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EXCLUSIVE: Oil analyst Barney Gray discusses the latest from Tower, Coro, Colter, Reabold & United Watch Here

EXCLUSIVE: Oil analyst Barney Gray discusses the latest from Tower, Coro, Colter, Reabold & United
UPDATE: #COPL set timeline for Q2/Q3 Nigeria drilling programme


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Member Since: Fri, 31st May 2013

Number of Share Chat Posts (all time): 1,061
Number of Share Chat Posts (last 30 days): 161

Last Posted: Today 12:37


Post Distribution over the last 30 days




Today 12:37

Sorry I should have quoted the full sentence once more.

"dedicated transport capacity in the OBA for the transport of oil from the Farm-out Blocks" So all the blocks are expected to be fed through the OBA. So something has to change, especially if GTE want to put their oil through it too, which it very much sounds like they do given their comments about " access to local infrastructure."
Today 12:32

@ColonelDrake I appreciate that. Perhaps I have not made myself clear. When I say the OBA won't be able to handle it, I don't actually mean the OBA itself, I mean the agreed 9,000 bopd minimum capacity with PetroAmazonas EP following the completion of the Chiritza re-pumping station.

The OBA has far greater carrying capacity but that isn't what is key. Yes the 9,000 bopd is minimum capacity but it could also be turned into a maximum by PetroAmazonas as and when they want.

If Put-8 and Put 9 both drill later this year and both come in, then it isn't going to take a great many wells before the 9,000 bopd is used up. The interesting part of all this is that agreement with OXY states that there will be "dedicated transport capacity in the OBA" because that surely points to further deals being done with PetroAmazonas or alternative plans to get the oil to the coast implemented. In my view AMER cannot make such a deal based on a minimum throughput of 9,000 bopd when they know it could be capped off. So they must have another plan.

I know that the Platanillo block is ageing but it is still capable of producing 3,500 bopd. Even if AMER only take their own 50% of Put-8 through the OBA, which I doubt, then between the two partnerships that 9,000 bopd is going to get used up pretty quickly, which hints at a plan fora further deal being instigated sooner rather than later because dais deals take time to fulfill. That's not to say that 5,500 bopd is going to be generated over night but more that it is assumed to be coming at some point and so something has to give, whether they buy the oil at the well head or not.

However, the words in the OXY farm in do not in my view declare AMER buying the oil at the well head, they say there will be a commercial tariff, which is in my view associated with the OBA throughout only.

But perhaps I have missed something somewhere.
Today 11:25

I know these are immortal words used far too often on these BBs, but in all honesty can there be a better oil play out there right now, given the current value and fundamentals disconnect. Please feel free to send the detail my way if you believe there is.

Its a screaming buy at these levels.
Today 11:22

John Wardle in the BRR Media interview from 11th Feb (3 mins) discussed access to market and the OBA pipeline.

"Transport costs are world class $3 per barrel, which goes from the centre of the continent basically all the way to the pacific coast where we get brent pricing, so its a marvellous enabling piece of technology"

"it really opens up and gives you a really high margin aspect in a virgin basin where we are the dominant player"

I would think GTE will be competing strongly with others for any spare pipeline capacity because there simply isn't anything else anywhere near as good available. I wouldn't be surprised to see them strike the same sort of deal as OXY where by ;

RNS dated 23rd Nov 2018 '$93.25m farm-out signed with Occidental Andina'

"The companies have agreed there will be a dedicated transport capacity in the OBA for the transport of oil from the Farm-out Blocks, with a commercial tariff charged for Occidental Andina's share."

However, to coin a phrase from a certain famous movie ;

"we're going to need a bigger boat"

Because the OBA won't be able to handle everything thrown at it even with declining throughput from Platanillo.
Today 10:57

@Endion The quote you have employed is directly associated with the assembly of VRFBs in SA.

I posted some thoughts and quotes last Friday on FM's presentation at the 121 Mining event in Cape Town (4th to 5th Feb).

"we expect to assemble VRFBs in SA. Not just for the SA market but for a broader African market. A VRFB that is assembled in SA with electrolyte that is manufactured in SA, will boast as much as 70-80% of local content."

Strong words for a company that is still to execute a techno-economic study to prove the cost effectiveness of the proposal don't you think.

It is very much like the techno-economic studies undertaken with the IDC for the electrolyte plant. Needed yes, but how much was alrady known prior to the study, given the company communicated the same confidence about its realisation as it is now with the assembly plant. We are back at the discussion over what is known and what the market has thus far been told.

FM is no dreamer or market player. he says what he knows to be true and will happen, that is why I enjoy trying to read him so much. He expects therefore enough work has been conducted with UET, who let's face it will be the plant owner, to establish that with sufficient local demand there is cause to invest locally and avoid shipping substantial amounts of the components from China/US to SA.

What they need is the confidence and that comes with contracts, and there is no bigger contract out there right now than that Eskom BESS project - Cue FM's beaming big smile.
Today 09:55

Sorry glitch meant I posted twice there.

@Ophidian I agree wholeheartedly and would not ever wish to come across as not caring about being kept well informed by the company. I do feel they have still to appreciate how much they have changed as a company and that it comes with greater responsibility. However, the same applies to investors also. This is no longer a small AIM company desperate for PI attention. It is a professional outfit and should deliver its newsflow accordingly. Therefore, the expectation for minor details to be released is for me not correct. In my opinion.

I am under no illusions that the BOD would dearly love for much more of the stock held by PIs here to be moved over to steadier institutional hands. The large retail element creates these whirlwind periods of volatility, which isn't healthy for a company wishing to sell itself to bigger clients.

My key point though was that even with the time delays on informaiton flows, this is a wonderful stock to be invested in and so when i look at it logically, I note the information flow as a negative but I place it in the appropriate box and consider it against the bigger picture, and the bigger picture wins every time because its so damn big.
Today 09:48

@Ophidian I agree and perhaps my choice of wording was wrong. What i was trying to get at was the difference between knowing it is going to happen and being told that it has, for there lies the opportunity and it is why we research these things so damn hard.

I have 'known' for months that BMN will deliver 10,000 mtv, they will deliver an electrolyte plant for $10m, and they will achieve large scale mandates. If I wait to be told it is achieved then yes I can make good money but not as much as I could have. Yes it is percentage play driven but there is research and data out there that clearly pushes those percentages much further in my direction (all my opinion only of course), which i guess is a long way of saying what you have delivered in just 15 words.

As for missed timelines they don't bother me so much, it is about getting there, it is about achieving what are monster developments in this company's short life. They are worth the wait.

All of that aside, the key message for me is its all coming and the market isn't even giving the current Vametco achievements the correct level of respect yet.
Today 09:45

@Ophidian I agree and perhaps my choice of wording was wrong. What i was trying to get at was the difference between knowing it is going to happen and being told that it has, for there lies the opportunity and it is why we research these things so damn hard.

I have 'known' for months that BMN will deliver 10,000 mtv, they will deliver an electrolyte plant for $10m, and they will achieve large scale mandates. If I wait to be told it is achieved then yes I can make good money but not as much as I could have. Yes it is percentage play driven but there is research and data out there that clearly pushes those percentages much further in my direction (all my opinion only of course), which i guess is a long way of saying what you have delivered in just 15 words.

As for missed timelines they don't bother me so much, it is about getting there, it is about achieving what are monster developments in this company's short life. They are worth the wait.

All of that aside, the key message for me is its all coming and the market isn't even giving the current Vametco achievements the correct level of respect yet.
Today 09:29

Just to be absolutely clear, that $81 per kg average is the company stated 1 month prior average price, as stated by BMN in every quarterly update.

We are 11 weeks into the Q1 pricing and I have it at just below $81 per kg. So rock solid on the cash generation thus far this year.
Today 09:24

Whilst it appeats the same SP focused fixation has once again gripped the BB, be it in a far more positive direction, it is important to remember some key facts.

Whilst there was clear initial disappointment with the Vametco full year figures, they still demonstrated a ability to deliver very strong cashflows. As I have posted previously, any calculations based on net profits, be they a good marker, are at this point in time irrelevant. With the stated plans that this company has this story right now is all about having the cash to deliver that growth. $107.5m in EBITDA achieves that by some margin.

It is also important to remember that said EBITDA was achieved against an average vandium price of just $81 per kg and sales of just 2,573 mtv.

Despite the large pullback in vanadium prices through December and early January, the quietest period in Chinese production/trading, the vanadium prices has near as damn it maintained that $81 per kg. However, it has achieved it when the vast majority of negative forces were against it. All the signs are showing that we will now move beyond that level, thus improving the econmoic performance of Vametco further.

In addition, the company has already stated that the Vametco plant was performing at 2,800 mtv by Q4, and that plans to be implemented this year, will deliver a production result upto 3,400 mtv. Now they may come in some way short of 3,400 mtv, but the benchmark is just 2,573 mtv and prices are going to rise.

So Vametco should deliver an even stronger EBITDA performance in 2019, thus securing those plans that will see BMN increase its production capabilities by 165% to 10,000 mtv, deliver an electrolyte plant, an electrolyte leasing model and large scale energy storage mandates.

The performance of Vametco secures the vast majority of all of that if not 100%, and it is that future position that should be valued, not the current EBITDA of Vametco because knowing it is coming and knowing it is effectively paid for, then it really should be priced in more because it is going to happen, becasue the CEO said as much on a video just yesterday.
Today 08:14

@jointhedots excellent find and thank you for sharing. Its certainly heating up in the AMER kitchen.
Wed 15:15

The other thinhs that I find facinating in all of this is the fact that BM have stated that a dividend policy will be forthcoming by the end of Q1. If we are to assume that it will start this year (possibly post FY results), then that means that they are able to invest in brownfield that increases production by 165% at the same time.

So what does that say about how much this expansion is going to cost? If it is at Vametco or the Vametco BEE partner is involved then there is more free cash flow available (26%). However, if it isn't and the BEE partner isn't involved, then the bill surely just got even cheaper. There could of course be some dilution, but that surely would come with the JSE listing in H2. There could also be some debt but again I would question the sense in doing this if you are giving cash back to investors. After all they have only recently become owners of Vametco and so there isn't any pressure to commence dividends this year.

I lean towards there being no debt raise or dilution, so I think we may just be pleasantly surprised at how little (relatively) it costs to move to 10,000 mtv. When we think that the electrolyte plant is also only $10m and that will be partly debt/equity with the IDC, then the value that these new businesses add to BMN relative to their CAPEX, could be quite something to behold.
Wed 13:58

I would think that any trader worth their salt wears the sentiment hat and follows it, and it is clear that it has moved in the direction of the bulls.

Enjoy it for what it is. Any shorts in play will now be under pressure.
Wed 13:01

Finance Minster Tito Mboweni

"Climate change is real. The steps being undertaken at Eskom will allow us to expand renewable energy"

They being the break up of the business into 3 divisions. Excellent news for anyone wishing to supply Eskom's fleet of renewables with battery storage.
Wed 12:52

SA government to prop up eskom to the tune of R23 billion until its reconfiguration is complete.

First subsidiary BOD to be appointed by mid 2019. So Eskom is safe and the changes look to be being fast tracked.
Wed 12:16

@Swampdub As is your entitlement and I in no way wish to undermine that. It is merely my opinion at this time.

I would like to see the current 2-3 year plan realised first but I am under no illusion that a global acceptance of VRFBs has the ability to deliver a massive increase in demand for vanadium. BMN know it too and are aware that that is the path to getting as much of their high grade vanadium out of the ground as possible whilst we are all still alive. Hence their focus on enabling the industry through guaranteed supply and pricing whilst it is still finding its feet. a role not too dissimilar to that of The World Bank in supporting a loss making pilot programme at Eskom to help boost the industry to invest in larger cheaper methods of production, much like what happened with mobile phones and computers.

So i have no doubt that 10,000 mtv is merely a port of call, but I would be delighted at reaching that particular port first and foremost.
Wed 12:11

Here is another thing that may have perhaps escaped those that believe the BMN story has somehow overshot its worth but is again something that the LTHs here have discussed for some time.

When BMN state ;

"Reduced volatility of revenues and profitability, as energy storage features lower market volatility than commodity markets"

What they are essentially stating is that a fully functioning fully integrated vanadium play such as the one they are building, will be effectively recession proof.

Able to take advantage of an inflated vanadium market when the world economy is booming, but able to swing its trade more towards energy storage projects, which given the great amount of publicity regarding climate change and the need for more renewables, has as good a support mechanism as one could possiby hope for to guarantee a strong and steady market, which does not stop simply because the world economy is faultering.

Thus they effectively become recession proof. Pay regular dividends as well and what worth does a pension fund or institution place upon that then? Where does the PE ratio come out on that? How close is it to becoming a reality given what FM has said today?
Wed 11:57

I should of course add that all of this is merely my opinion and my opinion only. It is for the individual to read into it what they want, do there research and come to a conclusion.

I am simply stating where i stand.
Wed 11:53

@swampdub I think its a little dangerous to get too far ahead of oneself, nor begin to mention such names as Apple and Microsoft.

What is clear to me though is that a fully integrated vanadium play such as the one BMN is looking to accomplish, is not miner. It doesn't belong in that sort of world.

I have said all along that if/when the fully integrated play is delivered and the market has had time to properly understand it, then the valuation has the ability to move well beyond that of a comparable miner, particularly as fully entering the energy storage space will clearly signal the point at which all of the written potential begins to be opened up. BMN indicated as much in the Energy Storage 101 webinar (slide 58)

"Vertical integration brings several advantages to Bushveld as a group"

"4. Reduced volatility of revenues and profitability, as energy storage features lower market volatility than commodity markets"

"5. Higher valuation multiples, as energy and diversified listed companies carry higher earning multiples than miners (in part due to relatively lower capital requirements)"

The key is proving to the market that it is all about more than just words and beliefs. FM is signalling that at the very least, 2019 will be a significant step on the way as actual details are going to be released. That is why my excitement is building because in that interview today FM states ;

"outline in a lot more detail the business model for BE"

Couple that the fact that he is also telling us that the plans to expand to 10,000 mtv will be released. What that means is, as long suspected, they have their target. The whole ruse about still looking at opportunities in the market, was just a means to control the release of the plan, just like it was for Vametco.

Well now there is no hiding any of it. Both are coming and both are going to (in time) be high impact.
Wed 11:17

I think also now that FM has all but confirmed that the path to 10,000 mtv will come this year, then it comes down to method and cost.

The medium term target of $170m total investment was set at the SA Investment Conference last year. The acquisition or expansion of any facilities along with their renovation and/or upgrading should clearly demonstrate just how great an advantage BMN has by being based in SA.

Much excitement exists in the vanadium space and many potential new pure plays are gaining much exposure. However, none of them have reached financial close yet, be it becasue they aren't ready yet or they simply cannot raise the finance.

So imagine what will happen when BMN declare their move and demonstrate theri ability to pay for it. There may be some finance involved, there may even be a little dilution, but it will be nothing compared to the pain everyone else will/is suffering, and it will be certain and it will deliver around 165% increase in capacity. And they will do it for a great deal less money than those pure plays can even dream of.

In such an elevated pricing environment that is going to be some story.


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