Deficit of industrial gas supply has now begun, says leading fundie

The value of Australian-based coal seam gas exploration company Comet Ridge, says Pure Asset Management portfolio manager Tim Callan, “very much comes down to the supply/demand dislocation, which is developing in the Australian gas market”.

Delving into the outlook for industrial gas supply and demand during his The Insider: Meet the Fund Manager appearance earlier this year, Mr Callan said the projected supply deficit had begun, saying “the shortfall in terms of gas production in east coast Australia is really stark”.

In fact, by 2039, there could be demand of 4.57 times available supply – and that is if all development ready reserves are brought into production.

In a move that Mr Callan said was necessary for the project to be developed, Pure Asset Management funded the buyout of APLNG’s (Origin) 30% stake in the joint venture to bring Comet’s holding to 70% (up from 40%), with the remaining 30% being held by Santos.

This allowed it “to move to two parties with prospects of development and hopefully fulfil the potential of the Mahalo gas area”.

The company’s current reserve estimates stand at 186 petajoules (PJ) in 2P and 321 PJ in 3P for the Mahalo Gas Project, with Mr Callan adding that “at a micro level, they’ve got really significant exposure to the Mahalo gas hub area”.

“In terms of size, we saw Senex acquired for $900 million a couple of months ago … the Mahalo gas hub area itself, just the JV location is larger than the area that Senex have got … Comet own adjoining tenements as well (Mahalo North and Mahalo East),” he said.

The portfolio manager noted that the dewatering phase of gas production testing is often a good indicator of the pressure in which gas is likely to flow after dewatering has been completed.

On Mahalo North, Mr Callan added: “There is significant pressure build-up … The pressure does indicate a significant gas flow once this takes place.”

This interpretation proved abundantly true, with Mahalo North going on to achieve enormous success during its recent pilot gas production test, passing 1.7 million cubic feet per day.

This represents the highest recorded gas flow rate from a pilot well in the Mahalo Gas Hub area, on a 100% Comet Ridge-owned project.

The test achieved its objectives and, through demonstrating a strong gas flow rate, has confirmed the presence of a large reservoir volume.

The company has also attracted interest from the likes of veteran Bell Potter resources and energy analyst Stuart Howe, who has increased his price target from $0.12 per share in May 2020 to $0.25 per share in June 2022.

Click here to view more videos from Tim Callan’s The Insider: Meet the Fund Manager session.

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