Comet Ridge Ltd (ASX: COI) is poised for significant growth after announcing a strategic acquisition that could increase its stock value by over 60%. The energy exploration and development company, focused on coal seam and conventional gas projects in eastern Australia, is acquiring Santos Ltd’s (ASX: STO) 42.86% stake in the Mahalo Joint Venture coal seam gas project. Once completed, Comet Ridge will hold a 100% interest in the project.
This acquisition involves an initial payment of 40 million AUD, followed by an additional 20 million AUD contingent on meeting production milestones. According to Bell Potter, which has provided a speculative buy rating for Comet Ridge, this deal simplifies the company’s structure significantly. The firm stated, “The transaction will vastly simplify COI’s Mahalo acreage, increasing development optionality and overall project funding capacity.”
With the Mahalo area fully permitted and its front-end engineering design nearing completion, Comet Ridge is well-positioned to enhance its production capabilities. The project is expected to initially produce up to 60 terajoules per day for the east coast gas market, with a final investment decision targeted for mid-2026. This timeline reflects a shift from Santos’s previous stance, as the asset was considered non-core for the company.
The acquisition allows Comet Ridge to control the Mahalo project according to its timeline, opening avenues for potential strategic partnerships and gas prepayments. The company is currently in discussions with the Northern Australia Infrastructure Facility for debt financing, which could further bolster its financial position.
Bell Potter has maintained a price target of 21 cents for Comet Ridge shares, suggesting a potential upside of 61% from the current share price of 13 cents over the next year. This situation presents an intriguing opportunity for investors with a higher risk tolerance. The firm noted, “Our COI valuation is underpinned by COI’s Mahalo projects; we are yet to apply the acquisition of STO’s Mahalo JV interest.”
The Mahalo Joint Venture was awarded a Petroleum Lease in mid-2020, making it one of the few development-ready gas projects capable of supplying the market in the near term. Bell Potter remains optimistic about the Australian east coast gas markets, citing likely supply shortfalls that may drive prices higher.
Overall, Comet Ridge is characterized as a gas development company with substantial growth potential, though it carries a speculative risk rating due to market volatility and the nature of its operations. This acquisition marks a pivotal moment for the company as it seeks to expand its footprint in Australia’s competitive energy sector.
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