Portland Gas Share Discussion Threads

[bones30] 13/5/2009 16:10

Its certainly looking perky today, good volume too.

[eacn] 13/5/2009 16:07

abcd1234, truth be told the target hasn't changed much in nearly two years and was nearly achieved in May 2008.

400p could be realised this year if finance is forthcoming and PTG sells the bulk of its interest in PTG. My guess is that we will get to 200p as and when a finance deal is agreed (assuming that this funds a significant proportion of planned capacity) and that the share price will progress from in fits and starts as development proceeds. Planning approval for Larne in 2010 would be another major milestone.

My target for end 2009 is 200p, with 300p pencilled in for end 2010.

[abcd1234] 13/5/2009 15:43

483? eacn ... thats quite a target, whats the timescale?

[bones30] 13/5/2009 14:23

Something leaked? Surprised noone else is watching this one.

Some kind of gas leak ?
:-)

[eacn] 13/5/2009 13:06

New Seymour Pierce note out following on from the recent management presentation. Target is 483p for the Portland asset with another 100p for Larne.

[eacn] 11/5/2009 11:56

499budgie, PTG management intimated as much at the recent presentation: they are minded to proceed and expect to progress the pipeline using contractor led finance, without the need to dilute PTG shareholders.

What they were careful to avoid saying, however, was whether such finance would require dilution at the Portland holding company level, which is of course dilution by another name ...

[499budgie] 11/5/2009 10:07

Hi...

CBI are the EPC main contractor at PTG and I have heard they are manning up for the next phase of the contruction, which means something is sorted or they are spending what evers in the pot...

I think (IMO) that some sort of deal has been completed....I may be way off but just seems odd..

....

[eacn] 11/5/2009 08:49

Chrismez, the ground rules on control of gas storage assets were explored at length during the Competition Commission enquiry into the sale of Rough to Centrica, for a summary of the findings see:



The measures introduced in the recent budget, would appear to confirm that HMG is concerned about future gas storage capacity in the UK. HMG backing for a EIB loan and tax incentives for depleted field operators, particularly offshore operators, are all clear signs that HMG wants to help kick start investment in the sector.

With PTG the key is sentiment. As and when operators gain the confidence to commit to long term storage contracts then PTG will be in a position to unpick the financing conundrum, since these contracts will provide the security needed for the debt finance.

With the data room now formally open, and sentiment improving, I would expect to see first round bids on the table by end June / early July, which should hopefully coincide with progress in debt negotiations. If there is sufficient interest then I would expect PTG to commit to the pipeline for 2010, with the contractor providing much of the finance.

There are lots of ifs and buts, since this type of multi-party negotiation is labyrinthine, but in the current climate it is possible that they may bring it off. Odds are probably no better than 50:50, however, the upside is potentially very significant: if they can pull off a deal the share price should rise to 200p, with further upside in due course.

All imo, DYOR, etc.

[chrismez] 09/5/2009 10:44

eacn - interesting post as usual but shouldn't the Govt be more worried about the Ruskies turning off the taps rather than about how much capacity Centrica is allowed to control. I agree with you though there are probably a multitude of players out there of all different creeds looking at this UK energy space right now which is why I feel PTG is heavily undervalued. Lokking forward to the upturn in the sp!

[eacn] 07/5/2009 12:54

Chrismez, re: your post 940, Centrica's focus on depleted fields has received a boost from the recent budget, and I would expect them to continue with their current strategy. There is a limit to how much capacity Centrica would be allowed to control and I would expect their current and planned projects to bring them close to that limit.

There are, however, other players in this space, particularly in Continental Europe and the US, and PTG have already indicated that they expect interest from these players.

With credit markets easing somewhat (albeit that spreads remain historically high), and greater risk appetite returning to the equity markets, imo the chances of PTG finding funding in the current round have improved somewhat.

PTG, despite being one of the more notable victims of the credit crunch, has yet to benefit from the recovery seen in other sectors of the market as fears of financial armegedon have receeded. If the gains seen in financials are anything to go by, when PTG has something positive to report the share price should rise significantly.

[value viper] 07/5/2009 10:45

took a call from someone very keen to buy thats all.
looks interesting down here - seems they need to get their financing sorted - is that right ?

[chrismez] 07/5/2009 10:03

In what sense VV?

[value viper] 06/5/2009 10:51

hhmm, just wonder if something may be up here also ! nri

[chrismez] 06/5/2009 10:45

Topped up with a small 7k yesterday. Differential between present market cap and values attributed by the co. to its various projects is way too much to ignore IMHO.

[chrismez] 29/4/2009 18:40

Thanks for that eacn. Any chance that Centrica might be forced to move out of their comfort zone and might have to adapt and be flexible, might have to adopt new 'technologies' etc etc? Way I see it is that there are many foreign companies and funds out there that want to play a major part in the UK plc Energy market over next 20 years. Centrica might not be able to ensure that they have it all their own way you know. And if they hobble themselves too much, they may go the way of Westinghouse and others who simply disappeared altogether - unwilling and unable to adapt is not the kind of phrase that Centrica would want to be associated with, I would guess.

[holism] 29/4/2009 07:46

Makes sense

[eacn] 28/4/2009 18:08

Chrismez, PTG management say that Centrica are only interested in depleted field storage: apparently they are not comfortable with salt cavern storage, having no experience of salt cavern operations.

While I suppose it is possible that Centrica will buy a minority stake in the Portland holding company, the implication of the recent presentation was that the majority of the interest in Portland is coming from companies already involved in salt cavern operations, with some potential interest from infrastructure funds.

[chrismez] 28/4/2009 17:18

I assume you guys saw the news at the weekend re Centrica - upshot of which is that it may have to look at alternative sources for gas storage, including Portland, if it is assailed from all sides in its quest to dominate the North Sea.

[mina123golf2] 27/4/2009 10:20

Down we go again - the cycle repeats itself. When will we get a sustained lift? Is this a good buying opportunity???

[eacn] 24/4/2009 08:23

Holism,

PTG are looking for debt to provide 60% of project finance, and for the debt to be secured by long term storage contracts with equity partners in the Portland holding company. PTG are looking for the EIB (and potentially others) to provide the debt finance. They are projecting that this finance will be available at 8%, which PTG believes to be a market rate for a project of this kind (i.e. relatively low risk - the rate for proven oil and gas field developments would be c. 10%).

Of course once Portland is up and running you would expect the company to refinance the debt on improved terms, but although the premium above LIBOR should significantly reduce, the suspicion is that interest rates will be a great deal higher in 2013 than they are today, so 8% as a whole of life rate for the term loan is probably a prudent assumption.

It is worth noting that the 8% assumption only holds true if the counterparties to the long term storage contracts offer a solid covenant. This implies that PTG need to be dealing with major players with sound balance sheets.

On the face of it PTG should not have a problem attracting such partners given that the projected IRR's are high (between 19% and 25%). I want to satisfy myself that these IRRs are valid for a range of sensitivities, but assuming that they are, that sort of rate of return should prove very attractive if you believe that the development risk (and potential for over-run) is relatively low and that future gas storage prices will not collapse. The evidence that PTG have assembled on both counts strongly supports these assumptions. The fact that players such as Centrica are buying up gas storage assets (albeit all depleted fields) adds weight to the argument.

The big risk is that PTG will fail to secure finance before they run out of cash. If PTG is to believed, this is a negligible risk.

At the recent result presentation Hindle indicated that there would be no equity fund raising in 2009 and that such a fund raising was not part of their plans at the PTG level, full stop.

Given that there was no going concern qualification in the results statement (a fact alluded to by Hindle and the FD at the presentation) indicates that the company has sufficient cash to see it through to end Q1 2010. Even if funding has not been concluded at that stage, it might be possible to bridge any shortfall if a deal was in process.

An acid test of progress will come this summer. If PTG order the pipeline materials, it will indicate that they are fairly confident of closing a deal before end Q1 2010. The pipeline needs to be built in 2010 because the Olympic sailing will be using the bay in 2011 and 2012. PTG are understandably keen to get the piepline completed before these activities intervene.

Pipeline costs are c. £12M to £13M and PTG have indicated that they can finance these activities without recourse to shareholders if funding discussions are on track. The implication is that the contractors will chip in finance since they are short of work.

[holism] 24/4/2009 07:51

Presumably EIB support would change the mathematics.

[eacn] 23/4/2009 12:25

Deeppockets, PTG also got a mention in the Times a couple of days ago.

Budget 2009 delivered on the cushion gas eligibility for capital allowances, but I can't find anything in the Red Book about salt cavern drilling costs. There is however a reference to existing infrastructure:

"To maximise the potential of existing infrastructure, Budget 2009 announces reforms to remove fiscal barriers to projects that reuse North Sea oil and gas infrastructure for other activities, potentially benefiting gas storage, CCS, and wind energy projects."

I can't, however, find any detail on this. My first reading is that these measures assist at Larne and for depleted field projects but will do little or nothing for Portland (contrary to management expectations). However, this needs to be confirmed.

There was also mention in the Budget speech of up to £4B of development loan support from the European Investment Bank. There is limited further detail on p.156 of the Red Book:

"European Investment Bank: up to £4 billion lending which could be enabled. This package will ensure that planned investment in energy and low-carbon projects continues to happen, contributing to achievement of the EU ETS cap."

PTG are certainly looking for EIB support, but whether or not this is committed funding remains unclear.

[deeppockets] 23/4/2009 08:18

Piece on the back of today's Telegraph about gas storage and picture of Portland, quotes from Hindle etc - good PR