Share price: 1,375c JSE code: REN
SELL RENERGEN’S FIRST ACQUISITION — Molopo, an onshore gas field in SA — sounds exciting, but execution remains to be seen.
It is hard to fault the rationale for the deal, which is to meet the gas deficit in SA that cannot be met from Sasol’s pipeline or LPG. Molopo holds SA’s first and only onshore petroleum right and is scheduled to produce its first gas in the current half-year to June.
It will develop in three phases. The first two require minimal capital, about R20m, after which it will be generating revenue.
Molopo has proven reserves valued at R2.2bn but investors in commodities know this number is more of a guide than a pledge. In practice, economic extraction can present unanticipated problems. SA’s gas market is in its infancy, the country lacks skills in onshore gas extraction and environmental lobbyists will be waiting for Molopo to make a mistake. Renergen’s executive management team is youthful and includes no-one with long experience in oil or gas projects.
Resources companies with several projects offer investors more protection against unexpected hitches than single-project companies. Renergen will add other alternative energy assets but intends to bed down Molopo first.
The shares have slipped below the listing price and tradability is limited, with just over half a million shares traded a month out of 77-million in issue.