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12 months on, a de-risked EXR continues to deliver

June 04, 2021 | Price:$0.28

Elixir Energy (ASX:EXR) is exploring for natural gas on the Mongolian-China border to replace burning of coal for energy in China.

EXR is progressively unlocking a massive, clean burning, natural gas source, right on energy hungry China’s doorstep. 

Wise Owl added EXR to our portfolio a year ago, when it was trading at 3.6c.  

12 months on EXR has significantly de-risked its project and has raised enough cash for the next couple of years as it continues to explore and appraise its natural gas potential.

EXR has had an exceptional strike rate on drilling in Mongolia, with 10 out of 12 successful wells so far, has traded above 40c and just completed a placement at 36c.

So even though it has been a while since we wrote about EXR, we continue to hold the stock long term as it continues to outperform and deliver great results. Today EXR is trading under the recent placement price of 36c.

EXR’s next drill result is expected in the coming days.

ASX:EXR

EXR has a busy 2021 work program planned, and it’s about to get busier given EXR recently raised $26.6M, and is now sitting on ~ $36M –  which is plenty of funding to deliver newsflow.

One of the reasons we invested was EXR’s contribution to transitioning China from fossil fuels to a low carbon economy. 

Aside from EXR, we have had some other good wins in our portfolio:

Our Track Record

WO Portfolio 4-June-21

Our take on EXR’s recent progress 

1. EXR raises $26.6M in total – now has circa $36M in the bank.  

EXR recently raised $10M from institutional investors and a further $16.6M from existing holders via a Share Purchase Plan. Both raises were done at 36c/share. 

EXR now has a fully funded multi-well exploration and appraisal drilling programme to roll out over multiple years. The placement shares look to have been digested in recent trading, so positive newsflow should contribute to share price appreciation. 

2. Mobilised extra drilling team. More drilling means more newsflow. 

With more cash, EXR has been able to put an extra drilling team on site. There are now two drilling teams working for EXR. 

This means more exploration results at a faster pace, leading to acceleration in resource definition and continual newsflow.

3. New well just spudded. Results could come any day now.  

EXR spudded a new well on 27th May, so we should get results from that soon. 

4. Seismic programme ongoing. Helps with resource definition. 

EXR is running a seismic programme to assist with determining where to drill next.

5. Hydrogen plans. Upside from renewable energy? 

EXR recently announced Blue and Green Hydrogen ambitions. EXR’s plans to move into this space looks to have been in the background for some time, with the company already having created a clean energy subsidiary and procured a SODAR sun and wind monitoring machine. 

EXR is currently taking field data on its renewable energy resources, by measuring sun and wind data on its project. 

Hydrogen is a hot global thematic, so we are interested to see how this progresses in addition to EXR’s core business of gas discovery. 

Why we are invested in EXR

 Giant prospective resource next door to China

Massive 30,000km2 Production Sharing Contract with a very large prospective resource. EXR has enlarged its prospective resource from 7.6 tcf of gas (risked “best” (mid) case) to a (best case) of 14.6 Tcf, a 92% increase from the 2018 estimate. We expect it will continue to grow. 

✅   Multiple channels to market 

Cash-flow generation can be early & modular. EXR has partnered with one of Mongolia’s largest fuel retailers to develop a Small Scale LMG (SSLNG) plant. The Asian Super grid and Power of Siberia II pipeline also present opportunities.

✅. Deep CSG expertise from Australia being transmitted to Mongolia

Team has a history of success in CBM in Richard Cottee (the “godfather” of QLD CSG) plus ex-Santos Neil Young and Stephen Kelemen. EXR delivered Mongolia’s first CSG discovery at Nomgon-1 well and results continue to exceed expectations

✅  Aggressive exploration program underway 

Fully funded exploration for multiple years is aimed to open up new sub-basins in a number of locations across the gigantic PSC area. A contingent resource booking for Nomgon sub-basin targeted for year end.

  100% ownership of PSC

100% ownership position maximises optionality to pursue value adding farmout(s).

What’s next for EXR:

EXR has ~ $36M in the bank and is accelerating its 2021 drilling program.

  • Watch out for upcoming new sub basin opening wells and wells that extend the size of already discovered sub basins – we will keep you up to date as these come along.
  • We are expecting a new result every few weeks from EXR, so there is plenty of news to come as it continues its drilling program.
  • The Hydrogen news is interesting and even though EXR has already made some progress, it is obviously very early stage – we continue to watch for updates on this front.

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Disclaimer

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this report is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

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