Stocks’ Details

Byron Energy Limited

SM58 G2 Well Results: Byron Energy Limited (ASX: BYE) is engaged in the exploration of oil and gas and development in the shallow waters of the Gulf of Mexico, USA. The market capitalisation of the company stood at $296.48 million as on 21^st September 2020. Recently, the company notified the market with the operational results of 100% owned and operated South Marsh Island Block 58 G2 (SM58) well located in the US Gulf of Mexico, wherein, it stated that the G2 well has been drilled to a final total depth of 11,237 feet Measured Depth (10,233 feet True Vertical Depth) and has been deemed non-commercial. The company added that the G2 well has been drilled through the primary target section of the Lower O Sand. However, no commercial hydrocarbons were logged with Log While Drilling (LWD) tools. Previously, the operations at SM58 G2 were suspended because of the presence of Hurricane Sally in the Eastern Gulf of Mexico.

Reserves and Resources at June 2020 Quarter: On 10^th September 2020, the company announced the estimates of reserves and resources report, wherein, it mentioned that BYE possesses proved reserves (1P) of 8.1 Mmbbl of oil and 58.5 Bcf of gas. BYE also has proved and probable reserves (2P): 17.5 Mmbbl of oil and 105.3 Bcf of gas with a combined Net Present Worth of US$486 million. During June 2020 quarter, the company reported oil and gas production (net sales volume) from SM71 and SM58 E1 well of 84,988 barrels of oil and 397,749 mmbtu of gas. Net revenue for the quarter from both wells stood at US$3.7 million. Over the period, the company also finished capital raising of around A$27.6 million through a placement and A$13.8 million via SPP (Share purchase plan). In addition, the company experienced no material impact of COVID-19 on its SM71 platform. As on 30^th June 2020, the cash at bank and borrowings of the company stood at US$16.6 million and US$18.4 million, respectively.

Reserves and Resources (Source: Company Reports)

Focus Areas: The company is mainly focused on projects with high oil content in the current oil and gas price environment. Looking ahead, BYE would only consider gas projects if the assessed potential gas opportunity surpasses 50 BCF and is producible from a maximum of two or three wells. The company is scheduled to conduct its Annual Shareholders Meeting on 27^th November 2020.

Stock Recommendation:  Current ratio of the company stood at 3.34x in 1H FY20 against the industry median of 1.09x. This indicates that the company is in a decent position to pay its short-term obligations. The stock of BYE has provided positive returns of 21.28% and 96.55% in the past one and three months, respectively. The stock is trading slightly below the 52-week low -high average of $0.105-$0.389. On a TTM basis, BYE has EV/Sales multiple of 8.1x as compared to the industry median (Oil and Gas) of 26.6x. On the technical analysis front, the stock of BYE has a support level of ~$0.174 and a resistance level of ~$0.221. Therefore, considering the company’s decent liquidity position, its future focus areas and current trading levels, we give a “Hold” recommendation on the stock at the current market price of $0.190 per share, down by 33.333% on 21 September 2020 owing to release of SM58 G2 well.

Metalicity Limited

Focused on Future Pipeline: Metalicity Limited (ASX: MCT) is involved in the mineral exploration and development with a market capitalisation of $36.08 million as on 21^st September 2020.

Assay Results from Kookynie Gold Project: Recently, the company achieved a second batch of assays from the Phase Two Drilling Programme at the Kookynie Gold Project. Till 15^th September 2020, the company finished 78 drill holes for 5,784 metres at Leipold, McTavish and Champion. In addition, the next batch of assay results are due in late September 2020. These results include the following:

Notable Drilling Results (Source: Company Reports)

Placement to Ramp-up Exploration: On 7^th September 2020, the company finished the placement of $5 million, which was strongly supported by existing and new professional and sophisticated investors. The company would use the funds to significantly accelerate exploration efforts at Kookynie Gold Project, including plans to add a second drill rig to the programme. The company possesses a healthy balance sheet with around $5.8 million to accelerate exploration and development at the Kookynie Gold Project.

June 2020 Quarter Highlights: During June 2020 quarter, the company completed 32 of the 44 drill holes in phase one drilling programme, which returned a significant intercept demonstrating excellent near- surface gold endowment. In addition, the company closed an over-subscribed entitlement issue and a further placement which raised $1.33 million.

Cash Flow (Source: Company Reports)

Outlook: The company is focused on the pipeline of further tenements at Kookynie Gold Project. With respect to Kookynie Targets – Leipold, the company is planning to develop the down plunge as it reflects an exceptional opportunity for exploration success.

Stock Recommendation: Debt to Equity of the company stood at 0.04x in 1H FY20 against the industry median of 0.21x.  In the past three and six months, the stock of MCT has moved up by 100% and 823.04%, respectively. The 52-week low-high range for the stock stands at $0.002-$0.045.  The stock of MCT is trading at a price to book value 16.7x against the industry average (Basic Materials) of 6.6x on TTM basis, demonstrating that the stock might be overvalued. On a technical analysis front, the stock of MCT has a support level of ~$0.022 and a resistance level of ~$0.029. Thus, considering the aforesaid facts, current trading levels and price movement in the past months, we give an “Expensive” rating on the stock at the current market price of $0.024 on 21^st September 2020.

Musgrave Minerals Limited

Acquisition of Nanadie Well Project: Musgrave Minerals Limited (ASX: MGV) is involved in the exploration, discovery, and development of gold and base metal resources within Australia. The market capitalisation of the company stood at $267.86 million as on 21^st September 2020. Recently, the company noted that the Joint Venture company “Cyprium Metals Limited” has completed the acquisition of tenements E51/1040 and M51/887 from Horizon Minerals Limited, which includes the Nanadie Well Cu-Au Project. It was mentioned that Nanadie Well deposit has a high grade, shallow supergene Cu-Au zone and has been granted with mining lease M51/887.

Drilling Programme Commenced: During June 2020 quarter, the company commenced a large RC and diamond drilling program at the new high-grade Starlight gold discovery. MGV divested 7.5 million Legend Mining Limited shares and exercised 10 million options for a net gain of $634k cash and a retained holding of 12.5 million Legend shares. In addition, the company completed an oversubscribed placement and raised $6 million before costs.

Cash Flow from Operating Activities (Source: Company Reports)

Future Focus: Musgrave Minerals Limited remains an active explorer, and it would continue to advance its Cue Gold Project.

Stock Recommendation: Current ratio of the company stood at 4.41x in 1H FY20 against the industry median of 1.87x. This indicates that the company is in a decent position to pay its short-term obligations. The stock of MGV has moved up by 28.41% and 615.19% in the past three and six months, respectively. In addition, the stock is inclined towards its 52-week high level of $0.830.  On a TTM basis, the stock is trading at a price to book value multiple of 13.3x against the industry average (Basic Materials) of 6.6x on TTM basis, demonstrating that the stock might be overvalued. On a technical front, the stock of MGV has a support level of ~$0.517 and a resistance level of ~$0.645.  Therefore, in the light of aforesaid facts, stock movement in the past months and current trading levels, we give an “Expensive” rating on the stock at the current market price of $0.565 per share on 21^st September 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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