Pilot Energy: Ready to Power On

Business model
Pilot Energy is a junior oil and gas company with a portfolio of emerging opportunities. The critical focus of management will be to pursue its transformational growth opportunities in the renewables and carbon capture space through its Mid-West and South-West project proposals, which are currently undergoing feasibility studies. The company is looking to leverage its acreage and infrastructure base to underpin a strategic blue-print for expansion into the renewable energy and carbon capture space and the diversified revenue streams that could emerge. Financing for the renewable and other downstream opportunities could be provided partly through partnering.

Adding pieces to the portfolio
The opportunity set is growing with PGY adding a South-West carbon capture option, whilst securing a farminee to drill its Tcf scale Leschenault gas prospect – that will be a two for one shot with ‘success’ options independent of the well result. The South-West Project would complement the company’s Mid-West renewables strategy adding more diversification to the portfolio and importantly providing investors with exposure across a range of ‘new energy’ options on success. The recent equity capital raising, with the farmout deal and Cliff Head work programme carry, underpins working capital requirements over the next 12 months.

Renewables options are early stage but value is crystallising
Valuing early phase projects and project proposals is a subjective exercise, particularly when timing. work programmes and financing are somewhat uncertain. We set our base-case asset value against risk-weighted development scenarios and transactional analyses, applying where appropriate, discretionary probability weightings to success factors. The market is now pricing renewables options and we have adjusted our carrying value to reflect these opportunities within the PGY asset base. We assign a risked valuation of $137m (27.2cps – refer Exh. 1) to the portfolio against a reference share price of 6.6cps. We note the renewables and carbon capture options are as yet still early-stage and subject to significant change through the feasibility and evaluation process. Our attributed value should be considered within that context and with the commensurate risk overlay. It’s worth highlighting that a successful, integrated renewables development could deliver an equity value of >2.3Bn across the life cycle, on a 1.5GW project with associated hydrogen manufacture on the basis of our assumptions and reference valuation methodology.