Supersized production boosts Brookside Energy valuation

MST Access has lifted its valuation of Brookside Energy to $3.05, up from its September valuation of $2.85 – and its current share price of $0.50
Brookside’s four-well FMDP project has been turbocharging net production by 178% on the 3Q24 average to ~3000BOEPD, which is higher than guidance of ~2500BOEPD
The production milestone from the wells within the SWISH Project in Oklahoma drives a step change in Brookside’s revenue and cashflow, upgrades its estimates, plus de-risks Brookside’s next growth phase

Special Report: Brookside Energy’s excellent results from new wells at the Flames Maroons Field Development (FMDP) have delivered the junior producer an early Christmas gift in the form of another boosted valuation from MST Access.

The research house has now valued Brookside’s (ASX:BRK) shares at $3.05, up from $2.85 in MST’s September 16 report and a huge uplift on the current price of $0.50.

The increase is thanks to four new wells within the FMDP in Oklahoma’s prolific Anadarko Basin rocketing into production during September at ~3000 barrels of oil equivalent per day (BOEPD). Those rates are ahead of guidance of ~2500 BOEPD and equate to a 178% boost to production on Brookside’s Q3 2024 average.

The results have fuelled a step change in revenue and cashflow for Brookside, derisking the next growth phase planned by the producer, which has $14 million in the bank, no debt or hedging and an undrawn US$25 million credit facility.

The FMDP’s early success additionally bolsters Brookside’s confidence in the geology of the project, plus its drilling and completion techniques used to access the resource.

With expected production of 11.6 million barrels of oil equivalent per day (MMBOE) of 2P (proved and probable) reserves, MST believes Brookside is significantly undervalued on a discounted cash flow (DCF) basis, which estimates the value of an investment using its expected future cash flows.

Election winner

One of the few ASX-listed companies in the North American oil and gas sector, which is forecast to be a big winner from last week’s Trump victory, Brookside is now planning its SWISH full field, 16-well development.

Planned to start in early 2025, this next growth phase is targeting further lifts in production to ~4500 BOEPD average in FY2028, with development to be primarily internally funded.

Brookside’s guidance is for revenue of US$104 million and net profit after tax (NPAT) of US$51 million (at ~$70/bbl oil, and US$2.3/MMBtu gas price) in FY 2028.

Led by management with deep in-country experience, the company is also responding to significant interest from US investors by pursuing a listing on the New York Stock Exchange, while maintaining its primary ASX listing. The US listing is expected to be completed by Q1 CY25,

(Note: On October 10, 2024 there was a 1-for-50 share consolidation. Prior reports show per-share measures at the previous share count.)

This article was developed in collaboration with Brookside 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.