Economics of the ATP 2044 Acquisition
A simplified initial set of numbers based on taking the published resource estimate as a starting point.Based on the 2U1 Unrisked Prospective Resource estimate of 3,265 billion Cubic Feet of gas.
1Prospective Resources are those estimated quantities of petroleum that may potentially be recovered by the application of a future development project(s) related to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further explorations appraisal and evaluation is required to determine the existence of a significant quantity of potentially moveable hydrocarbons.
3,265 Bcf = 3,444 PJ and risked at a COS of say 50% we end up with about 1,700PJ
1,700 PJ= 1,000 x 1,000,000 GJ @ a conservative transactional sale price of say 50c/GJ = $850,000,000 divided by (The current Elixir Shareholding of 891,733,376 ordinary shares + the 20,703,394 shares involved in the acquisition) = 912,436,770 shares comes out to $0.93/Share.
These figures are over simplified and do not take into account the CAPEX & resultant dilution needed to reach the 2P certification milestone but at this stage the underlying business case looks pretty robust.
At this early stage the impact on the share price is IMO unlikely to be anywhere near that but it does represent a new component that should be taken into consideration in the overall de-risking of Elixir's operations.
Based on the tenement area of 1,000 Sq., KM this leads to an across-the-board number of about 1.7 PJ/Sq. KM which is IMO a nice comfortable commercial number.
Say 1,700 PJ recovered over 30 years gives a net round 200 TJ/day down the pipe allowing for production downtime Etc.
Bearing in mind that the surrounding infrastructure could be utilized to reduce the field development CAPEX.
Even at a before tax & royalty profit of $1.00/GJ, annualized this looks like $73 million PA.
I therefore see this acquisition as supporting the underlying value of elixir shares as well as providing a the potential for a future exploration cash flow to feed into (Mongolian) exploration and acquisition.
This type of tenement follows a common scenario in the industry where the overheads that inevitably come with a gas major detract from the profitability of smaller tenements which are best developed by an agile operation with low overheads and the ability to execute development at a fast pace.Adjacent spare capacity from infrastructure such as pipelines to market, water treatment Etc. can be utilized to everyone's benefit.
Given that Mongolia is only 2 hours behind Eastern standard time I could see a QLD based Australian drilling operation management team providing down the wire support to the on the ground Elixir supervision in Mongolia.
I therefore see this acquisition as being not only complimentary but supportive to the Mongolian operation.
Elixir's Chairman, Richard Cottee has done this before when his parting gift to CTP was the acquisition of 2 CSG tenements and it's my guess that this track record played a part in gaining this tenement and this as well as the well-known credentials of the Elixir board probably played a major part in the successful ATP2044 Acquisition.
I am starting to get calls from parties wondering why I have not posted for some time and I thought I had better comment.
In simple terms the Model has not changed much but is of course being progressively de-risked subsurface wise.
The geopolitical environment is a different story and I have taken the approach that the best way to understand it is to focus on the economics and the potential impact of both primary and secondary sanctions imposed by the collective West (Basically the US & NATO).
These extend as far as attempting to interfere with the insurance and reinsurance of seaborne cargoes of Russian LNG.
At this point, not one of the expert opinions I am following can see an off ramp to the global sanctions war that has broken out.
As far as Elixir shareholders are concerned, my guess is that the US will put increasing pressure on China not to buy Russian gas.
IMO his US initiative will run into headwinds from the strong underlying China Russia relationship.
Apart from commercial considerations, if the US could overthrow the present Russian political regime and open the door for it to use Russia as a giant military and resource base I am sure that the Chinese would see this as yet another existential threat.
Based on their track record with Nordstream 2 the US would not be too happy with the construction of the Power of Siberia 2 pipeline through central Mongolia.
Long story short, my own opinion is that there is a good chance that Southern Mongolian CBM will fly under the geopolitical radar.
The West East Pipeline infrastructure to the South of the Nomgon IX tenement is getting a significant upgrade this year with Lone D adding another 30Bcm/Year (Another say 3,000 TJ/Day)
Central Asia–China Gas Pipeline - Global Energy Monitor (gem.wiki)Given the current sanctioning environment, if I look at gas security from China's perspective, I would want to own the pipeline delivering the Mongolian gas and for some time I have been looking at the benefits of combining the production of Elixir and Jade as well as Talon to come up with a combined pipeline feeding into the West East pipeline at say
1,000 TJ/day which should be large enough to interest the Chinese.
I see an increasing case for the Chinese wanting to establish full (Unsanctionable) ownership of as much Mongolian CBM as possible as early as feasible before a (Sanction friendly) party from the Collective West get their hands on it.
It's a risk and reward game and I see the recent ATP 2044 acquisition as a geopolitically independent asset contributing to a further de-risking Elixir operation.
Now that the geopolitical situation has had more time for people far more experienced than me to assess I propose to reissue the Model particularly for the benefit of newer Elixir investors.
Clearly the above should not be taken as investment advice.
Best regardsOGP
(20min delay)