Po Valley Energy: Tiny ASX-listed gas producer books surging profits from Iran war

ASX-listed gas producer Po Valley Energy has doubled its free cashflow over the month since the Middle East conflict sent energy prices surging across the world.

The gas minnow operates near Bologna in Northern Italy and is leveraging surging demand for domestically produced energy, after Russia’s war on Ukraine and the Middle East conflict shattered Western Europe’s economies.

“Over the last few years we made free cashflow of $500,000 per month, but effectively the last month it’s been over a $1 million,” said Kevin Bailey the group’s chief executive officer. “You don’t know how long it’ll last, but Europeans are desperate to get supply. The Italian Ministry for Energy is encouraging us to fast track (new gas wells) as they want as much domestic production as possible.”

Mr Bailey said the price Po Valley received for natural gas jumped 66 per cent from €0.30 cents per cubic metre before the Middle East war to €0.50 cents per cubic metre over March.

Benchmark prices for liquefied natural gas in Europe more than doubled from €30 per megawatt-hour to €60 per MWh since the Iran War and closure of the Strait of Hormuz, before falling back to €46 per MWh on Friday.

In March, Po Valley, used its windfall profits to declare a maiden dividend and Mr Bailey said it wants to use its ballooning free cashflow to commercialise another, three, or four, wells in the years ahead.

“So, we drill natural gas about 1500 metres below the surface, bring it up and connect it into the national grid which powers a lot of the industry,” he said. “All the base load power in Italy comes from natural gas, it doesn’t have any nuclear or coal, oil is frowned upon but they see natural gas as a clean energy transition fuel.”

Middle East another bloody nose for Europe

Owned largely by a group of high-net-worth Australian investors, Po Valley was formed 22 years ago after Italy sold state-owned Eni Spa gas fields as part of its push for renewable energy targets, alongside European Union membership that tied it to relying on cheap Russian gas supplies.

Mr Bailey said Russia’s invasion of Ukraine in February 2022 and the subsequent severance of gas pipeline supplies was a far worse shock for European economies, than the latest Middle East war.

“In the decade before the Ukraine invasion the average gas price was around about €0.20 cents per cubic metre. It spiked to €350 cents afterwards, and then settled back down to €0.30 to €0.40 cents,” he said.

“So, the Middle East’s another bloody nose, but nothing like Russia. Before Ukraine was invaded, Italy’s government cut domestic gas production from 40 per cent to 8 per cent (of total energy supply), now the policy is to get it back over 40 per cent.

“And gas prices in Italy are much higher than Australia or America. All of Europe now has to focus on domestic energy security, it can’t continually rely on unstable parts of the world.”

On Friday, shares in Australian gas pipeline giant APA Group hit a three-year high of $10.05 and have added 10 per cent across 2026. While other oil and LNG production giants Santos and Woodside have surged higher amid a rush of buyers betting on them.

By contrast, Po Valley’s penny stock valuation has barely budged from 6.2 cents since the war erupted.

Melbournian Mr Bailey, who owns more than 25 per cent of the company, shrugged off the lack of investor excitement in his business, which often has less than $100,000 of stock change hands in a day.

“We run the business for two or three years ahead not the short-term of months anyway,” he said.

“And we’ve just made an announcement that we want to buy back some shares. At the moment we’ve got free cashflow with one well of about $6 million per annum. Once we bring two or three more wells on stream and they’re de-risked we certainly expect a significant share price re-rating.”

Based on Friday’s price of 6.2 cents and 1.16 billion shares on issue, Po Valley’s market cap is $72 million.