High Peak Royalties Ltd (ASX:HPR) had ‘a very positive year’ in three standout areas - acquisition of Planet Gas USA royalties, Amadeus Basin drilling and the increase in the company’s share price - according to the company's FY2019 annual report.
Growth of revenue in non-operated royalty income continues and steadily increased throughout the year to $647,433 at June 30, up from $225,912 in FY18.
High Peak Royalties believes it is in a strong position moving forward, with the existing portfolio providing cash flow and organic growth from exploration and development potential.
Upside potential in royalty areas
In the FY19 report chairman Andrew Carroll said the business plan of holding a wide range of royalties remained sound with upside potential in many of the royalty areas.
“This was demonstrated by the interim results from the Dukas well drilled by Santos in the Amadeus Basin (NT) where HPR has a 1% royalty over a wide area.
"The target for this well is the Heavitree Quartz below a salt seal, which has flowed helium and hydrocarbons at nearby wells such as Magee-1.
"One of the participants, Central Petroleum Limited (ASX:CTP), announced that the Dukas well had demonstrated the salt was present, had encountered high pressures, and drilling will continue once rig equipment is upgraded.
"A gas sample confirmed inert gases and hydrocarbons. In addition to the value of hydrocarbons, helium is in global shortage and is a very valuable commodity."
Continued company growth
Carroll added that there were ‘very good’ results offshore in Western Australia in areas adjacent to permits where the company has a royalty.
“Production at the offshore Longtom gas field is expected to resume now that repairs have been completed.
“Central Petroleum has announced they have a large exploration target near the Surprise oil field in the Amadeus Basin and may bring Surprise back on production."
He said royalties in the USA also continued to produce and provide royalty income.
“One of the objectives remains to grow the company and this was achieved with the $3.7 million acquisition of royalty interests over 2,000 wells in the USA through the acquisition of Planet Gas USA.”
He said the acquisition was funded from cash reserves and a loan facility with the Macquarie Bank and was strengthened with a well-supported $1.2 million capital raise in December 2018.
Carroll added: "This acquisition has significantly increased the revenue from royalties so that the current revenue income exceeds the running costs of the company.
"Finally, importantly for shareholders, the share price has increased significantly this year."
HPR last traded at 11.5 cents after recently reaching a new 12-month high of 12.5 cents and up from 5.3 cents almost 12 months ago.