Howdy all,
Long time no post from me, and although life has been somewhat busy I made sure I made time for this webinar. It did not disappoint.
Overall another fantastic preso from Iain. He was looking super relaxed, quietly confident and switched on as always... and again the Q&A at the end was the best part.
A fair bit to unpack, but I will do my best to jot down my key takeaways:
- Iain started by noting the last year and a bit has been truly transformational... not that long ago NWE had a MC of just $7m (and I thought what have I done with this investment) and today sitting @ ~$300m+ MC (and now I am thinking how smart I was to have the faith)
- Share register is now more insto than retail... and Top 40 has grown from ~38% to ~50% today. Big vote of confidence.
- Reiterated the ~30bcf per 1km2 GIP... which when you extrapolate to the 102km2 potential field size... gives a very large number (3TCF+) GIP, that is gas in place, they estimate 75% to 85% recoverable
- Next 2 wells are critical to narrow the wide range of potential Lockyer resource size to be able to accurately quote an independent contingent resource figure (thinking range is 1 to 3 TCF... did anyone else hear this?)
- Next catalyst is the drill rig booking... should be very soon... MIN is negotiating to bring in another rig into WA... so that would make 3 rigs drilling in the PB (Ensign970, Easternwell106 and one other?). Flagged this will be in conjunction with another operator in the PB (my read is STX) and they will lock away this rig for sometime (3 yrs +?)
- Plan is to drill L2 then NED 1 back to back, then give the rig to (my guess is STX for their planned 2 SE wells) then MIN/NWE take back for the L3 and L4 wells in late 2023.
- Good news is we will have flow testing immediately after well is completed, so no waiting for 6 months like with LD1. Market will appreciate the immediacy of knowing the flow rates etc. Will they beat the mega 117mmcfsd of LD1?
- of the 2 wells, NED 1 is the most critical to confirm potential size of Lockyer structure given it is 7-8 kms away from LD1. If pressure data etc confirms what they believe (hope?) then NED1 will confirm size on the upper end of estimates (3TCF+...) and maybe no field compartmentalisation.
- Also note they expect to encounter oil at NED1 in the Arranoo/Dongara/Wagina formations... exciting.
- re the Rococo 3D survey to start very soon... in fact people are on the ground already... likened 2D vs 3D as compared an xray to an MRI. The data and insights they will glean will be incredible... clear image resolution down to 20m spacings.
- 3D results will take a good 9 months for full processing (will get some interim reports b4 then) so expect final report late Q3 into Q4 2023.
- Re monetisation of Lockyer... LNG is still very much on the cards... lots of talk about domgas shortfall... but NWS will be crying out for gas... mentioned Mitsui and BPT are very fortunate to secure 250TJ p/d for 5 yrs as LNG export. Will be printing money (my words)... and you know what, their subsequent cashflow and balance sheet strength could very well be used to fund M&A activity (these are my words and of xourse tongue in cheek given the WGO play)... which is why IMO it is very unfair to have such an uneven playing field. Hope this changes very soon (come one Mark McGowan, don't kill the golden goose).
- Mentioned MIN is still targeting first gas in 2025... and they are very keen for gas to use in their magnetite pellet plant... lithium downstreaming plants... and even talked up urea plant... like STX are doing. Of course NWE have the eLNG pathway to explore netback LNG pricing.
- Touched on recent M&A activity... Iain said we might see a new BIG O&G player enter the PB... watch this space.
- So to conclude, big next 12 months coming up. Bit of a quiet time right now (just look at how low daily trading volumes are and also the fact the Top 20 is sitting very tight at the moment). IMO great time to "top up".
OK, now the Q&A:
- qn re Unitisation across the 2 permits given NWE's 20% and 22.2% equity ownership? Not a big issue, simple to work out with MIN.
- Maiden contingent independent resource figure likely to come after the next 2 wells. How big???
- Timeline to production?... MIN have done heaps of work on this behind the scenes... still looking at 2025... Will likely be a phase 1 & 2 development... like what Waitsia has done... 40TJ/d gas plant phase 1... then step up to 250TJ/d phase 2.
- Processing plant size? Waitisa is 250TJ/d... sees LD being a base case 250TJ/d... 375TJ/d likely or even higher if they gain export approval.
- 3D survey cost is $12m AUD... Iain confirmed they are fully funded for the seismic survey and the next 4 wells.
- FID? likely to be earlier and split into phase 1 & 2 FID. Reckons first gas can be achieved by 2025 (only 2 years away!) Timing couldn't be any better for NWE.
- LNG export? No formal govt consultation... but alluded that WA govt is very close to releasing formal guidance (IMO this will be a significant catalyst fort all PB players... and likely why BPT has moved now on WGO - watch this space). Could STO enter the fray or one of the NWS JV partners...?
- Future capex requirements? Envisages 25-30 wells needed across the entire Lockyer structure over it's field life. Noted reservoir risk for future wells is now significantly lower.
- Discussed capex estimate for gas plant to be ~$800m... they are having preliminary discussions with financers. Early days.
- Noted that MIN are quoting $1 to $1.50 per GJ gas cost to produce... mentioned opex will be low. So Lockyer gas will be quite profitable even with domgas prices estimated to rise to ~$8 GJ. And LNG at $30-35 GJ...
- M&A thoughts? Iain again mentioned plenty of large O&G companies would want a piece of the PB.... and feels they may come for NWE. Now, Iain is not one to drop flippant comments so this one grabbed my attention... he would very well know that others are circling in the PB tank... lets see what happens with WGO/STX/BPT... MIN is a dark horse to consolidate things... with their SP on the march to $100, they could very well write some big cheques with their scrip alone.
I think that is all.... keen to hear anyone else's notes.... hope others are as pumped as me.
But to be clear, NWE remains a SIGNIFICANT holding for me... and I see next year - 2023 - being absolutely epic.
GLTA
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