Hartshead Resources NL (ASX:HHR) has received a prediction of strengthening forward value from MST Access having been favourably compared to the historical performance of UK-based Independent Oil and Gas (IOG), a gas and infrastructure operator that is “well advanced in the same strategy HHR is pursuing”.

IOG – in a very similar manner to Hartshead – is leveraging existing infrastructure to develop Southern North Sea gas assets with first gas forecast in Q4 2021. IOG has enjoyed a six-fold increase in its enterprise value over the last four years.

HHR is planning for first gas in late 2024, so MST believes IOG is about three years ahead of HRR today. MST has analysed IOG’s performance as an indicator of how HRR might progress.

The following is an edited excerpt of MST’s access research report.

IOG valuation up 6X as first gas nears

In 2013 IOG owned 50% of the Blythe field. Over the next three years it acquired the remaining 50% of Blythe, was awarded the Elgood licence and acquired the Vulcan Satellite fields.

At the end of 2017, IOG was trading at an enterprise value (EV)/(2P+2C) of less than US$1/barrel oil equivalent (BOE) on its reported 2P reserves plus 2C contingent resources of about 52 million BOE.

As IOG has developed the Saturn Banks Project (SBP) with forecast first gas from the project in the 4Q 2021, IOG shareholders have seen a steady increase in the EV/(2P+2C) multiple the stock is trading at to its current multiple of about US$6.00/BOE.

Applying that value multiple on 50% of HHR’s current 2C contingent resource for its Phase 1 proposal of 37.4 million BOE (assumes a 50% farmout to fund Phase 1 development) implies a value on the gas retained of over A$150 million at first gas in 2024, compared with HHR’s current trading EV of A$29 million.

Operational update for Phase 2

HHR has started Phase 2 subsurface work program covering the Hodgkin and Lovelace field developments.

The company has received datasets from the previous operator incorporating six separate 3D seismic surveys which will enable the finalisation of a new work program and budget for the Phase 2 subsurface workstreams, targeting completion in Q2 2022.

The work program will encompass the construction of a new geological and geophysical database, detailed interpretation of the new 3D seismic data, petrophysical analysis and reservoir engineering to deliver revised in gas in place volumes, recoverable 2C contingent resources and production profiles for both fields.


“We have a valuation for HHR of A$0.10. It is based on the blend of our Phase 1 project valuation at first gas (A$0.10) and a valuation (A$0.11) based on the mid-point of recent exit multiples achieved for 2C contingent resources and 2P reserves.”

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