FYI | Nov 26 2019
By Pitt Street Research
Real Energy ((RLE)) is a Sydney-based gas developer, currently focussed on the Windorah Trough project. RLE owns 100% stake in the project, which is located in the Cooper Basin – Australia’s most prolific onshore unconventional resource play.
The company has already discovered significant total mean gas in place of 13.76 TCF and a substantial 3C gas resource of 770BCF, through its four quasi-exploratory wells. RLE is currently in search of a farm-in partner to further develop this project and plans to begin production in 2020.
Infrastructure in place; production to start in 2020
Real Energy recently received the pipeline licence, which would help connect its Tamarama wells to the Santos operated gas gathering facility at Mt. Howitt.
As gas processing agreements with Santos and Beach Energy are already in place, RLE is well placed to begin production in late 2020. Moreover, the Cooper Basin is favourably located to serve the Australian East Coast market, which faces a looming gas supply crunch. The current high gas prices in this market provide significant growth potential for RLE.
Valuation range of $0.15–0.25 per share
We value Real Energy at $0.15 per share base case and at $0.25 optimistic case using a DCF approach for the Windorah Trough project. Our model is based on the estimation of gas supplied from the three Tamarama wells.
We assume that RLE will begin production in late 2020, following the construction of the gas pipeline. For the sake of conservatism, we have not incorporated the potential funding from farm-in partners or gas sales agreements into our model. However, the funding from these sources presents a potential source for re-rating, in our opinion.
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