Comet Ridge executed an agency agreement with Santos in April, assuming responsibility to manage the field subsurface work for the Mahalo 2017 JV exploration work program and budget on behalf of Santos, until December 21, 2018.

 

With Santos needing more gas and Mahalo looking good with Comet currently sitting on 219PJ of 3P reserves and 112PJ of 1C contingent resources, the program could add significant economic reserves to each of the JV partners' portfolio.

 

RBC Capital Markets initiated on Comet Ridge with an Outperform rating in late October after its shares went up 250% this year, with the analysts then seeing the Mahalo CSG field driving plenty more upside for the junior, calling it "catalyst rich" and seeing its operator status a big plus. 

 

Comet Ridge remaining as operator of the project it shares with Santos and APLNG (30% each) is important for maintaining momentum as it moves into a stage 1 2018 final investment decision and for cost control. 

 

RBC sees a "high likelihood" of the JV giants supporting a Mahalo development. 

 

Santos will likely see the development as a valued source of additional reserves to support Horizon contract obligations from the Cooper Basin and though APLNG has less need, it too has recently undertaken an obligation to send more gas into the domestic market, after promising the prime minister of supply through the end of 2018. 

 

"It would be logical to support a commercially attractive Mahalo development," RBC analysts Ben Wilson said in a client note yesterday, enlightened after a Mahalo site visit.

 

The lateral appraisal well is scheduled for target depth in the middle of this month, with up to 1000m in coal seam and then the well be kept on flow long enough to gather necessary data. 

 

This will contribute to an upgraded reserve estimate for the project, due in the next few months. 

 

"We anticipate a material upgrade to 2P field reserves, more than sufficient to underpin a 25 terrajoule per day stage 1 Mahalo FID," Wilson said. 

 

That is the lowest estimate, with RBC recently saying there was a 20% chance of a 100TJ/d supply. 

 

The analysts also met senior management and representatives from pipeline builder Jemena and said discussions revealed a firm intention to work with the JV to bring gas into the Queensland Gas Pipeline. 

 

"Jemena also spoke positively regarding longer term prospects of a line running south of the Galilee Basin which may in time serve as an export route for any gas developed in the Basin," Wilson said. 

 

RBC is now looking forward to observing Comet's first operated well targeting conventional sandstone plays in the Albany-1 well to be drilled next year.

 

Mira-6 spudded yesterday with Silver City Drilling Rig 20 which has previously drilled other lateral wells for operators in the Bowen Basin. 

 

Mira-6's objective is to produce alongside vertical wells to accelerate water and gas production from the Mira field and assess the optimal production well design for the first phase of development at Mira. 

 

Comet Ridge was down by 1.8% this morning trading at 27c.