Real Acquisition Target

With the countdown on to the potentially game changing flow rate news from the Tamarama-1 well it is worth considering the potential scenario's should the field be proven to deliver commercial quantities of gas. Real Energy's 1.2 million acres in the cooper basin are surrounded by major Oil players such as Beach Energy, Senex, Drillsearch and Santos. In recent times many of these large operators have publicly stated their ambitions to pursue value adding acquisitions. These are generally done at a per acre valuation representative of the commercial opportunities, each de-risking stage completed by RLE adds significant weight to the acquisition or farm-in value which is likely the ultimate goal.

The bulk of the management team have come from Mosaic, a company which they successfully set up for acquisition at $132m representing a 92% premium to the SP at the time.

With 7.5m (minus burn since last 1/4ly) of cash, no debt and a MC of $18.3m at 8.0c the current EV is around $10.8m representing around $8.30/acre, at this point there remain an opportunity to add significant value to the acreage throughout the de-risking stages, the most critical of which will be to prove commercial flow rates can be achieved.

Looking at a few somewhat recent acquisitions and farm in arrangements highlights the value that could be realised over the coming weeks and months


Chevron has farmed-in with Beach on PEL 218 at $1,103 per acre

Then it's worth thinking about who is in a position to acquire or farm in to RLE's acreage.

21/8/17 The AFR featured an article about Beach Energy's acquisition hopes.

http://www.copyright link/business/...y-bounces-back-into-the-black-20170817-gxyjls

"Beach Energy has fuelled suspicions it will aggressively pursue Origin Energy's oil and gas spin-off, telling investors it is assessing "multiple" acquisition opportunities after posting a sharp rebound in profits.
While chief executive Matt Kay declined to single out specific opportunities, he highlighted the capacity of Beach's balance sheet to support acquisitions.
"We are looking at inorganic growth as one of the potential angles to grow the company, particularly as we are now sitting on $200 million of cash and have around $700 million of liquidity," Mr Kay said.
"We are actively looking at a number of opportunities. It is all about being disciplined, choosing the right opportunities and creating value for shareholders. We will take our time and choose the right one at the right time.""

31 JUL 2017 the Australian Energy Review published an article on Senex' and their growth strategy

http://australianenergyreview.com.au/senex-building-momentum/

"SENEX has a plan to take advantage of significant opportunities in a structurally short east coast gas market. With a successful recent capital raising and support from heavyweight energy investor EIG Global Energy Partners, the gas producer looks set to progress its Western Surat Gas Project (WSGP) in Queensland; progress opportunities in the Cooper Basin; and pursue company-building acquisitions."

Santos who share borders with RLE appear to have been quiet on the acquisition front however seem to be in an increasingly good position to dust off the hat. They have demonstrated a willingness to work with RLE via the recent data swap agreement and are also actively perusing the Windorah basin centered gas play as per the attached slide set



"Real Energy has also agreed in principle to swap geological data for its wells for geological data for a nearby well drilled by Santos"

In summary we appear to be on the cusp of proving commercial flows that will add significant value at a time when many large players are looking to bolster their reserves and cement their futures which leads me to think that at 8.0c/share RLE are supremely undervalued