• Comet Ridge has near-term gas developments that can supply Australia’s east coast
  • Flagship Mahalo JV with Santos now in the FEED phase, which places it closer to FID
  • Near-term news from its Mahalo East pilot with flow testing expected to start soon

Australia’s gas supply picture on the east coast remains bleak with the combination of ageing fields and a lack of investment into exploration and development really starting to make its impact felt.

Moratoriums on oil and gas exploration in Victoria and New South Wales certainly have not helped matters.

The prospect of not having enough gas for power generation and industrial use has prompted juniors and majors to look for alternative sources of gas – notably in upstream friendly states such as Queensland and South Australia.

And what’s new supply without supporting infrastructure with pipeline operator APA Group (ASX:APA) unveiling plans on February 24 to boost gas transport capacity by 24% across the East Coast Gas Grid, with upgrades to pipelines and storage to meet growing demand.

Speaking to Stockhead, Lowell Resources Fund chief investment officer John Forwood said gas prices on Australia’s east coast have soared north of $12 per gigajoule, making companies with near-term gas developments, which are few and far between, intriguing from an investment point of view.

He added the fund liked to see companies – be they gas or minerals – that had both a smaller, wholly owned project they can go and progress themselves with lower capital requirements as well as a larger project with a major partner that could help or potentially fund its higher capital requirements.

And it so happens that Comet Ridge (ASX:COI) has a nice combination of both these things.

 

Big gas development

Forwood points to the company’s Mahalo Gas Project joint venture with Santos (ASX:STO) , which has proved and probable (2P) gas reserves of 266 petajoules and a further 315PJ in best estimate (2C) contingent gas resources.

“It is one of the few near-term gas developments that is able to supply the east coast grid,” he noted.

Operator Santos, which holds a 42.86% stake in the project recently started Front End Engineering Design, which moves the Mahalo Gas Project out of the feasibility stage into the pre-cursor for a final investment decision.

The JV also has a memorandum of understanding with the Queensland government’s CleanCo for the supply of 21-25PJ of gas while pipeline operator Jemena has started studies on a 80km connector from the project to its Queensland Gas Pipeline that will take gas from Mahalo into the Wallumbilla gas hub.

“Obviously, Santos gives the project and the company a big tick of credibility and validation. It means in our view that it will be developed,” Forwood said.

“Santos being involved in Gladstone LNG is also a positive for the project as it raises the possibility for gas exports as well.”

He did warn that having Santos as the operator mean that any progress would be made on its timetable.

However, Forwood is hopeful that the JV could take a final investment decision early in 2026 rather than later the same year.

He also pointed out that COI has a $10m loan from Pure Asset Management that is repayable in September, which currently serves as an overhang or negative on the stock.

“We hope to see that converted into shares at 15.2c per share. Once that’s sorted, we should see some positivity for the stock,” he added.

 

Wholly-owned gas assets

COI also holds the wholly-owned Mahalo North and Mahalo East projects that add more to its gas resources.

Mahalo North has 2P reserves of 43PJ and proven gas production with the Mahalo North-1 pilot having produced 1.75 million cubic feet per day of gas during testing.

It is currently working through federal Environment Protection and Biodiversity Act permitting and benefits from being along the pathway of Jemena’s proposed pipeline, which would greatly simplify project development, though there’s also a smaller low pressure pipeline just 12km away that provides another option for development.

Forwood adds that in the near-term Mahalo East, which has 2C contingent resources of 31PJ, will provide significant news flow.

“They got a $5 million grant from the Queensland government, drilled the pilot wells and de-watering is underway,” Forwood said.

“A flow test is probably not too far away.”

Success here will allow COI to convert most if not all of Mahalo East’s resources into 2P reserves.

 

At Stockhead, we tell it like it is. While Comet Ridge is a Stockhead advertiser, it did not sponsor this article.

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