London, UK, 13 March 2018

Edison issues initiation on Renergen (RENJ)

Renergen represents a unique opportunity for investors. The company holds the first, and currently only, onshore petroleum production right in South Africa. While it is already producing and selling gas, production is set to accelerate in the next 18 months as it moves to liquefied natural gas (LNG) production, primarily serving the growing domestic heavy duty truck market. The move to LNG also unlocks the potential to extract and sell helium, adding material upside to economics (c 35% upside to NAV). With gross 2P reserves of 142 bcf of methane and c 2.2% of additional helium (Renergen 90% WI), our risked core NAV on a fully diluted basis is ZAR19.0/share. We estimate additional funding of c ZAR240m is required to become self-funding, in addition to a secured ZAR218m of term loan.

Renergen has contingent access to a ZAR218m debt facility from the Industrial Development Corporation (IDC). In addition to debt we calculate a further ZAR240m is required to be self-funding, that we assume to come from equity. On a fully diluted basis, our risked valuation for the 2P reserves is ZAR19.0/share, of which ZAR13.8/share is from LNG. Our risked valuation for the 1P reserves alone is ZAR7.0/share, while contingent resources could add substantially to the valuation in time.

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