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9.0¢ real energy corporation limited

Upgraded valuation >350% @ 41c, page-2

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Kipper01

7,681 Posts.

582

08/11/18

15:39

Post #: 36435659
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Originally posted by jakspara ↑

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.

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Let's get ready to kick *rse jak!

RLE Price at posting: 9.7¢ Sentiment: Buy Disclosure: Held
2 Upvote

0 Great analysis

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