Leigh Creek Energy Limited (ASX: LCK) is engaged in the operations involving energy. Leigh Creek is a growing firm with an emphasis on the development of its Leigh Creek Energy Project in South Australia.
The company today, on 12th April 2019, published a transcript of the Boardroom Media Interview featuring Executive Chair, Justyn Peters and the company’s Investor Relations Manager, Tony Lawry.
Tony communicated that as per the observation, at current share prices, the market is valuing LCK’s gas at 13 cents per gigajoule compared to the market average at $1.43. LCK’s 13 cents per gigajoule is probably a bit higher now, as the share price has risen since the maiden reserve announcement by the company.
An analytical distinction between LCK and its peers would suggest that the peers, for the most part, are funded to production, are mature on multiple oil and gas producers, which have revenue from commercial production with off-take agreements. Hence, LCK is not directly comparable, but the comparison does suggest that LCK is significantly undervalued. The most recent transaction that the market is aware of is the sale of the Ironbark Project to the Australian Pacific LNG consortium. This was for $231 million for 129PJ of 2P gas, which equates to a value per gigajoule of $1.79. The difference between the $1.79 per gigajoule from Ironbark and LCK’s 13 cents provides some insight into LCK’s upside potential.
Further, he stated that syngas is a composite gas that can be converted to several products, such as natural gas, electricity or a range of petrochemical products, such as ammonia, urea fertiliser or hydrogen. These downstream products offer a positive financial outcome, but the company is focusing its attention on synthetic natural gas and urea at present because both business models offer superior shareholder returns. There is also a range of non-financial considerations in the decision, such as the ammonia-to-urea option consumes carbon dioxide, which lowers the carbon footprint of the project.
On the future strategies of the company, Justyn stated, the company has shown that with a reserve, they have a bankable asset that can go onto the balance sheet of the company. Moreover, the company must move to the next step and turn those assets, the valuable things that they have done into a project.
Justyn also emphasised on working very closely with the partners of the company, since LCK is looking at a major commercial project in South Australia with a high CapEx, which is not easy for the company to handle alone. As partners, it has China Communications Construction Company in China, Shanghai Electric and China New Energy, which is a subsidiary of Shanxi Meijing Group.
On the price-performance front, the stock of Leigh Creek Energy Limited, at market close on 12 April 2019, was trading at $0.360, an increase of 10.769% during the day’s trade and with a market capitalisation of $177.99 million. The stock has generated a significant YTD return of 170.83%, with returns of 38.30%, 182.61% and 66.67% respectively over the past six months, three months and one-month period, respectively. Its 52-week high price stands at $0.430, and 52-week low price stands at $0.089, with an average trading volume of 4,194,499.
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