NG Energy: Beacon Reiterates Buy Rating, Suggests Firm Could Move Beyond $2.80 Price Target
On January 4th, NG Energy (TSXV: GASX) announced that it has completed all civil works and had laid out all the flow lines to connect its plant to the national gas transportation system. With them now focusing on completing the consultation process with the people who live near/around the pipeline.
The company expects that the assembly of the gas plant will be completed “in the coming days,” which seems like they are only waiting on the Glycol and Dehydration units to be transported to the site. The company also announced that roughly 40 meters of flow line will be laid, this additional flow line will extend the limit of the Aruchara-1 platform to the wellhead in order to tie the well in.
On January 5th, Beacon Securities reiterated their C$2.80 price target, or 46% upside to the current stock price and their buy rating on NG Energy, saying that with the news initial production is imminent. NG Energy getting to initial production has been delayed largely by COVID-related restrictions in Colombia, “that has impacted permit/consultation approvals, movement of equipment & supplies.”
Even with these delays, Beacon believes that management’s timeline will be accurate with the company being able to install the 40 meters of flow line by the end of the month. The application was submitted 5 weeks ago, but “with only ~10% of that government department in the office approvals have dragged on.”
Beacon says that once the pipeline is completed at Maria Conchita, NG Energy should be able to start converting their LOIs into “take-or-pay” contracts at >US$6/mcf. Though, Beacon in their estimates has the gas price at US$5.50/mcf, which means there is the potential additional upside to their price target.
Lastly, Beacon says that when the company reaches initial natural gas from Maria Conchita, “the company should be generating funds flow in excess of US$12 million annually,” which is expected to climb to as much as US$40 million once a single well at SINU-9 reaches production. The firm closes out its note by stating, “if GASX has early exploration success at SINU-9, especially of the high impact variety, its share price may move beyond our target price.”
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