Pure Hydrogen Corporation Limited

PH2 Details

Completion of Merger: Pure Hydrogen Corporation Limited (ASX: PH2) is engaged in the gas and hydrogen business. PH2 has three gas projects – Windorah project in the Cooper Basin, Venus CSG in the Surat Basin in Queensland, the Serowe Project CSG in Botswana, and seven hydrogen projects under development. As of 17 March 2021, the market capitalisation of the company stood at ~$46.30 million. On 17 March 2021, PH2 notified the market regarding the issuance of 148.30 million Chess Depository Interests in the firm under Section 708A, without disclosure to investors. It also confirmed the completion of the merger between the Strata-X Energy Limited (SXA) and Real Energy Corporation Limited (RLE) to Pure Hydrogen Corporation Limited and the appointment of Mr Scott Brown as the company’s MD as of 17 March 2021.

Update on PH2’s Projects: In January 2021, PH2 signed the MoU (Memorandum of Understanding) with Hyzon Motors to co-develop an integrated hydrogen supply, delivery, and refuelling points in Australia and develop a solution for Hyzon Motors’ vehicles. On 12 March 2021, PH2 announced the completion of stimulation and testing of water influx on its Venus 1 well, a CSG Walloon pilot well in the Surat basin at its Project Venus.

1H21 Results of Strata-X Energy Limited: On 15 July 2020, SXA and RLE announced a binding Scheme Implementation Agreement (SIA) of merger wherein the shareholders of RLE would receive one new share of SXA for three shares held in RLE. The merger is expected to provide PH2 a broader asset portfolio in Australia, further upside on the Botswana project, and will provide opportunities for significant cost savings.

For December 2020 quarter, SXA earned nil revenue and had no operating oil production during the period. It incurred a loss of $13,513 from the discontinued operations and general and administrative expenses of $287,119 due to the ongoing operating and merger activities. SXA held $275k of cash and cash equivalents as of 31 December 2020.

Cash Flows from Operating Activities, Q2FY21 (Source: Company Reports)

Key Risks: The company faces the risk of exploring gas and hydrogen on its ongoing projects, risk of commercialising the projects and seeking timely regulatory approvals from the authorities.

Outlook: At Project Venus, PH2 is planning to start the work to set up the well and is also planning to start the flow testing by the end of March 2021. The test results will be used to design an extended pilot, further production wells and water handling needs.

Stock Recommendation: The stock of PH2 gave a positive return of 266.27% in the past three months and a positive return of 425% in the past six months. The stock is currently trading towards its 52-weeks’ high level of $0.44. The stock of PH2 has a support level of ~$0.298 and a resistance level of ~$0.343. Considering the high trading levels, absence of revenue from core business operations, negative bottom line, we give an ‘Avoid’ rating on the stock at the current market price of $0.315, down by 12.50% on 17 March 2021. We suggest investors to wait for updates regarding post-merger developments.

PH2 Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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