Take off, page-71

New SGC research report out;

Price target – sees 12 month target price: $0.11/share

We have taken our risked NPV based valuation of $0.118/share and taken cognizance of the need for a possible $2m of added equity funding once production has begun to drill additional wells. This has been captured in our DDM analysis that generated a value of $0.106/share

Investment thesis
Our investment thesis in SGC is that the company has two multi-TCF drill ready gas prospects ideally located to infrastructure and a market paying premium prices.

In drilling Dempsey prospect it has the opportunity to realise considerable value upside. Its success would also upgrade the Alvares project. Similarly, if CRC moves to commercialise its Tulainyo gas find, SGC’s assets are likely to be rerated by the market, or potentially be the subject of a takeover

Catalysts to move toward our share price target:
SepQ’16 – Raising of $2.5 to $3.2m; introduction of supportive shareholders. A possible farm-out of part of the well reduces funding burden and places a value on the prospect.

SepQ’16 – Engage with contracting companies to finalise drill plans for Dempsey. The prospect has a short path to any remaining approvals and its status is “drill ready” and there is ample equipment and personnel available to undertake cost-effective drilling.

DecQ’16 – Mobilise drilling equipment to site and begin drilling 60-day project.

MarQ’17– Examine drilling result – if successful then engage with gas buyers and look for equipment upgrades if required. Engage with debt providers to fund added equipment and development drilling on a more cost-effective reserves-backing basis.

MarQ’17 US seasonal gas pricing peak – gas in storage is now falling from record levels. Lower drilling could see less surge capacity to cope with seasonal peaks resulting in gas price spikes that can draw attention to gas plays lie SGC.



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