It’s been a truly transformational year for Talon and it’s only the beginning
Link copied to
Following a transformational 12 months, Talon has a fresh new image and is fully funded to start unlocking the potential of its highly prospective Perth Basin and Mongolian assets.
In the past year, Talon Energy (ASX:TPD) has rocketed as much as 1200 per cent to a 52-week high of 1.3c in mid-April, propelling its market cap from $2m to a peak of $70m.
The company has now laid the foundations for success with a fresh new image and plenty of cash in the bank.
Shareholders recently approved a name change from Talon Petroleum, the company has raised over $10m and has several near-term catalysts on the horizon.
Following its recent entry into Mongolia’s emerging coal bed methane (CBM) industry and despite COVID-induced lockdown delays, Talon is expecting the award of the production sharing agreement (PSA) over the Gurvantes XXXV Field, located onshore Mongolia, within the next four to six weeks.
In early February, Talon signed a deal with Telmen Resource JSC giving it an option to earn a 33 per cent stake in the soon-to-be-granted PSA.
The PSA covers 8,400sqkm in what is considered one of the most prospective basins for CBM globally and is close to the extensive Northern China gas transmission and distribution network.
A clear advantage and point of differentiation for Talon and Telmen is the coals in the Gurvantes XXXV Field are fully gas saturated.
Talon anticipates a multi-trillion-cubic feet prospective resource will be estimated as soon as the PSA is awarded, with drilling set to see Mongolia’s largest contingent resource booked by the end of 2021.
Over in WA’s gas-rich Perth Basin, Talon and partner Strike Energy (ASX:SRK) will start drilling the Walyering-5 appraisal well in the third quarter of this year.
Drilling will target an in-place best estimate prospective resource net to Talon of up to 38.7 billion cubic feet of gas and 0.98 million barrels of condensate.
The company has already determined that the Walyering-5 well has good quality gas, containing less than 1 per cent carbon dioxide, thereby requiring minimal processing and lowering the cost of production.
Additionally, the high condensate ratio has the potential to further enhance the economics of Walyering.
These factors combined with the permit’s proximity to both existing pipeline infrastructure and potential commercial gas users could see rapid commercialisation of any discovery, Talon says.
Success at Walyering also has the potential to lead to a re-rate for a much larger Condor project, which already has prospective resource upside of over 700 billion cubic feet of gas.
Talon’s strategy for the Perth Basin has yielded entries into Walyering and Condor, as well as the securing of a right of first refusal over the Ocean Hill gas discovery.
All these projects have gassy, conventional targets supplemented by strong projected yields of condensate.
Condor in particular could be the Perth Basin’s largest untested wet gas structure.
Highlighting the strong investor interest in Mongolian CBM plays, shares in Talon’s peer Elixir Energy (ASX:EXR) are on the way up again.
The company has a large 30,000sqkm CBM permit in the south of Mongolia and has become a 10-bagger in the past year, with shares now fetching 33c for a market value of around $250m.
This a good indicator of the road Talon’s shares still have to run, with key differentiators including the company’s landholding being the closest of Mongolia’s CBM projects to China’s West-East Gas Pipeline and a diversified portfolio also featuring highly prospective assets in Western Australia’s gas rich Perth Basin and the UK’s North Sea.
This article was developed in collaboration with Talon Energy, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.