Perth Basin running hot (and what it might mean for TEG)

TEG is primed to reap the benefits of being in the right place at the right time for their L7/EP 437 permits in the Perth Basin. The value of just these permits could be more than double TEG's current MC.

1. Perth Basin in being rediscovered

Far from being spent the North Perth Basin Creaming Curve (NWE website) highlights its rediscovery by going deep. Massive finds at Watsia, West Errugalla (WE) and Lockyer Deep highlight the potential for further significant discoveries.

2. The Perth Basin is tightly held


The basin is dominated by Mitsui, BPT, Min Res and STX. The takeover of WGO will either further consolidate the basin (if BPT or STX win) or introduce another major play in Hancock Prospecting. Either way L7 will be one of the last farm in opportunities in the Basin.

3. Infrastructure and demand are in place The basins proximity to Perth and in place gas pipelines provides a speedy route to market. Watsia, as an example, went from discovery to first supply in less than 2 years.

A Production license is already in place for L7 and the Dampier-Bunbury pipeline runs through the lease.

4. Major players are interested in the Perth BasinBPT, STX and Hancock Prospecting have all placed formal bids for WGO. Rumors are flying but others are also considering bids. (Min Res, Fortescue, Mitsui)

5. Most recent farm in was high value

The most relevant/recent farm out agreement was Warrego's farmout of WE to STX in 2018.
Consideration: $0.6m cash and $11m carry
2c Reserves: 71BCF gas
Implied value: $12m/ $0.169m BCF

L7 has prospective 2c resources of 617 BCF gas and 19 mmbbls oil. On comparison to WE farmout L7 seismic is likely further advanced. (i.e. prospective resources better mapped, less upside potential)

Allowing a 50% reduction in value per BCF, due to more advanced mapping, L7 has an implied value of $52m (617 BCF *0.0845)

At a current MC of $22m the market is yet to realise the potential of L7/EP 437 to TEG.