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Condor Energy Ltd

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- Condor Energy Ltd
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Investment Memo:

Condor Energy Ltd (ASX:CND)


Opened: 05-Dec-2023

Shares Held at Open: 31,050,000

What does CND do?

Condor Energy (ASX: CND) - formerly Global Oil and Gas, holds an 80% interest in an offshore oil & gas exploration project in Peru.

What is the macro theme?

Oil and gas demand continues to increase with oil prices trading near decade highs, whereas investment in new supply continues to fall below record lows year on year.

Underinvestment in new exploration means the world is heading towards a supply/demand shortfall in the medium term.

Our Big Bet for CND Big Bet Tooltip

GLV defines a multi-billion barrel prospective resource and sees its market cap re-rate by 20x prior to drilling

Why did we invest in CND?

Connection to IVZ

IVZ’s Managing Director Scott Macmillan has agreed to join the CND board. We have had success backing Scott before - our Initial Entry Price for IVZ was ~3.5c, and the company has traded as high as ~41c per share.

We are Investing in CND at a similar stage to when we first Invested in IVZ.

Giant block

4,858km2 with a portfolio of leads and prospects that can be followed up.

Project has existing 2D & 3D seismic data

7,935km2 2D seismic data and ~3,878km2 of 3D seismic data. As well as ‘well control’ and ‘geological’ data. This data would cost tens of millions of dollars if it were to be done again. CND benefits from all of the old work done on the project.

Surrounded by multi billion barrel oil fields

CND’s project is spread across Tumbes/Talara basin. Talara was responsible for ~1.6 billion barrels of historical production. Nearby oil fields are producing at rates of ~3,000 barrels of oil per day.

Already has existing discoveries

CND’s block has three confirmed discoveries already sitting inside it. The three discoveries that sit inside CND’s block were also a part of a project-sell down by Canadian explorer BPZ Energy worth ~US$335M back in 2012.

Existing processing infrastructure

CND’s project sits ~70km to the north of the Talara oil refinery. The refinery has been processing oil from the Talara basin for decades.

Farm-in deals in offshore Peru signed for up to US$900M

Offshore Peru has attracted big ticket farm-ins before. KNOC (South Korean National Oil Corporation) and Ecopetrol (Colombian National Oil Company) in 2009 signed a deal worth US$900M for projects to the south of CND’s block.

Low-cost work program

CND’s Technical Evaluation Agreement (TEA) means it will be doing mostly desktop work (identifying and ranking drill targets) for an initial two year period. There is no large capital commitment for any exploration wells which gives CND two years to rank its highest priority drill targets and put together big prospective resource numbers.

Low market cap leverage to re-rate

At its current share price (1.6c per share) CND has a market cap of $7.4M. CND had $2.4M in cash at the end of the September quarter giving it an enterprise value of ~$5M.

High-risk, high-reward

We have had success in the past with “swing for the fences” style oil & gas drilling, and we like that CND fits this type of investment.

What do we expect CND to deliver?

Objective #1: Reprocessing of 3D seismic data across the highest priority areas.

As part of its first year work program, CND plans to process 1,000km^2 of 2D seismic data. We want to see CND pick the highest priority areas of its block for this reprocessing work.


complete Pick highest priority targets

complete Start reprocessing 3D seismic data

not done Results from the reprocessed data

Objective #2: Prospective/contingent resources for highest priority targets.

After the seismic data is reprocessed, we want to see CND put out prospective resource numbers for leads that haven't been drilled yet, and/or contingent resources for the leads that have been drilled in the past.


in-progress Prospective resource estimates

in-progress Contingent resource estimates

Objective #3: Progress funding for first exploration well.

At the end of the two year Technical Evaluation Agreement (TEA) we want to see CND either progress a farm-in deal to fund its first exploration well and/or go it alone if the company’s market cap is high enough to sole fund the well.


not done Prepare promoting data room

not done Signed non-binding farm out deal

not done Sign a binding farm out agreement for one well

not done Sole funding plan for first exploration well

What could go wrong?

Geopolitical risk

The project is located in Peru which in the past has gone through periods of geopolitical instability. There is always a risk that geopolitical issues could lead to permitting issues. Any geopolitical instability in Peru is likely to impact CND’s share price significantly.

Permitting risk

CND’s project is currently permitted under a Technical Evaluation Agreement (TEA) for a period of two years. Eventually before any drilling work can happen CND will have to convert it into an exploration licence. There is always a risk that the licence doesn't get granted and CND is left with no claim over the asset.

Commodity risk

CND’s project is leveraged to the price and demand for oil & gas. As the world looks to move away from fossil fuels, hydrocarbon projects may be phased out.

Funding risk

CND does not generate any revenues and so is reliant on raising capital to fund its exploration programs. If the markets are unwilling to finance CND’s exploration programs the company may need to go slow on its operations or offer large discounts to its share price when raising capital.

Market risk

If the broader market sells off, investors may shy away from high-risk investment opportunities like junior explorers. During market downturns, investors will look to pull capital away from the high risk investments. CND is a junior explorer and may be impacted by these market wide sell offs.

What is our investment plan?

Our Oil and Gas Investment Strategy is to:

  • Invest early, as the company is in the early exploration work stage.
  • Increase our investment, as the company de-risks the project through permitting, geophysics and target generation.
  • Top Slice, if the share price runs in anticipation of the drill results
  • Free Carry, into the drill results while still maintaining a large position to be leveraged for a positive drilling outcome
  • Evaluate our position post-drilling results

For CND, we plan to hold the majority of our position for the next 2 years.

Disclosure: [Corrected] Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 31,050,000 CND shares and 5,175,000 options at the time of the time of memo (5 December 2023). . . The original disclosure had incorrect details: 40,500,000 CND shares and 6,750,000 options at the time of publishing this article.

Our Investment Summary

Date of Initial Coverage


Inital Entry Price


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