Blue Energy is unique with its large undeveloped resource in a gas market that is short. The investment case hinges in management’s ability to execute a transaction and the timing and quantum are speculative. However the strategy is clear, the reserves are real and management credentials and track record are first rate. Hence, Breakaway Research has a BUY recommendation on Blue Energy Ltd.
Blue Energy’s (BUL) strategy is to amass acreage with proven or prospective gas resources, monetise via an asset transaction, and return capital to shareholders. This is unique, and differentiated from peers that seem more intent on growing by amassing staff, raising capital and drilling wells.
Eastern Australia faces a large and extended gas supply shortfall and gas prices have risen 300% in 5 years. This justifies a new wave of investment in production and infrastructure, predominantly in Qld and the NT. Blue Energy has the largest undeveloped resource in Eastern Qld and enormous prospective acreage in the NT, which it plans to monetize via asset transactions. The size of this resource and commercial strategy differentiates BUL from peers.
BUL’s principle assets are:
BUL does not have production or earnings. The investment case is underpinned by transaction and enterprise value for reserves, resources and prospective acreage:
BUL strategy is to monetize this resource via an asset transaction, with a gas-short producer or customer, and return a substantial amount of the proceeds
On current market and transaction benchmarks, we estimate BUL’s asset base is worth 55 cps in the central case, but with a very wide range between 19c and 153c.
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Official website: www.blueenergy.com.au
ASX on Hotcooper: http://hotcopper.com.au/asx/BUL