Empire Energy Group Ltd (ASX:EEG, OTC:EEGUF) has drawn broker attention with the inking of a 10-year binding gas sales agreement (GSA) with the Northern Territory Government for the Carpentaria Pilot Project in the Beetaloo Basin, which will see the oil and gas company offload 25 terajoules of hydrocarbons per day.
Blue Ocean Equities (BOE) has estimated the net present value (NPV10) for Carpentaria at $300 million, based on price assumptions of A$10.50 per gigajoule and a total revenue forecast of about A$790 million over the life of the 10-year agreement.
Clear path to first revenue
BOE points out the binding GSA gives the Carpentaria project a clear “line of site to first revenue” in the second half of calendar year 2025, when EEG will begin to deliver between 8 and 10 terajoules a day.
With the broker's current price estimates, it assumes Glencore’s demand for gas alone will generate about A$36 million per year and about A$21 million in operating earnings.
The research report also highlights potential for further improvements to flow rates in the near future, as further work by PWC to upgrade the McArthur River Pipeline could increase output to 15.5 terajoules per day, generating revenue of about A$57 million per year and operating earnings of A$34 million.
Overall, Blue Ocean says Carpentaria’s valuation is well in excess of EEG’s current market cap and enterprise value and leaves the target price for the company’s stock unadjusted at $1.05 per share.
The research note highlights that further de-risking of the project would likely move its valuation higher, suggesting a potential price range compared to peers in the US market of between A$0.75 and A$1.50 a share, for a midpoint of A$1.13 per share.
Empire Energy shares are currently trading at $0.267.