Cooper Energy Limited

COE Details

Butlers Appraisal Program and Rincon Appraisal: Cooper Energy Limited (ASX: COE) is an upstream oil and gas exploration and production company and the primary purpose revolves around securing, finding, developing, producing and selling hydrocarbons. As on January 6, 2020, the market capitalisation of the company stood at $1.02 billion. The company has announced that the 4 well appraisal program of the Butlers oil field in the Cooper Basin by the PEL 92 joint venture is concluded.

The results of 4 wells which were drilled at Butlers are 1) Butlers-10, that is located around 540 metres south-east of Butlers-6, was plugged and abandoned with oil shows in McKinlay Member after drilling to the total depth of 1,697 metres MDRT (or measured depth below rotary table), 2) Butlers-11, that is located around 460 metres south-east of Butlers-4, had oil shows as well as was cased and suspended in preparation for the cased hole test of McKinlay Member reservoir after drilling to a total depth of 1,681 metres MDRT, 3) Butlers-12, that was located around 350 metres south-west of Butlers-1, was dry and plugged and abandoned post drilling to the total depth of 1,695 metres MDRT, 4) Butlers-13, that was located around 500 metres north-west of Butlers-2, wrapped up the program and was dry and plugged and abandoned post drilling to total depth of 1,694 metres MDRT.

Sole Gas Project Update: The company provided an update on the Sole Gas Project and, primarily, the upgrade to the Orbost Gas Processing Plant. It also announced that APA Group is completing the upgrade to the plant to process gas from the Sole gas field. APA has advised remobilisation of the workforce to site as well as the resumption of the commissioning work remain subject to the assurances of safety as well as adequate supplies. APA estimates the impact of bushfires, to date, is for the delay of around 2 weeks to the schedule.

Completion of Minerva Gas Plant Acquisition: The company has recently announced the completion of the acquisition of the Minerva Gas Plant by participants in the Casino Henry joint venture. It was added that the plant was acquired from the Minerva Joint Venture participants (BHP Petroleum is having 90% interest and Operator, and Cooper Energy has 10% interest) after cessation of the production from Minerva gas field. For quarter ended 30 September 2019, the company witnessed a record sales revenue of $22.7 million, up by 21% from $18.7 million in the prior quarter. Notably, cash at end of the quarter stood at $166.8 million.


Key Measures (Source: Company Reports)

Looking Ahead:COE expects that Minerva Gas Plant would be connected by mid-CY 2021. The company plans to manage the capital with an objective of providing shareholders with optimal risk-weighted return from the application of the expertise in the exploration, development, production as well as sale of the hydrocarbons. 

Valuation Methodologies:
Method 1: Price/Earnings Based Approach


Price/Earnings Based Approach (Source: Thomson Reuters)

Method 2: Price/Book Value Based Approach

Price/Book Value Based Approach (Source: Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months.

Stock Recommendation: As per ASX, the stock of COE gave a return of 48.24% in the last one year, a return of 13.51% in the past 6 months and a return of 16.67% in the past one month. The stock is currently trading towards its 52-week high level of $0.685. During FY19, gross margin and EBITDA margin stood at 44.4% and 49.7%, down from 46.2% and 59.8% respectively. We have valued the stock using Price/Earnings and Price/Book multiples approach and expect correction in the price, going forward. Hence, we recommend a “Sell” rating on the stock at the current market price of $0.610, down by 3.175% on January 06, 2020, owing to the recent update on Butlers appraisal program.
 
 
COE Daily Technical Chart (Source: Thomson Reuters)

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