AJ Lucas Group

AU: AJL

AU$108.8m market cap

AU$0.15 last close

AJ Lucas has investments in the exploration and commercialisation of shale gas in the UK through licence equity interests and a stake in Cuadrilla. AJL also has two Australia-based operating business units: Drilling Services (LDS) and Engineering & Construction (LEC).

Investment summary

Cuadrilla has become the first operator to have flowed gas from a horizontal shale gas exploration well in the UK. Initial results are encouraging, with recovered gas containing very high methane content (96%), no H2S and minimal CO2. Core samples suggest the Bowland shale is quartz rich, with low clay content and excellent properties for fracturing. Gas flowed to the surface from PNR1-z at a peak rate of 0.2mmscfd, but with just two of 41 installed stages along the horizontal section fully fractured as designed. Less than 14% of sand planned for injection was put in place as Cuadrilla attempted to operate within the regulatory micro-seismic traffic light system. Cuadrilla estimates that a 2.5km horizontal well, with all stages fractured as planned, would have a potential initial production (IP) rate of 3–8mmscfd (no IP time period stated). Data were not provided on type curve or potential estimated ultimate gas recovery (EUR) given the limited duration of the test. EUR would be a key additional input when determining commerciality. In our initiation note published on 9 April 2018, we estimated a minimum commercial 30-day IP rate of 5mmscfd for a 2.5km lateral.

Y/E Jun
Revenue (A$m)
EBITDA (A$m)
PBT (A$m)
EPS (fd) (c)
P/E (x)
P/CF (x)
2017A 122.6 (3.8) (36.3) (6.67) N/A N/A
2018A 127.1 15.4 (16.7) (1.14) N/A N/A
2019E 127.2 13.5 (8.9) (1.47) N/A 4.9
2020E 129.7 13.9 (4.0) 6.89 2.1 9.1
Last updated on 21/02/2019
Industry outlook

AJ Lucas has investments in the exploration and commercialisation of shale gas in the UK through licence equity interests and a stake in Cuadrilla. Central government supports the exploitation of shale gas resource in order to increase domestic energy security and to support intermittent renewable energy sources.

Last updated on 21/02/2019
Sector
Oil & gas
Share price graph
Balance sheet
Forecast net debt (A$m) 86.3
Forecast gearing ratio (%) 67
Price performance
%
1m
3m
12m
Actual (27.5) (51.7) (61.8)
Relative* (30.3) (54.9) (62.6)
52-week high/low A$0.4/A$0.1
*% relative to local index
Key management
Phil Arnall Chairman
Austen Perrin CFO
Marcin Swierkowski Company Secretary

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