Comet Ridge Limited (COI) - Government readying the gas sector...

Comet Ridge Limited (COI) - Government readying the gas sector (Petra 13/5/24)

Hot on the heels of the Federal Government’s Future Gas Strategy, whereby it pivoted to a much stronger pro-gas stance, the QLD State Govt has issued $5m in grant funding to COI. The funding comprises the broader $21m Frontier Gas Exploration Program, designed to accelerate QLD gas supply. COI’s funding will be allocated towards a pilot well in the undrilled Mahalo East project (Figure 1), expected to commence in Sep.Q’24. Mahalo East has a 2C Resource of 31 PJ, which if converted to 2P Reserve, at COI’s current market value of in-ground 2P Reserve, could add ~$35m, or 3cps, of value. Maintain BUY, PT A$0.35/sh (unchanged).

QLD Government incentivising new gas supply

• COI awarded a $5m grant from QLD Government, as part of a broader $21m made available under the Frontier Gas Exploration Program.
• Pro-forma (post grant) cash balance of $24m.
• To be allocated towards a pilot test in COI’s 100% owned Mahalo East Project containing a 2C Resource of 31 PJ (Figure 1).
• Mahalo East pilot will look to replicate the extremely successful Mahalo North pilot program, which flowed nearly 2MMscf/d, but also add enhanced steering technology to improve lateral well lengths and design.
• These improvements, if successful, can be replicated across the entire Mahalo Hub, minimising capital costs.
• Successfully converting 31 PJ into 2P Reserve could add ~3cps of value at COI’s current 2P market multiple.

Federal Government becoming more supportive

• Federal Govt has released its Future Gas Strategy.
• Highlights future gas shortages, and as a result, the need for additional gas developments.
• COI is well placed to capitalise on shortages, with a large-scale, advanced development, currently in the regulatory approval process.
• We see the Federal Govt’s new stance, and the QLD Govt’s grant money issuance, as a signal of intent, with perhaps shorter approval timeframes next.

Cheap vs peers (Figure 2)

• COI trades on an EV / 2P Reserve multiple of $1.05/GJ.

o This is a 43% discount to the peer average, which would imply a COI share price of A$0.29/sh.

Key Dates Ahead

• Jun.Q’24 – Mahalo North Infrastructure agreement.
• Sep.Q’24 – Mahalo East pilot well test.