Price looks low to account for volume uncertainty: The contract's volume uncertainties are seemingly reflected in a low price. Specifically, Westside talks of revenue over A$1bn which, although oil-linked, points to a pricing range of between ~A$5.5/GJ (in real terms) which is likely to be competitive versus other sources of local supply.
· Corporate acquisition may have been cheaper: Westside is under hostile takeover by Landbridge Group (at an offer EV of just ~A$133m) which implies an EV/2P multiple of merely ~A$0.39/GJ (or A$0.18/GJ on a 3P basis). Adding estimated opex and capex of ~A$2/GJ and A$1.8/GJ respectively (based on A$1.5m well costs, EURs of ~1PJ and A$80m gross for additional compression) to Landbridge's offer points to full-cycle costs of ~A$4.2/GJ. This looks like a potentially cheaper option relative to the gas price price being paid while also giving GLNG control of supply volumes and offering exposure to the significant 3P reserves upside.
WCL Price at posting:
32.5¢ Sentiment: Buy Disclosure: Held
