Empire Energy Group Limited: Liquids-Rich Gas in the Offing for Beetaloo-Carp 1 Region
Empire Energy Group Limited
Liquids-Rich Gas in the offing for Beetaloo-Carp 1 region
Empire Energy Group Limited (ASX:EEG) is a junior oil and gas producer/explorer, with onshore Northern Territory (NT) and US oil/gas assets. EEG has the largest tenement position (28.9m acres) in the highly prospective Greater McArthur Basin, which includes the Beetaloo Sub-basin. The material uplift in EEG’s 2C/2U gas/liquids resource base, after the purchase of the Pangaea-EMG JV Beetaloo Sub-Basin acreage lifts stated 2C Contingent Resources to 199Bcf gas/3.5mmbbls liquids, with significant upside potential. The NT energy basins are fast developing as liquids rich gas, strategic bolsters for east coast Australia’s future energy needs, and potential supply for Darwin’s expanding LNG export terminals, amid strong policy/funding support from Territory and Federal governments. EEG recently lodged a gas Discovery Notice from its EP187 Carpentaria-1 well, after yielding an instantaneous peak flow rate of >1.6 mmscf/day from the stacked Velkerri target shales, with strong, above expectation liquids content. EEG has been awarded up to $21m in Federal grants, supporting up to three horizontal appraisal wells (25% total costs, including seismic) to advance Beetaloo commercial evaluation.
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 holds substantial exploration acreage (28.9m acres) in the world-class, McArthur-Beetaloo basins Northern Territory). EEG is looking to progress evaluation activity to support reserve bookings and underpin early gas development opportunities. Success could see first cash flow within 24-36 months (RaaS estimate), assisted by LPG liquid “credits”, assuming existing pipeline infrastructure links and upgrades are delivered in parallel; supported by Federal government “Strategic Plan” infrastructure funds and EEG drilling grants of up to $21m.
Liquids-rich gas results progress EEG’s LPG business case
EEG has released very encouraging follow-up flow test results from Carpentaria-1, importantly demonstrating a high LPG content (21% of the raw gas stream). The relative zonal contributions from each of the target shale zones (A, Intra A/B, B and C) also support a high confidence level of potentially commercial prospectivity across the entire Velkerri section. Strong gas contributions were reported from both the B and C Velkerri zones, with Intra A/B also exhibiting >20% output. Although noting this is one data point, the liquids content is well above our expectation and offers significant commercial optionality for EEG. A recent Senate Inquiry has upheld the Federal Government’s Beetaloo Cooperative Drilling Program aiming to accelerate regional energy developments. Next steps: a) Complete Carpentaria-1 test work (targeting late-September; b) complete regional infill 2D seismic acquisition; c) commence Carpentaria-2 horizontal multi-stage appraisal. The company is well-funded with gross cash ~A$28m on-hand as at 27-Aug.
Our midpoint valuation is $1.04/share ($622m)
Our valuation range for EEG is $400m-$738m ($0.64-$1.19/share), with $622m or $1.04/share the mid-point. With several event drivers emerging over the next 6-12 months, there is the potential for further uplift to the valuation.
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