Neighbour Empire Energy delivers strong gas flow rates

Our previous note on our domestic gas exploration Investment Top End Energy (ASX: TEE) focused on the activities of its neighbours in the Beetaloo sub-basin in the Northern Territory.

We touched on all of the majors that are currently actively exploring the region and how we would be watching their exploration initiatives closely.

Our thinking is that any success by TEE’s neighbours would bring market interest in the basin and eventually flow through to interest in the permits TEE holds in and around the region.

This morning TEE’s neighbour Empire Energy put out strong gas flow rates from its Carpentaria-2 horizontal well.

Empire announced a normalised flow rate of 2.8 million standard cubic feet per day (per 1,000m horizontal section).

For some context, we noted that both industry analysts and operators in the basin considered a flow rate of 3 million standard cubic feet per day (per 1,000m of horizontal well section) as the “commerciality standard”.

This means Empire’s flow test rates up until now are right near the levels required for it to be considered a commercially viable operation.

The market also seemed to like the news adding ~$31M to Empire’s market cap - almost 2x TEE’s entire market cap, which at today’s share price of 23c per share is ~$16M.

We see these developments out of Empire as positive as part of the overall macro picture regarding the Beetaloo sub-basin.

The positive takeaway from Empire's announcement is that the Beetaloo continues to shape up as a region that could become Australia’s next gas production hub with the ability to supply the gas hungry East Coast energy markets.

With TEE weeks away from its on country meetings with native title holders, we think that if the necessary permits are granted, and the company has tenure over its permits surrounding the Beetaloo, the market could start to show an interest in the acreage our portfolio company holds.