The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
Observer, I wasn't aware the June presentation was available, I'll go check it out. Coop
Observer, reading between the lines on my part: "The current FEED schedule is to have designs, cost estimates and process guarantee scopes to be substantially completed by end Q2 2018, with orders for long lead items being placed at the end of the FEED process in Q3 2018. The current timetable is based on a planned commissioning of the project in Q1 2020 and lithium carbonate shipments commencing subsequent to commissioning. This schedule and final project go ahead is subject to completing the US$450 million debt and equity project financing strategy and final Board approvals. The schedule will be updated at the end of the FEED process." Coop
Financing pushed out to Q3 which is disappointing but I'm not too concerned. The Hanwa offtake extension is positive. FEED still ongoing and won't be fully completed in Q2. Plant commissioning is still scheduled for 20 months based on current timetable which is still Q1 2020 but not sure in the project schedule where the 20 months is taken from. I think things are going to the right (i.e. taking a little longer) but, again, not too concerned as this is to be expected in large projects. I would have liked more on where they are with financing but all in all fairly positive. Coop
The only thing I picked up on was that financing is probably being pushed out to Q3 which is the end of the FEED process. Coop
Ratty, still here my kiwi friend. I won't post if I've nothing to say and won't get drawn into idle discussion with people like yourself who have an obvious agenda. Needless to say, the RNS is very disappointing and looks as though they'll be flowing the well with a high THP (i.e. on the choke) which will be detrimental to contribution from the tighter zones (2,3 and 4) which needed low THP's to get the limited production we've seen from these zones. The high THP is supposedly based on experience from flowing the Kione zone historically. Stimulation is what is required to flow these tight zones and I'd like clearer details and definition on SGC's plans and timelines. I'd also like to understand where the money is coming from as cash flow is going to be limited. I have to admit that I'm none too confident with the Alvares re-entry and development; are they going to repeat the test strategy we have seen on Dempsey or are they going to have the option to stimulate permitted? Also, where is the money coming from? If we were flowing 6-7 MMscf/d from Dempsey then I wouldn't be too concerned but cash flow is going to be pretty limited. Still waiting to get news on Indo and China before I make a decision on my investment. Coop
From experience, it's very likely they are dealing with issues in the gas compression commissioning, if there are any issues as these things tend never to be straight forward. During start-up and through the commissioning of the gas compression system the facility has to flare the gas under the granted flaring consent. This means they cannot ramp up production as they'll exceed the consent and get into hot stoogie with BEIS. What they can do is involve BEIS as soon as any issues are identified and present a plan to show best efforts to get gas commissioning on track which may be viewed favorably (or not) but could allow the operator to increase production (i.e. flare to produce) for a short period of time. At the end of the day, if there are any issues it's likely a commissioning issue and should be viewed as short term in the grand scheme of things; the oil isn't going anywhere. Coop
I received a very prompt reply from My Jeffery himself: Good afternoon XXXX The pressures and flow rate are correct. There were no production restraints other than the choke. We chose to test the well conservatively based on years and many wells' worth of experience in testing and producing the Kione sandstone reservoirs. This is to optimize gas recovery from the well. Once we have some production history from Dempsey 1-15 we will review and adjust as required. A great result delivered by the local team. Best regards Gary Jeffery" Very very good news indeed!!!!! Coop
I'm not sure if anyone picked up on this: "The flow rate is very encouraging as it is water free natural gas, flowing through a 12/64" choke with flowing tubing pressure of 1140psi, and surface shut-in pressure exceeding 1300psi." Three things: 1. This zone is obviously depleted but we already knew this as it is field level reservoir 2. This is one of 4 field level reservoirs so lots of upside 3. Probably the most important point, the drawdown on the reservoir is pretty low (FTHP of 1140psi versus SITHP of 1300psi. This means that this WILL flow at much higher flow rates if we reduce the FTHP to pipeline entry pressure of (I think) 140psi. It doesn't say they were constrained by the well test package on the RNS so I'm not sure why they restricted the flow rate to 1MMscf/d. You can calculate a very crude productivity index of 6.25Mscf/psi/day by using the tubing head pressures. Therefore, initial gas potential could be around 6-7MMscf/d from this zone alone. Finally some encouraging news. Coop
I think for construction to begin before the end of June then the debt part of the financing needs to have been completed. Once the debt part is completed then we'll know how much equity we'll need to raise. I think they'll do it that way because the SP will get a lift when the debt part of the financing is announced as the market will see this as very positive - thereby minimizing dilution, that's certainly how I'd want to do it. I think we'll hear something by mid June latest. That's my thoughts. Coop
Once they know how much debt they can "affordably" raise, they'll then know how much equity will be required. Equity obviously means dilution. The Hanwa vehicle gives them access to cheaper debt (they've advertised this in their latest corporate presentation) but how much we're yet to see. I'd like to see the debt / equity ratio of the financing to be high just to minimize dilution but I'm sure the ii's will be very helpful especially if there's a decent discount being offered. He talked about another couple of months before the financing is finalized so we're not there yet. Coop
FYI - Just a nice reminder of what we have and where we're going. Any newbies, this is where you should start your research. http://www.bacanoraminerals.com/cms/wp-content/uploads/2017/05/corporate-presentation.pdf Coop
One other thing I should have said. In formations where the slope of the curve is very high (you can see this in the Well Cemented Hard Sand or the Fine Grained Friable Sands on page 1) then it doesn't take a large increase in porosity to have a significant impact on permeability. At the end of the day we will have the following in our favor: 1. Overpressured formation 2. Pipeline quality gas 3. Higher porosity formation 4. Significantly longer interval Will we get commercial gas rates of >3MMscf/d, I don't know but we're giving ourselves the best chance. Also, with the change in completion strategy, there should be the ability to co mingle zones. Coop
Here's a link explaining the porosity / permeability relationship. http://infohost.nmt.edu/~petro/faculty/Engler524/PET524-perm-2-ppt.pdf The math says that as porosity increases then so must permeability, this was all derived originally from empirical data (and still is to this date by operators) but the fundamentals remain constant. All the trends plotted will be averages or best fits but statistically, as porosity increases then so does permeability. Ratty, can you give me an example of where you have seen a reduction in permeability when porosity increases? I would certainly like to understand your logic. Coop