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Blue Energy Ltd

BLU is shaping into a major supplier of gas to the east coast market. The quantum of gas that is contracted and the revenue it could generate dwarf the current market value. Our best estimate of fair value is 34.4c and our rating is buy.

  • Blue Energy (BLU) has advanced monetizing its substantial gas assets at a time of rising Governmental support and recognition of the critical importance of gas. BLU has vast acreage and very large gas resources in all of the areas coming into Governmental focus, in Qld and the NT. Agreements with “blue chip” customers for the supply of 505 PJ in total, and MoU’s with pipeline companies for infrastructure access position BLU as development-ready.
  • Key exploration and acreage assets are:
    • Gas reserves of 71 PJ 2P, and 298 PJ 3P, and resources of 1166 PJ 2C and 4179 PJ 3C, in Qld’s Bowen, Surat and Galilee Basins.
    • Interests in 112,000 km2 of prospective acreage in the NT’s Wiso Basin, with broadly similar geology to the widely promoted Beetaloo & McArthur Basins.
  • It is “development” ready in Qld’s Bowen Basin:
    • BLU conducted significant exploration programs in Qld between 2008 and 2014, with numerous wells drilled and $110M invested, and delivered a series of reserve and resource upgrades.
    • Commercialization of the Bowen Basin, which hosts the majority of Blu’s reserves and resources is advancing. Non-binding agreement’s with gas customers in Townsville and southern Qld total 505PJ. At current contract gas prices, this volume represents a revenue opportunity of ~$4B.
    • Queensland Government support for a new pipeline to connect the southern market to the Bowen Basin, and agreements with the APA Group to bring gas south, and owners of the Northern Gas pipeline to send gas north to Townsville, effect gas delivery to the critical markets.
  • The share price does not capture the value from commercial activities. There are E&P peers trading on higher market valuations which are at an exploration phase or have no gas sale agreements. Our best estimate of fair value is 34.4c, based on peer group resource valuations, and the gas volumes subject to sale agreements. However only 15% of BLU’s Bowen Basin gas resource is contracted, leaving substantial upside if the Bowen Basin opens up and Blue can monetize the remaining 85%.

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More details about Blue Energy Ltd

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ASX on Hotcooper:

Markets: Gas, Oil