• MST Access values Brookside at a ~400% premium to its current share price
  • NPAT estimate of $40m in FY26 versus a market cap of $55m
  • Unhedged, Brookside offers oil bulls cheap leverage to price and production growth


Special Report: Research house MST Access has initiated coverage on Brookside Energy, one of the few ASX companies in the North American oil and gas sector with a valuation 5x its current share price.

Already generating strong profits and operating cashflows, MST expects Brookside’s profit to increase materially over the coming years, growing to almost $40m in FY26.

In the shrinking landscape of ASX listed pure plays in the American oil and gas sector, Brookside Energy (ASX:BRK) is sitting among a rare cohort of junior resources and energy plays generating a healthy profit, something MST’s Stuart Baker expects to grow in the years ahead as its onshore oil production in the USA’s Anadarko Basin increases.

Baker recently initiated research coverage on BRK, valuing it on an NPV basis at 5.7c/share. At just 1.1c, his valuation implies he believes the stock should be trading around 400% higher.

Baker notes the company holds $33m in net cash and has a production mix favouring liquids-rich gas, which is more favourable to develop economically than dry gas.

BRK is also unhedged, meaning Brookside is leveraged to any recovery in North American natural gas prices after a recent move beyond US$3/MMBtu, where MST sees prices staying in CY2025.

While Henry Hub gas prices fell from over US$8/MMBtu in 2022 to around US$2/MMBtu in late 2023, Brookside’s assets remained profitable even with prices at basement levels.

Baker believes “risk factors are low” for Brookside, noting that capex is within Brookside’s means and there is no frontier exploration required to unlock resources in a known and prosperous gas field.

“BRK’s business is predominantly a development operation, with drilling into known geological settings and with numerous data from offset operators,” he said.

Anadarko Basin Focus

Since 2015 Brookside has been building an acreage position in the onshore US, one of the lowest risk oil and gas jurisdictions globally, specifically in Oklahoma’s Anadarko Basin.

Underpinning MST’s bullish outlook for Brookside is an expected continuation of the company’s increasing production levels, thanks mainly to the recent sanctioning by Brookside of its SWISH Full Field Development.

Among the key points in his investment thesis for Brookside, Baker noted it had:

“Strong growth in production, revenue and profit over the outlook from drilling of ~20 wells. Drilling is underway with 4 wells this year in BRK’s “SWISH” area, followed by a 16-well development commencing in 2025 to exploit ~8.5 million of barrel of oil equivalent (MMboe) of 2P reserves.”

The project is expected to drive peak production from current levels of ~1200 barrels of oil equivalent per day (boepd)to a peak of 6300boepd by mid-2028. This would make Brookside one of the top energy juniors on the ASX in terms of scale.

Cumulative net income from 2024-2028 is projected at US$156m.

The SWISH FFD envisages a program of 16 horizontal wells drilled over 2025 to 2027 to develop 8.5MMboe of Brookside’s current 2P reserves, so it is not dependent on any further exploration or appraisal success.

Profit could gush in Brookside growth plan

Having printed an NPAT in FY23 of $16m, Baker is forecasting a steady NPAT for the company in FY24, despite lower oil prices, before several years of solid growth.

He sees Brookside achieving underlying NPAT of $28.1 million in 2025 and $39.9 million in 2026, based on an oil price of under US$80/bbl.

Brookside itself has guided the market to expect a net income of US$55m in FY28, equivalent to A$83m at spot exchange rates, as production hits its straps.

That compares favourably to a current market capitalisation of $55m and enterprise value of less than $30m.

Unique opportunity

The SWISH FFD is expected to cost Brookside US$126m out to 2027. Baker is not, however, forecasting Brookside to come to the equity market for development funding.

Despite completing a 5% share buyback in 2023, Brookside has existing cash of $33m and no debt. This financial flexibility, combined with forecast cash flow, is expected to give Brookside the firepower to bring the SWISH to fruition without coming back to shareholders.

Once a well-trodden path for junior ASX energy companies, there are now few ways for energy investors to play the low political and geological risk that characterises the onshore US oil and gas sector.

Following the $2.5b takeover of Aurora Oil & Gas in 2014, the sector has been largely forgotten by investors.

In recent times, Brookside’s peer group has continued to shrink. Calima Energy recently liquidated itself, returning about $80m to shareholders, whilst Byron Energy is planning on delisting from the ASX altogether.

Brookside, however, appears set to go in the opposite direction and is firmly focused on executing its growth strategy.

Against this backdrop, the company appears to be valued below its peers against every conceivable industry metric – NPV, EV/BOE and cash flow multiples. Baker says the market has been slow to recognise the success of its US production strategy.

“We attribute this to market factors and BRK’s unheralded success in the USA,” he said.

“We believe drilling results, and revenue momentum over the outlook are catalysts for a re-rating.”


This article was developed in collaboration with Brookside, 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.