Comet Ridge gains full Mahalo control as development funding becomes the next test

Full Mahalo ownership raises the stakes

Comet Ridge Limited (ASX:COI) now controls every part of its flagship Mahalo Gas Hub, after completing the purchase of Santos’ 42.86% interest on 21 August. The transaction leaves Comet Ridge with 100% ownership and operatorship, following the Santos stake buyout, and gives it a single development plan across Mahalo, Mahalo North and Mahalo East.

“Mahalo Gas Hub (north of Rolleston) near pipeline infrastructure and gas market access.”

Comet Ridge paid Santos $24.42 million in cash and issued 83.78 million shares as upfront consideration. A further $30 million is contingent on the project reaching cumulative sales gas milestones of 10 PJ, 20 PJ and 30 PJ, meaning that part of the consideration is deferred until production and sales are established.

A larger gas project, with engineering still to finish

The consolidated Mahalo Gas Hub contains 361 PJ of 2P reserves and 316 PJ of 2C contingent resources, or 677 PJ on a combined 2P-plus-2C basis. Comet Ridge says full ownership should allow it to sequence development across the permits, share infrastructure and incorporate additional reserves into a more integrated plan.

Upstream FEED work covering the gas field, gathering system, compression and water handling facilities has been handed over from Santos. Comet Ridge appointed Equinox Engineering to review the design, identify value improvements and prepare independent high-level cost estimates. That work remains underway, so the capital requirement for Stage 1A is not yet settled.

“Mahalo Gas Hub assets and proposed path of pipeline connection to existing transmission pipelines and domestic and LNG markets in Queensland.”

Jemena has completed the technical FEED for an approximately 80-kilometre, 10-inch high-pressure pipeline from Mahalo to existing transmission infrastructure. The Queensland Government has granted Jemena a petroleum pipeline licence, and the planned arrangement would see Jemena own and operate the pipeline while charging a transport tariff.

Cash runway puts funding at the centre of the story

The company ended September with $11.4 million in unaudited cash after $25.5 million of investing outflows during the quarter, including $21.0 million attributed to acquiring Santos’ Mahalo interest. Based on relevant quarterly outgoings of $5.1 million, the Appendix 5B estimates approximately 2.2 quarters of funding available. That measure does not fund Mahalo construction, and Comet Ridge is still in discussions with debt providers and third parties about project-level and corporate funding.

The balance sheet also includes a secured $9.5 million loan from PURE Asset Management, carrying interest of 12% a year and maturing on 30 June 2027. Comet Ridge has issued 55 million warrants to PURE, with the adjusted exercise price now $0.1201; if exercised, they could provide $6.6 million in cash that may be applied to the loan balance. The company also completed a $40.9 million capital raising during the quarter, issuing 482.6 million ordinary shares and 199.4 million options, but the funding challenge has shifted from acquisition to development.

Gas sales and policy remain important variables

Comet Ridge has a gas sales agreement with CleanCo Queensland for up to 21 to 25 PJ over seven years, although CleanCo retains an option to reduce the term to five years and conditions precedent remain in progress. Even at the maximum contracted volume, 336 PJ of the Mahalo Gas Hub’s 361 PJ of 2P reserves would remain uncontracted. Discussions with other buyers continue, including around a non-binding memorandum with Highview Power.

The proposed Domestic Gas Reservation Scheme has redirected the company’s marketing focus towards Gladstone LNG projects and other large gas buyers. Comet Ridge says Mahalo gas would initially be viewed as “additional gas”, but the legislation remains before Parliament and its final form and commencement are unsettled. The company is targeting a final investment decision in mid-2027 and first gas in 2029; before then, it must turn engineering work, gas sales and financing discussions into binding commitments.