Buru Energy recently engaged MST Access to provide an assessment of the Company and its portfolio of assets, the crown jewel of which is its Rafael conventional gas and condensate discovery in the Canning Basin of Western Australia. MST Access has developed a valuation model based on publicly announced information and assessed a share target price of AUD $0.40, with significant upside potential.
Rafael a game changer
NEED TO KNOW
− The 2021 Rafael gas discovery is transformational, and added to new ventures and free-carried exploration generates an unrisked upside of ~$1.62/sh.
− New ventures in carbon capture and storage (CCS) and Hydrogen opens up low-carbon opportunities.
− $14M cash, nil debt, production cash flow and operational skills to execute growth plans.
Buru’s 2021 conventional gas and condensate discovery at the Rafael#1 well, in the onshore Canning Basin W.A. transforms Buru. Development concepts for a small scale FLNG project generates an un-risked NAV of A$1.62. A 3D seismic survey in 2023, appraisal drilling in 2024 in parallel with commercial work, partner selection, financing and eventual development are de-risking events and if met, provide substantial upside.
Buru has options for a low carbon world and has set-up subsidiaries
GeoVault for carbon capture & storage (CCS) in the Canning & Carnarvon Basin, and 2H Resources to explore for natural hydrogen in South Australia.
Oil production provides funds for business costs, there is nil debt and $14M cash. Other significant events are a two-well free carried exploration program in the Carnarvon Basin planned in 2024.
Investment Thesis
The Rafael conventional condensate-rich, low CO2 gas discovery justifies a significant re-rating. The resource has been independently assessed at 260 Bcf (2C) and up to1Tcf of gas and 20 million barrels of condensate at the 3C level. The share price discounts the value of in-situ resource and gives no value to commercial potential, in our view.
GeoVault and 2H Resources new ventures differentiate Buru from peers
and would have significant value as stand-alone entities. We expect these initiatives will gain momentum in a de-carbonising world and in time.
There is significant commercial and technical work to fully exploit Rafael, and other exploration activities planned in 2024, but Buru has extensive in-house capability to manage what could become a very large and valuable enterprise.
Valuation: Core value A$0.40. Un-risked upside $1.62
MST’s valuation method is a combination of a risked DCF of a Rafael gas project and equity market peers active in natural hydrogen, CCS and exploration. We value the core E&P assets at A$0.40, with Rafael risked due to its pre- development status. Major de-risking milestones and the value implications are documented in this report, and lead to an un-risked upside of $1.62.
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