Kursziel GASX 2,80 USD
Drjimjones June 29, 2022 NG Energy International Corp. (GASX-V) View Full Report (PDF) 12 Month Target: $2.80 (unch) | Buy (unch) Potential Natural Gas Discovery At Magico-1
GASX announced that its Magico-1 natural gas exploration well on the SINU-9 Block has reached the target Cinaga De Oro (CDO) sandstone reservoir at 3,000 feet with well logs identifying several gas bearing zones between 3,200 and 3,250 feet for a gross pay section of 150 feet. The net pay was quoted at 100 feet.
The original design of the well included three phases of drilling to a total measured depth of 8,000 feet. However, with the thick section of potentially productive sands and evidence of a potential water contact not too far below the depth drilled, GASX has made the decision to not jeopardize this well and to move forward with completion and testing of Magico-1, which should last approximately 10-12 days. We expect an update following the testing phase.
The net pay section encountered at Magico-1 in the CDO zone compares reasonably well with the results that Canacol Energy (CNE-T; not rated) has publicly released over the past few years from its drilling on the VIM-5 and Esperanza Blocks. The range of net pay from CNE’s reports was between 13 feet and 309 feet with the recent Aguas Villas discovery having 412 feet of net pay, which is the thickest section that CNE has encountered. While we caution a direct comparison between net pay figures as it is atypical that a whole net pay section is tested or produces, we note that the Ocarina-1 tested at a final rate of 30 mmcf/d from a 13-foot section in the CDO zone. CNE’s blocks are directly east of GASX’s SINU-9 Block in the Lower Magdalena Valley and generally target the same CDO zone.
Conclusion & Recommendation: As we have stated on multiple occasions, the SINU-9 Block has high impact potential for GASX as each well in the company’s 4-well Phase 1 drilling program has potential of 20-35 mmcfe/d (gross). GASX has a 72% WI on the SINU-9 Block. With the data that GASX has so far on the Magico-1 well, it is looking like the 1st well in this program a potential discovery. We will know after testing if Magico-1 has production potential in that range. If/when Magico-1 becomes a producing well, it will append to the natural gas production from the two wells in the Maria Conchita Block as GASX makes steps to become one of the largest independent natural gas producers in Colombia. We maintain our $2.80 target price, which is derived from a combination of our Risked Exploration NAV and a 3.0x EV/DACF multiple of our 2023 forecasts. We maintain our Buy rating.
View the full report (pdf): GASX-2022-06-29.pdf Kirk Wilson | 403.910.5379 | kwilson@beaconsecurities.ca
Beacon Securities Limited
66 Wellington St W, Suite 4050, Toronto, ON M5K 1H1
www.beaconsecurities.ca
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