Triangle Energy (Global) Ltd (TEG)

“Now we are here in Xanadu”

Triangle Energy (Global) Limited (TEG) is a WA based E&P company that is the majority owner and operator of the Cliff Head Oil Field and the Arrowsmith plant, a 30% partner in the newly discovered Xanadu oil field and the largest shareholder of State Gas (ASX:GAS) in Queensland.
 

Summary Key Points

TEG is the majority owner and operator of the Cliff Head and Arrowsmith Processing Plant: TEG is the 78.75% majority owner and operator of the Cliff Head oil field and nearby Arrowsmith processing plant. The field is currently producing ~1,200 bbls/day or ~440,000 bbls per year.

TEG is working on a program to upgrade resources and to reduce costs in the Cliff Head Field: TEG has identified several opportunities to reduce field Opex and potentially add more barrels of oil to its resources through an EOR program and infield drilling. This program includes the optimisation of producing wells, recompletions and workovers and following up on several in field and near field drilling targets.

TEG is a 30% shareholder in the newly discovered Xanadu oil field: The Xanadu-1 well confirmed the presence of a 4.6m oil column at the top of the Irwin Coal Measures and high-quality oil was recovered to surface. It is expected that the JV will now embark on a seismic program and drill an up-dip sidetrack well as it believes the well has intersected the accumulation at the lower part of the structure due to sparse seismic coverage. Now that a trap seal has been confirmed it is almost certain that there is more movable oil up-dip of the part of the reservoir that was intersected by the Xanadu-1 well.

TEG is a major shareholder of State Gas (ASX:GAS) in Queensland which gives TEG exposure to the East Coast Gas Thematic: TEG own 47.8m shares which are worth $16.7m at $0.35 (11 October 2017). GAS’s key asset is Reids Dome (PL231) which is a conventional gas accumulation in the Bowen Basin in Queensland. This gives TEG exposure to the East coast gas thematic and high gas prices.
 

Recommendation and Valuation

We initiate on TEG with a BUY recommendation and a $0.38 price target. We have valued TEG on a sum of the parts basis by developing a comprehensive DCF analysis for each of its operational assets. It is important to note that at the time of publication the current TEG share price is 30% below our most conservative view of the business. In our opinion, this provides a high margin of safety for investors as our conservative view assumes no further appraisal, exploration or optimisation success from programs that are currently well advanced.
 

Key Catalysts

Cliff Head Cost Savings: TEG is working to lower the Opex costs of the Cliff Head field thereby improving margins. Good progress has already been made and we can expect further progress on this front.

Increased production from the Cliff Head field: TEG has a field optimisation program underway that has the potential to achieve greater production and a longer field life. Positive results will improve the resource base and production profile.

Near field exploration upside: TEG is looking to drill the Mentelle prospect, which if successful, could add substantial additional reserves and production to the Cliff Head field.

The drilling of a side track well at the Xanadu field: The JV is planning seismic survey and the drilling of a side track well. Results from this program will be critical in determining the commercial potential of the Xanadu field.
 


Disclosure & Disclaimer

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This Research Report, accurately expresses the personal view of the Author. DJ Carmichael Pty Limited, including authors of this report, its directors and employees advise that at the time of publication they hold or may become entitled to securities representing up to 1.2% of the issued capital of the company and/or earn brokerage and other benefits or advantages, either directly or indirectly from client transactions in stocks mentioned in this report.

DJ Carmichael Pty Limited acts as Corporate Adviser to Triangle Energy (Global) Pty Limited and is paid a fee for that service.

The Author of this Research Report made contact with Triangle Energy (Global) Pty Limited for assistance with verification of facts, admittance to business sites, access to industry/company information. No inducements have been offered or accepted by the company.

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Recommendation Definitions

SPECULATIVE BUY – Potential 10% or more outperformance, high risk
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Michael Eidne

Director - Research

Michael has over 14 years experience working in financial markets in South Africa, UK and Australia. Prior to joining DJ Carmichael, Michael held research analyst positions at Bell Potter Securities and Blackswan Equities. He also spent several years working as a consultant for various Perth-based resource companies before moving back to the equity markets. Michael is originally from South Africa where he was a portfolio manager at Edge Capital, which is a large South African alternative investment manager. He also worked for a number of years at Investec Asset Management as an investment analyst.

Michael has a MSc in Mineral and Energy Economics from Curtin University and a MBA in Finance from the University of Cape Town.