http://www.realenergy.com.au/images/2018/v5/Real_Energy_Limited-2...

http://www.realenergy.com.au/images/2018/v5/Real_Energy_Limited-26_October_Report_2018.pdf

"● Real  Energy  has  completed  drilling  at  its  flagship  Cooper  Basin
Windorah  trough  acreage,  at  Tamarama  #2  and  #3,  and  a  critical
flow  test  phase  is  underway.  Positive  flow  rates  could  trigger  a
commercial  development  in  2019,  catapult  RLE  from  explorer  to
producer and drive a share price re‐rating.
● RLE has achieved many pre‐development objectives:
▪ 4 wells drilled to date all encountered gas reservoir and
two flowed gas to surface on test last year.
▪ DeGolyer & MacNaugton estimate a prospective resource
of 13.7 Tcf in place, with 5483 Bcf recoverable. Contingent
resources are  276 Bcf of 2C and 672 Bcf of 3C.
▪ A binding agreement was signed on 15 October 2018 with
the Santos JV  for gas processing and transportation
enabling RLE’s connection to the eastern gas market.
▪ A gas‐sale MOU with Weston Energy for 15 PJ over 5 years,
including a provision for a pre‐payment of A$6M is in place
providing initial revenue opportunity.
● A gas flow‐rate testing program is underway:
▪ Tamarama 2 & 3, step‐outs either side of Tamaram1 were
successfully drilled and stimulated in 3Q this year, and
confirmed lateral extent of the gas zones.
▪ Flow testing has commenced on both wells. RLE’s reservoir
models predict flow rates of >3 mmcfd are achievable.
▪ If test rates confirm this, then we expect RLE to tie the
existing wells into the Santos infrastructure and begin
commercial production in 2019.
▪ Following  drilling  and  testing,  cash  reserves  will  have
depleted  and  additional  funds  will  be  required  for
development.  Options  include  farm‐down  of  equity,  gas
pre‐payment, equity issuance or early option exercise.
● There is a gas shortage in eastern Australia, and prices are expected
to move higher in 2019. RLE is well placed to supply this market and
has processing and gas sale agreements already in place.
● RLE is  the smallest of peers  trying  to commercialize gas and offers
the greatest leverage in the event of success. EV/resource multiples
are  lower  than  peers  and  DCF modeling  of  small  scale  production
generates a valuation of 41c .
RLE  has  made  significant  progress  its  Windorah  gas  project  and  is  at  an
important juncture, with a move to commercial production dependent on test
results  expected  within  weeks.  Breakaway  Research  has  a  buy
recommendation  on  Real  Energy  and  a  revised  price  target  of  41cps."

The recent Breakaway research report has placed a conservative valuation of 41c, on a fully diluted basis, if sufficient flow rates are achieved at T-2/T-3 to underpin phase 2. RLE is the last of the peer group to re-rate, yet has the potential to become the first to reach production....by a long shot. RLE's MC is approximately 1/4 of the average of this group and is in the box seat to achieve a commercial outcome.