Triangle Energy (Global) Ltd (TEG)

Quarterly Report Update

Summary Key Points

Cliff Head production report at 99,860 bbls for the quarter: TEG announced that for the September quarter Cliff Head produced 99,860 bbls of oil which resulted in oil sales of AU$6.361m in revenue. Of this revenue, AU$5.0m is attributable to TEG.

Cliff Head revitalisation is targeting 8mmbls of resources: TEG has announced that it is working on near-term upside opportunities for the Cliff Head field. It believes these opportunities could add 8mmbbls to the resource base of Cliff Head.

A positive oil price environment: Our TEG valuation is based on a US$50 Brent oil price and the Brent oil price is currently above US$60 per barrel which is a level that the oil price has not achieved since mid-2015.

Testing of the Xanadu Oil confirms quality: The test results on the oil recovered from the Xanadu-1 well have shown it to be similar to the oil from the nearby Cliff Head field. Therefore it will be possible to treat the crude at the Arrowsmith plant without any major changes to the current process. The testing also confirmed the oil is a high-quality crude at 34o API. The crude will, therefore, attract a good price from refiners.

Xanadu appraisal program announced: The partners in the Xanadu discovery have also announced the appraisal plans for the next few months. The JV expects to complete the seismic early in the new year as well as the drilling of a side-track well to further test sands discovered in the Xanadu-1 well.

Our View

In our view, TEG has a lot of news flow to come over the next few months as the company tackles the Cliff Head infill program and the appraisal of Xanadu. TEG is also working on driving the costs of production down, and this may well create a positive “jaws” going forward of increasing stable oil prices and falling costs, which will lead to increased free cash flow. This free cash can then be reinvested into the Cliff Head and Xanadu creating further value for shareholders from Cliff Head and Xanadu.

Recommendation and Valuation

We maintain our BUY recommendation and a $0.35 price target. Our price target is slightly lower due to the drop in the GAS share price from $0.35 to $0.31 valuing TEG’s GAS stake at $14.8m. However, TEG at $0.16 remains very undervalued when one takes the potential of Cliff Head resource upgrades and the potential of the Xanadu discovery into account.

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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
BUY – Potential 10% or more outperformance
HOLD – Potential 10% underperformance to 10% over performance
SELL – Potential 10% or more underperformance
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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.