Empire Energy Group Limited: New Beetaloo Permits Ensure EEG Spoilt for Choice

Business model
Empire Energy Group (EEG) is a junior oil & 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 basin, considered world- class. Commercial gas flow rate successes from EEG’s Beetaloo 2021 work program could deliver reserves and allow cashflows within 24-36 months (RaaS estimate), assisted by liquids “credits”, assuming existing pipeline infrastructure links & upgrades are delivered in parallel; supported by generous Federal government “Basin Strategic Plan” funding.

2021 to focus on Beetaloo commercial development outcomes
With the Pangaea-EMG $67m buyout largely concluded and 2021 funding fully secured, EEG can focus its attention on developing the commercial outcomes for its expanded Beetaloo tenement portfolio. Recent uplifts in US oil and gas asset prices may additionally renew M&A interest in EEG’s US Appalachia portfolio, which no longer looks a natural fit amid EEG’s increasingly NT-dominated portfolio. A sale could release cash for the NT drill programme. In the Beetaloo, we expect EEG to continue its NT-approved vertical hydraulic stimulation & flow testing plans for the Carpentaria-1 well, plus conduct infill and step-out 2D seismic on the SW area of the EP187 tenement, after observing liquids-rich gas within EEG’s EP187 middle Velkerri Formation shales in 2020, enabling sizeable prospective resource upgrades. The Pangaea tenements will also receive drilling attention, once access rights and EMP approvals are in place, likely by 2Q 2022’s dry season. Further expansions to EEG’s 2C resources will define the size/delivery schedule of potential sales agreements. A liquids component offers early commercialisation “credits” options, while installed pipeline infrastructure on EEG’s Beetaloo tenements offers ready-made transport options, both into Darwin (for processing/exports) and east coast consumer markets.

Resuming coverage with a valuation range of $0.62-$1.17
We have updated our model to incorporate the Pangaea-EMG Beetaloo tenement buyout. Our mid-point valuation has lifted by 207% to $0.98/share (previously $0.61/share). Our valuation range is now $0.62-$1.17/share. EEG has several event drivers over the next 6-12 months which we view hold potential to generate a sizeable uplift in NAV.