[This statement is wholly speculative and IMO but is based on some solid research with FACTS presented for everyone's consideration]
Good afternoon LWPers,
Last week I presented a scenario about the information on Page 2 of the Offtake Agreement announced on Wednesday. Today I want to present another scenario for everyone to discuss and consider.
And as the room has quietened considerably I feel I can now present this information.
Why did the Hallmark Venture stall?
Answer: THE PRICE OF OIL
So here are my thoughts and the FACTS as to why I strongly support this proposition.
BACKGROUND When I first came on here (LWP room) in February I didn't quite know what I had walked into. There was so much angst and emotion in the room which continued to heat up during March and then the big neighbour explosion a few weeks ago.
Well, as I spent more time in HC I began to follow the breadcrumbs to discover if there was any truth in the posts about management, HC members causing sp drops, mismanagement which included the stall in the Pune JV, etc etc. And many who have been following/commenting on my posts saw that I began, with looking at the FA's and the shorting of stock in mid 2015 at the time of the changeover from Coretrack to LWP Technologies.
Now as the weeks progressed a few people, including myself, had mentioned that the POO was probably the main cause for the stall in the JV, but it didn't seem to get any traction. So I just continued quietly to investigate management, the products, the Takeover, the Joint Venture and the reasons for the drop in the share price. I needed to know whether to stay in or get out of this puppy.
So getting to the point.....
My investigation of management and in particular Dr David Henson and Siegfried Konig showed me that these two guys had runs on the Board with previous companies and knew their stuff about proppants. One was a chemist, one was a Minerals/Energy Marketing Specialist and the other one was an administrator/manager.
Siegfried Konig Executive Chairman MAICD Entrepreneur and LWP Technologies Co-Founder. 30 years’ experience in business management, successful listing of 3 start-up companies on ASX. Global relationships in capital markets & public company sector. Siegfried is an early stage investor with experience in building companies from start up to IPO and company management. He has not been a Director of any other Australian listed company in the last three years. Dr David Henson Non-Executive Director PhD BChE Co-Founder and Non-Executive director based in Houston TX, former CEO of Siemens conceptual engineering services, now Project Manager of a $3 Bn. gas to liquids facility. PhD in Chemical Engineering, over 15 years’ experience in process engineering, project management and business development. He has not been a Director of any other Australian listed company in the last three years. Sean Corbin Executive Director and Company Secretary BBus, CPA, GDipMan Sean Corbin has worked as an executive at CEO and CFO level in a wide range of industries in various stages of the business. Sean has previously served as an Executive or Director in Allied Brands Limited, RP Data Limited, Future Corporation Limited and Adelaide Brighton Limited.
I began to follow the breadcrumbs to understand why the JV had started with such fanfare in 2015 and then suddenly stalled at the beginning of 2016. I read all the reports on the LWP website and few industry reports notably the following:
Transcript "How is the Indian Joint Venture progressing?" "All planning and pre-engineering for the plant expansion and conversion has been undertaken and completed, however, before further expenditure is undertaken on the project, the Company has decided, in conjunction with our joint venture partners, to wait until there is some recovery in the oil price, or firmofftake commitmentshave been secured for the product that will be produced from the Pune plant. We are firmly committed to the Pune manufacturing plant moving forward in the near term, and are in early stage discussions with potential offtake partners. As soon as a decision has been made to proceed, weexpect that the plant will produce revenue for the Company within a year of commencing refurbishment."
The project had stalled!
But for some reason, and IMO, many in the HC room had difficulty believing that it was only the POO that had halted the JV.
I followed more breadcrumbs... In any "conspiracy" there is always an element of truth. Was it really the POO that stalled the venture or had the talks with the potential JV partner been a ruse to lift the share price?
Here is where I went..I started with the first statement: wait until there is some recovery in the oil price" From my reading of the situation it seemed that most of the talks and finalizing agreements were taking place around April, May, June of 2015. I went looking for a historical chart on the POO to see what was happening around that time.
You will see that even though the POO had been dropping in 2015 there was a positive lift and apparent stabilisation of the POO towards the end of the first quarter of 2015 around the time of the announcement. So in my books a possible sensible decision for an announcement.
News reports around that time were also bullish for a cautious but continuing lift in the price. You will also notice that after a little lift in September the POO tanks to touch 'quickly in the high 20's and then back into the 30's.
So after 6 months of declining oil prices LWP makes the announcement in February to hold the JV until the POO recovers.
Was it the right decision to make at that time? Now to answer this properly we must take into account that all the discussions and media reports on the global price of oil in February were mostly very bearish for a lift in oil fortunes throughout the rest of 2016.
From here I turned my immediate attention and research to the oil /gas production industry and the supply of proppants. I wanted to see how the POO was affecting proppant manufacturer's and if those production numbers would support LWP's decision to stall the Pune JV. Here is what I found. I went to the share price of three of the world's largest proppant manufacturer's Carbo Ceramics, Saint-Gobain and US Silica Holdings.
We can notice in the three charts that the share price in 2015 dipped sharply or moved in line with the POO. It can also be noted that as the POO lifted in March the share price and fortunes of those three companies also lifted.
I soon came to the conclusion that the manufacture and sale of proppants is directly synced to the POO.
Now I have to ask myself at this stage. Was this a good decision on the part of LWP mgt to temporarily close the bank purse and stall talks on the JV in India? I believe it was! And I am very grateful that LWP management did not throw millions of ours/theirs dollars at this to see that money go up in smoke on employees’ wages and plant equipment during an oil price recession. Can you imagine what the conversation might have been like in here if Siegfried and the team had gone ahead with the production and manufacturing at Pune and in February we only had a few hundred thousand in the bank to show for the effort and no real prospect of sales???????
If we can PAUSE and think on that for a moment.......
CONCLUSION Now tying into my previous article.
As can be seen in the POO chart, the noted rise in the shareprice of the proppant manufacturers and the meeting by the Saudi's, that there is definitely bullish sentiment regarding the POO. Maybe even hitting $60/barrel + by years end or even sooner. It presently sits at $42.00/barrel and slowly recovering. http://www.bloomberg.com/news/artic...n-output-freeze-meeting-in-qatar-in-mid-april
So I simply finish by saying that I support LWP's first statement that the POO was the flag that stopped the JV last year. And thankfully the story is not over!
We wait for further updates. Thanks for listening.
