News: COI Comet Ridge Says Mahalo Acquisition Agreement With APLNG Is Now Unconditional, page-13

Comet Ridge Limited (COI) - Flow rate accelerating at Mahalo North (Petra 22/6/22)

COI has increased gas production almost four-fold at its 100% owned Mahalo North-1 (MN-1) appraisal well in QLD’s Southern Bowen Basin (Figure 1). Production is increasing daily as anticipated to over 310 Mcf/d, up from 85 Mcf/d since the prior update in mid-May. This indicates that production rates have accelerated since the installation of a new pump to facilitate additional production of water and gas. We expect gas rates to continue to increase over the course of the test as the pressure in the reservoir declines. We maintain our BUY and PT of A$0.35/sh.

MN-1 production climbs above 310 Mcf/d

• MN-1 gas production continues to increase daily. Production is now over 310 Mcf/d, an almost four-fold increase since the previously reported peak production of 85 Mcf/d in May (Figure 2).

• Installation of a larger pump has allowed water production to remain steady at 1,560bwpd. Concurrent with bottom hole pressure reducing, this indicates successful desorption allowing gas rates to accelerate over time.

• Modelling indicates MN-1 is draining a large area, improving the ultimate recovery potential of future wells, and potentially reducing the total number of wells required under a development scenario.

• Our 90TJ/d base case development currently assumes a 104 well development, draining 90TJ/d.

• Historical wells at Mahalo have achieved successful outcomes (Figure 3); Mahalo 7/6 flowed 0.43MMcf/d (361m in-seam) and Mira 6/2 flowed 1.4MMcf/d (924m in-seam). MN-1 is testing 1,884m in-seam.

Mahalo is a strategic asset

• COI’s Mahalo partner STO is short gas. STO operates the US$20bn GLNG facility in Gladstone which is currently, and consistently, 20-25% shy of nameplate capacity (Figure 4). STO needs production of ~250TJ/d to fill this void, significantly more than the 90TJ/d development we assume for Mahalo.

• The spot price for east coast gas (QLD) is A$40/GJ (Figure 5). This is 4-5x historical levels and contract prices. In time, an elevated spot price is likely to flow through into higher realised contract prices. COI is perfectly placed to capture the upside with marketing expected over the next 12 months.

• Our model is based on a contract price of A$9.50/GJ. For reference purposes, at spot gas, our valuation increases 497% to A$2.09/sh

Key Dates Ahead

• Ongoing – APLNG and STO deal completions