Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
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Blimey Zengas, (et al) you carry on like this and I might turn to the dark side of FA! (Yikes....!!!!) (good post, thanks)
For those not familiar with the interview that Zengas refers to:
https://www.youtube.com/watch?v=UZh1gj_Kj5I
Very nice to see you on this board Zengas.
In the latest interview the CEO was asked, (other than Buffalo), what's cooking at the moment and he replied 'Cooking quite a lot of stuff'.
Other than the scale of the potential future cash flow, the greatest thing i took away from the interview and presentations is that what ever project they are involved in, it will have discovered oil so very low risk imo and it is not going to be a one asset play.
I beleive ADV will have production before they bring Buffalo on stream and that's why i think the steady buying is not solely for the Buffalo outcome but for what is coming down the pipeline in terms of significant deals which won't imo imply a 20 or 30p price target but a good bit more in terms of growth.
Currently speaking to two parties -
One with 'production'.
The other one a Buffalo lookalike - an 'appraisal situation with a lot of upside associated with it'.
'Two other assets we are very interested in'.
So there is potentially 4 opportunitiies so far on top of Buffalo.
1) "We have no need to build a large and complex organisation keeping our overheads low and preserving value for our shareholders".
2) "We have no need to be geographically constrained".
3) "We target only discovered resources in good fiscal regimes".
4) "No high-risk exploration".
5) "Deliver exceptional project outcomes and exceptional returns ! "
Imo deal flow news is the wider picture for investing at these levels. If Buffalo comes in, a production asset is acquired given the low overheads the company has outlined and a possible 2nd Buffalo lookalike with a lot of upside attached - this company should be on a significant growth trajectory if it only has half the success it expects.
MT Many thanks for posting your recent calculations. Being a cautious type I like the look of your 1C calculation of 17.3p sp based on $85 Brent. The question then would be what probability the market would assign to reaching a 1C outcome. At present it seems to be arond 25% given a sp of 4.3p on Friday - which is significantly below a reasonable assumption. I suspect that the market will apply a discount to any drill outcome but what would be a fair figure on the day before drill results arrive? It is easy to argue for 7-8p without stretching credibility. Given volumes traded last week there appear to be quite a few new investors buying in to the story.
On a 4000bopd scenario do you think that development would go ahead given capital costs and other potential uses of capital as yet unidentified?
RISC CPR
'Production is initially constrained at 30,000 bopd by the oil handling capacity with a plateau duration of 0.7, 1.3 and 2.2 years in the 1C, 2C and 3C realisations.'
'RISC estimates operating costs of approximately US$60 million per year'
Some thoughts:
This suggests an ultra high cash generation performance during the plateaux production phase:
30,000 bopd is 10.9 million bbls/yr - with estimated operating costs of $60m/yr, this would deliver OPEX/bbl of $5.5 at plateaux production.
Suggesting operating cash flow(attributable to Advance Energy) during estimated PLATEAUX production of:
At today's $85/bbl Brent price
$313 million - 1C (8.5 months)
$585 million - 2C ( 1 yr 3.5 months)
$989 million - 3C ( 2 years 2.5 months)
At $60/bbl Brent
$218 million - 1C (8.5 months)
$403 million - 2C ( 1 yr 3.5 months)
$683 million - 3C ( 2 years 2.5 months)
The Buffalo Field was abandoned in 2004 while still producing 4,000 bopd - Brent then was $25/bbl
Buffalo Redevelopment Plan
Operating Cash flow at 4,000 bopd and $60 million OPEX/yr:
@ $38.5 Brent - Zero
@ $60.0 Brent - $16 million Net to Advance Energy
@ $85.0 Brent - $34 million Net to Advance Energy
Production level producing ZERO Operating Cash Flow Level at various Brent Prices:
1,878 bopd at $85 Brent
2,630 bopd ar $60 Brent
AIMHO/DYOR