STTCOMP EXR FA LONG ENERGY - OIL & GAS SP 4.9c SOI 487m OOI 111m (strike 6.79c by 21/12/20) CASH $4.3m MC ~$24m (undiluted)
EXR are exploring for coal seam gas in Mongolia with a maiden drill planned for September (the catalyst) to test a play 8 years or so in the making. The risked prospective resource is 7.6TCF and the upcoming drilling will aim to increase the certainty of this prospective resource, ideally leading to the booking of reserves.
For perspective 7.6TCF of gas is worth somewhere around $60 billion if ever converted to sales gas. EXR are al long way from here but it’s worth getting some appreciation for the scale of the elephant they have set in their sights. As with any oil and gas play the value attributed to the resource/reserve grows as the confidence level of being commercial increases.
EXR have done their homework, they have secured 100% ownership in the 7 million acre Nomgon IX block which is set in the Gobi Desert region of Mongolia, bordering China, the block in known to host the right type of coals in the right depth window to have gas saturation and permeability levels which support commercial development.
In recent times EXR have successfully negotiated a PSC with the Mongolian govt which gives them a 10-15 year exploration window and a production term of 30 years. Govt support is in place for development both from an economic and environmental standpoint. The county are currently reliant on coal as their primary source of energy and income and have some serious smog issues in their main centres so it’s not just an economic incentive but also public wellness.
In terms of management the team have been bolstered recently with Richard Cottee having been appointed as Chairman, Richard took his last coal seam gas play which was QGC from 20m MC to $5.7b takeover. The other addition is Stephen Kelemen who those in the industry will possibly know as the man who drove STO into CSG, hes currently on the board of GLL and is a professor teaching in the University of QLD at the Centre for CSG . The other key person is the MD Neil Young who also has extensive experience with the QLD CSG projects at their inception. Neil has been working in Mongolia since 2011 and this is his baby. The team are highly skilled and vastly experienced in frontier coal seam gas commercialization.
Elixir’s Managing Director, Mr Neil Young, said “Our upcoming core-hole program is on track to supply us with the key data we need to start to convert part of the massive prospective resources independently confirmed in our PSC into contingent resources. Quite simply, we aim to book Mongolia’s first gas discovery within less than six months.”
Come September the drill will be spinning and they will be drilling 2 or 3 holes, should the cores prove that the coals are as extensive and productive as hoped then the reality of a gas project with tens of billions of dollars worth of gas becomes one step closer to fruition. The value of the company will likely shift to reflect this and as we often see the time when this is priced in is generally during the drill as expectation builds. It’s not a sure thing , nothing in O&G is but the ingredients are all there for this to be Cottee’s next QGC.
TA wise the chart recently back tested the break which saw a sharp move from 3.4c to 6.5c, since the back test volume has began to rebuild as we approach the FA catalyst of drilling. Roadshows are booked for the first week of September which will likely increase interest in coming weeks also.
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