Central Petroleum (ASX: CTP) holds an extensive package of prospective acreage of over 270,000 km2 in central Australia, which is predominately in the Pedirka Basin, along with 25,000 km2 in the Southern Georgina Basin.
Apart from conventional gas potential, the company has had independent estimates of over 10,000 trillion cubic feet in UCG "syngas" prospective recoverable resources.
Central Petroleum (ASX: CTP) has received a Speculative Buy recommendation and a price target of A$0.20 per share, more than double its current share price, from a broker.
The following is an extract from the report.
- CTP has announced the termination of Mr John Heugh as CEO of CTP (remaining as non-executive director) and the appointment of acting CEO Dalton Hallgren formerly COO. CTP will be undertaking a search for the permanent CEO immediately.
- CTP have also announced in an operations update that new initiatives have been announced to expedite and promote farm-out opportunities so as to spread and reduce risk with encouraging results to date and for the right deal they no longer have a requirement to be operator of their projects.
- The announcement of a new CEO is key development for CTP and brings increased flexibility as the company pursues potential farm out opportunities and looks to sell down CTP’s high asset positions.
The ability to transfer operatorship of CTP’s projects is also a significant step to attract a suitable farm in partner.
- CTP has high acreage positions and high retained interests of up to 100% which provides a good opportunity to secure funding via farm out for their drilling program.
As a reminder CTP holds a significant acreage position of 295,000km2/50m acres across the Amadeus, Pedirka, southern Georgina and Wiso Basins in Central Australia, prospective for conventional and unconventional oil & gas, Helium and coal for UCG/GTL and coal mining potential.
CTP has commissioned a number of independent assessments across its non-conventional assets which estimate a mean prospective recoverable resource of some 14bnboe.
- CTP has drilled 5 conventional wells and recently announced that oil was successfully flow tested at the Surprise 1 well in the Amadeus Basin at 380bopd. Next steps are extended production test & 3D Seismic in April/May 2012.
- Petro Frontier (TSX:PFC.TXV) have acreage in the Georgina basin and have mobilised a rig to the southern Georgina Basin and drilled two horizontal wells targeting shale. Early results have shown hydrocarbons with fraccing/testing and completion for both scheduled for April 2012.
- Activity in shale gas in Australia is high with large oil companies active in the region targeting companies with shale gas assets: Hess, Conoco Phillips, BG, Rodinia and Petro Frontier have all farmed into acreage.
Share price uplift has occurred for the following companies with shale gas assets: Beach (BPT), Senex (SXY) and Drill Search (DLS) (Cooper Basin), Buru Energy (BRU) and New Standard Energy (NSE) (Canning Basin).
- CTP stock price has not been a beneficiary of this activity, but with the removal of the impediment to farm-out and operatorship, we believe there is now a better opportunity for the company to realize the full potential of its unconventional oil & gas assets and a farm-out will offer a less dilutive funding option for CTP and better look through value to the underlying asset value.
- We believe CTP is significantly undervalued by the market and currently trades at a value of ≈$1.30/acre (current EV/acre) vs peers at above $80/acre (BRU, NSE). Farm-out transactions in shale gas assets in the Georgina//Canning basins have averaged $17/acre.
CTP is targeting dual listing on TSX H12012 to improve the rating of the stock. We re-iterate the Speculative Buy rating on CTP and Price target of A$0.20ps.
- Key Catalysts: Farm out of acreage; Well results; TSX listing/ Key Risks: Exploration risk, funding risk and commercialization.