Company Overview: Cooper Energy Limited is an upstream oil and gas exploration and production company whose primary purpose is to secure, find, develop, produce and sell hydrocarbons. The Company's operations consist of oil production in the Cooper Basin (onshore Australia) and the South Sumatra Basin (onshore Indonesia); pre-development activities associated with the Sole and Manta gas fields in the offshore Gippsland Basin, and exploration for oil and gas in the Cooper, Otway and Gippsland basins. The Company's Australian Business Unit includes exploration and evaluation for oil and gas, development, production and sale of crude oil in various areas in the Cooper Basin, Gippsland Basin and Otway Basin. It holds interests in approximately three exploration licenses, over 30 retention licenses and approximately 10 production licenses in the South Australian Cooper Basin. The Company holds interests in over four exploration licenses and a retention license in the onshore Otway Basin.


COE Details

With the release of the first half FY18 results, Cooper Energy Limited’s production expectations for FY18 have been reinforced and development work is expected to feature prominently in the Company’s activities over the balance of the year. Group’s Sole project is tracking well within schedule and budget. Further, there are significant drilling projects which are in pipeline, and the group is concentrating its efforts and resources on building a portfolio-style gas business to help participate in gas supply opportunities in south-east Australia.

Bumper FY18 First half result: The key highlights of the result depicted revenue, cash generation and statutory profit growing by 2 to 3 times or more for the first half. Production also increased by 417% and reached to 0.8 MMboe from 0.16 MMBoe. It also raised $135 million of capital successfully. 2P reserves were upgraded by 362% from 11.7 million and the same reached to 54.1 million boe. The group also got a regulatory approval to act as an operator of offshore operations for its projects including Casino Henry, VIC/P44 and Sole. It also completed its Orbost Gas Processing Facility with APA Group. Meanwhile, Cooper Basin oil production increased by 6%. Some offshore drilling programs were slated to be scheduled as at 31 January 2018. Overall, these results show gains from gas strategy delivery. There were also changes in capex like cooper basin’s capex for 1H FY17 was 2.1 and was 2.3 for 1H FY18 given the amount of activities undertaken. On safety front, zero injury cases and environmental incidents were recorded.
 

Financial Performance (Source: Company Reports)
 
Positive Outlook: Balance of FY18 is said to be laden with aspects that will be serving as catalysts for de-risking, for value creation and for commercial activities. COE plans to commence marketing of Sole uncontracted gas and review potential Gippsland JV partners in relation to Sole wells. Sole gas project is also scheduled for the gas to plant by March 19 and within the budget of $355 million. South-east Australia gas market and outlook also continue to offer prices and demand to reward cost competitive supply from south-east Australia. It is focussed on delivering full value to its shareholders and at the same time, it is working to mature its resources including Manta while Onshore Otway portfolio is expected to deliver a second phase of growth to 2023.
 

Outlook (Source: Company Reports)
 
Key Achievements and plans: It is in the midst of a 6-years’ growth profile which is being sourced from its existing assets and has a leverage to the south-east Australian gas market. It reflected a 264% growth in its operating cash flow and a 433% growth in its underlying EBITDA and a 406% of growth in production in its first half result. Production is said to be in line and has a full year guidance of 1.4 MMboe. Sole project has also been completed by about 30% by the end of January. Further, COE has entered into a new Casino Henry gas contract. Moreover, geotechnical analysis of its offshore Otway Basin also reshaped its exploration plans and views of potential. It is worth noting that Diamond Offshore Ocean Monarch will depart Fremantle for Otway Basin in February 2018 and also Casino-5 workover will be completed by March 18. Sole-2, Sole-3 and Sole-4 production well drilling will be completed in June, April and May, respectively.
 

Cash Movement (Source: Company Reports)
 
Updates on Projects: There was a marginal growth in the operations at Cooper Basin. It produced 137 of kbbl over 130 of kbbl in pcp. Operating costs was A$32.40/bbl for H1FY18. Two exploration wells were plugged and abandoned, and no further drilling was planned for FY18. If we talk about offshore Otway Basin, Casino Henry reported production of sales gas of 3.1 PJ and entered into a new gas contract with Origin Energy from 1 March 2018 to 31 December 2018. Processing at lona has been earmarked for December 2018. Sales gas of 0.7 PJ was also produced in Minerva gas field, and field production exceeded the forecast leading to the need for re-estimating field life.
 
Financial Position: As on 31 December 2017, total assets increased by $208.7 million from $492.6 million to $701.3 million. Cash and deposit balance were seen to have increased by $135.8 million and operating cash flow contributed to $10.0 million. Total equity also increased by $149.9 million while the group’s total liabilities climbed up by 458.8 million and recorded at $266.4 million against $207.6 million of last year. Zero injury and environmental incidents were recorded in the past six months ending December 2017.COE’s FY17 revenue was $39.1 million, which was up 43% from $27.4 million of previous year. Its significant non-operating items were at $(3.6) million after tax and the statutory net loss after tax narrowed down to $12.3 million as compared with FY16 loss figure of $34.8 million. The Company now recorded a statutory profit for the six months to 31 December 2017 of $19.8 million, of which $17.6 million is due to significant items mainly consisting of a gain on sale of subsidiaries, non-cash restoration expense and impairment losses recognised in respect of the Group’s Cooper Basin northern licenses. This figure is against the loss after tax of $8.2 million recorded in the 2017 first half.
 

Sole Gas Project (Source: Company Reports)
 
Other Exploration Updates: With regards to the onshore Otway Basin, COE holds 30% interest in PEL 494 and PRL 32 with balancing interests held by Beach Energy. Lately, Beach commenced the drilling operations at the Basin with spudding of Haselgrove-3, a conventional gas exploration well. Drilling of Haselgrove-3 is being supported by the South Australian Government through the plan for Accelerating Exploration gas grant scheme which aimed to bring new gas to the market within three years. Under the terms of the $6 million grant, if a discovery at Haselgrove-3 is deemed to be commercial, Beach will enter bilateral negotiations with prospective South Australian customers for supply of gas at prevailing market terms. It also continued operating Birkhead oil exploration and appraisal campaign and a four-well oil appraisal and development campaign continued in the Merrimelia Field while the campaign included two development wells, Merrimelia-65 and Merrimelia-66.

Stock Performance: Cooper Energy experienced a strong turnaround in first half results with a growth of 200% or more in net profit, operating cash flow, production and reserves as the Company realised gains from delivery of its gas strategy. As the group is inching towards the positive side on its financial gauge, its Return on Equity is also improving over last few years. Commonwealth Bank of Australia also became the substantial holder of the Group in January 2018 by holding 63,168,996 shares representing 3.95% of voting power. Given the long-term prospects while the stock price was down by 3% in the past one month (as at February 13, 2018), we give a “Buy” at the current price of $0.31
 

COE Daily Chart (Source: Thomson Reuters)

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