Member Info for mick2020

Hmm....and ultimately it all depends on Tanesco again.... that cash strapped company that does not pay its bills on time.... the reason why Songas threatened to stop generating electricity in December, and why the Tanzania power sector as whole doesn't develop quicker... Let's hope they sort out this mess soon, via some worldbank / development / trade agreements.... http://www.economist.com/news/middle-east-and-africa/21685504-electrification-plans-are-stalling-because-distributors-wont-pay-power-hungry

Thanks Josik, Don't get we wrong, I do believe in the potential that this company has. Problems around payments is actually the only serious risk that I can see, and even that risk seems quite small. Just a pity that it is such a long wait! :-)

Josik, Note the sentence: "The Company will recover this receivable from an agreed percentage of TPDC’s share of current and future production... What is the agreed percentage? (Do you know if that is 100%?) of course TDPC is not the same as Tanesco.... At the same time though, TPDC and Tenesco are both owned by the government, and one of reasons why Tanesco doesn't pay Orca is because the government itself doesn't pay its bills to Tenesco... Or why do you feel TPDC is fundamentally very different from Tanesco? Ultimately, I don't have much faith yet in TPDC, in the longer term. I understand that the payment protection is basically a fund that holds the required sum for 3 months gas consumption. What happens when this fund has been depleted? We won't know until much later this year; and I'm afraid that this mechanism still needs to be tested....

Many thanks Josik, very impressive that you are willing to share this as well! Comparing your numbers with mine, I see that you are overall a bit more optimistic in the short term, while I am in the long term: my prod. profile doesn't drop after 2018 (exploration , new acreage/acquisitions should allow the company to grow further and keep increasing production rates; but off course with more capex), but my annual average rates for 2016 and 2017 are a bit lower. Apart from that, the differences are quite small. My debt reduction is a bit slower (I assumed 7.4 million for interest+debt pay off per year), I have to redo the tax element (didn't know the scales in the cost + profit gas), but the impact is small. Are you certain/do you know that 100% of the TPDC share will be used for cost recovery in the initial years? (I assumed only 70%). I assumed slightly lower well costs (capex) than you did. Doing a quick NPV check with your numbers, I see that my value per share is about 10p lower than yours... still highly attractive though! :-) Overall, as long as TPDC pays all their bills, there really is little that can go wrong it seems.... :-) Or at least, I can't find it!

Josik, If WRL had received the full 20% TPDC share in Q4, in addition to their normal gas sale revenues, then we payment from TPDC should be ca. US$ 6.7 mln. Mtwara gas gales to Tanesco will add another 0.25-0.3 mln. So for Q4, payments from TPDC should be between 4.2 - 6.7 mln, for gas sales + cost recovery, depending on the amount of costs recovered. To me, any payment from TPDC greater than 5.2 mln indicates that TPDC did indeed pay ALL of its bills to WRL…. (well, at least until December that is …. my confidence in the Tanz. authorities is basically zero…) For 2016, I think evidence of prompt payment of the TPDC receivables (in addition to gas sales payments) is far more important than predicting when exactly “flow will reach 80 MMscf/d”. The latter issue is just a matter of time, even if AEX would start production after all, while the former should add more than US$ 10 mln to the revenues this year (and the next) How did you get invited to that meeting with Katherine and Geoffrey? In your next meeting, :-) , please ask them if they can include a clear statement on the TPDC receivables in the Q4 results, including payment record….. it would give me a lot of “extra” comfort! :-) I read that the “Norwegian water resources and energy directorate” (NVE), are also helping in Tanzania, to restore their hydroelectric power plants (see link below). Maybe a country entry by Statoil is within the realm of possibilities… WRL could probably be a small but nice starting point…. http://allafrica.com/stories/201602012151.html

Thanks Josik, Overall, my estimates are similar (YE 2016: 19 million cash, debt reduction: 7.4 million, tax: 9 million), but since the numbers also depend on the –more uncertain- cost recovery element (TPDC cost recovery, T&D receivables, initial line-pack volumes), the exercise is becoming a bit academic I would say… in any situation, net revenue should be pretty good for such a small company!! There is one area though where my numbers are markedly different: gas sales As announced, Q4 2015 average gas production rate was 46 MMscf/d (to Dar). At a price of US$ 3.07 per thousand cubic feet, this amounts to US$ 4.15 million in total for a 31.94% share. Including sales to Tanesco (Mtwara) this would be ca. US$ 4.5 Million. So why do you expect gas sales of 6.5 Million in Q4?? Cost recovery is expected to start in 2016, I read somewhere…. Also my estimated gas sales for 2016 are significantly lower than yours (US$ 26.9 million in total, with a flowrate of 75 MMscf/d in Dec. 2016), but including cost recovery, the overall numbers are comparable again. By the way, to me, this also shows the risk associated with WRL: if costs recovery gets “postponed” (the “Orca disaster scenario”…), WRL would end up with only ~ US$ 4 million at the end of 2016 in my calculation (ceteris paribus)… Luckily, I think it is unlikely that this will happen, for various reasons. (and even if it would happen, WRL would still be able to drill a well in 2017 and increase production rates + revenues, while paying off debt. Obviously I hope that I have underestimated sales gas revenues… (I already wondered why WRL expected a “$3.5 million per month” cash flow at the end of Q4). How did you get to 6.5 million? It would be a very pleasant surprise if cost recovery has already started!

Maurel et Prom reported gas sales of 7 Million Euros in Tanzania in 2015, on 28 January (see link below) Converting that amount to dollars, and using WRL's share (32% for WRL and 48% for M&P), this gives a very healthy income for WRL as well! (> 5 Million US$) Given that average Q4 gas production was only 43 MMscf/d, Q1 will show a significant further increase, no matter when the expected increase to 70-80 MMscf/d exactly happens. Bring on 2016, I love cash cows! :-) 3 more weeks to go to the Q4 + 2015 results! http://www.maureletprom.fr/index.php?option=com_joomdoc&task=doc_download&gid=406&orderby=dmdate_published&lang=en

"...from September 17 this year .......electricity production has increased from 260mw to 540mw" (280 MW corresponds roughly with 55 MMscf/d) and ..".another 130mw is expected from natural gas sources between now and January 2016" 280+130= 410 MW, which corresponds roughly with 80 MMscf/d http://www.dailynews.co.tz/index.php/home-news/44851-cheating-power-users-sanctioned It's is perhaps taking a bit more time than I had hoped, but everything seems to be on track for WRL. Looks like they will indeed achieve a production rate of 80 MMscf/d by the end of the year, which is a fantastic achievement. A brand new gas production company in Tanzania with hopefully a solid and gradually increasing revenue stream for many years to come.... Looking forward to 2016! can't wait until their Q4 results are out! (end Feb).

..."Thanks to the natural gas from Mtwara, Tanesco has now added at least 245 megawatts to the national grid. Soon more megawatts from Ubungo II and Kinyerezi power plants will be added, 35mw and 75 MW respectively" http://www.ippmedia.com/?l=86511 All gas is coming from the Mnazi Bay partners. 245 MW corresponds with ca. 50 MMscf/d, and including the further 110 MW that will be added soon, it adds up to > 70 MMscf/d, while power generation at the Symbion plant can be increased further as well I understand. Looks like we will indeed be producing 80 MMscf/d at the end of December, all looking good for WRL!

Hardly any surprises in the Q3 results today. The most interesting bit is perhaps that "current production into the new pipeline is approximately 45 MMscf/d" while on 4 November is was still only 33 MMscf/d, and that four of the five wells are now tied in. Looks like things are going according to plan! Great news for WRL! With an expected flowrate of 80 MMscf/d by the end of the year and payments made on time, big money is finally coming in...

I think the buy recommendations will keep coming in. However, it will take time before this share moves up, as institutional investors will want to see evidence that payments are really made, also in the long term... A 6 months track record of actual payments, combined with an active drilling program focused on building more production capacity and increasing reserves (so drilling Mnazi Bay development + exploration wells) will do wonders for the share price... Exactly as planned... But it will take time. Unless there is a takeover of course, then things will more a lot quicker! Overall, I think this share looks like an extremely safe investment with minimal downward risk and serious upward potential. Highly unusual for an AIM company! WRL is a share to buy and forget for now. Come back 6 months time, and I'm convinced the price will be significantly higher!

4 Nov: Cantor Fitzgerald reiterates buy rating (again...) Target price: 57 p http://www.octafinance.com/cantor-fitzgerald-reiterates-gbx-57-00-target-price-on-wentworth-resources-lonwrl-reiterates-buy-rating/

Interestingly, if you base the calculation on half the target rate (so 40 MMscf/d), and include full cost recovery (so gross payment for 100% of the gas), then the payment should be... 3.8 million... So perhaps the take or pay agreement does indeed specify a minimum rate! (after the initial start-up period) Anyway, it is great news for WRL, and if the payments will keep come in as planned, 2016 will be a fantastic year.

Hmm... correction, the RNS states clearly that "a gross payment of $3.8 million has been received relating to the October 2015 gas deliveries", so nothing for August or September". However, if you do the math, based on 1032 MMscf delivered, the payment should have been around 2.53 million (80%) excluding cost recovery. 100% is 3.17 million.

Mbolea, You are right, perhaps the payment also covers August & September. Regarding the cost recovery issue: WRL apparently have priority over M&P whom will get their receivables AFTER WRL have got theirs. Page 65: http://www.wentworthresources.com/pdf/RPS-March-2-2014-Reserves-FINAL.pdf (Josik answered on this in an earlier post)

Excellent news, and what a great surprise (I didn't expect any news releases before the Q3 results on 19 Nov). Actual production rates are a bit lower than expected I have to say, but the received payment is significantly higher. I wonder if this is the result of cost recovery element (TDPC owes WRL around 40 million development costs I understand) or if the take or pay contract specifies a minimum flow rate, after the initial start-up period (which we had in September). Either way, this is fantastic news, WRL will really be very well funded at the end of this year. I'm also very happy that management is confident that the 80 MMscf/d target will be achieved with the current well stock.

Interesting interviews below with Randall Abramson. Just like WRL, although the Orca shares appear to be very cheap, the share price has remained almost flat for ages. His explanation is pretty clear. To move WRL upwards we need a track-record of punctual payments from TDPC, to convince the institutional investors and the general public. Tanzania still has a bad reputation. Although this should not be an issue now with the agreed payment security, I doubt that the WRL share will move up significantly within the next few weeks. WRL is a long term investment, so all we can do now is........ wait…. "The company has more than US$60M cash and is owed more than US$60M by TANESCO and has no debt—there's about CA$2.50/share of net working capital, including amounts we expect Orca to ultimately collect from TANESCO. You're nearly getting all the reserves for free. And the 2P reserves are worth in excess of CA$11/share according to the company’s third-party engineers. Why hasn't that created more of a run on the stock? RA: People are simply scared of Tanzania. A country that does not pay its bills on a timely basis does not sit well with most investors. People pay a premium for safety, and they discount things that they're concerned about. Our job is to determine whether those risks are real. While we don't believe there are material risks here, resolving Orca's issues has taken way longer than we'd thought. http://www.theenergyreport.com/pub/na/the-three-principles-that-guide-randall-abramsons-oil-gas-investment-strategy http://www.theenergyreport.com/pub/na/randall-abramson-locks-on-to-unusual-bargains-at-todays-oil-prices

Good news, thanks. 600 MW corresponds with ca. 120 MMscf/d, so that would increase the production rate with another 60 MMscf/d, bringing it to 330 MMscf/d. No doubt the reserves are there, so there could be some very exciting announcements next year (GSA for volume beyond 130 MMscf/d) I don't understand why there is so little interest in WRL. Given the Orca payment problems, all I can think of is that there is no trust yet that TDPC will actually really pay, even with a payment protection in place. Hopefully things will improve quickly once the first few payment have actually been received.

Reading through the Q2 results again, I noticed this little paragraph on page 5, that confs that WRL is indeed planning to fill up the Madimba GPF fully, as well as produce another 60 MMscf/d for a regional power supply. This would result in a production rate of 270 MMscf/d in 5 years time!! Big expansion plans therefore... just why is this share not moving up.... ...........Subject to the deliverability from the existing Mnazi Bay wells and the drilling of additional development wells as deemed necessary, the Company anticipates gas sales to the pipeline to increase to 130 mmscf/day as market demands grow. Gas deliveries could escalate up to 270 mmscf/day within five years from first gas delivery should additional exploration success occur within the Mnazi Bay Concession. Of the 270 mmscf/day, 210 mmscf/day is expected to be supplied to the Madimba GPF and 60 mmscf/day is anticipated to be supplied directly to a power plant planned for construction in the Mtwara region or supplied to industrial customers in the region. http://www.wentworthresources.com/pdf/MDA%20-%20Q2%202015%20-%20Final.pdf

Pipeline pressure is 29 Bar now... http://www.thecitizen.co.tz/Business/Power-outages-end-Saturday---Tanesco/-/1840414/2872752/-/opd936z/-/index.html