https://announcements.asx.com.au/asxpdf/20240902/pdf/067dd8gr4lj3hz.pdf

One of their fields now going to produce more oil and gas. This will provide a bit more revenue.

BUT - the big news we are waiting for is on PEL182.....and from watching this video....we are years and years and many cap raises from making this happen.

See video here:

https://youtu.be/r_LvenGEW6Y

My Thesis was that because PEL 182 is the largest Gas field in Aus and is next door (40km) to Santos' field...which is going to run out in the near future.....Santos would buy BAS for about $1 billion (current market cap is about $50m). The Gas is worth about $4 billion or more.

BUT - Santos is going through a potential takeover....or being split up and sold. So I doubt any investments will be happening by their board. So BAS will have to keep working on PEL182 using their own cash/cap raises.

I will try to exit BAS at about 13.5 cents......and look to buy back in about 2 years from now...when much of the R&D on PEL182 will be complete.

https://static1.squarespace.com/static/58c0dc77cd0f68722c90237d/t/6621fc042953ab079b8bf643/1713503242191/BAS+2024+Placement+Results+and+SPP+Announcement+-+R.pdf

Well i guess their cash generation from their operations is not enough for them to pay for the development work of PEL182 (the big Gas field they own in South Australia).

They say that a Tier 1 Institution Resource Investor has put in a million bucks. And they want the rest of us to put in 2 million via the SPP. Strange how they don't mention this Tier 1 investor.....

I think it is good that BAS are doing the work on PEL182....but $3m is not going to go far. Maybe another year of work? Like I have said previously...i hope they can get this prep work done...and they Santos buys BAS or PEL182. Long term PEL182 is going to be worth big money......but how long will it take?

John

PS I won't be particpating in the SPP. I have enough exposure. This was a high risk investment for me...and I don't feel i need any more.

Wow. Its really interesting to go back and look at your valuation assessments.

I had these assumptions 8 Months ago:

• There will be strong demand for gas in the energy transition. 
• BAS has the largest undeveloped gas supply in Australia located in the Cooper Basin – PEL182.
• BAS is currently cash flow positive with zero debt. This cash can be used to further prove PEL 182 without the need for a capital raise.
• PEL 182 is located near Santos current operating assets.
• Santos is the logical buyer of PEL182.
• Management has a good track record of selling to the majors/takeovers with good outcomes to shareholders. The MD is also ex Santos.
• A takeover SP could be at about $1.00 which would leave enough upside/fat on the table for the buyer. 
• I would put this into my ‘high risk’ category of investments.

So the assumptions above all still hold in my opinion. And I was hoping for a quick sale to Santos. But these things take years. So that is one thing I got wrong. Also the gas market has gone really strange:

• Victoria moving away from Gas and mandating new builds use electical appliances etc.
• Lots of environmental activists trying to stop exploration for gas in Victorian waters (and all over Australia)
• Gas companies selling gas off shore due to better prices and there being potential gas shortages in Australia.

I'm not really across the Australian and global gas sector (its on my reading/research list), so i'm sure there are many other factors.

But I think in the short term, the market/gas stocks will go sideways. But in the longer term, with all the red tape/govt/environmental approvals etc, it will make it hard to expore or develop new gas sites. Especially offshore where the environmental risks are greater and development costs are higher. And in the longer term, it is a no brainer, that the world will need more gas to make the 'energy transition' work.

Which then makes BAS a great option (not off shore, close to current operating Santos project, scale). I hope BAS does not try to develop it themselves because that will take 10-15 years and i shudder at the thought of all those capital raises. I think they would be best to just do all the proving work / approvals...and then get bought out by a Santos or similar.

Anyone on Strawman with expertise in the gas sector?

Bass Oil Limited (BAS)

What they do:

• Oil and gas producer and developer. 
• Have producing assets in Indonesia and Australia (Cooper Basin in SA). 
• Have a range of development assets. 
• In Nov 2022 BAS confirmed that PEL182 (one of their development assets in the Cooper Basin), that it owns 100%, has 21 Trillion Cubic Feet (TCF) of gas making it the largest in Australia. 

Current financial position:

• BAS’s producing assets creates revenue of about $500k a month. 
• They have zero debt. 
• Cash balance is about $2.6m as at March 2023.

Management:

• Giustino (Tino) Guglielmo – Managing Director – Ex Santos and has also led other junior oil/gas companies that have been acquired with good returns to shareholders (Stuart Petroleum Ltd/Ambassador Oil & Gas Ltd ). He has about 20 million share/options.

Growth strategy:

• BAS’s current production at about $500k a month should continue for the foreseeable future (5 years +). Which will at least partly fund any development works. So I can’s see any capital raising in the near term. 
• PEL182 has the following attributes:
• 100% owned by BAS
• Natural gas of 21 TCF along with 845 Million Barrels in place of condensate/oil
• The exploration work was done with Santos so they have first hand knowledge of the field.
• It is located near from Santos’ current producing assets.
• Located near existing gas/oil pipelines so getting permits etc should be easy

• BAS have not yet stated the growth strategy for PEL182. However, it could be one of a few ways:
• BAS develops the field itself. It will need to prove up the field, get permits, develop business case, lock in financing, build etc. This would take 10-15 years (at a guess). 
• BAS partners with a major to co-develop the field. This would probably take a little less time (say 10 years).
• BAS sells PEL182 to one of the majors. 
• I think this last option is the most likely because:
• Tino the MD is not getting any younger and I’m not sure he would want to hang around for another 10+ years.
• Santos is just next door and has been involved with the exploration with BAS. Santos’s current large gas project in development is the Barossa Gas Project which is offshore from Darwin. They have had loads of issues with cost increases and now Indigenous claims etc. For all the complexity with that project, they could shelve it, and buy PEL182 which is onshore in an existing/proven field region next to their current assets. 

Valuing BAS:

• The current producing assets are relatively small. So I have excluded them for this analysis. 
• The value in BAS is the gas and condensate/oil at PEL182. For simplicity I have also ignored the oil. I have put my assumptions below and tried to be conservative. 

• So a MC of $1 billion would mean a SP of about $4. The current SP is $0.12.
• So if someone was to buy PEL182…they would be taking on all the risk. I’m guessing that they would only pay 25%? So the NPV would be about $250m….that would equate to a SP of about $1. That would leave lots of upside for the buyer and room for cost overruns, changes in demand/price etc. 

The Gas market:

• In my analysis of Energy Transition, there is a constant theme of gas being used to fill the renewables gap in generation of electricity. 
• Most forecasts I have seen say that gas demand will increase over the next 10 – 15 years and then stay relatively constant past that period.
• So gas is here to stay. And new sources will be required. 

Conclusion:

• There will be strong demand for gas in the energy transition. 
• BAS has the largest undeveloped gas supply in Australia located in the Cooper Basin – PEL182.
• BAS is currently cash flow positive with zero debt. This cash can be used to further prove PEL 182 without the need for a capital raise.
• PEL 182 is located near Santos current operating assets.
• Santos is the logical buyer of PEL182.
• Management has a good track record of selling to the majors/takeovers with good outcomes to shareholders. The MD is also ex Santos.
• A takeover SP could be at about $1.00 which would leave enough upside/fat on the table for the buyer. 
• I would put this into my ‘high risk’ category of investments.

Love to hear what others think about BAS and the assumptions I have used in my crude model (Oil and gas joke). ;-)

Parko