Carnarvon Energy Ltd

Collins St Value Fund continues to hold Carnarvon Energy (CVN) because they believe the company’s stake in the Dorado project, a Tier 1 offshore oil and gas asset, remains undervalued. Despite oil trading at higher prices than when CVN’s share price was last around 15c, the market has priced the company far below its true potential. The Fund's conservative discounted cash flow (DCF) valuation of CVN's interest in the project suggests the company is worth significantly more than its current price. Moreover, with Santos prioritizing Dorado in its long-term strategy, and given the underinvestment in the energy sector, the Fund anticipates potential corporate interest in CVN. Larger oil and gas players, including Santos, may be keen to secure production sources, making CVN a likely target for acquisition. Based on these factors, Collins St Value Fund remains optimistic about the upside potential for Carnarvon.

Collins St Value Fund continues to hold Carnarvon Energy (CVN) due to the significant upside potential in its flagship Dorado offshore gas project. As a joint venture partner with Santos, CVN is involved in one of the largest undeveloped gas projects globally, located in a Tier 1 jurisdiction off the coast of Western Australia. Despite recent underperformance in the share price, CVN's successful capital raise and nearly $180 million in cash will allow the company to fully fund its obligations for the Dorado project. While market frustrations have stemmed from Santos' focus on other projects, Collins St Value Fund believes any concerns about CVN's funding ability have been resolved. With the project's highly attractive cost profile and a favorable market environment, the Fund expects real progress in the near to medium term, reinforcing its confidence in Carnarvon’s long-term value.

Collins St Value Fund continues to hold Carnarvon Energy (CVN) based on their belief that the market is undervaluing the company's potential. The Fund first invested in CVN in 2022, recognizing the significant value in its Dorado offshore oil project, which appeared worth much more than the 20c per share price at the time. Since then, CVN has taken strategic steps to reduce its funding risk by selling half its stake in Dorado, ensuring its share of capital expenditure is fully covered. Despite this, and based on the deal's valuation, CVN shares have remained undervalued, languishing around 14c. With a market cap of approximately $200 million, CVN's cash balance of $178 million and additional entitlements of $130 million suggest that the company is trading at a significant discount, even when ascribing no value to its projects. Collins St Value Fund remains confident in the future prospects of CVN and believes the current share price does not reflect the true value of the company’s assets.

Collins St Value Fund continues to hold its investment in Carnarvon Energy Ltd, updating its investment thesis based on the company’s substantial asset base and recent developments. CVN’s primary asset, the Dorado project—a joint venture with Santos—remains a tier-one oil discovery off the coast of Western Australia, with an estimated 160 million barrels of oil. While Santos has previously been focused on other large-scale projects, recent regulatory approvals and operational signals suggest a renewed emphasis on the Bedout Basin, with production expected to ramp up to 100,000 barrels per day. To address market concerns about funding its 20% share of development costs, CVN has sold half its stake to CPC Corporation (Taiwan), securing liquidity. Based on this transaction, Collins St Value Fund estimates CVN’s share price should be around 32c, yet it continues to trade significantly lower at 15c. Analyst reports suggest the company’s projects could be worth approximately $800 million on an un-risked basis, with an additional $180 million in cash and liquidity expected to rise to $320 million post-transaction. Given these factors, Collins St Value Fund believes CVN is trading at an attractive valuation and sees potential for further corporate interest in the company.

Collins St Value Fund continues to hold its investment in Carnarvon Energy Ltd, updating its investment thesis following active involvement in driving Board-level change. While the Fund has long recognized the company's strong fundamentals—including one of Australia’s largest oil and gas discoveries, a tier-one jurisdiction, and full funding for its share of the Dorado project—it became evident that previous management’s approach was not unlocking the company's inherent value. Market confidence eroded as concerns grew that capital would be diverted to new projects rather than preserved for Dorado. In response, Collins St Value Fund, alongside Nero Resources Fund, initiated a strategic effort to reshape the Board, emphasizing cost reduction and a singular focus on Dorado. Since these changes, market sentiment has improved, with CVN’s share price rising from 12c to 22c, though the Fund believes further value remains to be realized. Collins St Value Fund remains committed to supporting the new leadership team and looks forward to seeing the gap between the company’s intrinsic value and share price continue to close.

Collins St Value Fund continues to hold its investment in Carnarvon Energy Ltd, updating its investment thesis in light of significant changes within the company. Previously, the Fund had concerns over the former Board’s approach to capital allocation and alignment with shareholders, particularly regarding excessive fees, minimal personal investment, and a dilutionary approach to raising capital. The decision to pursue new projects despite securing sufficient capital for the Dorado development raised further red flags. However, with new management now in place, Collins St Value Fund sees a positive shift. The new leadership team has aggressively cut costs, including executive salaries, and has restructured incentives to align with shareholder returns. By refocusing on the core Dorado project and adopting a more disciplined financial approach, Collins St Value Fund believes the company is now positioned to drive stronger performance and deliver greater value to shareholders.

Collins St Value Fund continues to hold its investment in Carnarvon Energy Ltd, as it updates its investment thesis following recent developments. Over the past twelve months, the Fund has been involved in changes to the company’s Board, and it anticipates the next six months to be a critical phase for unlocking value. Carnarvon Energy has engaged bankers to market its assets, signaling a strategic move toward realizing their full potential. Collins St Value Fund expects that any resulting sale or corporate activity could significantly narrow the gap between the current share price and its own assessment of the company’s intrinsic value. While the precise timing of such outcomes remains uncertain, the Fund maintains a positive outlook on the business and its prospects in the near term.

Collins St Value Fund continues to hold its position in Carnarvon Energy Ltd, updating its investment thesis in light of recent developments. The fund acknowledges that Carnarvon’s core asset remains its stake in the Dorado joint venture with Santos, but with Santos opting not to commit to Front End Engineering and Design (FEED) at this stage, the anticipated timeline for a Final Investment Decision (FID) in 2025 has been delayed. While this deferral impacts near-term project progress, Collins St Value Fund believes Carnarvon’s value will ultimately reflect its underlying assets, strong cash reserves, debt-free position, and cost management success. Recognizing the extended timeline, the fund intends to advocate for a significant return of capital, arguing that distributing a substantial portion of Carnarvon’s cash would appropriately reward shareholders while ensuring the company retains sufficient resources for its ongoing operations.

Collins St Value Fund has updated its investment thesis on Carnarvon Energy Ltd following the announcement by Santos that it does not plan to proceed with the Dorado project this year. The Fund continues to hold Carnarvon because it believes the company's strategic response—considering a 7c per share capital return—is a prudent move that aligns with shifting capital demands and enhances shareholder value. Collins St Value Fund, which had advocated for this course of action, sees the potential return as a catalyst for the market to reassess and more accurately value Carnarvon’s remaining assets, particularly its interests in the Bedout Basin, including Dorado. Additionally, by reducing Carnarvon’s cash balance, the Fund believes the company becomes a more attractive acquisition target, as any future buyer would likely require a lower outlay. Despite the near-term setback, Collins St Value Fund sees long-term strategic value in Carnarvon’s portfolio and supports management’s approach to unlocking it.