Echelon Resources $ECH (ASX), Rebranded from New Zealand Oil & Gas Limited (AU:NZO)
Company
New Zealand Oil & Gas Limited/Echelon Resources is an energy commodity exploration and production company. Its segments include Perth Basin, Kupe oil & gas field (Kupe), Amadeus Basin oil & gas fields, and Cue Energy Resources Limited (Cue). Perth Basin segment is engaged in exploration interests in Western Australia comprising the L7 Production license and EP437 Exploration Permit. Kupe segment is engaged in the development, production, and sale of natural gas, liquified petroleum gas and condensate (light oil), located in the offshore Taranaki Basin, New Zealand. Amadeus Basin oil & gas fields segment includes Mereenie oil and gas field, Palm Valley gas field and Dingo gas field, all located in the Amadeus Basin in Australia. Cue segment includes its participating interest in the Amadeus Basin assets. The 5,600-square kilometer Mahato PSC is located in the Central Sumatra basin close to several producing oil fields. The Mahato PSC covers a prospective area, close to several large producing oil fields.
It’s parent organization is, O.G. Oil & Gas (Singapore) Pte Ltd.
P/E: 7.62 (Australian average is 20.1X)
P/B: 0.59
P/S: 0.9
EV/EBIT: 1.38
Market Cap: 84.6M (AUD)
Balance Sheet
Total Current Liabilities/Total Current Assets: 20.44M/60.76M –> 33.6%
Cash: 36.38M
Total Debt: 0
Net Debt: -46.44M
Cash to Debt sits at a large 126, making it one of the best in the small producer industry; Quick Ratio is 3.58
Shares outstanding: 227.37M (steady for last 3 years)
Margins
EPS: 0.064
Net profit Growth rate (5Y): 7.45%
Earnings grew 61.2% last year
It has been profitable for 5 of the last 10 years.
Recent Performances/News
–Net Income After Tax (17.27%): 23.88M
–For the six months ended 31 December 2023, New Zealand Oil and Gas Ltd revenues increased 11% to NZ$51.3M. Net income increased from NZ$3.3M to NZ$7M. Revenues reflect an increase in demand for the Company’s products and services due to favorable market conditions. Net income benefited from Exploration and evaluation costs expense decrease of 92% to NZ$609K (expense), Royalties expense decrease of 17% to NZ$1.8M (expense).
- New contract to supply gas destined for rare earth mining in Western Australia.
- On 14 February 2024, New Zealand Oil & Gas agreed to purchase a further 25% equity interest in the Mereenie licences, located in the Amadeus Basin in Australia’s Northern Territory. The cost totalled 69M AUD with an initial draw down from a debt facility of just shy of 50M.
Bad news
“No cigar” says Echelon boss Perth Basin well to be plugged and abandoned after no moveable hydrocarbons hit.
I am always skeptical when a company has a name change too, there’s something going on that has warranted a rebranding. + they don’t seem to have a website and it’s generally difficult to find widespread news.
Things I Like However
- Quiet, not many people are interested in this sector in Australia and New Zealand markets [DELISTED FROM NEW ZEALAND].
- Profitable; Net income, trimming expenses and a small cap, with room to expand & benefit from nat gas prices
- Paid their first dividend in March 2024, may be a sign that more will come
- No Debt + Cash to cover ALL current liabilities.
- Exposure to Indonesia, a country I am very bullish on for manufacturing and production (NEEDS ENERGY). Indonesia is the new manufacturing powerhouse in my estimation (not China).
Closing
I think this is a stock that really highlights what I try to do different with On The Ball; find stock picks that are in a primed sector, healthy area, that are valuable (profitable) that few people are noticing with any real degree. I recall Ray Dalio saying “All you need is 15-20 really good uncorrelated revenue streams to a portfolio” and perhaps this could fit into yours.
Despite me jokingly calling Australia, “AusJail’ya”, there’s a lot of great resource stock picks in this region–> Here’s another I like: FENIX RESOURCES. Please consider my silver and gold plan to subscribe to receive even more stock picks!
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#STAYONTHEBALL
