Director, RaaS Research Group, Research as a Service (RaaS)

RaaS Research Group (RaaS)

Director, RaaS Research Group

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Equity Bottom-Up

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<h2>Pilot Energy Limited</h2>
<h3>Leading the renewables push</h3>
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<p>Pilot Energy Ltd is a junior oil and gas exploration company that is embracing a bold new ventures programme. To that end the company is evaluating the potential growth opportunities in renewable energy by submitting an Expression of Interest (proposal) to the WA Government under its Oakajee Strategic Industrial Renewable Hydrogen programme, to develop the Cliff Head &amp; Mid-West Wind and Solar Project (CH-MWWSP) leveraging and complimenting material working interests in the Cliff Head oil production facilities and WA-481-P offshore WA. Pilot is looking over the horizon, identifying that a renewable energy project could support an interconnected development strategy with multiple commercial outcomes. There is a portfolio of potential, likely worth more than the sum of the parts especially leveraging its acreage and infrastructure assets.</p>
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<p><strong>The Projects</strong><br>The company holds an upstream portfolio of production and early-stage exploration assets in the mid-west of WA. Whilst the E&amp;P portfolio provides growth opportunities it’s not the transformational investment driver. The company is looking to transition into the renewable energy space, leveraging its advantageous position through WA-481-P and infrastructure facilities at Cliff Head into a multi optioned development portfolio. To that end the company is well advanced on a feasibility study (the Cliff Head &amp; Mid-West Wind and Solar Project – CH-MWWSP) to underpin a submission to the WA State Government seeking Expressions of Interest to develop a major integrated renewable project with hydrogen manufacture in the mid-west. The opportunity is conceptual at this stage but up- and mid-stream assets provides PGY with a significant, cost- advantaged opportunity to pursue an integrated development with multiple commercial outcomes. This is not simply a power generation play, in our view.</p>
<p><strong>The opportunity</strong><br>We live in a new energy paradigm – there is more pressure and focus on the traditional models of energy supply and companies must adapt. Driven by an increasing need to address climate change issues related to carbon emissions, renewable energy alternatives are now firmly set on the societal agenda as evidenced by recent publications and initiatives from the Federal Government and in this specific case, the WA State Government. The Oakajee strategic hub could host up to 1.25GW of wind power and up to 270MW of large-scale solar generation. The mid-west region of W.A. already hosts numerous wind and solar farms; and is recognised for its world-class wind and solar energy potential as outlined in numerous studies. In this regard PGY’s holdings in WA-481-P with the associated Cliff Head oil production facilities provide the company with a strategic location and infrastructure advantage. The potential to combine a sustaining, high quality offshore wind resource and manufacturing opportunity with existing offshore and onshore infrastructure and if necessary, supply from existing, large- scale gas production operations underpins the company’s project premise and strategy. The proposal is supported by a tangible pathway to commercialisation.</p>
<p><strong>Making ‘H’ while the sun shines</strong><br>PGY will also be investigating the potential for the establishment and integration of a hydrogen production plant using the natural gas resources within the hub. An integrated project provides multiple ways to market and multiple revenue streams...as an electricity (power) provider, a hydrogen seller and with commercial potential from the CO2 stream formed as a natural product of the hydrogen process. Interestingly, in its recent results presentation (ASX:APA 23 Feb 2021), APA Group highlighted that it had launched its Pathfinder Program to unlock next generation energy solutions including seeking out pilot projects and strategic partnerships that focus on scalability. APA Group’s is readying 43km of its Parmelia Gas Pipeline in WA (which connects to the Oakagee hub) to be 100% hydrogen ready.</p>
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Pilot Energy Limited
Leading the renewables push

Pilot Energy Ltd is a junior oil and gas exploration company that is embracing a bold new ventures programme. To that end the company is evaluating the potential growth opportunities in renewable energy by submitting an Expression of Interest (proposal) to the WA Government under its Oakajee Strategic Industrial Renewable Hydrogen programme, to develop the Cliff Head &amp; Mid-West Wind and Solar Project (CH-MWWSP) leveraging and complimenting material working interests in the Cliff Head oil production facilities and WA-481-P offshore WA. Pilot is looking over the horizon, identifying that a renewable energy project could support an interconnected development strategy with multiple commercial outcomes. There is a portfolio of potential, likely worth more than the sum of the parts especially leveraging its acreage and infrastructure assets.





The Projects The company holds an upstream portfolio of production and early-stage exploration assets in the mid-west of WA. Whilst the E&amp;P portfolio provides growth opportunities it’s not the transformational investment driver. The company is looking to transition into the renewable energy space, leveraging its advantageous position through WA-481-P and infrastructure facilities at Cliff Head into a multi optioned development portfolio. To that end the company is well advanced on a feasibility study (the Cliff Head &amp; Mid-West Wind and Solar Project – CH-MWWSP) to underpin a submission to the WA State Government seeking Expressions of Interest to develop a major integrated renewable project with hydrogen manufacture in the mid-west. The opportunity is conceptual at this stage but up- and mid-stream assets provides PGY with a significant, cost- advantaged opportunity to pursue an integrated development with multiple commercial outcomes. This is not simply a power generation play, in our view.
The opportunity We live in a new energy paradigm – there is more pressure and focus on the traditional models of energy supply and companies must adapt. Driven by an increasing need to address climate change issues related to carbon emissions, renewable energy alternatives are now firmly set on the societal agenda as evidenced by recent publications and initiatives from the Federal Government and in this specific case, the WA State Government. The Oakajee strategic hub could host up to 1.25GW of wind power and up to 270MW of large-scale solar generation. The mid-west region of W.A. already hosts numerous wind and solar farms; and is recognised for its world-class wind and solar energy potential as outlined in numerous studies. In this regard PGY’s holdings in WA-481-P with the associated Cliff Head oil production facilities provide the company with a strategic location and infrastructure advantage. The potential to combine a sustaining, high quality offshore wind resource and manufacturing opportunity with existing offshore and onshore infrastructure and if necessary, supply from existing, large- scale gas production operations underpins the company’s project premise and strategy. The proposal is supported by a tangible pathway to commercialisation.
Making ‘H’ while the sun shines PGY will also be investigating the potential for the establishment and integration of a hydrogen production plant using the natural gas resources within the hub. An integrated project provides multiple ways to market and multiple revenue streams...as an electricity (power) provider, a hydrogen seller and with commercial potential from the CO2 stream formed as a natural product of the hydrogen process. Interestingly, in its recent results presentation (ASX:APA 23 Feb 2021), APA Group highlighted that it had launched its Pathfinder Program to unlock next generation energy solutions including seeking out pilot projects and strategic partnerships that focus on scalability. APA Group’s is readying 43km of its Parmelia Gas Pipeline in WA (which connects to the Oakagee hub) to be 100% hydrogen ready.









Pilot Energy Limited: Leading the Renewables Push

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<h2>Pilot Energy Ltd</h2>
<h3>Sometimes it pays to be long winded</h3>
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<p>Pilot Energy Ltd is a junior oil and gas exploration company that is embracing a bold new ventures programme. To that end the company is evaluating the potential growth opportunities in renewable energy by submitting an Expression of Interest (proposal) to the WA Government under its Oakajee Strategic Industrial Renewable Hydrogen programme, to develop the Cliff Head &amp; Mid-West Wind and Solar Project (CH-MWWSP) leveraging and complimenting material working interests in the Cliff Head oil production facilities and WA-481-P offshore WA. Pilot is looking over the horizon, identifying that a renewable energy project could support an interconnected development strategy with multiple commercial outcomes. There is a portfolio of potential, likely worth more than the sum of the parts especially leveraging its acreage and infrastructure assets. The submission is due by 24-December.</p>
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<p><strong>Scope</strong><br>This report has been commissioned by Pilot Energy to present investors with an analysis of the opportunities emerging for the company over the next 12 months. The company will be pursuing growth opportunities within its core E&amp;P business, particularly the Cliff Head production enhancement campaign, but also via the CH-MWWSP with the submission of an EOI by 24-Dec. The oil and gas business is high-risk by definition and the transition to a renewable model is transformational but potentially long-dated at this stage.</p>
<p><strong>Business model<br></strong>Pilot Energy is a junior oil and gas company holding a production interest in the offshore Cliff Head Oil Field with expansion options; and an accompanying exploration portfolio in the North Perth Basin. The company is looking to leverage its acreage and infrastructure base to underpin a strategic blue-print for expansion into the renewable energy space and the diversified revenue streams that could emerge. Future oil production could service upstream exploration and appraisal commitments. Financing for the renewable opportunities could be provided partly through partnering.</p>
<p><strong>Scenario analysis</strong><br>Our analysis and review of Pilot Energy’s opportunities <strong>assumes the merger with Royal Energy will be approved</strong> by shareholders at the scheduled EGM. We have evaluated the PGY portfolio against a range of risk factors based on our assessment of the operating environment accounting for commodity prices, location, phase of exploration, timing and scale of work programmes; and the probability of success associated with the CH-MWWSP submission. However, we note our current assumptions are subject to potentially significant adjustment as growth opportunities become better defined over time.</p>
<p><strong>Valuation of $17m (4.9cps)<br></strong>Valuing early phase exploration and even production growth assets is a subjective exercise, particularly when work programmes and financing are uncertain. We set our base asset value against risk-weighted development scenarios applying where appropriate, discretionary probability weightings to pricing, volume and success factors, which we believe are reasonable given the commercial operating environment and available data. We assign a risked valuation of $17m (4.9cps) to the upstream assets against a <strong>reference share price of 3.4cps. We cannot directly ascribe</strong> any value to the CH-MWWSP in particular or to a greater renewables opportunity at this stage, noting any nominal value at this point resides in the IP associated with the feasibility study. However, it’s worth commenting that an integrated renewables development <strong>could deliver an equity value of $90mn through &gt;$1.7Bn</strong> across the life cycle, on a 1.1GW project alone. We add that power generation would be only one component of a what would likely be an multi=stream project opportunity.</p>
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Pilot Energy Ltd
Sometimes it pays to be long winded





Pilot Energy Ltd is a junior oil and gas exploration company that is embracing a bold new ventures programme. To that end the company is evaluating the potential growth opportunities in renewable energy by submitting an Expression of Interest (proposal) to the WA Government under its Oakajee Strategic Industrial Renewable Hydrogen programme, to develop the Cliff Head &amp; Mid-West Wind and Solar Project (CH-MWWSP) leveraging and complimenting material working interests in the Cliff Head oil production facilities and WA-481-P offshore WA. Pilot is looking over the horizon, identifying that a renewable energy project could support an interconnected development strategy with multiple commercial outcomes. There is a portfolio of potential, likely worth more than the sum of the parts especially leveraging its acreage and infrastructure assets. The submission is due by 24-December.





Scope This report has been commissioned by Pilot Energy to present investors with an analysis of the opportunities emerging for the company over the next 12 months. The company will be pursuing growth opportunities within its core E&amp;P business, particularly the Cliff Head production enhancement campaign, but also via the CH-MWWSP with the submission of an EOI by 24-Dec. The oil and gas business is high-risk by definition and the transition to a renewable model is transformational but potentially long-dated at this stage.
Business model Pilot Energy is a junior oil and gas company holding a production interest in the offshore Cliff Head Oil Field with expansion options; and an accompanying exploration portfolio in the North Perth Basin. The company is looking to leverage its acreage and infrastructure base to underpin a strategic blue-print for expansion into the renewable energy space and the diversified revenue streams that could emerge. Future oil production could service upstream exploration and appraisal commitments. Financing for the renewable opportunities could be provided partly through partnering.
Scenario analysis Our analysis and review of Pilot Energy’s opportunities assumes the merger with Royal Energy will be approved by shareholders at the scheduled EGM. We have evaluated the PGY portfolio against a range of risk factors based on our assessment of the operating environment accounting for commodity prices, location, phase of exploration, timing and scale of work programmes; and the probability of success associated with the CH-MWWSP submission. However, we note our current assumptions are subject to potentially significant adjustment as growth opportunities become better defined over time.
Valuation of $17m (4.9cps) Valuing early phase exploration and even production growth assets is a subjective exercise, particularly when work programmes and financing are uncertain. We set our base asset value against risk-weighted development scenarios applying where appropriate, discretionary probability weightings to pricing, volume and success factors, which we believe are reasonable given the commercial operating environment and available data. We assign a risked valuation of $17m (4.9cps) to the upstream assets against a reference share price of 3.4cps. We cannot directly ascribe any value to the CH-MWWSP in particular or to a greater renewables opportunity at this stage, noting any nominal value at this point resides in the IP associated with the feasibility study. However, it’s worth commenting that an integrated renewables development could deliver an equity value of $90mn through &gt;$1.7Bn across the life cycle, on a 1.1GW project alone. We add that power generation would be only one component of a what would likely be an multi=stream project opportunity.













Pilot Energy Ltd: Sometimes It Pays to Be Long Winded

Australia

Pilot Energy Ltd operates as a oil and exploration company. The Company acquires, explores, and produces crude oil and natural gas. Pilot Energy serves customers in Australia.

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Pilot Energy (PGY AU)

Pilot Energy Limited: Leading the Renewables Push

Pilot Energy Limited Leading the renewables push Pilot Energy Ltd is a junior oil and gas exploration company that is embracing a bold new...

Research as a Service (RaaS)

Pilot Energy Ltd: Sometimes It Pays to Be Long Winded

Pilot Energy Ltd Sometimes it pays to be long winded Pilot Energy Ltd is a junior oil and gas exploration company that is embracing a bold...

Research as a Service (RaaS)

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Market Cap (USDm)

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