When it comes to investing in the energy sector, Santos Ltd (ASX: STO) and Woodside Energy Group Ltd (ASX: WDS) shares are often front of mind.
But there is another ASX energy stock that Bell Potter is recommending to shareholders.
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Which ASX energy stock?
The stock Bell Potter is bullish on is Comet Ridge Ltd (ASX: COI).
It is an energy exploration and development company focused on the Mahalo Gas Hub in Queensland's Bowen Basin.
Bell Potter notes that the company is raising up to $45 million. These funds will be used partly to settle its acquisition of Santos' 42.86% interest in the Mahalo joint venture.
The broker highlights that this leaves it well-placed now to focus on its final investment decision (FID), which is due in FY 2027. It said:
COI is now targeting Gas Sales Agreements and releasing Mahalo Gas Project economics by the end of 2026 to support funding approvals and a Final Investment Decision by the end of the March 2027 quarter. On this timeline, COI see first gas production in late 2028.
The Mahalo development will leverage 676PJ of 2P Reserves plus 2C Contingent Resources, successful pilot wells and the permitting already received over some acreage. With the STO transaction now funded, COI must now turn its efforts to funding Mahalo's development capital costs, the quantum of which will be highly dependent on the development scenarios and project economics now being considered.
Should you invest?
According to the note, Bell Potter has retained its speculative buy rating on the ASX energy stock with a reduced price target of 14 cents.
Based on its current share price of 9.9 cents, this implies potential upside of 41% for investors over the next 12 months.
To put that into context, a $2,000 investment would turn into approximately $2,800 by this time next year if the broker is on the money with its recommendation.
Commenting on its investment thesis, Bell Potter said:
Our COI valuation is based on COI's Mahalo project which is one of the few development-ready gas projects capable of delivering near-term supply. We are positive on Australian east coast gas markets, with supply shortfalls likely to support higher prices. Funding the Mahalo development remains a risk. COI is a gas development company with prospective operations and cash flows only; our Speculative risk rating recognises this higher level of risk.
