shorters providing opportunity?, page-9

PB saw synergistic benefits in US EOR with UCG-GTL – There is a shortage of CO2 for EOR, and an abundance of trapped coal. Get the CO2 from UCG, modularise with a GTL, and you have a very efficient closed loop process that is economically efficient and profitable throughout the value chain.

This closed loop process takes time to materialise, but will provide an immense competitive advantage to LNC US oil and gas assets, hopefully by then a separately listed company. I do question PB’s team of advisors, business analysts and managers though. There is no need to sustain such a large clean coal team until permits are approved in the US or globally for that matter, the legislative journey takes time… and there is a timing misalignment which he is starting to correct with staff cuts.

There are cheaper alternatives, if the Golden Concord deal doesn’t materialise. The smart thing would be for PB to simply keep a vital and small UCG-GTL technological team, that is enough to implement enhancements to US Oil and Gas assets which they own and have control over, to ramp up to 10,000 to 20,000 bopd, with the sole focus of de-risking Umiat’s 50,000 bopd potential.

There is the fundamentally low risk strategy to take for PB and LNC. As painful as it could be, being recognised by the market simply as a growing North American oil and gas play, with a Umiat dark horse jackpot potential will be enough to re-rate the share price of LNC to $1+.

LNC should follow Adani’s footsteps, and separate out the lines of business. I would much rather LNC become
- LNC QLD Coal; to lock in the bottom drawer till Adani starts producing, collect Teresa/Pentland as a special dividends followed by a steady stream of dividends from the royalty.
- LNC Oil and Gas; immediate dividends of ~$85m from net cash flow ($15m EBITDA + corporate overhead cost subsidisation) leaving enough for capital works to fuel growth. Happy to participate at a raise to fund umiat.
- LNC Clean Energy; hope they get the Golden Concord Deal, if not, doesn’t matter, no worries, wish them best of luck for the next deal.

We should take it up at the next AGM, given the fact that we are now dominated by US Oil and Gas producing assets, we should be positioned to the market as such. Everything else is a bonus.