Funny no Meo talk ?, page-6

Ok, IN2IT, please go back to my last two posts, have a read of them before you read this one and then form your own view. Referring to my post of yesterday and the one the day before that. I had taken into consideration the onshore/offshore view in those post – for someone who only implies they wants to talk about Meo you seem to have to many cross references to MSMN in your posts.

LNG costs
Anyway, agree MSMN is in an onshore area and therefore doesn’t have an expensive offshore pipelines to contend with, but an onshore LNG (or gas equivalent) development, at least, will cost US$20 billion plus for a 10 mtpa facility. i.e LNG infrastructure is not cheap. Do your own research there.

But then MSMN need to add these other capex costs, as LNG in NZ would be a new thing in that area and therefore MSMN would face higher transportation infrastructure costs – ports and the like. Because MSMN have a fracking development capex for taking the gas from the field will also be very expensive so what ever savings made from the need not to not have a offshore gas pipeline we be blown there and then what you have is the real problem that the gas won’t flow as expected – hence a higher hurdle rate of return would be put into any financial model – above a conventional LNG project – for this risk alone. Opex for fracking is also going to mean a much higher operating cost budget and NZ location also means much higher transportation costs to end markets (so this factor alone could render them uncompetitive to Australian projects where the export market targeted is Asia). In a financial sense MSMN project totally won’t be be viable so got back and read previous posts of last two days. A good pointing as to costs on fracking is US oil shale/gas developments – they are the ones suffering the most from a low oil price because of their higher opex costs and the fact capex when compared to conventional players is not that different.

In terms of offshore LNG developments etc, just be mindful that the traditional model of offshore platform to offshore pipeline to onshore LNG infrastructure is also shifting. If LNG moves to Floating Offshore Production Systems – Preclude is one – then capex cots for LNG projects utilising gas from a conventional deposit – not fracking ones- would fall as well. This is where the offshore LNG industry is heading in the future. This is further bad news for MSMN, but I haven’t even considered this aspect in this reply.

Drilling program and resource estimates
On drilling, the proposed MSMN drilling program will not cover the required need for actually ensuring they have the proved reserves to underpin such a development. LNG projects per se have extensive exploration programs to ensure the gas is there – take Gorgon, Wheatstone, and Inpex Icthys projects they have taken years of exploration effort before getting to a FID decision, and they are still in construction (Gorgon started construction in 2010/11 I think and the onshore LNG facilities are still been built).

Than lets get to the MSMN resource estimate – what drilling program underpinned this. All I see is some inference of using historical log data. When did they last drill and what was that log – seismic surveying alone doesn’t get you a resource estimate because the basis of a resource estimate is using actual drill testing to determine a commercial flow rate. Now because you have fracking you are going to have to flow test a number of areas at the target – unlike conventional deposits where less drill holes are enough to test a commercial flow. And that means expensive. And in production the same applies. And by the way where is the MSMN analysis on rock permeability because that is important for fracking developments when seeking a flow – also how many drill holes do they estimate they need for their development. Environmentalists are going to have a field day here.

At the end of the day Murchison is a desk top study – there is years of work left before MSMN proves up a resource and I doubt that resource is there on the P50 and p90 basis suggested. But yet as Meo holders we are meant to believe it is there. And not to repeat myself from my post of yesterday, the P50 and P90 Murchison reserve is based on blue sky assumptions because the work has not been done – just my opinion.

Meo
The thing I agree with you is that we should be talking only about Meo – agree totally but we have a opportunistic bid to deal with first. As I said to you on previous post some time ago, if I had a choice today to invest in Meo or MSMN I wouldn’t invest in either but thought Meo’s future was better than MSMN’s and therefore as a Meo holder why would I sell to MSMN. That view hasn’t changed. In fact I have moved to been a little more positive on Meo based on their last cash reserves – I note you are now saying Meo has enough money for 18 months as against your previous posts where you have inferred Meo will die by the end of the year!!.

The MSMN BOD has remained silent on farmins and funding in particular, beyond some low cost drilling program which they still haven’t found a farmin partner for. Good luck to them finding a major player willing to stump up the capital infrastructure funding required for their supposedly export based gas reserves.

I said previously I wouldn’t debate you – the only reason why I have replied this time is the supposedly MSMN new news – so like I said read my last two posts then this one and you’ll understand why I intend keeping my Meo shares.