. Time from a successful drill and pressures to production is only 2-3 months"
XST is currently a 'Producer' - it has oil and gas production assets. It is about to drill Borba in the next week or two, and if there is a decent flow rate and with a gas pipeline nearby it could also be producing gas from Borba in the next few months.
There are 'Explorers' however who have a substantially higher market cap than XST.
Take BPH Energy (BPH) for instance.
BPH with PEP11 has a market cap of approx $100m.
XST with oil production assets and Borba has a market cap of approx $30m.
PEP11 offshore $25m+ to drill, Borba onshore $6m to drill.
PEP11 no drill permit Borba drill permit granted.
Vocal opposition to PEP11, no opposition to Borba.
Unknown spud date for PEP11, Borba spud this week or next.
PEP11 offshore no pipeline, Borba onshore has a pipeline adjacent to it (a few miles) to hook up to.
Borba is in California where the natural gas market is greater than Australia's natural gas market as whole.
And then there are Perth Basin 'Explorers, Strike Energy (STX) and Warrego (WGO), who have market caps of $516m and $222m respectively, and who are operating in an area GJ referred to as the Sacramento Basin's little brother.
STX, with a market cap of $516m, at West Erregulla has approx 730 BCF of gas and is still in the exploration phase, with gas sales for phase 1 expected in 2022 and phase 2 in 2024. $398m of CAPEX is required to get to phase 2 production.
Despite what i have said, XST still continues to fly under the radar and continues to remain significantly undervalued both as a 'Producer' and also when compared against 'Explorers'.
The company making Borba drill is imminent which has the potential to open up a new 'fairway' along trend with Borba, which XST has a 24% interest in.
Once the market wakes up to this the upswing in shareprice is going to be brutal imo and we may even hit Mid Cap territory one day if all the stars align (PDN, OXR and IGO shareholders never thought it was possible for their companies either).
We will look back at now and think what an amazing buying opportunity this was and why didn't we buy more when they were so cheap !!
As always DYOR and GLTAH's
XST Price at posting:
1.2¢ Sentiment: Buy Disclosure: Held
