RENERGEN Ltd (JO:RENJ) represents a unique opportunity for investors. The company holds the first, and currently only, onshore petroleum production right in South Africa. While it is already producing and selling gas, production is set to accelerate in the next 18 months as it moves to liquefied natural gas (LNG) production, primarily serving the growing domestic heavy duty truck market. The move to LNG also unlocks the potential to extract and sell helium, adding material upside to economics (c 35% upside to NAV). With gross 2P reserves of 142 bcf of methane and c 2.2% of additional helium (Renergen 90% WI), our risked core NAV on a fully diluted basis is ZAR19.0/share. We estimate additional funding of c ZAR240m is required to become self-funding, in addition to a secured ZAR218m of term loan.
In production, permits in place, major helium upside
Renergen’s Virginia Project in the Free State of South Africa is the first and still only approved petroleum production right onshore in the country. EIA approvals are in place and early stage production is already underway; this will ramp up in 2019 when LNG production commences, targeting the growing domestic heavy duty truck market. With LNG comes the ability to isolate a highly lucrative 2.2% helium stream for which Renergen already has offtake agreements in place, adding c 35% to project economics. Edison’s recently published Macro View on helium indicates a potentially tightening market that could further improve these margins.
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