RESEARCH: Momentum building For Brookside Energy

This story features BROOKSIDE ENERGY LIMITED, and other companies. For more info SHARE ANALYSIS: BRK

Pitt Street Research has updated its modeling for Brookside Energy post a new JV and capital raisings

Momentum building For Brookside Energy

By Pitt Street Research

Brookside Energy Ltd ((BRK)) is a Perth-based energy company with exposure to the most productive oil and natural gas plays (STACK and SCOOP) in Oklahoma’s Anadarko Basin.

BRK has a strategy based on three pillars focused on 1) operated drilling, 2) producing property acquisitions and 3) land & leasing.

The three pillars strategy has positioned Brookside to take advantage of the oil and gas cycle at every level while minimising downside risk.

This approach has allowed BRK to grow in the Anadarko Basin using an asset-light model.

Orion Project gaining momentum                   

In June 2020, BRK has entered a 50:50 JV with Stonehorse Energy ((SHE)) to exploit opportunities to acquire producing oil and gas properties within the SWISH AOI in the Anadarko Basin region.

Within about two months of operations, the JV has successfully closed two acquisition opportunities, the Newberry Well and the Mitchell Well, both located within the SWISH AOI.

In addition to acquiring the assets, the JV has managed to unlock their upside potential through implementing low-cost, low risk workover operations, which have resulted in increased reserves, improved net volumes, and expected cashflow levels.

BRK to grow asset base at a low point in cycle

2Q20 has seen the company experiencing some difficulty in net revenues due to the significantly lower realised oil and gas prices.

To remediate and conserve cashflows, BRK has adopted some measures to optimise its operations which included cutting its operating cost base.

Availability liquidity stands at approximately $3.5M. Additionally, BRK has sought to take advantage of the low price point in the commodity cycle by pivoting towards a producing property strategy, which involves acquiring value enhancement wellbores and unlocking their upsides through low-cost operational execution such as workovers.

Valuation revised to $0.015 – $0.018 per share                

We have re-worked our DCF model by incorporating the JV’s acquisitions and their expected cashflows to be generated from forward gas sales.

On a per share basis, however, we trim our valuation range to $0.015 – $0.018 (previous: $0.019 – $0.022) caused by the dilution of an expanded share base following the company’s recent equity raisings.

Key risks we see in BRK include: 1) extended period of weak commodity pricing; 2) partnership risk and 3) execution risk.

Download the full report

Earlier today the report above was released by Pitt Street Research for which FNArena is a partner in distribution. The full report can be accessed here:

https://www.fnarena.com/index.php/pitt-street-research/BRK/

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