Energy

Cooper guides to higher earnings on back of higher gas prices

Mon 16 May 22, 3:44pm (AEST)
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Key Points

  • Cooper Energy raises earnings guidance to $57–68m from $53m-$63m
  • Optimisation of processing at the Orbost Gas Processing Plant resulted in a higher average processing rate
  • Capex revised lower at $19m-$21m, from up to $24m to $28m previously

Cooper Energy (ASX: COE) share price was up 3.77% around noon today after raising earnings guidance to $57–68m from $53m-$63m previously due to higher east coast wholesale gas prices [in the spot market] and higher sustained Orbost Gas Processing Plant processing levels.

Production was narrowed to the upper end of its previous guidance - to 3.2m-3.4m barrels of oil equivalent (mmboe), from 3mmboe-3.4mmboe - while sales volume were also narrowed 3.7mmboe to 3.9mmboe, from 3.7mmboe-4mmboe previously.

Then there was capital expenditure which was also revised lower at $19m-$21m, from up to $24m to $28m previously.

Following Copper’s strong Q3 Quarterly Report update last month, the company flagged a review of guidance including stability at its Orbost Gas Processing Plant operations, in its third quarter.

Strong three months ended 31 March

Today’s guidance upgrade follows the set of strong results announced 20 April for the three months ended 31 March within which the company announced record year-to-date (YTD) production up 24% to 2.45 MMboe.

The company noted that due to optimisation of processing at the Orbost Gas Processing Plant resulted in a higher average processing rate.

Managing Director, David Maxwell added that a higher average processing rate at the Orbost Gas Processing Plant, together with a reduction in the volume required to be supplied to the Sole long-term customers and a significant reduction in third party gas purchases meant Cooper Energy was a net seller of gas into the higher price spot market.

Maxwell noted that “discussions are ongoing with APA regarding the long-term arrangements for the Orbost Gas Processing Plant and therefore the Transition Agreement has been extended to 30 June 2022 for Cooper Energy and APA to finalise terms.”

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Cooper Energy share price: A five year snapshot.

What brokers think

Following a positive 3Q production report by Cooper Energy, Morgans and Ord Minnett held their Add (target price (0.35), and Hold (target price $0.33) recommendations, respectively.

Meantime, last week Macquarie noted movement was afoot at Cooper Energy's Orbost Gas Plant, after processing hit a new high in May, with reduction of Sole GSA production allowing some of the Orbost production to be sold at spot.

Having cast a wary eye over the company's balance sheet, the broker expects more capex will be required, and retains Underperform rating, with the target price rising 4% to 25c.

Interestingly, Stock Doctor believes Copper Energy exhibits unacceptable levels of financial risk due to a below benchmark Financial Health score.

The company is forecast to become profitable over the next 3 years and has sufficient cash for at least 1 year of operations.

Consensus on Cooper Energy is Moderate Buy.

Based on Morningstar’s fair value of $0.32, the stock appears to be undervalued.

Based on the brokers that cover Cooper Energy (as reported on by FN Arena), the stock is currently trading with 5.9% upside to the target price of $0.286.

Written By

Mark Story

Editor

Mark is an award-winning investigative financial journalist and editor who started his career working for Marathon Oil in London. He has a degree in politics/economics, a diploma in journalism and has completed the Institute of Directors course. Mark has worked on 70-plus newspapers and financial publications across Australia, NZ, the US, and Asia including: The Australian Financial Review, Money Magazine, Australian Property Investor and Finance Asia. Mark is passionate about improving the financial literacy of all Australians through the highest quality content.

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