This analyst believes Pure Hydrogen is trading well below the value of its gas
Clean Energy play Pure Hydrogen could be worth more than twice as much as its shares are currently trading just on the basis of its gas resources alone.
Breakaway Research has assigned a 47c per share value to the company’s best estimate (2C) contingent resource of 472 petajoules and prospective resource of 11.8 trillion cubic feet across its coal seam gas assets in Australia and Botswana.
Shares in Pure Hydrogen last traded at 21.5c on 22 June 2021.
And that’s not taking Pure Hydrogen’s (ASX:PH2) hydrogen assets into account.
Breakaways believes the company’s hydrogen assets are worth a further 16c to 32c though it noted that this had a greater level of subjectivity due to the uncertainty around valuation benchmarks for hydrogen related companies.
Taken together, this works out to a valuation ranging between 63c to 79c.
“The hydrogen economy has arrived and many companies are working on economic production, storage and distribution of emissions-free hydrogen,” Breakaway oil and gas manager Stuart Baker noted.
“Methane contained in natural gas is a critical input to the most common hydrogen production methods, and PH2’s combination of gas ownership and strategies to capture value-add in conversion of gas to hydrogen, is unique on the ASX.
“PH2 gas projects alone are undervalued compared to peers, with the hydrogen business a free option with huge future upside potential.”
Pure Hydrogen holds Project Venus in eastern Queensland, which has a 2C resource of 130PJ.
The company has had promising news this month after its Venus-1 pilot CSG well recorded early gas breakout after producing just 50 barrels of water during de-watering ahead of expected gas production.
Over at the Serowe CSG project in Botswana, the company is reducing its 100% stake to 51% under a farm-out to private company Botgas.
Botgas has kicked off a six-well appraisal drilling program that will confirm the geological modelling, as well as to demonstrate the uniformity of the formation for CSG extraction.
Besides CSG, Pure Hydrogen also holds the Windorah project in the Cooper Basin, which is a basin-centred gas play with 2C resources of 330 billion cubic feet that was defined by four wells drilled and tested from 2015-19.
While the company’s gas resources are substantial, its hydrogen plans are the path to the future as the world continues to de-carbonise.
Pure Hydrogen plans to use its new, but demonstrated Plasma Arc Technology to manufacture hydrogen. This process produces hydrogen with by-product solid carbon products such as soot, carbon black, graphite or graphene and some of these are commercially very valuable but all can be stored, avoiding atmospheric carbon dioxide emissions.
It has also progressed a number of strategies for large scale hydrogen production, storage, and re-fuelling.
The company is planning for four large-scale hydrogen plants to be located at various ports with a view to future exports and a number of dec.
The first instance will be sited at Project Venus.
This article was developed in collaboration with Pure Hydrogen, 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.