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#EPP presenting at the NSTA partnered Energy Share Fair next week (a nice slot in between Spirit Energy and BP)

https://x.com/energy_pathways/status/1899788012277395482?s=46&t=IHEn1TE0c7FNFBktt6H8XQ

Https://x.com/energy_pathways/status/1899129991339884868?s=46&t=IHEn1TE0c7FNFBktt6H8XQ

Well, it’s not clear of the 35p per therm is break even either with or without tax. So difficult to comment. However the significant CAPEX tax umbrella will be a big help… as will the investment allowance. Yes?

But no discounting factored in as it’s also unclear if any will occur at what rate.

Also interesting the government are removing the levy on gas/oil profits from 2030 too which is a plus.

The fact is there are 460m therms of natural gas in marram alone (not including nitrogen as we have see from the higher cavern capacity). It’s fully appraised and 100% owned. Then there’s Knox and Lowry.

Gallmat, it’s interesting you’ve not mentioned the MOU with a prominent green energy fund for cornerstone investment at multiples of the current SP and gas offtake agreements with a FTSE 100 company who may be providing project level debts funding. What are your thoughts on this?

Gallmat, no discounting applied as that data is unknown as yet.

As for tax, of course the more money a company earns the more tax they pay, not quite sure that’s something to be concerned about as it’s the basic mechanics all companies operate by.

However, there’s also the decent CAPEX tax umbrella to take into consideration once up and running and there’s a Smart bit of engineering from EPP. Electrifying all upstream production of gas/hydrogen will get them a 66% investment allowance against future profits enhancing its attractiveness to investors. It will be the lowest cost Gas producer via the tie back and EPL doesn’t kick in until 57p p therm. Offsets any levy above this during the transition phase.

Also Spirit and Centrica have producing commercially viable gas fields with the same component mix of natural gas to nitrogen in the neighbouring vicinity as well.

You’re really not very good at this deramping lark are you Laststanding? 😂

Those aren’t my numbers. And the nitrogen is factored in to the 460m therms recoverable fully appraised values… hence the storage of the vacated cavern being 500-600m therms.

Nice try, but you’ve got to do better than that 😉

Right let’s clear this up for any new investors trawling through all this.

- The original IPO documents estimated an NPV of £100m based on average gas prices at the time of 75p-85p for Marram gas production alone. (At the time of IPO gas storage and hydrogen storage and production were not on the cards as it has been formulated since).

Currently the 460m therms of fully appraised gas from Marram is worth around £510m as of todays gas price of £1.11p and as breakeven is 35p per therm (data from original IPO presentation) that’s a profit of £349m approx just for gas production alone at Marram.

- There is no documented evidence I can see that production would only happen for 6 months of the year. Why would it?

And with gas storage licenses TBA production would be assured for 365 days of the year (save for any maintenance)

- Gas Storage is of hugely significant value. As per the recent RNS’s capacity has risen to 500-600m therms at Marram.

- Should licenses be granted for Knox and Lowry the gas production rises to 1 billion therms of appraised recoverable gas. And the gas storage rises to approx 1.5 billion therms

- Hydrogen production and storage also adds another lucrative diversifying string to their bow with 2.8Twh at Marram and the chance to increase that to upwards of 4.5Twh with Knox and Lowry

- The chances of the licenses being granted?

Let’s put it like this: In May last year they were approved to apply for an “out of round” application for the license which is no mean feat, in October EPP were invited to help consult on the design of the hydrogen business model with NSTA & DESNZ, in January the NSTA & DESNZ approved them as an operator for the License… They also are restructuring the original license with NSTA and Crown Estate to make it a “straight to production” license and more logistically and financially beneficial to EPP… and At the end of March they’re presenting at a NSTA and DESNZ organised energy event. Chances are good I would say.

A decision is expected any day.

Heres a post I wrote last month putting the EPP case across as purely a gas production play:

Here’s an overview of #EPP simply as a gas production company.

Due to the fact that @energy_pathways MESH Gas & Hydrogen Storage Project will be powered by renewable energy & therefore fall under the zero emissions or NetZero label, it’s often forgotten that their primary phase of revenue generation will actually be Natural Gas production. So let’s take a closer look at the gas assets at hand:

First up is Marram, in December we saw EPP granted an Operatorship license for their 100% owned, fully appraised 46BCF gas field at the centre of their plans for gas production & storage.

With production set to begin in 2027, the 46BCF in-situ gas reserves equate to approx 460m therms. For context, this week’s per therm gas spot price sits at around £1.35/therm. So even at a more conservative £1 per therm, Marram has in-situ reserves worth around £460m.

But it doesn’t end there, EPP also have an application lodged for production/storage licenses for the nearby Knox and Lowry gas fields which are also fully appraised, (to quote the RNS dated 15th April 2024) “Like Marram, the Knox and Lowry licence requests are also ‘ready for development’ meaning they will not require appraisal drilling”

So how much gas is sitting in these additional licenses?

Well, as quoted by the company in the same RNS. The 3 combined Marram/Knox/Lowry (excluding Castletown) discoveries equate to circa 100BCF of gas recoverable, or 1 billion therms. Using the same £1 per therm metric, that of course equates to a combined value of around £1 billion.

Interestingly, in the most recent @RoastPR interview, when quizzed on the value comparison of gas storage compared to anticipated revenues for gas production, CEO Ben Clube stated that the Gas storage arm of the business would be worth double the revenues of gas production… And then of course there’s the little matter of the Hydrogen storage side of the MESH project to factor in.

So, even if EPP don’t receive approval for the gas storage licenses, then they still have a very solid business in gas production, therefore derisking the investment case further. (However based on the neighbouring Bains gas storage approval and an ‘out of round’ application thumbs up, I’d say the storage licenses are highly likely to be granted)

It just goes to show that you don’t have to be an advocate of zero emissions and the NetZero agenda to see there is significant upside to EPP as an investment, even solely as a gas production outfit, let alone as a fully integrated gas/hydrogen production/storage project. It makes the current MCAP of around £11m look very good value indeed.

Sunday Roast Interview: youtu.be/MlVnU6Eb4hg?f

The two Irish Sea fields are in relatively advanced stages of the approval processes so I certainly think they will go ahead.

Having read up on their plans I think the cutbacks on renewables are for future planned activities and budget expenditure.

The 70% cut to BP’s renewables ventures wouldn’t effect a hypothetical deal with EPP as the RNS states “gas production and storage offtake agreement with a FTSE 100 company”. So materially fossil fuel focussed deal.

In the Irish Sea there are a few options for this FTSE 100 co and BP and Centrica lead the way in the opinion of several investors as likely candidates.

Also EPP mentioned BP among others in an RNS stating potential tier one partners who were possibilities.

As we close out the week and the month, it’s worth remembering what a transformational February it’s been with so much groundwork laid at #EPP @energy_pathways:

• MOU with prominent green energy fund providing cornerstone finance at multiples of the current SP

• Discussions with a FTSE 100 company for gas production and gas storage offtake agreement

• Discussions with the same FTSE 100 company regarding provision of a project-level Debt finance package

• Increase in gas storage by up to 20% to 500-600m therms

• Increase in Hydrogen storage from 1.5TWh to 2.8TWh

• Restructured license decision imminent on a new straight to development petroleum licence for the MESH project that is more financially and logistically beneficial

• Panacap Ventures announces they’re a key investor

• 2x @EnergyVoiceNews articles

• Further technical engineering and design studies completed detailing pipelines, platform plans etc

• Government funding mentioned in an RNS for the first time

A very interesting post just popped up on my LinkedIn Feed.

Seems #EPP @energy_pathways is drawing the eye of some funds and high net worth individuals.

“Exciting advancements are on the horizon, and updates will be shared. As a founding investor Panacap is proud to continue supporting the business on its next chapter of growth.”

https://www.linkedin.com/posts/george-panayiotou-69250915_lseepp-energypathways-plc-operator-approval-activity-7300612023392890880-OEP9?utm_source=share&utm_medium=member_ios&rcm=ACoAACfjpYIBfg9c5qegFyzzOJh2vwryJJ1Fmho

No problem, in the recent interview (link below) the CEO states that as a ballpark figure the value of the gas storage is approximately double that of the gas production.

Most recent @RoastPR interview: https://audioboom.com/posts/8653050-midweek-takeaway-ben-clube-on-energy-pathways-aim-epp-the-future-of-clean-energy-storage-epp

A very interesting development in the Irish Sea with CIP (Copenhagen Infrastructure Partners) taking over the Morecambe Wind Farm, the nearest Wind Energy hub to #EPP’s MESH project just over 25km South West.

CIP manages the ETF I which is the largest dedicated clean hydrogen fund globally and they aim to have the wind farm online by 2030 and are yet to announce an offtake partner… I might know of a likely candidate.

The Rough max rate is 3.18m therms. So the preliminary estimate of 1.7-2m is pretty rapid.

Also FYI the dynamics of gas storage aren’t to fill and completely empty the cavern, it’s a regular give and take system dependent on supply and demand.

EPP RNS dated 10th February:

“ Phases 1 and 2 will deliver a facility that will store an estimated 500-600 million therms of gas with withdrawal and injection rates of 1.7-2.0 million therms of gas per dayfrom the combined 4 well storage facility.”

https://www.lse.co.uk/rns/EPP/mesh-development-update-uaduf61jyugiwmy.html

Yes, MESH will have very good injection rates:

“ injection rates of 1.7-2.0 million therms of gas per day”

There’s another two presentations since then FYI

https://res.cloudinary.com/investorhub/raw/upload/v1727089493/leaf-prod/310/documents/EnergyPathways_Energy_Proactive_Presentation_Sep_24_FINAL_pdf_mojc4r.pdf

https://res.cloudinary.com/investorhub/raw/upload/v1726057883/leaf-prod/310/documents/Energy_Pathways_Energy_Storage_Project_-_July24_ipoexb.pdf

The NPV wasn’t discussed in the original presentation and a key part of EPP’s appeal is its lack of sensitivity to gas prices, via its diversification into gas storage, and hydrogen storage and production.

Gallmat

The company is concluding PreFEED works so will have all the data to share imminently.

Maybe look at other gas producers pre and post production for a measure of value.

MESH represents something much bigger here. An integrated gas/hydrogen production and storage infrastructure investment. Value comes from early stage investment, not just from production.

To put it as simply as possible and as others have reiterated. Should the cornerstone finance sign off at the ‘multiples’ quoted then EPP will no longer be valued at £10m MCAP.

If the FTSE 100 offtaker invests with debt finance as per the RNS then this stops being a £10m MCAP company.

And finally, if the production/storage license lands then the company becomes a takeover target for Centrica who are positioned in the neighbouring westerly Morecambe gas field.

Next step: License approval

Can’t put it any clearer.