AJ Lucas Group

AU: AJL

AU$92.2m market cap

AU$0.06 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. It also has an Australia-based operating business unit: Lucas Drilling Services (LDS).

Investment summary

AJ Lucas offers investors exposure to the most advanced UK shale appraisal programme. Current activity is focused at Preston New Road (PNR) where AJL became the first operator to have flowed gas from a horizontal shale gas well in the UK. AJL estimates that a 2.5km horizontal well, with all stages fractured, would have a potential initial production rate of 3–8mmcfd. In August, AJL recommenced hydraulic fracturing at its second horizontal well at PNR, however, seismic activity (a high of 2.9ML recorded on 26 August) brought operations to a halt. Cuadrilla is carrying out a technical investigation. In September, AJL released its FY19 results which benefited from a recovery in its Australian onshore drilling division. We are currently updating our valuation. Given current uncertainty around Bowland shale type curves, well costs, rig availability and gas prices, we use a probabilistic approach to valuation.

Y/E Jun
Revenue (A$m)
EBITDA (A$m)
PBT (A$m)
EPS (fd) (c)
P/E (x)
P/CF (x)
2018A 127.1 15.4 (16.7) (1.1) N/A N/A
2019A 143.8 21.1 (20.8) (3.4) N/A 3.2
2020E 143.7 17.3 (8.1) (1.4) N/A 5.0
2021E N/A N/A N/A N/A N/A N/A
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 14/11/2019
Sector
Oil & gas
Share price graph
Balance sheet
Forecast net debt (A$m) 104.4
Forecast gearing ratio (%) 82
Price performance
%
1m
3m
12m
Actual (41.4) (17.8) (74.8)
Relative* (42.2) (19.7) (78.0)
52-week high/low A$0.3/A$0.1
*% relative to local index
Key management
Phil Arnall Chairman
Austen Perrin CFO
Marcin Swierkowski Company Secretary

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