Empire Energy Group Ltd (ASX:EEG, OTC:EEGUF) has held its base-case valuation of $1.18 per share with an upside case of $1.54 per share, according to a research report from RAAS Advisory.
The analysis is underpinned by testing data and materially a higher-contingent resources estimate which builds confidence in the economic and commercial case.
“The success case at Carpentaria continues to build and could deliver further valuation upside well in excess of our base case,” says the analyst.
Empire shares are currently trading at $0.15 with a market capitalisation of approximately $115.97 million.
Following are excerpts from the RAAS Advisory report.
Business model
Empire Energy Group is an oil and gas development and production company, focused on maturing its portfolio of onshore, long-life oil and gas opportunities.
The key asset is the substantial tenement holdings across the world-class McArthur-Beetaloo basins. The latest testing and evaluation data further underpins the commercial case in support of an early gas development option.
In practical terms, we suggest the company can be considered to be in a pre-development phase, particularly with upgraded resource data, sufficient to underpin economic planning and an accelerated path to first gas.
Making the dollars stretch further
The capital requirements of alternative Beetaloo Basin exposures reinforce the low-capex nature of EEG and how well-advanced the company is, heading towards a target of FID by end-2023 and first gas in 2025.
Recent testing results at Carpentaria confirm the IP30 commercial benchmark with further design optimisation to come.
Notably, EEG has been able to progress through to its current pre-development position on substantially lower inground capex, which also supports a high degree of confidence in the commercial potential.
Testing has delivered material resource upgrades to LNG-scale gas potential in EP-187 and first EUR assumptions based on measurable data strengthening the economic case.
FEED studies and environmental applications are underway for next phase work. We are increasingly confident of further material de-risking across the portfolio across the next 12 months.
A valuation based on lower risk gas
We maintain our valuation, underpinned by testing data and materially a higher-contingent resources estimate which builds confidence in the economic and commercial case.
With further re-rating events to come, a project sanction could be delivered by end 2023. We hold a base-case (mid-point) valuation of $911 million ($1.18/share) with an upside case to $1.54/share.
The success case at Carpentaria continues to build and could deliver further valuation upside well in excess of our base case.