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What did the ASX energy stock announce?
The energy exploration, development, and production company's shares crashed deep into the red yesterday after releasing an update on drilling activities at its Isabella prospect in the Offshore Otway Basin. The ASX energy stock revealed that pressure depletion during the testing period does not support a commercial development of the Isabella field. As a result, the well is now being plugged and abandoned. The company's managing director and CEO, Jane Norman, said: "The result at Isabella is disappointing but geological data from this well will help inform our future exploration prospects."What is Bell Potter saying
Bell Potter notes that a final investment decision on the East Coast Supply Project has been delayed until subsequent wells are drilled. However, this doesn't change when first gas is being targeted nor the probability of success at other wells. The broker said:A final investment decision for the East Coast Supply Project has now been deferred until subsequent wells are drilled, expected in 2H 2026. The current drill program, budget and target for first gas from 2028 are unchanged. The Isabella result does not impact the probability of success at subsequent exploration wells.
Should you invest?
According to the note, Bell Potter remains positive on the ASX energy stock. In response to the update, its analysts have retained their buy rating with a reduced price target of $2.70 (from $3.40). Based on its current share price of $1.65, this implies potential upside of 64% for investors over the next 12 months. Importantly, it notes that "AEL's existing producing assets account for around $2.50/sh of this valuation." Commenting on its buy recommendation, the broker said:AEL's conventional gas assets deliver into Australia's east coast market. Debottlenecking at Orbost could incrementally lift near-term production and contracted prices are expected to strengthen this quarter on indexation and new sales agreements. There are short term risks associated with the market's response to outcomes of the ECSP drill program currently underway. However, ECSP should lift production from 2028, with the development of an existing discovery and two relatively low-risk exploration prospects which on success could be tied into latent existing pipeline and processing infrastructure capacity.
