Prominence Energy adds a hydrogen string to its oil and gas bow, raises $3.2m
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Prominence Energy is making its foray into the booming hydrogen market with the acquisition of a 20 per cent stake in Patriot Hydrogen as part of its plan to make it a greener oil and gas play.
Prominence Energy (ASX:PRM) has received firm commitments to raise $3.2m, which will fund the drilling of the Bowsprit project in Louisiana and pave the way for the company’s entry into hydrogen.
The company has signed a binding term sheet to acquire a 20 per cent stake in Patriot Hydrogen, which is building a biomass to hydrogen plant at Port Anthony in Victoria.
The hydrogen plant is expected to take around 12 months to be built, commissioned and reach steady state production.
Patriot will licence, build and develop “Patriot 2 Hydrogen” (PH2) branded units for biomass to hydrogen plants within Australia.
“Patriot has great potential to grow by placing P2H units in numerous settings to provide locally produced, low carbon electricity and hydrogen, both generated from essentially carbon neutral waste biomass materials,” Prominence Energy managing director Alex Parks said.
“As the world transitions to a lower carbon base, PRM will transition too.
“One of the major things that we liked about the Patriot Hydrogen business model is that hydrogen is tricky stuff to transport and store, and these units that produce hydrogen from biomass can be used onsite.
“So, you can put one of these units at a bus port, produce the hydrogen and then load it straight into the hydrogen buses onsite and you don’t have to transport it.
“Part of the challenge with hydrogen is how to transport it and we think this is one way of getting around some of these obstacles.”
Hailed as the “fuel of the future”, hydrogen is tipped to be a game changer for the energy industry, with governments around the world making multi-billion-dollar commitments to grow the industry in their respective countries.
PwC sees the global hydrogen market exploding between 2030 and 2050, with global demand expected to rise to 100 million tonnes by 2030 and exceed 500 million tonnes by 2050. That is a massive 668 per cent increase on the 69 million tonnes of demand recorded in 2020.
The addition of a stake in a hydrogen play is designed to diversify Prominence Energy’s portfolio and complement the company’s oil and gas activities.
Prominence Energy is preparing to drill the highly prospective Bowsprit project, which was once a producing asset for oil and gas giant Shell, in July-August this year.
Bowsprit has a potential upside of nearly 5 million barrels of oil if drilling proves successful.
“That’s 5 million barrels net to us at a very, very low operating cost of under $20 a barrel,” Parks said.
“So, for us it’s a 10-bagger if it comes in. We will drill it and if the exploration upside is there, we’re looking at over 4 million barrels recoverable. If that is the case, we will drill a second well.
“The two wells will be tied back to a nearby production facility and put on production in the space of a few months. So, it will be quick and early cash flow.”
Lead manager GTT Ventures has secured firm commitments to place 320 million shares at 1c each to raise $3.2m.
About $2.5m will fund the drilling of a vertical well down to 8,000 feet.
To settle the Patriot Hydrogen deal, Prominence Energy has agreed to issue 25 million shares and 3 million options and pay $250,000 in cash.
This article was developed in collaboration with Prominence 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.