Great announcement today. It's always a momentous occasion when...

Great announcement today. It's always a momentous occasion when you move from explorer to producer. Having worked in the O&G industry some time ago, it really is a high risk, (usually) high reward game. Getting this asset developed and to market is no easy feat, especially in this challenging market, muddied by political agendas, climate pressures and probably most challenging, the supply chain and labour economics. I commend both TPD and STX.

Now, I know I haven't been in TPD as long as quite a few of you, but I get the feeling I have timed my entry quite well. It's clear from quite a few posters that we all feel TPD is undervalued, some may say grossly undervalued. I've had a chance to digest a bit more of the research out there and I thought the recent Bridge Street piece was quite good, definitely worth a read if you haven't already.

It got me thinking about some of the numbers being thrown around, and some of the assumptions and sensitivities. It is fun to have a play with some of those variables, see what it spits out... without doing a full NPV or SOTP calc. Given we are literally only weeks away from making the transition to producer and earning revenue, I was thinking that perhaps, some in the market don't appreciate some of the potential upside to come for TPD.

For example, the GSA TPD have signed jointly with STX to supply a minimum 36.5PJ to STO over 5 years. That's locking in ~60% of the Walyering plant's nameplate 33TJ/d capacity to this GSA. I get to 60% by the following....36.5PJ is 36,500 TJ, over 5 years, ~7,300 TJ p.a. or ~ 20 TJ/d p/d of the possible 33TJ going to STO, as a minimum. TPD's 45% share of the 20TJ is ~9TJ/d. That leaves TPD with ~6TJ/d of uncontracted gas to sell into the spot market, which as we know is pretty hot in WA at the moment. We are seeing prices nudge over $10GJ, which is 5 times what the market saw in the covid depths of 2020. How things have changed in the space of 2-3 years.

So, just doing some back of the envelope calcs, it appears analysts have STO GSA priced around the $7GJ mark give or take, I have seen some blended GSA/spot numbers out there but for argument sake I am trying to carve out the LT GSA pricing. So, TPD's share is 9,000GJ p/d @ $7GJ, comes to ~$23m per annum revenues - this is just from the STO GSA. Add in the potential "as available" gas volumes, and if we assume $10GJ spot price, gives us an additional ~$22m. At $12GJ spot price its ~$26m. And this is just the gas, no rev. calcs for the condensate as yet. And I am not going to be factoring any potential Mongolia gas into these calcs as it's such an unknown ATM.

So my point is, TPD could be on the cusp of becoming a producer at the most opportune time, with spot market on the boil and not looking like stopping or receding anytime soon. With TPD gas revenues potentially $40m to $50m+, well it doesn't take a genius to see TPD remaining at it's current EV of $100m does not make sense. Well it doesn't for me. Happy to be corrected if anyone feels TPD is fully valued ATM.

A couple of other valuation metrics that some may find of interest. Peer comparisons using EV / mmboe or EV / 2P+2C. Not long ago STX shared this:


The point here was that bringing Walyering online may help facilitate a re-rate across all of STX (and TPD's) Perth Basin gas Reserves & Resources.

Using this metric, TPD currently sits at an EV of $100m and with 2P (24PJ) +2C (434PJ) = 458PJ or approx. 78mmboe, gives you a rather underwhelming 1.28. That's substantially below peer developers of 2.5. If we used that peer metric TPD should by argument be sitting at ~36c as a developer. If we were to hypothetically apply the "producer premium" then you could argue TPD should be pushing up on it's way to $1+.

If we used Bridge Street's example:



If were to "mark to market" to STX as our logical peer, you could argue TPD SP should be closer to ~86c rather than 18.5c. However bear in mind it's not always easy to compare apples with apples b/c if you dig deeper, STX's total 2P/2C is 981PJ however 38% of that is in 2P, a far more "bankable" number. TPD, by comparison, has 458PJ but only 5% of that is in 2P. It is clear TPD has more work to do in converting the 2C to 2P... but that is all in the pipeline of future exploration and appraisal activities... and it is also clear there is a great deal of upside in their portfolio across both contingent and prospective resources. It is the reason why I have invested.

Are these numbers fanciful? Perhaps... but the market will decide what this re-rate is once some concrete numbers start coming through our quarterlies... in the c/f statements and balance sheet. I have a gut-feel we are about to break through 20c and will march much higher. There is no denying these numbers and I think 17/18c will be a distant memory.

Until then, very happy to continue buying at these levels.

GLTA