Norwegian energy giant now in PFE’s backyard
Last week, Norwegian energy giant Equinor invested more than US$130 to get its hands on a 45% stake in two Smackover lithium brine projects in Arkansas:
(Source)
New York listed, and majority owned by the Norwegian government, the $127BN capped Equinor has traditionally made money from North Sea oil and gas.
The Norwegians clearly want to change that with its latest clean energy investment in Arkansas.
Relative to our Investment, Panterra Minerals (ASX: PFE), Equinor is a bit late to the party in the Smackover region of Arkansas - PFE has been building its land position well before Equinor made its move last week.
This is now the second energy giant to enter the Smackover too, with Exxon Mobil also present.
PFE is rapidly advancing a lithium brine project of its own in acreage immediately adjacent to ExxonMobil:
The timing is good too - PFE is positioning itself as a potential source of domestic lithium for the US, at a time when lithium demand in the US is forecast to rapidly ramp up:
(Source)
Importantly, a good portion of PFE’s Smackover acreage was picked up BEFORE ExxonMobil made its move.
Here’s the key takeaway for us as long term PFE Investors:
Equinor’s equity stake in two lithium brine projects in the Smackover provides an excellent baseline valuation of lithium brine acreage in the region.
In other words, we think:
With a market cap of just ~$10.5M, PFE’s significant land position in the Smackover, appears to be trading at a steep discount to what oil giants with clean energy ambitions are willing to pay for land in southwest Arkansas.
What are the big energy giants willing to pay for a slice of Smackover acreage?
ExxonMobil paid at least US$100M for its projects in Arkansas in early 2023.
Now Equinor has paid at least US$130M for only a 45% stake in two projects in Arkansas and east Texas.
Simple maths points to the value of Arkansas lithium brine land getting increasingly pricey - which is why we’re very pleased that PFE moved quickly on the once prolific oil and gas region, a good portion of PFE’s Smackover acreage was picked up BEFORE ExxonMobil made its move.
Now with close to 20,000 acres in the Smackover we think PFE will make a strategic shift from aggressively leasing land to establishing a resource by re-entering a well to extract a brine sample.
The Smackover is home to some of the highest concentrations of lithium brines in the US - something which Equinor and ExxonMobil would be well aware of.
The fact that these two energy giants are in the Smackover play, provides further validation to us that PFE is in the right spot, at the right time - in what promises to be the lithium heartland of America in just a couple short years.
We’ve personally travelled to see PFE’s project in Arkansas as well - read our full rundown on that trip here:
Click here to read more about why we think Arkansas will be the epicentre of US lithium
At some point we think the market may have to re-rate PFE on the underlying value of its acreage alone - perhaps that re-rate comes if PFE successfully pulls a high concentration lithium sample to the surface in a quickly approaching well re-entry program?
This is what the ultimate upside scenario for PFE is in our eyes:
Our PFE Big Bet:
PFE to return 10x by making a discovery and defining a deposit significant enough to move into development studies.
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 - just some of which we list in our PFE Investment Memo. Success will require a significant amount of luck. There is no guarantee that our Big Bet will ever come true.
Here’s the newsflow that we are expecting for PFE in the near future…
What’s next for PFE?
Acquisition of 2D Seismic & geophysical data 🔄
PFE plans to acquire existing 2D seismic data over its acreage.
The new data will ultimately be used to guide PFE’s drill programs in the future.
Re-enter a well 🔲
The first step toward converting its exploration target into a maiden JORC resource will be to re-enter historic oil & gas wells that sit on its acreage.
The goal for the re-entry programs will be to see how much lithium sits in the ground and at what concentrations.
DLE test 🔲
The re-entry will bring up samples which PFE can then send off to DLE (Direct Lithium Extraction) tech partners.
Read more:
New PFE Investment Memo - and did lithium sentiment just return?
