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JEV: DOE Funding & Manufacturing Agreement

What you need to know:
• Jericho announced that two of its associated Hydrogen Hubs were selected to receive up to $1B each in funding from the U.S. DOE’s H2Hubs program. We expect this announcement to translate into sales orders for the DCC boiler over the coming quarters.
• JEV also announced that it has signed a manufacturing MOU with leading firm, Superior Boiler for the manufacturing of the DCC boiler.

Jericho Energy Ventures Inc. (JEV:TSXV, OTC:JROOF) announced two solid updates over the last few weeks including U.S. Department of Energy funding for two of its affiliated hydrogen hubs as well as a manufacturing MOU for the DCC boiler. We remain highly bullish on Jericho as its Hydrogen Technologies subsidiary continues to make advancements each month and high commodity prices support the cash flow generation of its O&G JVs. We are maintaining our BUY rating and C$0.50/share target price on JEV.

U.S. Department of Energy Funding
On October 17th, Jericho announced that two of its associated Hydrogen Hubs, the Midwest Alliance for Clean Hydrogen (MachH2) and the Pacific Northwest Regional Hydrogen Hub (PNWH2) were selected for up to $1B in federal funding each from the U.S. DOE Regional Clean Hydrogen Hubs (H2Hubs) program. These were part of a $7B program awarded to seven hubs out of 33 final applications. The program aims to accelerate the commercial-scale deployment of low-cost clean hydrogen across production, storage, delivery, and end-use. The H2Hubs are expected to produce 3M metric tons of hydrogen annually, representing one-third of the 2020 production target for the U.S.

We expect this announcement to translate into sales orders for the DCC boiler over the coming quarters as spending plans are finalized. The remaining five hydrogen hubs still represent an opportunity for JEV to obtain additional sales orders as well. Our estimates for HT remain unchanged. We note that the HALO Hydrogen Hub which JEV was also involved in, was not selected but there remains other government programs that can be utilized to fund it.

Manufacturing Agreement
This morning, JEV announced that it has signed an MOU with Kansas-based Superior Boiler for the manufacturing of the DCC boiler. Superior Boiler is the leading global manufacturer of Scotch Marine Firetube, industrial watertube and high-efficiency condensing boilers, as well as associated boiler room equipment for process steam, hot water, and waste heat recovery. The Company has shipped more than 21,000 boilers and is a leader in green energy solutions. Superior Boiler will be JEV’s manufacturing partner for the U.S. and will expedite the fulfillment of new and existing orders.

Valuation
We continue to value JEV on a sum-of-the-parts basis, with its O&G assets valued at C$0.20/share (0.7x our adjusted PV-10), Hydrogen Technologies valued at C$0.26/share (4.5x 2025E sales), and its minority investments valued at C$0.03/share (cost). Our estimates remain unchanged.