REAL Energy Corporation Limited’s (ASX:RLE), appointment in October as a joint venture preferred bidder for the Queensland Government’s coal seam gas acreage in the highly prospective Walloon Fairway near Miles in Queensland was a defining moment for the group.
Real Energy’s 50/50 joint venture partner is a company actively engaged in oil and gas exploration and development, Strata-X Energy (ASX:SXA).
The partners engaged in a competitive tender process to be appointed as preferred bidders for acreage PLR2019-1-11.
This acreage, which has been dubbed Project Venus, is situated in a prolific gas producing region where more than 4000 wells have been drilled.
The large number of wells, and the high profile companies involved in their development is shown below.
Project Venus is surrounded by high profile companies.
Of note, are the projects being developed by Central Petroleum (ASX:CTP) and Senex Energy (ASX:SXY). From a share price perspective both of these companies have performed strongly in the last six months.
It is worth noting RLE’s existing acreage, which has a certified estimated total mean gas in place of 13.8 trillion cubic feet and a 3C gas resource of 770 million cubic feet.
In terms of determining fair value, K1 Capital updated its research on Real Energy in July, attributing a base case value of 16 cents per share, implying upside of 400% relative to the group’s current share price.
Further highlighting the company’s undervalued position, subsequent to K1’s report, Real Energy substantially upgraded its Windorah Gas Resource, including an uptick in the 3C Contingent Resource to 770 billion cubic feet, significantly higher than the 672 billion cubic feet referenced in K1’s report.
Consequently, there is no doubt that Real Energy is punching well above its weight, and should promising news flow from the Venus project trigger a swift rerating, the upside could be substantial.