Real Energy’s Action-Packed June 2020 Quarter and Subsequent Compelling Merger

  • Aug 12, 2020 AEST
  • Team Kalkine
Real Energy’s Action-Packed June 2020 Quarter and Subsequent Compelling Merger

Summary

  • Gas developer, Real Energy’s objective is to discover and exploit oil & gas resources to deliver attractive shareholder returns, and its current focus is on the East Coast of Australia with assets in Cooper Basin and Surat Basin.
  • Providing a number of opportunities to RLE, its tenements contain vastly under-explored areas. Hydrogen energy has been of keen interest to the Company.
  • In Q4 FY20, Real Energy primarily focused on Project Venus and formation of wholly owned Pure Hydrogen Corporation. Subsequently, RLE initiated the proposed merger with Strata- X Energy to become Pure Energy.

Since establishment in 2009, Real Energy Corporation Limited (ASX:RLE), an Australia-based oil & gas exploration and development company, has been aiming to discover and exploit oil & gas resources. Of late, reciprocating to the Federal Government’s road map for Australia’s National Hydrogen Strategy, the Company has been assessing options for establishing a dedicated entity to gauge opportunities for the development of a large-scale hydrogen fuel plant in Queensland.

In this regard, during the quarter ended 30 June 2020 (Q4 FY2020), Real Energy concluded the formation of Pure Hydrogen Corporation Pty Limited.

Let us cast an eye on the quarterly developments of Real Energy Corporation and screen through a compelling subsequent event- proposal of a merger with Strata-X Energy (ASX:SXA) to become Pure Energy, deemed to be “a merger of equals”.

Source: RLE Quarterly Report

Establishment of Pure Hydrogen Corporation

During the quarter, the Company established a wholly owned subsidiary, namely Pure Hydrogen Corporation Pty Limited, to embark on a detailed scoping study evaluating the commercial viability of building, owning, and operating a hydrogen fuel plant in Queensland. A dedicated team that Pure Hydrogen Corporation will establish, and an experienced engineering consulting firm are likely to undertake the scoping studies.

Pure Hydrogen Corporation has already earmarked a couple of potential sites in Queensland to establish the large-scale hydrogen fuel plant, which is expected to have an initial annual production capacity of 36 million kilograms. Real Energy believes that a plant of this size could possibly power 240k Hyundai Nexo’s for a year!

Currently, potential project sites are being reviewed in Surat Basin, adjacent to the Company’s existing 50%- owned Project Venus CSG project and another site near Gladstone. The Company also plans to assess eligibility for government funding.

Project Venus Developments

In the first quarter of 2020, Real Energy secured access to Project Venus permit ATP2051, an equal joint venture (JV) between the Company and Strata-X Energy. The Project comprises high quality and very prospective acreage covering 154km2 within the main Walloon Coal Seam Gas Fairway and close to gas infrastructure (including gas pipelines). Real Energy opines that there is significant coal in this permit that can be turned into significant gas resources.

Source: RLE Quarterly Report

Work undertaken via the JV seeks to accelerate the progressive conversion of gas resources to gas reserves with the objective to advance Project development, potentially deliver early cash flows.

Reportedly, Real Energy and Strata-X Energy have been undertaking initiatives to start operations on the project and are very close to declaring the commencement of this work program. First item of operation is re-entry of Connor 1 well that plans to drill-out cement to 384m, mill the bridge plug, undertake abrasive perforations of coals seams from 410 to 645m, flow test the well using a water test rig, undertake controlled draw-down to determine water influx and induce gas breakout, and use storage tanks for water from flow testing.

In the event of a successful re-entry, the JV plans to roll out a pilot program for establishing significant gas reserves.

Windorah Gas Project Developments

Through the quarter, Real Energy continued to review development options for this Project. Productive discussions were held with a number of potential partners for a farm in agreement, though completion of the same was impacted by COVID 19.

However, the Company remains committed to securing Project funding and is exploring all available options.

Corporate Update, COVID 19 Impact

During the quarter, cash outflows for the Windorah Gas Project and Project Venus JV developments amounted to $81k. The Company is further supported by a financing facility worth $550k provided by an entity related to MD, Scott Brown.

Besides, Real Energy significantly reduced admin and corporate costs. Directors agreed to take some/ all remuneration in shares. At the end of the quarter, fully paid ordinary shares on issue stood at more than 353.19 million. As of 30 June 2020, the Company had $ 1.6 million cash at bank and remains well-funded for its current works program.

Robust implementation of response to the COVID?19 pandemic is likely to ensure that the Company remains well placed once markets and business conditions stabilise.

Post Quarter Milestone: Strata-X Merger Proposal to Form Pure Energy

Subsequent to the end of Q4 FY20, the Company and Strata-X Energy Limited entered into a binding Scheme Implementation Agreement (SIA) to pursue a nil premium merger, whereby Real Energy shareholders will receive a new SXA share for three RLE shares that they own. Besides, the combination proposes formation of Pure Energy Corporation Limited- a compelling opportunity to create a material gas business with significant holdings in Surat and Cooper Basins.

The merged entity’s broader asset portfolio in Australia and Botswana presents further upside along with significant cost savings, owing to the removal of duplicate admin functions and listing costs.

The merger aims to create the next ASX energy growth stock. Real Energy opines that with the huge resources in three gas projects, keys to unlock those resources, this goal is quite achievable.

Source: RLE Presentation

ALSO READ- Real Energy and Strata-X Energy Host Joint Webinar Underscoring Pure Energy

Currently, a Scheme Booklet is being prepared and the Company plans to commission an independent experts report for shareholders. The RLE BoD unanimously recommend that shareholders vote in favour of the proposal.

To know more about the merger, READ HERE- Compelling Combination! Pure Energy to Form Via Real Energy and Strata-X Energy Merger

RLE quoted $ 0.020 on 12 August 2020.

(Note: Currency in AUD unless or otherwise stated)

 

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