Empire Energy Group Limited: Beetaloo $21m (3.4cps) Grant Approval Fast-Tracks 3 Wells

Business model
Empire Energy Group (EEG) is a junior oil and gas producer/exploration company, focused on maturing its portfolio of onshore, long-life oil and gas fields. The company is the 2nd largest conventional gas producer in the US NY State and holds substantial exploration acreage (28.9m acres) in Australia’s Northern Territory, McArthur-Beetaloo basins, considered world-class. EEG will be looking to generate commercial gas flow rates to underpin reserves bookings and support an early development opportunity. Success could see first cash flow within 24-36 months (RaaS estimate), assisted by liquids “credits”, assuming existing pipeline infrastructure links and upgrades are delivered in parallel; supported by generous Federal government “Strategic Plan” funding of up to $21m (3.4cps).

EEG gains up to $21m (3.4cps) via Gas-Fired Recovery Strategy
EEG has received up to $21m (3.4cps) in grant approvals under the Federal Gas-Fired Recovery Strategy Beetaloo Cooperative Drilling Program. The funding support aims to fast- track advanced regional exploration activity up to end-2022, with the ultimate prize to accelerate production from the “world-class” Beetaloo Sub-basin to bolster East Coast Australia’s energy supplies and create new jobs. Under grant specifics, up to 25% of EEG’s total costs from 3 planned horizonal appraisal wells on its EP187 tenement can be funded, to help boost resource definition and accelerate commercialisation returns. EEG’s first well, Carpentaria-2, is planned for early 4Q21 (subject to NT approvals), with preparatory design and engineering works underway. Seismic is also planned, to ascertain the best pad locations. EEG is completing an extended flow test of up to 90-days on its Carpentaria-1 vertical fracture well, while evaluating the proportionate contribution from each Velkerri target shale zone (A, A+B, B and C) and determining the relative gas/liquids composition, in preparation for the upcoming drillingl programme. The Pangaea asset approval EGM is slated for 3rd August.

Valuation is $0.98/share or $608m
Our valuation range for EEG is $385m to $728m or $0.62-$1.17/share with $608m or $0.98/share being the mid-point. With several event drivers emerging over the next 6-12 months, there is the potential for further uplifts to the valuation.