Iofina Share Discussion Threads

[superg1] 12/10/2014 16:20

Bakken fracking

Please feel free to soak up what Macca spouts out in his attempt to undermine every aspect of the company.

I stopped looking a long back but some have mentioned content in recent times. No one did confirm. Did he use his fave Culbertson watering can depot once more as an example? Or is it the number of wells to be completed.

What I doubt he mentions is maintenance water. There is a feature of the Bakken produced water that most are unaware of. The Bakken produced water has unusually high salinity.

Over the life of a well it needs around 3 to 4 times the amount used in the initial frack just to flush out the salt over the life of the well. Then individual wells are fracked many times in their lifetime to increase flow rates. Next comes the pressuring of the wells known as water-flooding. That is where water is forced into the relevant shale level to up the pressure to force oil out.

Water-flooding involves the use of water at levels many times greater than used for fracking.

The Bakken is in it's early days, the full impact of maintenance water, further fracks in the same wells, and potential water-flooding have yet to seriously feature, but they will. If it expands as suggested there will be 10 times the wells there are now.

Halliburton know how much water they need, and they know the serious water issues pending in the US.


The experts in their report list the concerns for the Bakken region, and future water supply for fracking and well maintenance.

They are;
Depletion concerns in relation to groundwater with regular refusals on groundwater permits.

Most supplies of surface water do not provide a reliable supply of surface water due to the seasonal variations EXCEPT the Missouri river.

Water supply concerns compounded by the battle between the state and the army corps of engineers over industrial water withdrawals from the lake Sakakawea section of the Missouri river.

As you can see the only reliable long term source of water supply deemed as reliable, is the Missouri. The vast majority of permits relate to groundwater and smaller tributaries.

So that is why Halliburton and others are so interested in the Iofina permit/s and overall assets related to water, they want Missouri river surface water. IOF has the other assets that no one else has, and are unlikely to ever to try and pursue, let alone achieve.

[superg1] 12/10/2014 15:40

I have looked at 100's of various documents on the relevant topics here, including those on the web but not visible as such if you don't do specific searches to find them.

I have mentioned Halliburton and their comments where they were clear about avoidance of reliance on any water rights associated to ground water. Their view is that all future use will rely on surface water as aquifers continue to drop in level.

I have now found the source document which relates to the investment advice surrounding the US water industry and fracking for such companies.

Halliburton quote such matters as they handle 25% of the US fresh water business in relation to oil services, they supply more than the next 5 or 6 put together which includes Schlumberger and Baker Hughes.

The supply of fresh water threatens the US oil industry as much as anything else just down to the need for the water needed to maintain wells.

EG we go on about Bakken water use, but Texas uses 3 times the water and it's in a high water water stress area. A lot of the demand is for maintenance water and the vast majority is taken from aquifers which are depleting rapidly.

The Texas water issue is serious, but there is a potential shocker there in the future. A Chile situation almost, as the majority of aquifer withdrawal in Texas doesn't require a permit. What happens when they start to clamp down on aquifers in Texas? (it will happen), as all surface water use there requires a permit, and there isn't a lot to go around.

That's a small part of why US folk, that understand what is going on, call fresh water, the next oil boom.

[dcgray21] 12/10/2014 13:58

Seems to me that to become the global leader in iodine and associated derivatives will need more cash injection than maybe $10m off the water rights . Wonder if the Strat review will have considered the other resource pools of oil and helium from a JV / farm out basis that could add considerably in the immediate short term to the potential upfront cash pool to really take advantage of the current Chilean malaise. Let's hope so.

[woolybanana] 12/10/2014 13:37

Some of the stuff late at night is a bit close to the knuckle but I think the culprit is sleeping it off for the moment or perhaps begging forgiveness in confessional!

[bobbyshilling] 12/10/2014 13:12

Just caught up. Excellent points/discussion lately; this is how a bb should be.

[woolybanana] 12/10/2014 12:45

superg1, have there been past objections to the water rights being granted? If so, have they held up the final grant very much? There is a scenario in which Greens, local interests, other companies might attempt Iof getting on.

[superg1] 12/10/2014 12:39

Simmy

re your request it relates to anticipated revenue.

There is no point going into that now as the strategic review is due and once we know the plan then a better forecast can be made.

On top of that I believe there is a very strong chance of an offer including significant sums in relation to the recent water permit and water division as a whole.

If that happens will IOF go aggressive on iodine, or do some expansion plus try to pay back some on those loan notes etc.

Any expansion will be at carefully chosen sites of high ppm meaning costs drop.

We may only have to wait a few weeks, or less to have a different picture to consider.

Furthermore, water and iodine is not the only near term consideration as some probably know.

[superg1] 12/10/2014 12:30

Ex pat

Two points. The first being the reason the boom is in Oklahoma is due to the lower costs nature of extraction there due to the shallow reserves. I will seek to gets some details for you on costs.

Note Continental resources are getting excited about what they call SCOOP, which is southern Oklahoma (oh and good ppm for iodine I hear)

Point number 2 and the best one.

Hooray if they curtail fracking in the OK area (I doubt it).

IOF had their ideas for the area sorted well before the fracking ever arrived. Going on 2007 data, there is probably 1.5 billion to 2 billion barrels of water going down SWDs in OK currently, and it's been at very high rates for years.

IOF pre frack boom identified 19000 mt of iodine going down SWD wells in Oklahoma per year. Note they have now acquired 82000 acres of brine leases.

I have mentioned it before, but until they secured the Io2 deal by purchasing it from Arysta they potentially had no business to pursue in Oklahoma in 3rd party deals (or anywhere else).

That was because Arysta were the applicants for the 3rd party extraction agreement patent. IOF got that patent application in the deal and it was awarded.

Existing wells will still keep pumping out oil and brine, running costs are low post the initial expense.

Then add in the point if the cost of oil per barrel drops, the oil companies will want to reap maximum value out of them. That can be achieved at no expense by signing deals with IOF, most of which already have for the Oklahoma area.

So on the iodine side potentially good news, especially if you consider the biggest gripe on this BB is frack disruption.

As for the Bakken

One of their cost issues is transport of the oil. A pipeline is planned by 2016 I believe to help on that front.

Regardless of new wells water is in high demand, as they re-work wells over their lifetime to increase production, the cost of a re-work pays back quickly.
Wells also need maintenance water every day to clean out the salt.

If there is a pull back in new wells or a drop in water demand, then the water bureaus will start to withdraw the emergency measure they gave to farmers to sell their irrigation water. then the next step will be to control the depletion of aquifers as fracking is a 100% consumptive use with no water returning to aquifers which are depleting faster than they recharge.

There are reports on the aquifer worries. I will (keep meaning to) try and find Halliburton's own report in which they state they expect water rights for aquifers to stop due to the problem. They see the future water rights all based around surface water and that is probably why they are so interested in IOF

The vast majority of water rights relate to aquifers.

On other points mentioned by some, I can't see the US government wanting to take a backward step in relation to energy independence. They want rid of any reliability on the middle east for obvious reasons.

[simmy1699] 12/10/2014 11:22

SuperIf you get the chance, please can you take some time to respond to post 25900?Thanks

[engelo] 12/10/2014 11:15

Expatken good question. Was about to reply but 1mad, spike have answered very well.

In your scenario of fracking stopping flow to IOF main plants, by definition they are in the right location to relatively easily connect to the SWDs used and also by definition these would hold high ppm brine.

Furthermore closed SWDs remote from main plants could connect up to minis.

"Subject to completing minor design modifications, the first two mobile units or mini WET® IOSorb™ technology plants (namely 'IOA' and 'IOB') are planned to be ordered throughout 2014 on a turnkey basis for operational deployment in the fourth quarter. The Group has some very high parts per million (ppm) but low brine volume sites where the units can be economically deployed. The Group is highly encouraged by the potential returns of the mobile units and envisages further mobile unit installations in 2015."

So all in all IOF is bombproof against this scenario imo :-)

edit: can't believe that plans for minis will not be revealed in the Autumn review. Bit like a new model in the motor show :-)

[spike_1] 12/10/2014 10:17

ExPatKen
IOF have been looking for some time (RNS'd) at buying and operating an SWD (Salt Water Disposal) well that is no longer in use. There will be lots of them I guess to chose from?

Obviously there will be some capital involved in opening them, but presumably not huge. Obviously they need to have a reasonable amount of ppm, but no reason to suppose they don't exist.

I think it reasonable to assume that if the oil price gets down to a point where it is no longer profitable, then as supply diminishes, the price will stabilise then rise again.

IOF provide a $ contribution to those companies that 'lend' them their water, so there presumably will be an increasing incentive to take IOF on board.

Wells that currently exist can need water for 30 - 40 years, so even if expansion is curtailed (is there any / much evidence that that is happening?), I imagine wells that are currently active, will continue to produce as the capital expenditure has already been made and ongoing costs relatively small.

I am no expert but that's my view for now.

Best wishes - Mike

[1madmarky] 12/10/2014 10:03

ExPatKen - there are two reasons not to expect an end to franking.
1) Us desire for energy independence. Russian action in the Ukraine is only likely to fuel the paranoia.
2) the gulf states have generous social programs so they cannot afford lower prices.
I suppose as well oil is a limited resource, we are unlikely to find a large amount in a cheap and convenient location, so unless we significantly reduce our use of oil, prices are unlikely to fall.
GLA

[superg1] 12/10/2014 09:18

Rug
Good point.

I did ask re letters of intent, and if you look at the water bureau site it talks of contracts.

I'm told contracts in the US contravene the laws when you don't have the product or service at hand at the time of the contract.

The hearing examiner covered that point.

The Department has previously recognized that it is difficult to obtain contractual commitments when an applicant does not yet have a water right to sell water, so the Department requires letters of intent to purchase water with applications for water marketing use in which the total volume of the letters is equal to or greater than 50% of the volume requested in the application.

In conclusion of your point, perhaps the identified letter of intent was part of the beneficial use query. If it helps the actual counties in Montana listed by the companies supplying the letters of intent are, Dawson, McCone, Richland, Roosevelt, and Sheridan.

I have noted that some companies including oil companies like Oasis plan to move to a network of freshwater pipelines. I suspect in such cases those companies would seek to link pipelines into fresh water out-take points or depots.

In that regard the bigger the available supply the better as it reduces the amount of pipeline networks needed.

The maximum anyone could reasonably apply for is 4000 acre feet. Anything over that and you are looking at maybe 5 years or more to achieve it due to the rules, hence the IOF permit is near as big as they get for an individual permit.

Going on from that point the person supplying letter of intent probably has a deal or deals pending which would evidence the beneficial use.

The actual details are.....

54. The letters of intent from the oil field service companies (which account for more than 50% of the requested volume) indicate that the water purchased will be for purposes such as hydro- fracturing, fresh water treatment of oil and gas wells, and fresh water for drilling fluids used in oil, gas and water well drilling.

[expatken] 12/10/2014 09:17

I don't post here so often but I wondered what the committed Iofina investors may have to say regarding the following concerns I have.

Oil prices have been falling for several years and, of late, there has been a marked decrease in the price of oil. I have read elsewhere that shale oil production costs are $60-$80 per barrel which, given current oil prices suggests the economics of such a business in the locations where Iofina operate are becoming marginal. However it is not only the price of oil which could be a determining factor as I assume that when these companies were raising finance then in all likelihood the estimated reserves were used for secured loans and now those reserves may be worth considerably less there is the worry that the creditors will be wanting their cash back if oil prices remain at current levels for a prolonged period.

So the point of my question is what are the perceived risks specific to Iofina that fracking operations will be severely curtailed or indeed suspended indefinitely by the oil field operators and thus no brine supplied to the Iofina plants?

[danster4] 12/10/2014 08:36

OK makes sense thanks.

[naphar] 12/10/2014 08:12

Danster
the new mobile design is based on technology used elsewhere. They are taking kit that is used for a similar purpose in another area, tweaking to their needs. The picture Lance showed at the agm was a pic of the standard piece if kit, not of an IOF tweaked prototype.

[danster4] 12/10/2014 07:43

It also comes down to the contracts in place to supply iodine. At the AGM they did say they wouldn't spend the cash to produce more at any cost and stock pile if they couldn't sell it. IOprill should help the sales now.

I also remember seeing a picture of the new mobile plant which looked much larger than the old pods. Which does therefore indicate that there is a built mobile somewhere!

[engelo] 12/10/2014 00:32

Various references to the coming Review: perhaps worth repeating the original.

"The Board is of the view that, prior to work commencing on further full scale plants, an operational review be undertaken. This review, scheduled for completion in the autumn, will include considerations for improvements to construction methodology, reduction in total cost, improvement in time to complete, and optimal plant sizing. Construction of further full size plants will be delayed until this review is complete which will reduce short term capital expenditures and improve cash flows."

Looking forward to this, and we're running out of autumn soon :-)

[arlington chetwynd talbot] 12/10/2014 00:24

Graham?

Let's see what you think...

[arlington chetwynd talbot] 11/10/2014 23:36

You think this doesn't matter? Well perhaps you should look back to the posts you all ticked-up regarding your real boss saying bottom-line is all that matters.

[arlington chetwynd talbot] 11/10/2014 23:33

Anyone?

What is your estimate for pre-tax profit/loss for the year?

I'll make a list.

[arlington chetwynd talbot] 11/10/2014 23:11

What is your estimate for pre-tax profit/loss for the year che?

[che7win] 11/10/2014 22:48

Have you added the second loan interest?

plants 5 and 6 will take a couple of months for cash generation. Admin cost reduction probably expected slightly higher from comments, but keep it as you have it to be prudent.

Some sales H1 will have been for lampricide.

[arlington chetwynd talbot] 11/10/2014 22:38

So what is your estimated pre-tax profit/loss for the year serratia?

[serratia] 11/10/2014 22:33

Updating my spreadsheet. Feel free to correct my assumptions. I'm looking to get an estimate of operating cash flow for 2014 and some idea for 2015 on iodine only.
IOF produced 140t iodine from Jan to June adding in their figures to the end of Sept it rises to 216t. The year end forecast is 325 - 350t, so that's 109 - 134 t for Oct to Dec or 36 to 44 tons/month.
Sales for year to Sept > $20m. From the interims IOF chemicals sales are forecast to be slightly lower in H2 than H1. (Assumption) - All H1 sales were via IOF Chemicals. H1 sales were $13m so year end $25m (?).
Cost of sales (COS) were 68.7% in H1. (Assumption) - Increased output in H2 reduces COS (?) so let's say 66% for the year (?). That gives a GP (Gross profit ) of $8.5m at year end.
I note the fall in admin costs which were $4.6m in H1. I'm using $7.5m for full year 2014. Finance costs I double H1 so $1.31m. Dpn double H1 so $1.52m (Might increase as new plants come on stream ) Amo double H1 so $268k.
The above gives a year end operating cash generation of $1.48m.
After operating cash flow comes exceptional costs + change in working capital + capex. Exceptional costs will include admin redundancies. Were they accounted for in H1 or will they be in H2. haven't looked yet.
Capex - don't expect too much, just some plant mods and maybe some IO6 costs as it came on stream in August.
W.Cap I've only glanced at so far. I guess inventories will rise as iodine output increases and IOF sales stay the same as H1 ? Receivables stay flat as sales volumes level.
At this stage of my analysis I'm looking at $1 to $1.5m cash generation at year end.

Any ideas to add to the above? Feel free to correct me.