Empire Energy Group Limited: “Discovery” – It’s a Gas, Gas, Gas (Liquids) At Carpentaria-1

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 “Basin Strategic Plan” funding.

Hydrocarbon Discovery validates Beetaloo south-east address
EEG has lodged a gas Discovery Notice with the Northern Territory government, following strong hydrocarbon flows to surface (0.37mmscf/day over 72hrs) from the vertical fracture stimulation of the stacked Velkerri A, A+B, B and C, gas-rich target shales of its Carpentaria- 1 well on EP187, comparable to other Beetaloo Sub-basin well results and at shallower depths. Better still, CO2 levels are below 1%. The results add further weight to EEG’s strategy of generating positive future cashflows from horizontal wells on its south-eastern Beetaloo property. The next steps are to complete a 90-day extended test, evaluate the proportionate contribution from each frack zone and determine the relative gas/liquids composition, in preparation for its upcoming horizontal programme. Overhanging this positive development has been the move in the Federal Senate to initiate an inquiry into the economic, social and environmental consequences, including groundwater and aquifer systems, of future Beetaloo developments. This inquiry will be chaired by the Greens. We note that the Federal Government has no jurisdiction over the regulation of the Beetaloo sub-basin; that is the province of the Northern Territory Government which has given bi-partisan support to the development of the Beetaloo.

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.