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Real Energy Corporation Limited

Real Energy has commenced appraisal drilling and fraccing of its northern Cooper Basin Windorah Trough tight gas targets with the drilling of Tamarama #2 and #3. Drilling will take four weeks per well, with fraccing and testing later in the year, followed by updated resources and maiden reserves.



  • Building blocks in place to deliver a commercial discovery
    • 2014 wells Tamarama #1 and Queenscliff #1 encountered gas that flowed to surface, demonstrating a contingent gas resource of 276 Bcf (2C) and 672 Bcf (3C). 
    • DeGolyer & MacNaugton estimate a prospective resourceof 13.7 Tcf in place, with 5483 Bcf recoverable.
    • RLE signed a MOU with Santos for toll processing of gas production in June 2017, and a sales offtake MOU with Weston Energy for 15 PJ over 5 years, signed 17 July 2017.
    • The Weston MOU includes a provision for a pre‐payment of A$6M. This would cover our estimate of A$3‐4M for a pipeline connecting the field to the Santos hub.

  • The appraisal wells:
    • Step out only 640m from Tamarama #1, so low risk
    • Drilling has started and regular updates are expected over the next two months.
    • The fraccing must release the formation gas with as little damage as possible to the surrounding coal seams. The coal seams are water aquifers. Disposing of water will be acost, and water displaced gas, reducing saleable output. 
    • RLE had A$8.4M cash on hand at 31 December 2017. We estimate the cost of the two wells at A$6M in total, with A$0.2M/quarter of overheads to pay.

  • Using EV/2C and EV/3C peer relative comparisons, we value Real Energy at A$0.39‐0.45/sh. Our price target remains A$0.32/sh..

  • The overarching theme of the gas supply shortage on the Australian Eastern Seaboard remains in place. Gas prices will appreciate to import parity. A$7 Billion of supply investment is required to 2024, and the gas price must be sufficient to incentivize that level of supply addition.

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