Carnarvon Petroleum Limited

CVN Successfully Raised $79 Mn Via Institutional Placement: Carnarvon Petroleum Limited (ASX: CVN) has an engagement in the oil & gas exploration, development and production. The company recently announced the issuance of 202,623,637 ordinary fully paid shares at the consideration of $0.39 per share. The proceeds raised will be used to fund ongoing appraisal of the Dorado discovery, including 3D seismic and well costs, Front End Engineering Design studies for the initial Dorado development, contribution towards the equity component of the initial Dorado development, general corporate purposes, working capital requirements and contingencies, including costs to progress the Company’s other projects.

June ’19 Quarter Key Highlights: The net cash outflow from the operating activities at the end of the June quarter was reported at $20.1 Mn. The cash and cash equivalents at the end of the period was reported at $73.85 Mn.


June ’19 Quarter Operating Cash Flow Data (Source: Company Reports)

What to Expect: A new 3D seismic survey at Dorado & Roc was commenced in May 2019. The survey will cover a large number of near field prospects and leads to facilitate further assessment and possible exploration drilling, including the Roc South, Pavo and Apus targets. It is targeted to be completed in August 2019 with fast track processing expected to result in the first technical interpretation to commence early 2020.

Stock Recommendation: Carnarvon’s share generated positive YTD return of 22.73%. Its current ratio for H1FY19 stood at 23.39x, better than the industry median of 1.28x, which implies the company is in a better position to address its short-term obligations. It can also be supported from the fact that the company’s cash position at the end of the June ’19 Quarter stands at $73.85 Mn with no debt. It is presently trading towards its 52 weeks low level of $0.305, which gives an opportunity for accumulation. Hence, considering the aforesaid facts and current trading level, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.410 (up 1.235% on July 29, 2019).
 

Leigh Creek Energy Limited

LCK’s Shut Down Process At Leigh Creek Energy Project Completed: Leigh Creek Energy Limited (ASX: LCK) has an engagement in the development of its Leigh Creek Energy Project (LCEP) in South Australia. The Company recently announced that it has completed the processes to shutdown the plant and facilities associated with the Pre-Commercial Demonstration (PCD) phase of the Leigh Creek Energy Project. On June14, 2019, LCK successfully completed its program to cease operations, shutdown and preserve the plant and equipment of the PCD, which commenced on April 11, 2019. Consequent to the shutdown of the PCD, LCK’s monthly operating expenditures have decreased by approximately $500,000 per calendar month.


Gas Reserves on East Coast of Australia (Source: Company Reports)

March 2019 Quarterly Report: LCK reported total cash balance at $6.6 Mn on March 31, 2019. During March 2019 quarter, the CBA Research and Development working capital debt facility was extended to $4.0 Mn.The total debt drawn under this facility was $3.6 Mn, leaving $0.4 Mn available to be drawn upon as needed. In the March quarter, the Company undertook capital raising activities by offering 25,000,000 Convertible Notes with a face value of AUD$3.0 million with a fixed conversion price of $0:12/note, to existing Top 20 LCK shareholder, Crown Ascent Development Limited. 


March ’19 Quarter Operating Cash Flow Data (Source: Company Reports)

What to Expect: The independent confirmation and certification of the 2P energy reserve will allow LCK to advance with its negotiations with potential joint-venture partners on investment structures and the full-funding solutions for a commercial facility at the Leigh Creek Energy Project. The Company has signed a Heads of Agreement with South African based African Carbon Energy Pty Ltd for the negotiation of one or several of the Lease Agreement, Sale and Purchase Agreement and the Service Agreement, which is expected to help LCK to recover the majority of its engineering and plant costs of the Pre-Commercial Demonstration facility and to also have an early path to revenue.

Stock Recommendation: LeighCreek Energy Limited’s share generated positive YTD return of 112.50% and is presently trading slightly above the average of 52 weeks high and low price of $0.439 and $0.083, respectively.Its current ratio for H1FY19 stood at 1.43x, which is better than the industry median of 1.28x, implying a better liquidity position to address its short-term obligations than its peer group. Its debt-equity ratio for H1FY19 stands at 0.14x, lower than the industry median of 0.39x, which indicates the company is less leveraged and utilises its own resources for funding needs. Hence, considering the aforesaid facts and current trading levels, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.260 per share (up 1.961% on July 29, 2019).  

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