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ASX:EXR

Elixir Energy

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ASX:EXR
- Elixir Energy
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$0.033

Last Price

Investment Memo:

Elixir Energy (ASX:EXR)

- LIVE

Opened: 24-Feb-2025

Shares Held at Open: 5,136,850

Options Held at Open: 2,567,021


What does EXR do?

Elixir Energy (ASX: EXR) is advancing an onshore gas project in the Taroom Trough in Queensland.

What is the macro theme?

Natural gas is a critical part of the energy mix.

Particularly in Australia, there are forecasts to be natural gas supply shortages off the East Coast due to a decade of underinvestment in gas projects to feed the domestic market. 

Our Big Bet for EXR

EXR to achieve a $500M market cap through successfully advancing its Queensland gas project.

NOTE: our “Big Bet” is what we HOPE the ultimate success scenario looks like for this particular Investment over the long term (3+ years). There is a lot of work to be done, many risks involved, and it will require a significant amount of luck. There is no guarantee that it will ever come true. Some of these risks we list in our EXR Investment Memo.

Why did we invest in EXR?

Taroom Trough in Queensland attracting some big names

EXR’s project sits in a part of QLD where majors like Shell and Santos are active. Another one of EXR’s regional peers is Omega Oil and Gas which is backed by Tri-Star Group who are pioneers of the Queensland gas industry. 

Tri-Star drilled Queensland’s first commercial coal seam gas well in the 1990s and laid the foundations for the $80BN Liquefied Natural Gas industry in the state.

Any work developing the region by Shell or Omega will be good news for EXR. 

EXR’s project is an existing discovery with ~3 trillion cubic feet in contingent resources

EXR already has booked 2C contingent resources of ~3 trillion cubic feet (TCF) of gas. 

IF the projects and resources in the region are unlocked technically (by showing commercially viable flow rates) then EXR’s contingent resource could become very valuable, very quickly.

Strong board and management team

EXR’s board and management team including Chairman Richard Cottee and managing director Neil Young have a history of success in gas in Queensland.

EXR’s Chairman Richard Cottee took Queensland Gas Company from a $20M capped junior through to a $5.3BN takeover back in 2008 by a company called BG Group.

EXR’s Managing Director Neil Young was ex-Santos management, and Director Stephen Kelemen ran Santos’ Coal Seam gas portfolio.

Gas from the Taroom Trough can go to domestic & international markets

The region already has developed infrastructure meaning gas production can be directed to both the domestic market & international LNG markets. 

  • International markets through nearby LNG Plants - there are three LNG plants in Gladstone near EXR’s project that have never operated at full capacity and could take more gas feedstock to ship to international markets.
  • Domestic market (east coast of Australia) - EXR’s project sits next to the Wallumbilla Gas Hub, which distributes gas to the east coast market. The east coast of Australia is forecast to be short gas in 2028 and expected to start experiencing supply shortages beyond 2026.

East coast gas exposure in Australia

Australia is in desperate need of natural gas, there are major shortages forecast for 2028 and beyond, and very little new supply coming online. EXR’s project is located near existing piping and gas infrastructure that can tie into the east coast gas market if commercialised. 

(Bonus) Free carried upside from Mongolian assets:

EXR just signed a farm-out deal for its Mongolian assets where it is free carried on all exploration/development work through to a Final Investment Decision (FID). 

The deal also has a clause which could see EXR’s share in the project get taken out for US$30M in the event the farm-in partner wants to exercise that right. 

We see this as bonus upside where EXR has no capital commitments. 

What do we expect EXR to deliver?

Objective #1: Drill first well this year (Santos JV)

As part of its 50/50 deal with Santos EXR has to drill a 3,100m appraisal well on ATP 2056 which already has a 2C contingent resource of ~1.3 TCF. 

Here we want to see EXR book more resources. 

Milestones

not done Drilling permitted

not done Drilling funded

not done Drilling commenced

not done Drilling complete

not done Book additional resources

Objective #2: Farm out agreement on 100% owned ground

EXR is looking for a farm-in partner to drill an exploration well over its 100% owned ATP 2077 block.

Milestones

not done Secure Farm-In Partnership

not done Drilling exploration well at ATP 2077

not done Drilling results

Objective #3: Regional progress

This objective is less specific to things EXR can control but we think it is important for the EXR story overall. 

We want to see EXR’s regional peers progress their projects and prove up commercially viable flow rates across the region.

Milestones

not done News from EXR’s peer Omega Oil and Gas

not done News from Shell

not done News from Santos

not done BONUS - New entrants into the region

Objective #4: BONUS: Progress on Mongolian assets

Any news from EXR’s Mongolian assets will be an unexpected bonus for us especially now that the project has been farmed out. 

What could go wrong?

Funding risk

To drill its Queensland appraisal well, EXR must still secure funding, which it is now pursuing but is not always guaranteed on favourable terms.

Exploration risk

If EXR drills an appraisal well, there is no guarantee that it finds anything interesting. There also could be mechanical issues that affect the outcome of the drilling.

Partnership Risk

EXR is looking for a partner for its exploration wells. There is no guarantee that EXR finds a farm-in partner for the project.

What is our investment plan?

We have been Invested in EXR for nearly 6 years now, and the share price can deliver some solid runs when the company is delivering success.

We are holding on to see the Taroom Trough project play out over the coming couple of years and will assess as the company approaches and delivers key catalysts in line with our hold conditions.


Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 5,136,850 EXR Shares and 2,567,021 EXR Options and the Company’s staff own 40,000 EXR Shares and 13,333 EXR Options at the time of publishing this Investment Memo. The Company has been engaged by EXR to share our commentary on the progress of our Investment in EXR over time.

Our Investment Summary

Date of Initial Coverage

11-Jul-19

Inital Entry Price

$0.041

Returns from Initial Entry

-20%

High Point

1144%