NXS 5.16% $1.47 next science limited

euroz current report...68c target before grayling

  1. 1,530 Posts.
    Nexus Energy Valuation
    A$m A$/sh
    Longtom (@ 300bcf) 113 0.46
    Other Assets 10 0.04
    Exploration 25 0.10
    Debt 0 0.00
    Cash 19 0.08
    Total 167 0.68c



    SHARE PRICE PERFORMANCE
    The company's strategy involves building a portfolio of exploration acreage with a
    view to achieving organic growth through success at the drill bit, generating strong
    self-sufficient cash flows. This strategy is borne from acquiring prospective acreage
    "ground floor" at high equity levels, working up prospects, before farming out to
    major companies on attractive terms.

    Comments
    A positive production test result in the lower 39m reservoir section
    of the Longtom-2 appraisal well (NXS 37.5%) has firmed up a
    large volume of gas result that is likely to give NXS a commercial
    reserve base. This follows a total 96m net gas pay intersection in
    the primary Emperor Formation reservoir. Pressure data from the
    lower reservoir section indicates a larger volume of gas downdip
    - this upside will be appraised when further Longtom wells are
    planned for the June H’05.
    The lower reservoir section in Longtom-2 flowed at a stabilised
    rate of 18-19 mmcf/day over an 11 hour period - an outstanding
    result confirming the commercial potential of the previously
    untested lower reservoir section in Longtom. Unfortunately the
    upper reservoir section did not flow gas to surface - NXS interprets
    reservoir damage caused during drilling to be the cause. A core
    has been taken from this section with the aim to give NXS a better
    understanding of the rock properties.
    At this stage we estimate Longtom alone to be worth 38-62cps to
    NXS from analysis so far. NXS estimates Longtom holds a mean
    recoverable gas estimate of 250-400 bcf from the lower reservoir
    section only (@ ~70% recovery).
    From the available data to date, it is reasonable to assume the
    following gross parameters for Longtom at >250 bcf recoverable
    reserves - first gas production from Dec H’06 at 25 PJ/yr and
    capex $150-$180m. As a result annual EBITDA net to NXS would
    equate to $20-25m/yr for 5-10 years.

    Potential Longtom Value
    Recoverable Recoverable Value Value
    Gas Gas (NXS net)* (NXS net)**
    (gross) (NXS net)
    200bcf 75bcf $75m $0.31/sh
    300bcf 113bcf $113m $0.46/sh
    400bcf 150bcf $150m $0.62/sh
    500bcf 188bcf $188m $0.77/sh
    * Using A$1/mcf in-ground gas value
    ** Post equity issue


    The Grayling-1 exploration well (NXS 37.5%) is set to spud later
    this month - the 3D target is 104mmbbls of oil in the Intra-Latrobe
    Formation and could be worth >$1.40/sh to NXS if successful.
    Target depth should be reached around 10 days after spud.
    NXS has an outstanding acreage position in the Gippsland Basin,
    second only to the Esso/BHP JV. We continue to believe this will
    provide NXS with a solid platform to build a substantial oil company
    beyond the current well program.


    MARKET STATISTICS
    Share Price $0.51A$/sh Market Capitalisation $124m R Hosking Director
    Enterprise Value $105m
    Debt nil
    Cash $19m
 
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$1.47
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