Investors interested in the energy sector may find a compelling opportunity with Comet Ridge Ltd (ASX: COI), which has been identified by Bell Potter as a stock with the potential to rise over 60% in the coming year. The firm has recently recommended this less prominent energy player as a noteworthy investment following its strategic acquisition of a significant asset.
Comet Ridge has announced plans to acquire Santos Ltd’s 42.86% stake in the Mahalo Joint Venture coal seam gas project, effectively increasing its ownership to 100%. This acquisition, valued at $40 million upon financial close and an additional $20 million contingent on production milestones, is expected to streamline the company’s operations and enhance its development prospects.
According to Bell Potter, the transaction will greatly simplify Comet Ridge’s Mahalo acreage, thereby increasing its overall project funding capacity. The firm stated, “The transaction will vastly simplify COI’s Mahalo acreage, increasing development optionality and overall project funding capacity.” This acquisition allows Comet Ridge to establish complete control over the Mahalo area, which is fully permitted and nearing the completion of its front-end engineering design (FEED).
The Mahalo project is projected to produce up to 60 terajoules per day for the east coast gas market, with a final investment decision targeted for mid-2026. Previously considered non-core by Santos, this asset now falls under Comet Ridge’s management, allowing the company to progress according to its own timeline. Furthermore, Comet Ridge is in discussions with the Northern Australia Infrastructure Facility for potential debt financing, which could lead to attracting a strategic partner and securing gas prepayments.
In response to the acquisition, Bell Potter has maintained its speculative buy rating for Comet Ridge, setting a price target of 21 cents per share. With the current share price at 13 cents, this indicates a potential upside of 61% for investors over the next 12 months. The broker emphasizes that while Comet Ridge presents a promising option, it is best suited for investors with a high tolerance for risk.
The broker concluded, “Our COI valuation is underpinned by COI’s Mahalo projects; we are yet to apply the acquisition of STO’s Mahalo JV interest.” The acquisition of the Mahalo Joint Venture, awarded a Petroleum Lease in mid-2020, positions Comet Ridge as one of the few development-ready gas projects capable of delivering near-term supply.
The article highlights the positive outlook for the Australian east coast gas market, where supply shortfalls are expected to drive higher prices. Comet Ridge’s focus on gas development aligns with this market trend, showcasing its potential for future cash flows.
Investors considering Comet Ridge should also note that it was not among the five stocks recommended by Motley Fool investing expert Scott Phillips. His service, Motley Fool Share Advisor, has provided extensive investment insights, though Comet Ridge is highlighted here due to its recent developments.
As the energy landscape continues to evolve, Comet Ridge Ltd stands out as an intriguing option for those seeking to diversify within the sector. The combination of strategic acquisitions and market dynamics could yield significant returns for informed investors willing to navigate the inherent risks.
