RENERGEN

Financial Mail - Investors Monthly - - Opening Bell - Char­lotte Mathews

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.

Pic­tures: iSTOCK

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