Elixir Energy - An Emerging Gas and Hydrogen Player Targeting High-Impact Wells

Summary

Elixir Energy is an Australian exploration and appraisal company focused on natural gas and hydrogen opportunities. With a sub-$100 million market capitalization, Elixir aims to rapidly identify resources and bring in partners to develop its assets.

The company has assembled a portfolio of permits across two core projects:

Nomgon Project - Coal Bed Methane and Hydrogen in Mongolia

Elixir's flagship project covers 30,000 square km in the South Gobi desert of Mongolia. The company is currently pilot testing coal bed methane production through a series of wells. Elixir is also exploring the potential for large-scale green hydrogen production for export to neighboring China.

The Nomgon pilot has proven a substantial resource in place by achieving gas flows from multiple wells. Ongoing testing aims to optimize flows as Elixir gathers data to plan a potential scaled-up production project. The company is also engaged with the Mongolian government to extend its exploration rights in areas adjacent to the pilot wells.

In parallel, Elixir is working with a large international partner to study the feasibility of building a major green hydrogen production facility. The project would tap into Mongolia's vast solar and wind resources to produce hydrogen through electrolysis. With hydrogen demand surging globally, Mongolia's proximity to China offers a strategic export location.

Queensland Gas Appraisal Well in Australia

Elixir also holds the Petroleum Exploration Permit in Queensland's Surat Basin. The company will soon spud an appraisal well to test an onshore gas resource identified by prior drilling from BG Group.

With BG's data pointing to substantial volumes in place, success at Elixir's upcoming Daydream-2 well could prove up a highly material gas resource. The well will penetrate an identified gas reservoir at depths exceeding 2,500 meters. Elixir expects drilling and testing to take 4-6 months, providing multiple potential catalysts.

Importantly, positive results could quickly lead to tying the resource into Queensland's active gas infrastructure and markets. The permit lies near major pipelines and LNG export facilities servicing Australia's east coast.

Interview with MD & CEO, Neil Young

Proven Management Team

Elixir's technical team includes personnel who have worked together on successful prior ventures, including the $6 billion takeover of Queensland Gas Company. The company also formed an advisory board in 2021, drawing on senior expertise from major gas producers including Santos, Shell, and Arrow Energy.

Well-Funded for Near-Term Catalysts

With A$11 million in cash reserves, Elixir is fully funded to complete its upcoming appraisal well in Queensland. The company also has options to bring in partners to share costs and risks on both core projects.

Risks & Opportunities

Risks

• Exploration drilling involves inherent risks - the appraisal well in Queensland may find lower than expected gas volumes or reservoir quality.
• Pilot operations in Mongolia may fail to achieve optimal coal bed methane production flows.
• Securing financing and partners for large-scale development remains challenging for small companies like Elixir.
• Mongolia's remote location could present challenges for export infrastructure needed for the hydrogen project.
• Equity markets remain volatile, limiting investor appetite for speculative exploration stocks.

Opportunities

• Success at the Queensland appraisal well could outline a globally significant gas resource for development.
• The hydrogen project in Mongolia leverages massive renewables potential right on China's doorstep.
• Further pilot results in Mongolia could de-risk plans for larger-scale coal bed methane production.
• Rising gas prices and declining Australian domestic reserves offer favorable backdrop.
• Potential spin-out or sale of the Mongolian hydrogen project could crystallize value.
• Experienced management team with track record of exploration success and monetization.

5 Takeaways for Investors

1. Exposure to potentially large gas resources through appraisal drilling at the Queensland permit and pilot testing at the Mongolian coal bed methane project.
2. Near-term catalyst at the Queensland well which could substantially re-rate the stock if successful - drilling due to start imminently.
3. Optionality in the early-stage but large-scale Mongolian hydrogen project targeting exports to China.
4. Proven technical team with experience in successful gas exploration and asset monetization in Australia.
5. Attractive entry point with the stock trading at multi-year lows despite upcoming catalysts - provides leverage to exploration upside.

Conclusion

Elixir Energy presents a compelling risk-reward opportunity for investors seeking leveraged exposure to potentially company-making gas and hydrogen projects.

While early-stage natural resource exploration inherently carries risks, Elixir has mitigated these by targeting assets with de-risked fundamentals based on prior drilling and technical work.

The company’s experienced leadership team is focused on systematic exploration and appraisal to surface value and attract partners for development. Near-term drilling in Queensland provides upcoming catalysts that could sharply re-rate the currently depressed stock.

For investors with sufficient risk tolerance, Elixir offers a mix of near-term news flow and long-term vision positioning the company to potentially deliver returns. The Queensland appraisal well and Mongolian hydrogen project each hold potential to add significant fundamental value over time.

Backed by a disciplined approach to capital allocation and project advancement, Elixir Energy warrants consideration as a unique emerging energy play on the ASX.