Iofina Share Discussion Threads

[writz] 16/6/2013 11:57

SG, thanks for the link re gasfrac - that's a useful proxy. I haven't looked at DNR, but I assume they must be able to make the CO2 tech work, perhaps with the help of being close to a supply. The huge returns on the water business are both attractive and a cause for concern, IMV. There's a bit of a goldrush feel to it. I'd think that the costs to the user alone are going to impel the search for cheaper technologies. As you say, medium term, selling the water business may be the optimal strategy. Anyway, it's a "free extra" at this point, so not an influence on the share price either way near term.

[superg1] 16/6/2013 11:10

Writz

re gas fracking. I looked at a Canadian company re that (gasfrac), for an indicator of performance and growth in that area. I did ask too way back re gas fracking and it's not a preferred method for now. That's probably why things are not so good for gas frac.

The last CEO and others left without saying why, the 2nd lot to go.

This shows the performance over the last few years



So even with that tech it seems they are not getting the interest.

[everybodywangchungtonight] 16/6/2013 11:03

Take Aim at the taxman
The Alternative Investment Market offers a tax-efficient way to own shares.

[everybodywangchungtonight] 16/6/2013 10:55

No British Inheritance Tax at all is paid on:-
- Alternative Investment Market shares

hxxp://www.universal-inheritance.org/pg3.html

[greatgiginthesky] 16/6/2013 10:39

On the matter of IHT exemption, I believe that IOF does not qualify for the reason that its trade is not wholly or largely conducted within the UK. BWTFDIK.

[superg1] 16/6/2013 09:59

Writz

It's been around for some time, but not that popular at the moment.

Water fracking has moved to hot water as the preferred method, less chemicals are needed and better results than cold.

Over time it will all come down to cost v results no doubt. ND and Montana tend to have plenty of water, whereas the lower states like OK and Texas struggle for fresh water.

It's one reason why I say sell the water div, water for fracking is a very hot sector is Montana and ND., so get rights and sell it off, imo while the interest is so high. Over time more competition from others will arrive and maybe down the road competing methods.

Iodine is essential for life, with no substitutes for certain applications, with a growing use in technology. They are using it in all sorts of graphene experiments.

If iodine prices dropped, a customer base would return, as it's a preferred product. If enough of it was around they would use it to make tyres.

That's what I like about iodine, the end user sector is wide, varied and growing. Prices have risen significantly in recent years, but it didn't affect the overall demand growth.

Back to my bungee rope analogy. If the price drops, not only would it put some out of action, demand would go up as it becomes viable again for sectors that have lower-priced, but lower quality alternatives.

The catalytic converter tech mentioned recently is a good example. If that's works OK, then I can't see cat producers using platinum

The articles






It seems to be a regular theme that Iodine is proving very useful in many technologies and in this case gave the best results.

[writz] 16/6/2013 08:35

Thanks, Librarian - good to have quality research on hand!

[the librarian] 16/6/2013 08:27

It's a good point Writz and one covered previously, I had a quick look....

'Wyoming has already started using carbon dioxide in its wells, and it could become economical in other places with CO2 pipelines--originally built for conventional fossil fuel extraction, says Robert Dilmore, a research engineer at the U.S. National Energy Technology Laboratory, in the MIT Technology Review.

But it's not without costs. Carbon dioxide from wells must be separated out from the natural gas, and CO2 pipelines-- 3,900 miles of the infrastructure already exists--will never reach every well. Finally, the economics aren't always a money maker. For CO2 to gain traction away from existing pipelines, either hydraulic fracking must cost more due to its risks or water scarcity, or the benefits of CO2 from carbon sequestration and lower pollution must be monetized.'

hxxp://www.fastcoexist.com/1681897/using-co2-for-fracking-means-no-dirty-water-and-less-climate-change

So it may feature more heavily at some point but not currently in any big way!

[writz] 16/6/2013 08:19

SG, from your long quotation above:

The best performers in the exploration and production index were Denbury Resources Inc. (DNR), which uses carbon dioxide to coax more oil from wells, and Range Resources Corp. (RRC), the second-largest holder of drilling rights in the Marcellus Shale. Both logged recycle ratios that surpassed Chevron Corp. (CVX)'s 2.5 and BP Plc (BP/)'s 2.8.

Interesting that DNR's use of CO2 seems to produce better recycle ratios (profit/cost per barrel) than the water based methods. Can't find the reference to it now, but I thought that the problem with CO2 was its relative scarcity and cost. For us this is a non-core issue, but does it affect the long term outlook on IOF's supply to the fraccing business?

[n3tleylucas] 16/6/2013 00:00

A simpler method is give assets away ... and then live 7 years after.

[n3tleylucas] 15/6/2013 23:56

Some amusing posts today ... the IHT avoidance tickled me greatly. It's true, but there's a catch LOL

[warmsun] 15/6/2013 22:37

"If you hold an AIM share like Iofina for 2 years it falls outside your estate for IHT purposes."

Not that I live in the England, but I didn't know that! Thanks for the education...interesting!

[orslega] 15/6/2013 20:37

monty - take your point, however, without going into detail, there are ways of dealing with IHT mitigation if that happens....too complex to discuss here right now but there are ways - so lets discuss that when it happens...

.but remember, and as they saying goes "don't let the tax tail wag the investment dog"....so very true..

...if IOF succeeds in changing the Iodine supply map as they envisage, tax planning will start to feature....and that's not just IHT, CGT mitigation also.....

[orslega] 15/6/2013 20:25

madchick, - handbags at dawn if you are denied AGM entry - no messing there!

superg - some great SQM info, interesting and thank you. Obviously raining in your neck of the woods today, time indoors well spent, and obviously no DIY for you today..(advice intended, always mess up your first DIY project, Mrs superg will never asked again, job done, lol)

[monty panesar] 15/6/2013 19:22

I did read a week or two ago about the possibility of Iofina moving to the full market. From a selfish point of view I don't want this to happen for Inheritance Tax reasons. If you hold an AIM share like Iofina for 2 years it falls outside your estate for IHT purposes.

If they move I would have to consider selling and reinvesting in other qualifying AIM shares to rollover the IHT shelter.....now that would be a difficult decision!

[madchick] 15/6/2013 19:19

In the video, when CF says:
We have got to remember that iodine is very much site specific. Lots of sites do not have any iodine in the brine at all. So, you have really got to find the sites as well, of which we have a large number, many double figures.

Did anyone else wonder what he meant by "many double figures" - at first I thought he meant the ppm, which was a massive understatement, but now I am thinking he means the number of sites with iodine and he means "many tens" - also an understatement, I believe. I just wondered if there was another interpretation and I've just not understood it!

I also found his voice quite soft, so I hope they use microphones at the AGM :-)

BTW, my bank is making a right mess of getting me my holding statement, so they'd better let me in if I turn up!

[superg1] 15/6/2013 18:47

Hitsha

There is the odd rumour that it will appear in a relevant media source, near term.

[superg1] 15/6/2013 18:41

I'm not sure if this one has been mentioned but it reads well as a report overall for future demand-:


14th June 2013

[superg1] 15/6/2013 18:09

SQM Analysts re late 2012, they all talk well of iodine, and I've copied in some bits.
As in another post these analysts will recognise IOF value instantly with any sign of increased production, or even being aware of them.

Bank of America

'given tight supply combined with strong demand. Iodine remained the key business for SQM'

'Iodine and lithium markets are fairly small, posing a threat of new entrants/new supply'

Citi research
Credit Suisse
Raymond James

Risks
global supply and demand, which as mentioned above are highly correlated to global economic cycles. Furthermore, in the case of potassium nitrate, iodine and lithium, international prices are also highly dependent on the production of the main producers (SQM among them) and their specific business strategies.

increasing competition

players that could enter these markets and push prices even lower. In this case, lithium is the product in which SQM has the most uncertainty related to potential new competitors and expansion of capacity, as global reserves of lithium are abundant. On the other hand, iodine reserves are very scarce worldwide, so the risk of new competitors or increasing capacity in the international market is more limited.

[superg1] 15/6/2013 17:44

A bit long but it gives a good overall view of what is going on.

Shale Drillers Squeeze Costs as Era of Exploration Ends: Energy

The pioneers of America's shale gas and oil revolution have done their work. Now it's time for the factory crews to take over.

After spending $53 billion on a land binge to find hydrocarbons, the petroleum industry is counting on technological innovations -- better imaging data, speedier and longer horizontal drilling, among them -- to ramp up the flow of oil and gas from U.S. shale fields where they're drilling more than 10,000 wells a year.

The techniques are embraced by the biggest producers from shale such as Chesapeake Energy Corp. (CHK) and Newfield Exploration Co. (NFX) to boost shareholder returns by shifting money from exploration, which is winding down, into what's known in industry parlance as manufacturing. The moves will help producers increase profit at a time shareholders are ousting executives and revamping boards because of poor performance.

"Now that all of the established shale plays are known, companies can start focusing on the economics of these plays," said Eric Gordon, who helps manage $35 billion at Brown Advisory Inc. in Baltimore. "They are under pressure to reduce drilling time and operating costs."

In Oklahoma, Chesapeake is blasting cracks into rocks surrounding each well at 10 times the rate of a few years ago. Newfield is using finely tuned mixtures of chemicals and minerals to stabilize wells that slice sideways through crude-soaked rock 10 times farther at half the cost per foot of a decade ago.

Land Rush

Producers that engaged in a land rush yielding vast shale discoveries from Pennsylvania to Wyoming and Texas are now being pressed by shareholders to turn promises into profit, said Brian Gibbons, a debt analyst at CreditSights Inc. in New York. By employing new technology, domestic explorers aspire to catch up with international energy titans such as Exxon Mobil Corp. (XOM) that generate six times as much profit from each barrel of oil.

Measures to cut per-unit production costs also are key to coping with oil and gas prices that are one-third and two-thirds lower, respectively, than their 2008 peaks.

Independent U.S. oil and gas companies -- those that focus on production and don't refine crude into fuels and chemicals -- ended 2012 with an average cash-flow deficit of $1.5 billion, compared with an average surplus of $386 million for the world's biggest energy producers.

Independent U.S. explorers spent more than $53 billion during the past decade snapping up drilling leases as breakthroughs in horizontal drilling and hydraulic fracturing allowed explorers to access previously impenetrable formations.

Shifting Gears

Of the 17 companies in the Standard & Poor's 500 Oil & Gas Exploration & Production Index, Chesapeake was the biggest spender on prospective U.S. oil and gas leases with $19.9 billion from 2003 through 2012, according to data compiled by Bloomberg. The company, whose shares lost 36 percent from 2010-2012, on May 20 said it hired former Anadarko Petroleum Corp. (APC) Senior Vice President Robert Douglas Lawler as its new chief executive.

Chesapeake, the world's largest driller of horizontal shale wells, said as early as March 2012 that all of the major untapped petroleum deposits in the continental U.S. had been discovered.

EOG Resources Inc. (EOG) Chairman and Chief Executive Officer Mark Papa told analysts on May 7 that the company's exploration unit is now looking for overlapping, oil-bearing geological formations that can be simultaneously tapped to extract "substantially larger" quantities of crude. Houston-based EOG is the largest owner of drilling rights in Texas's Eagle Ford shale.

Recycle Ratio

The payoff for the deeper-farther-faster approach remains to be seen for Chesapeake and explorers such as Devon Energy Corp. (DVN), QEP Resources Inc. (QEP) and Southwestern Energy Co. (SWN), which have the poorest records of turning untapped reserves into barrels of crude for sale.

Producers use a calculation called the recycle ratio as a measure of profitability, dividing profit per barrel of production by the cost of discovery and extraction. So a $40 profit divided by $20 in costs yields a recycle ratio of 2:1, or 2. A higher number represents more profitability.

Denver-based QEP's recycle ratio was 0.69 in 2012 and Chesapeake posted a 0.97, data compiled by Bloomberg show. In contrast, Exxon scored a 4.5 and Total SA (FP) had a ratio of 3.3. The ratios include three-year averages for reserves used in calculating costs for the companies.

Top Performers

The best performers in the exploration and production index were Denbury Resources Inc. (DNR), which uses carbon dioxide to coax more oil from wells, and Range Resources Corp. (RRC), the second-largest holder of drilling rights in the Marcellus Shale. Both logged recycle ratios that surpassed Chevron Corp. (CVX)'s 2.5 and BP Plc (BP/)'s 2.8.

Devon and QEP said several factors lowered their recycle ratio numbers in the past couple of years, including falling gas prices that cut revenue as they shifted more drilling to oil projects, which are costlier than gas.

During the shift, the company is recording higher costs without yet getting the full benefit of bigger profits, said Vince White, Devon's senior vice president of communications.

QEP incurred costs from an acquisition before production materialized from the assets, said Greg Bensen, director of investor relations at the company. QEP looks at the ratio using a multi-year view, he said.

Improving Results

Though Southwestern has some of the lowest costs in the industry, gas prices that collapsed to a decade low in 2012 reduced cash flow and forced the company to erase some proved reserves from its books, elevating per-unit costs for finding and development, or F&D, CEO Steve Mueller said in an e-mail.

"As the gas price increases, the F&D will drop dramatically as reserves are returned to the books and the yearly recycle ratio will be one of the best in the sector," Mueller said.

Jim Gipson, a Chesapeake spokesman, declined to comment.

Analysts expect rising profits and stock prices will come to producers who embrace a manufacturing model, according to data compiled by Bloomberg.

Chesapeake, which reported on May 1 a first-quarter profit of 30 cents a share excluding one-time items, is expected to see adjusted income of 43 cents a share in the comparable period next year and 49 cents a share in the fourth quarter of 2014. At Range, analysts estimate per-share adjusted earnings may almost double to 63 cents in the fourth quarter of next year, compared with 33 cents in the first three months of 2013.

Newfield's average 12-month target price from analysts' estimates compiled by Bloomberg is $33.75, 48 percent more than the closing price yesterday. Denbury's target price is $23.71, a 30 percent increase from yesterday's closing price.

Manufacturing Techniques

Energy producers and the oilfield-services companies they hire to help drill wells have continued to refine their techniques and equipment to increase the amount of oil and gas that can be squeezed from shale and other unconventional formations. Drilling sideways through the length of a field puts the well in contact with a larger section of oil-soaked rocks than a traditional vertical well.

Newfield is now drilling lateral wells as much as two miles long, 10 times the length of the horizontal bores used at the dawn of the shale revolution during the last decade, Clay Gaspar, a vice president at The Woodlands, Texas-based company, said in a telephone interview. In the last 18 months, the company cut the cost of drilling sideways by more than half to about $1,000 a foot, he said.

Fracturing Stages

In Oklahoma's Cana Woodford region, new techniques and improved materials are giving Newfield's crews better access to the well bore, allowing them to isolate smaller zones to target fracturing more precisely. Newfield crews are shattering the rock two or three times more frequently in wells with twice the lateral length of the 5,000-foot wells they were drilling just 18 months ago, Gaspar said. That equates to clusters of fractures approximately every 300 feet compared to more than 400 feet before.

"The world we live in today is all about manufacturing and it's trying to get to the point where that experiment that we do becomes repeatable," Gaspar said. "We're using a lot of the same efficiency techniques that other manufacturing organizations have used over the years."

Chesapeake has reduced the time it takes to drill wells in the Eagle Ford shale to 18 days from 25 days a year ago, according to a presentation published on the company's website on May 13. Chesapeake is aiming to eventually lower that to 13 days. The Eagle Ford will account for 35 percent of Chesapeake's capital spending this year, more than any other single region, the presentation showed.

Three-Dimensional Models

In Ohio's Utica Shale, Chesapeake has lowered its cost to drill wells to $5.9 million each from $8.5 million, a 30 percent decline, according to the presentation. The company has 14 rigs drilling in the Utica region.

Noble Energy Inc. (NBL) is drilling wells in Colorado's Denver-Julesburg Basin with 9,000-foot horizontal bores that the company's engineers estimate will ultimately produce the equivalent of 1 million barrels each, Chief Operating Officer David Stover said during an April 25 conference call with analysts. That's compared to the 40,000 barrels per well that the company was targeting three years ago with traditional vertical wells.

Producers are searching for ways to boost efficiency and curb costs before drill bits even begin chewing into rocks to start a new well, said Gregory Powers, vice president of technology at Halliburton Co. (HAL), the world's largest provider of hydraulic fracturing.

Three-dimensional modeling of subterranean formations help oil producers predict the nature, location and permeability of crude-rich reservoirs, Powers said during a meeting with reporters at Halliburton's Technology Center in Houston on May 9. Prospectors also are taking advantage of better technology in steering drill bits to precise locations deep underground.

"How much better is it?" Powers said. "It's immensely better than just 10 years ago."

[worraps] 15/6/2013 17:26

I've deleted my silly post 495 above. Thanks for your great posts today, superg, you're on great form once again. Whenever you re-cap on the prospects and potential it gives me a smile on the gloomiest of days.

[superg1] 15/6/2013 16:50

missed this bit

'Both firms have a term between 10 and 15 days to submit to the authority a compliance plan, otherwise risk the revocation of the RCA or fined millions, because the defects were classified as "serious".'

[superg1] 15/6/2013 16:46

Could be interesting (sorry links keep disappearing recently, it must be that tech they have on here for non subscribers playing up
)

[hitsha3] 15/6/2013 16:26

Thanks again SG, for youre brilliant write up.