Portland Gas Share Discussion Threads

[kooba] 06/11/2009 08:47

LONDON (Dow Jones)--A GBP1 billion project to develop Europe's largest gas storage facility in the North Sea is close to collapse because of the high rent charged by the Crown Estate, the owner of the U.K. seabed, U.K. newspaper The Times reports Friday.
The project, led by Italy's Eni SpA (E), would convert the Hewett gasfield in the North Sea into a storage facility and would more than double the U.K.'s storage capacity to at least 30 days supply from 15 days.
The newspaper quoted Roddy Monroe, chairman of the Gas Storage Operators Group, which represents Eni as well as some of the U.K.'s biggest energy companies.
Eni was not immediately available to comment.
Newspaper Web site:
-London Bureau, Dow Jones Newswires; [phone]

[kooba] 06/11/2009 07:42

agree holism with the eib interest confirmed the share placing at 100p would seem to be at an unnecessarilly large discount especially when the brokers will probably get 5% of the proceeds for their efforts!

[holism] 06/11/2009 07:27

eacn- I do understand your apeptite to acquire shares at a 16% discount, however this is not the first time the board has allowed the brokers an easy ride, raising funds at well mbelow market. What is your view about that? Another example of inexperience I feel.

[eacn] 05/11/2009 17:32

64bit,

The original approach to the EIB was back in Q1 I believe. Applications, however, only appear to get on the EIB "Projects to be Financed" list once they have been pre-qualified and, it would seem, deemed likely to obtain funding.

I am regarded as an institutional investor, because I tend to deal in institutional size, hence my inclusion in the placing.

[64bit] 05/11/2009 16:06

eacn, surprised you had access to the placing at all..
"shares were placed by Seymour Pierce Limited with existing institutional
investors and the Company Directors"
regarding EIB, good news as it is, quite amazed they hadn't requested
earlier.

[eacn] 05/11/2009 15:21

I had expected the share price to fall when the placing RNS came out since I was not informed of the EIB news as part of the placing.

[holism] 05/11/2009 13:37

Well done you for getting in on the placement at such a derisory price for the rest of us.Shocking.

[eacn] 05/11/2009 11:58

A good day for PTG.

The EIB "Projects to be Financed" list has 655 entries, showing the approval status. The most recent application to have received approval was made on 06.10.09 and a rough count suggests that over half of applications made in June and July 2009 are either approved or signed (69 out of 110), with a higher proportion for earlier applications (323 out of 389), see:



No applications on this list are marked as rejected. From the June/July sample it would appear that over 50% of applications are approved or signed within 4 months. The implication is that if you get on the list you have a 80% plus chance of obtaining approval and that approval can be expected in c. 60% of cases within 6 months.

So PTG could expect a decision by Q2 2010.

The £2.5M placing, in which I participated at £1, makes a great deal of sense, since it relieves any fund raising pressure on PTG. While the company have not said how much extra time is bought as a result of the fund raising, my calculation is that it should provide sufficient cash to allow the business to continue activities until end 2010 and probably to the end of the Q1 2011. If so this will allow the board to sign the going concern statement on the 2010 accounts with impunity.

While the gas market is weak and the recent IEA report suggest that the global gas glut will continue for years to come, there must be a good chance that (post election) the regulator or HMG will require major UK gas suppliers to acquire rights to gas storage in order to ensure energy security. If that were to happen, PTG would be pretty much home and dry.

I am slightly surprised that there has not been more of a price reaction to this news, since it places PTG in a much stronger position and de-risks the ongoing funding round. While there is still risk, it is materially diminished.

[curlingstone] 02/11/2009 15:56

holism, I think the only pure UK quoted company in coal bed methane company is Island Gas Resources (IGAS)which has brought in Nexen from Canada to help exploit its licenced acreage in the UK. The company has developed a pilot well which is producing gas and generating electricity for export to the National Grid. CBM in the UK is new but is attracting the likes of BG and Marathon who along with IGAS have been on a land grab of potential acreage and are the only active consortiums currently. I hope that, as with gas storage, CBM is on the verge of rapid development. I am a shareholder so DYOR etc.!

[holism] 02/11/2009 13:42

A great deal being said about shale gas. Sorry to ask but does anyone have a list of the companies with opportunities in this market should US technology apply to Europe. A long way off perhaps but maybe good to get in early.

[kooba] 01/11/2009 09:33

Winter crisis could see UK 'run out of gas in hours'Tories want energy companies ordered to increase reserves

[64bit] 27/10/2009 15:21

mr.bristow,
meaning - this is a long game.. so the short termers, here for an EIB
announcement on the back of recent FT comment, would have been disappointed
and have sold on the back of yesterdays interims.
my agenda of course, to buy cheaply and hold beyond settlement date..

what's your interest in PTG ?

[eric bristow] 26/10/2009 19:21

Hopefully short termers
exiting will now facilitate a lower share price .

Hmmmm an interesting investment strategy. My best and in fact only returns have always been when I buy a share and it goes up.



EB

[64bit] 26/10/2009 10:06

"The 2009/10 financial year will again be an active time for the business. The
Group looks forward to the introduction of investors in the Portland
Project.."

No surprises, all eyes now on Q1'10 for partner funding. Hopefully short termers
exiting will now facilitate a lower share price .

Interesting that the times sees Centrica's asset sales as potentially to
raise money for "investments in gas storage projects.."



think that's enough from me for now, slowly slowly..

[eacn] 23/10/2009 09:45

Announcement was poorly worded, but none-the-less positive.

For a better idea of the sort of organisations likely to be part of the co-operation group see, for example:



My guess, and it is only a guess, is that there is a better than 60% chance of this being funded by Q2 2010. All imo, DYOR, etc.

Edit: you need to scroll down to the "notes to editors section" in the link

[64bit] 23/10/2009 09:31

good news, confirms interest received to 'partner' project..
..not much point in funding development with debt without the utility co's
on board to consume the product.
talk of EIB funding barking up the wrong tree in my view, far better to have
the project partners really on board for the full fund it, build it, use it
cycle.

[mina123golf2] 23/10/2009 09:23

Yes I agree that it does seem all a bit downbeat BUT this is as predicted by EACN in his post 1128. In that post he suggests that this is the best we can hope for at this time. I still believe funding is on course and 2010 will prove the defining moment - time will tell

[scruff1] 23/10/2009 09:14

Ptolemy
Yep. Agree it is the word 'possibly'. Makes it all sound a bit half hearted.

[ptolemy] 23/10/2009 08:54

"The Group consists of five companies who have each expressed an interest in
possibly acquiring a working interest"

It's the word "possibly" that kills the impact. I think even I would be interested in possibly acquiring a working interest. Shows just how far there is to go?

[bionicdog] 23/10/2009 08:21

Not what they were hoping for.

[scruff1] 23/10/2009 08:20

mmm. It doesn't seem to me that we moved forward greatly in the last couple of years. Any opinions?

[eacn] 19/10/2009 09:47

bones30,

Yes I saw that. I was able to roughly replicate the figures assuming: a cushion gas price of 35p/therm, opex inflation of 3%, gas storage price inflation of 3%, a 50:50 split of debt to equity and a capex spread of £170M in 2010 & 2011, £227M in 2012 to 2014 and £113M in 2015. My NPVs and IRRs were very similar to those produced by EO for a range of storage prices (15p/therm to 20p/therm) and average cycles (1 to 1.25 p.a.), assuming a 35 year period for calculating NPVs.

Projected IRRs for Esmond are below those touted for Portland (projected IRRs of between 19% and 25%) mainly because Portland is assumed to command a total storage price of between 30p and 40p/therm, of which c. 20p is intrinsic value (as per the Esmond calculation), and the rest is extrinsic, short cycle revenue, which only the upper Esmond reservoir could hope to generate, and even then at a much lower premium. I note that I was able to match the Portland NPVs with only a 22 year period (significantly less than with Esmond).

If Portland can't find funding at higher projected IRRs , then I would be surprised if Esmond will find it easy to attract finance, particularly since Esmond is projected to require £1,133M of finance, compared to £450M for Portland, and Esmond, being offshore and with acquifer issues, has a higher probability and cost of over-run.

It is important to point out that the Esmond IRRs are those available to an equity investor assuming a 50:50 debt to equity split, with cushion gas costs (c. £475M) covered by additional debt facilities, and total ownership of the project. That implies that total debt peaks at £975M (assuming a 10 year rolling facility at 8%) with equity at £567M, giving an overall ratio of 65:35 debt to equity at peak.

The IRR and NPV are sensitive to the cushion gas costs and if there were to be a gas price spike to 70p in 2015 then this would dent returns.

Given the risks associated with Esmond development, it is unlikely that an investor would be prepared to cede more than a few % of the project to EO if the investor is providing all of the finance. So while the headline NPV may be over £1B, EO's share of that will at best be a % or two. Of course that could make a big difference to the EO share price, but I wouldn't bank on it in the near term: there are more attractive projects available.

[bones30] 18/10/2009 16:33

eacn: the reason I ask is covered in the EO. thread.

See:

(From a couple of days ago).