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Agreed Agricore that todays news is an under-appreciated positive. If they prove up 6.6trn cubic feet of gas in the shale then it won’t be under appreciated for long. It’s an ‘if’ for now so we’ll have to wait until we get the exploratory drill hole results.
Hi Troy,
You were right when you anticipated today's news about Shale drilling. I think it reflects the extreme despondency in the market that there's virtually no reaction or trades in the market to today's news. It's actually a positive sign (the only way is up, as Yazz sang).
Finalisation of the pipeline H2 2023 is later that either of us would like and I had hoped Q4 2022 would be achievable. Nevertheless it is welcome progress. I looked up the pipeline map and there's a much bigger picture than just connecting to Kolkota. The pipeline network stretches right across India and is a national pipeline network.
GLA
Just the update investors wanted to see. There are no guarantees obviously but proving up of the estimated gas in the shale at raniganj would propel the share much higher.
Also good to get an small update on the gas pipeline, albeit just that it is progressing.
Pieces falling into place here. Proof of Commercial shale gas volumes and completion of the pipeline news should arrive in the next few months. Would also expect an off take agreement to be put in place with GAIL when shale gas volumes confirmed.
Notice that the old story of geec looking to invest $2bn in shale gas over the coming years has surfaced again in the press and on the company website - dated June 5th.
The interim results from the company mentioned expectation of final approvals to be received for shale gas drilling later in 2021. We didn’t get these approvals in 2021 but I’m wondering if the rerun of the story now indicated that the company have reason to believe the approvals are imminent?
I think we're on the same page here Agricore. My point on the debt is in line with yours in that the balance sheet is in good order so rising interest rates is not a problem a the moment. They will though have to pay higher interest on debt that matures and is refinanced so merely highlighting that any existing or new investor should inform themselves of what this will mean for the company
regarding the 20 to 30 transition im in total agreement with you, again, my point being that geec is a structural growth play which reduces the importance of cyclical changes in demand and economic activity. The shift from coal to gas & renewables over the coming decades will provide stronger year over year growth than might be seen across a slowing economy for example.
23p is a great price to buy more shares at so congratulations on that purchase
Hi Troy
Regarding changing Indian 10 year yields GEEC's debts are not index linked so there's no effect. In fact below is my understanding of their debt situation:
"The debt level as at 31/12/21 is around $60m and the company is paying down around $8m p.a. plus interest of $5m.
The Company maintains a prudent approach to capital discipline and is continuing to pay down its debt position and not taking up the optional debt moratorium allowed by the Reserve Bank of India due to COVID-19. Gross debt fell by US$4.3m during the first six months of FY22 to US$56.3m, and estimates are that net debt fell to US$48.3m (FY21: US$52.4m) resulting in a material drop in GEEC’s net debt/equity ratio to 0.53 (FY21: 0.58). The Company continues to focus on optimising its debt coupon rate and had been able to reduce it from 10.32% in FY21 to 9.48% for FY22. This will result in an annual saving in FY22 of c.US$0.51m.
Regarding a 20-30 year transition to gas that's not what I'm seeing. I believe there's at least a CAGR of 9% for natural gas. ESG concerns do exist in India, and of course the $325/tonne coal price is encouraging a faster energy switch.
Refer to:
https://www.ibef.org/industry/indian-oil-and-gas-industry-analysis-presentation
I managed to top up today at 23p which I'm very pleased with.
Interesting day for geec share price. There’s a persistent seller around, selling blocks of 5000 or multiples of 5000 for a few months now. But combined with a surprise interest rate hike by the Indian central bank and geec has taken a hit.
Worth remembering that interest rate rises have been flagged in India for a while (like with much of the world) - no surprise that they are coming it’s just the timing that has spooked investors.
Also worth noting that 10 year govt bond yields in india are back to levels last even in 2019. Geec traded at 50p or so then with arguably a more stretched balance sheet then. I don’t think a few interest rate rises will stretch geek’s ability to pay interest on their debt immediately but interest cover is worth checking out and being sure on as the company have some debt refinancing to go through in the next year or two and they may have to lock in a higher rate.
Final point - geec is a structural play on the transition away from coal use to gas and renewables in india. This will play out over the next 20 to 30 years. Interest rate cycles will come and go during this time. Management just have to keep a relatively conservative balance sheet and these cycles won’t matter too much to the patient investor.
Own research vital as always but possibly some good days to come for patient investors with a longer time horizon to pick up good amount of shares.
Thanks for this post Troy, topped up today, difficult to see this being a looser in the med to long term
https://m.timesofindia.com/city/kolkata/city-pockets-may-get-piped-cooking-gas-by-may-end/amp_articleshow/90990195.cms
This is the most positive update I’ve seen yet on the market access prospects for the huge Kolkata market to open up for GEEC. Really shouldn’t be underestimated how important this article is.
GAIL pessimistic scenario reported as September 2023 for pipeline completion. With that geec will crank up gas output from their raniganj field and begin to drill more wells. We should also see them then proceed with shale gas test wells, which if they come in positive should see a very large re-rate for geec stock.
Domestic energy security never more important than now and with gas the people of Kolkata will get significantly better air quality in the city, saving lives and improving health outcomes.
The company will update in July and again in November this year. We should get some positive messages from them in both.
Interestingly it's not strictly speaking just about getting a pipeline connection to Kolkata (which is happening August 2022 according to SP Angel), searched and not found anything to contradict that view. The bigger picture is India is building a huge interconnection of gas pipelines and are planning on increasing gas usage from 6.7% 2021 to 15% 20230. This includes for cars (CNG) replacing diesel/petrol as well as domestic and industry. (replacing Urea, Wood and LPG). The pipeline network is 18,700km in 2022 and will grow to 25,700km by 2027 including to other large cities/areas like Mumbai. CMG (Coal Methane Gas) doesn't suffer the same increase of water content that conventional gas does according to the GEEC web site and the resource is large enough that depletions isn't a huge challenge.
So there's grounds for optimism on this share and how it provides an interesting and stable play on India, green(er) energy, commodities, poor sentiment/overlooked opportunity, controlled risk...tick tick tick tick tick
https://gailebank.gail.co.in/goga/NewApplication/images/New_Map3.jpg
https://economictimes.indiatimes.com/industry/energy/oil-gas/gail-puts-west-bengal-on-indias-gas-map-hurl-in-greener-cheaper-fuel-for-homes-automobiles/articleshow/80723294.cms
Off topic but this article is a fascinating glimpse into why we see a lack of condemnation from India towards Russia over Ukraine. The side of the news that we don't get to learn from our own news sources.... https://economictimes.indiatimes.com/news/how-to/why-india-has-been-soft-on-russia-here-are-the-strong-reasons/articleshow/90873069.cms
Good luck with it agricore. Nice to hear from another investor in geec. I’ll post anything I find of interest but could be quite quiet until the company update in July and then again in November.
Hi Troyto, thanks, your posts are much appreciated. I'm establishing a position here in what looks an interesting opportunity.
Not sure i understand why investors would sell GEEC at this point. Sadly, geopolitical tensions will be heightened for years to come leading to volatile energy and agriculture prices. Countries are already signalling moves to protect domestic production on both fronts. Global gas markets are tight as a drum as a result, which should encourage India's drive to develop domestic gas supplies more aggressively. But with Russia blocking exports of fertiliser to global markets and India being an important fertiliser producer, the outlook for increased demand for Indian production is strong. Fertiliser plants use gas as the primary feedstock and so with increased demand coming down the track then there will be increased demand for gas also. GEEC happens to be located close to several fertliser production plants in India. While the increased demand for gas may not feed through to GEEC directly, it certainly doesnt worsen the backdrop of market conditions for the company. I appreciate that commentators will state that investors are 'risk-off' at the moment but that doesnt stack up as a medium-term investment proposition. Now is the time to buy GEEC more than at any point in the last few years. Just my view of course. Do your own research (not that anyone is reading this).
https://timesofindia.indiatimes.com/city/kolkata/land-acquisition-roadblock-hits-cng-roll-out-in-state/articleshow/88820631.cms
The saga seems to rumble on. Talk of re-routing the pipeline in and around Kolkata is at least something but clearly a reasonable amount of work still to do to get the land access permissions fully in place for the pipeline. Travesty really given the human health impact of polluted air in the city and the ability of CNG for the transport system as well as cleaner household cooking gas to significantly clean up air quality. No investment should be based on hope but hoping that common sense prevails here and remaining permissions come in quickly through 2022. Share price should do very well if we get that news!
I try to make sure i share what i find in terms of research so that all those reading on the chatboard at least get information and hopefully some valuable opinions rather than ramping. Couple of articles worth a read here from the last few days that throw a bit of light on the remaining challenges of finishing off the natural gas pipeline to Kolkata.
https://www.telegraphindia.com/my-kolkata/news/cng-project-faces-stiff-resistance-in-bengal-mayor-vows-completion-in-18-months/cid/1839741
https://timesofindia.indiatimes.com/city/kolkata/cng-pipe-laying-hits-land-hurdle/articleshow/87787621.cms
this likely explains the massive discount to fair value of the share price currently. Market currently taking a very distrusting view on when or even if this issue gets resolved. For me, the government of India and state government are too invested in this to have it delayed much longer and a resolution will be found (hopefully) soon.
Not a lot of new information as suspected but what is encouraging is that nothing seems to have deteriorated further in terms of financial performance since the beginning of the pandemic impacted the business.
Wasnt expecting a bounce in the share price but it is welcome. As per previous post, i think the valuation is extremely undemanding at the moment as we come through the Pandemic and with a near term outlook of potential transformational growth.
SP Angel have re-iterated their previous strong buy on the stock https://www.spangel.co.uk/research/#/portal/sp-angel
Onwards and upwards!
GEEC made pre-pandemic FY EBITDA of c£17m (2020) and now stands on a market capitalisation of £23m. That's 1.35x EBITDA on a normalised basis. Would argue that expectations are currently very low on that valuation.
Dont think we will get much new information tomorrow in the results but looks like market makers are setting the share price back now anyway. The RNS will have been logged already and so this is probably confirmation of nothing new in the results.
Key as always:
1. News on completion of gas pipeline to Kolkata and timing of this
2. Update on off-take agreement with GAIL
3. Final approvals granted for shale gas drilling to commence and results of first test wells
Once connected by operational pipeline to large market demand and shale test-hole results back then taps will be turned full on with existing 147 wells and drilling on remaining 153 wells will commence. We'll get a rapid re-rate will happen as this becomes more obvious to the market. each results update now has the potential to spark that. sadly though i dont think this one tomorrow will be re-rate starting.
little over 2 weeks away!
"We are at an important point in the growth of our core business as a result of the opportunities offered by the GAIL pipeline that will allow us to expand our customer base and sales volumes and take advantage of our significant proven but as yet uncommitted gas reserves. On completion, the GAIL pipeline will allow us to pursue further material organic growth into the large and untapped industrial market of Kolkata and into the wider State of West Bengal and we look forward to reporting on our new gas marketing initiatives as they unfold. We also look forward to progressing our Shale exploration and appraisal project that represents another excellent organic growth opportunity for Great Eastern once all approvals are in place.
"With the steps being taken by the government to accelerate the growth of the Indian economy, demand for hydrocarbons in India will continue to grow, as is evident from rising LNG imports and where development of indigenous gas reserves like those held by Great Eastern can make a meaningful contribution. Given climate change concerns and the need to control emissions, Great Eastern is encouraged that its business focus on gas, increasingly seen as an energy transition fuel, can assist in the global trend towards low carbon/carbon neutral energy supplies."
Since the last announcement on 7 November 2019, the Company had obtained the environment clearance for starting its Shale exploration program and continues to be in the process of obtaining the balance of final approvals expected later this year. The Company is engaging with various vendors for commencing the Shale program. Subject to the results obtained and analysed from the core wells, the Company intends to drill an optimum number of pilot production wells.
· GAIL (India) Limited partially commissioned the "Jagdishpur - Haldia & Bokaro - Dhamra pipeline" on February 6, 2021. Further work on laying the pipeline section to Kolkata is underway and it is expected to be completed by August 2022 as per the media reports. This will provide the Company with the opportunity to expand its customer base and sales significantly by accessing the huge market of Kolkata and also to the wider State of West Bengal. The transportation tariff of this pipeline has been fixed at INR 71.08/mmbtu ($0.94/mmbtu) including 12% for Goods and Services Tax.
maybe there are a few concerns around with GEEC at the moment that might relate to the upcoming interim results to be announced around mid november or maybe relate to CoP26 and new climate commitments from India. For me concerns around either the results in November or CoP are not valid reasons for the share price fall over the last few weeks. Much more likely that someone has wanted to trade out of a position which made some strong gains to 40+p. Frustrating though.
Seller(s) back. Odd sequence of trades though. 90 minutes, 8 sales and 15% off the share price. Why do that? Maybe someone knows something that has recently changed in terms of outlook and that is either not easy to know or inside information. Seems odd though that a bunch off sellers just turn up on no news and dump 15% off the share price. There is then a small buy order that goes through for near the ask.
Think its just sellers out of the way (for now) and a buyer or two active. Nice to see a 121k share purchase from Fri 6th that popped up at the end of today. Spread was 30 - 32 at the time of the trade and price paid was 35p so maybe there is an ongoing buyer that is being quite aggressive to get stock.
Enjoying the ride upwards though. long may it continue! In the context of the latest IPCC report out today GEEC should do well. India is on track to make its contribution to a 2 degree celsius or less world by 2050 with share of energy sector for gas rising to 15% from 6% now. Ideally India would be more aggressive and align with Paris target of 1.5 degree celsius - gas and GEEC both have a role to play in that target if India were to make it.
* Proven and derisked significant reserves
* Increasing infrastructure connections to huge market demand
* Decent balance sheet and cash generative
* Significant discounted shares to intrinsic value
* Paris Agreement aligned
* Stars are aligned too
Obviously something going on behind the scene as the recent results can’t explain over 100% rise in the last 2 weeks..
Well…not complaining here..lol
GL as it looks like we are alone in this lovely lonely planet!
I think Modi family wealth is looking a lot healthier now..
35% @ 16p previously vs 65% @ 32p now!