By Dr. Michael Green

Gas prices in Europe have surged upwards once more in recent days as Putin begins to turn the tap off. Amidst this backdrop, Coro Energy was able to report its Italian gas production numbers yesterday with excellent timing.

Coro saw steadily rising gas production from its Italian portfolio in Q2 2022 largely due to restarting production at Sillaro in mid-March. At the time the board marked the card of investors in being able to highlight that “ ….the company notes the continued momentum in domestic Italian natural gas prices into July 2022, which would, at current levels, result in further increases in monthly revenues over Q2 2022 exit monthly revenues”. 

Apparently, a number of enhancement initiatives are being evaluated to further increase production of the Italian portfolio. The first move looks likely to be the reperforation of the reservoir interval at Rapagnano later on this year.  

That’s not to mention the Bezzecca where there is actually a chance that this might be back online by the year-end and is potentially much bigger than Sillaro. The Bezzecca Gas Field is located within the Cascina Castello Licence, which lies 35km east of Milan. An enlargement of the existing Cascina Castello Licence led to the Bezzecca Field being awarded production concession status in 2014. Gas production commenced in 2017 and this field had in the past been producing at a rate of 16,000scm/day (550Mcf/day).

Bezzecca had been shut down due to a ruptured pipe and the company has taken court action against the manufacturer of the pipe concerning design specifications. The good news is that the court has released the site which means that Coro can look to get back into business there.

In H1 2022 gas production was seen to average around 17,700 Scm/d. All we would say is that in H2 2022 it does look as though Coro’s gas production ought to be higher on the back of the reperforating of Rapagnano. Getting Bezzecca back in production will be worth waiting for as it could potentially be a big win in our view. Recent shenanigans by Russia have boosted European gas prices, which are currently sitting around €1.70 per scm so this looks likely to boost H2 revenues.

European gas is just a side interest for Coro which is at its heart a South East Asian energy company  focused on supporting the regional transition to a low carbon economy. Recent weakness in the small cap resources market has caused the stock price of Coro to drift back but the company has reassured investors that the impressive progress is continuing.

The 85%-owned Vietnam Solar business looks set to achieve maiden revenues before the end of 2022 from its 3MW solar rooftop pilot project; and then with net cash flow of US$0.3 million per annum. This follows the entry into a 25-year Power Purchase Agreement (PPA) with Phong Phu, one of Vietnam’s leading clothing manufacturers. Already, the equipment has begun to be installed. Panels and inverters have arrived in Vietnam and are waiting to clear customs. So, everything looks as though it could be in place to see revenue before the year end.

This is a pilot project and once it is up and running, the teething problems resolved, the project bedded in and the company’s assumptions proven, then the roll out will begin. The plan is to develop up to 150MW of rooftop solar in Vietnam with a 3MW project every couple of months. This should result in a rapidly growing healthy annual cash flow stretching many years into the future based on these 25-year PPAs.

Meanwhile, in the Philippines Coro’s 80%-owned Solar & Wind business seems to be making great strides with its two development stage renewables projects – a 100MW solar project and a 100MW wind project. When we last checked, allowing for permitting timelines, these projects are around, 6 and 12 months respectively, away from achieving ready-to-build status. Already, the all-important wind data gathering exercise has begun with Lidar equipment onsite and Met Mast equipment under contract.

There has been little let up in global gas prices, which has also been excellent news also for Coro’s 15%-owned Duyung PSC Gas Project in Indonesia. The Directors reckon this is the largest confirmed undeveloped resource in the area. They maybe well right as the Mako gas field is one of the largest gas discoveries (495 Bcf gross, full field) 2C (contingent recoverable resources) in the West Natuna Basin.

Moving forward the newsflow looks as though it could be quite impressive. Obviously, there will be ongoing updates on gas production from Italy on a quarterly basis, which looks as though it will make for good reading. There should also be news of Vietnam, which looks set to be operational before the year end. Updates on progress in the Philippines are also expected but bear in mind it is very quick to get a 3MW roof top solar project up and running in Vietnam as it doesn’t need the same level of permitting as a far larger 100MW project in the Philippines. Nevertheless, these projects have all the makings of being big winners. It also looks to be getting closer to the time that we might hear about progress on negotiating a binding Gas Sales Agreement as regional gas prices in South East Asia remain strong and the macro environment is really creating the incentive for the positive negotiations.

Coro is seriously undervalued in our view. We are very excited about the company’s big opportunities in solar and wind energy production as well as the vast gas project in South East Asia. Italy also has the scope to generate €5 million of free cash flow annually, which roughly equates to £4 million. That is £4 million a year of additional growth investment funding to accelerate growth.

There is clearly a lot going on in this company which is currently capped at derisory £6 million. Just on the current Italian production alone, the company is woefully undervalued in our view. We initiated coverage on Coro Energy in January 2022 with a Conviction Buy and a target price of 1.50p, when the shares were trading at 0.275p. Quite rightly since then the stock has been over the 0.45p mark but recent weakness has taken it back down to the current price of 0.30p, where we are more than happy to reiterate our stance.

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