appea and magellan , page-9

Thanks for the links guys. It is good to see you are keeping some sanity in the MEO forum.

I started a post some ago in response to the 'good news on the way' thread but took a break after that was hijacked. Thanks for the positive feedback from those serious posters. Whilst I agree a balanced viewpoint is great but wouldn't it be better to stick to sharing facts, good or bad, about the stock in question. Isn't this what HC is all about.

The discussion of late has been about the gas feed to TS. We are looking to a third party feed but whilst I think this would be great but I wonder if it is an absolute necessity.

There are a number of clues management have given us into the progress of the company. I have outlined these clues here (not in specific order).

The information is out there.

The first clue is in the LNG Journal article noted by ortstock above:

'To illustrate this (Methanol Sink) MEO uses the example of a gas field containing 9 percent CO2 (similar to Gorgon which is adopting a geo-sequestration solution for dealing with CO2).

Calculation

Assuming 74 percent (or 480 mmscfd) of the feed-gas is used to feed a 3.0 MTPA LNG plant, the CO2 removed is blended with the remaining 26 percent (or 170 mmscfd) of feed- gas to create a 25 percent CO2 feed-gas stream which
supplies a 1.75 MTPA companion methanol plant.

The combined plants require 4.5 Tcf of gas to fuel both plants for 20 years. Based on average historical LNG and methanol prices from 2006 to mid-2010, 67 percent
of the revenue stream would be generated from LNG sales and 33 percent from methanol sales.'

From the MEO releases it has been estimated that Greater Heron may have 5Tcf low CO2 gas. For both TS projects to get under way 4.5Tcf 9% CO2 gas is needed for 20 years of production.

If Heron does have 5Tcf low CO2 gas then, by my calculations, third party gas may not be needed. Funds will be needed to get both projects under way so it will be interesting to see if the farmee has deep pockets. After joint exploration it will be interesting how the 74/26% gas will be divided. If the farmee is only interested in LNG then they may take over the majority of the TSLNG costs leaving MEO with the Methanol side of the equation - who knows.

The important thing is for Heron to have a good supply of LNG quality - up to 9% CO2. Perhaps this time we will be lucky.

Once the LNG, and supporting Methanol, plants are constructed the Blackwood may contain sufficient gas to fire up the second 1.75 MTPA Methanol plant. By then MEO may be able to own 100% of this project using the shared infrastructure already in place.

Additions to the crew steering the MEO raft

The second clue is the recruitment of new staff members. Why would new personnel be added to the payroll without good reason? The vast experience they bring to the company will ensure the company's forward momentum.

For those doubters who say it is just more mouths to feed - we are talking about a massive project that will produce billions in revenue, not a cubby house in the back yard, so it will need to be done properly. I know that when I employ tradesmen I choose the ones with good references.

The imminent farmout of NTP/68

For the next clue MEO have stated they have selected their preferred farmee and negotiations continue. I have addressed this in another thread and I am now leaning towards PBR as the farmee but seldom do I get close to the pin. The next PBR board meeting will be a Friday mid April (15th?).

Mitsubishi is another company who has had long term interests in Methanol production. They have been established in Oz for some time now through Mitsubishi Australia. They combined with Mitsui & Co to form Japan Australia LNG (MIMI) which holds a 1/6 equity in the NWS Project.

I don�t know if Mitsubishi Australia have looked at the MEO plans in Bonaparte but their parent company, Mitsubishi Corporation (MC) and Mitsubishi Gas Chemical Co., Inc. (MGC), have just started operation of the second plant at Metanol de Oriente, METOR S.A. (�METOR�) in Venezuela. The new METOR plant has an annual production capacity of 850,000 tons. The first phase plant has an output of 750,000 tons/year.

This is of note when comparing the output to the proposed output of the two TSMP plants. From MEO�s calculations each Methanol unit at TS will double this production to a projected total of 2x175000 tonnes pa (350000 tonnes or 344000 tons):

'The first methanol plant proposed for the Tassie Shoal Methanol Project TSMP requires approximately 1400 Bcf of raw gas (including inerts) to produce 1,750,000 tonnes per annum for 20 years of operation' and they expect that 'there may be 1700 Bcf of raw recoverable gas at Blackwood'.

We can also compare the TSMP output with Petronas Methanol. They bought the Labuan Methanol Plant in 1992 with an output of 660,000 tpa. In 2008 they fired up their Mega Methanol Project with an additional 1,700,000 tpa. This plant is fed by 150 million cu ft of gas from Sabah offshore fields as feedstock.

One other point about the farmee. If the Heron gas is high in CO2 and not suitable for LNG I wonder if the farmee will be willing to participate in the TSMP as an alternative project? PBR, maybe not but Petronas or others may be. Once more is known about Heron we know MEO will certainly be interested in moving forward, whatever the scenario.

New investment

There has been accumulation of shares by institutional investors. As needle pointed out this morning Bentley Capital have put MEO on the top of their list and now have >5% interest in MEO.

I was at first wary of Bentley's intentions as they have a reputation but the recent talk about a takeover to squeeze out the capital would be like killing the golden goose. A partial takeover would need SH approval in any case. And that would depend on the offer and SHs view of management at the time.

Credit Suisse have always been at or near the head of the T20 list. They are there again with >6%. We don't quite know who they are accumulating for, either in Europe or Oz, but they also would have done their homework regarding MEO's potential.

Whether or not they are in for the long haul they see the value of MEO at cash value with such an impressive portfolio of projects.

It is unfortunate that people do lose money on speculative stocks such as MEO. The fact is that a lot of money has also been made from MEO over the years. Dry wells are a fact of life in the O&G industry and, even though A#1 appeared to have a good chance of success, the risk was there.

This is where the debate about LT investment and ST trading comes to bear. I have always been of the opinion that MEO is a LT investment. This way, obstacles like the GFC, Zeus and Artemis are tolerable as the company is still moving forward and looking at the long term goals.

Even in such trying times the management team has kept the company moving forward and even showed a profit last year. Those traders who were looking for a quick profit and didn�t get their strategies quite right did lose money, even though they were given indicators by the TA posters in the MEO forum.

After all, the company raised the VPS from 6c to 18cps on the back of a dry well (A#1). Whilst it might be argued that the company may have lost credibility I don�t agree. It is just good business sense. When the company reveals its future plans then the investors/traders will come back.

The last time MEO could be bought at cash value when it was 6-8 cps the SP increased to 80c. Now it is again at cash value (or thereabouts) with strong fundamentals - is it now the time to hold or buy or do we wait to follow the herd?

My take on speculative stocks like MEO is to decide a strategy early on. History tells us that the present plank we are walking (as volume T/A Mitta3 would call it) is a good time to come back on board.

The TA's talk about 'smart money'. The 'smarts' have been accumulating for four months now. Admittedly some retail investors have been stung by the misfortunes of MEO over the years. It would be a pity for us to miss the light at the end of the tunnel.

If we want to play the swings then a good idea may be to buy in the troughs (like now) and sell in the peaks which can be set at whatever %age suits our appetite.

For LT investors we must invest in companies with sound fundamentals and need to understand that our money may be tied up for the long term and if we continue to invest through wildcat drills then failure will mean a loss in portfolio value. We only realise that loss if we sell at that time.

For those that do sell the loss is bearable as it can be compensated with gains made through alternative stocks - provided we learn from our mistakes. Whilst MEO has been in the doldrums many have taken advantage of gains elsewhere.

But I have said all this before and unless we understand the pitfalls our money is safer in the bank.

Moving forward

The new MEO management have only been in charge since late 2008. This is a relatively short time for an emerging company in the O&G industry. The company's financial position has improved greatly even after the GFC and two failed well drills.

Imagine what they will do when the tide turns and some positive results start to show.

I don't think it will be long before TS changes from a vision to a reality. But that reality will still take time to process. In the mean time I believe the market will react as it has before but, once the farmin details are released, IMO, a re-rating from the present levels will be on the cards.

All we have to do is research and look at the clues which are out there.

And this post hasn't even mentioned any new projects or the on-going background work on 360/61P.

But this is only my opinion.

#:-))

PS - I do not work for the company and it is my intention only to look, and comment, on the facts as they present themselves.