Disclosure: I'm long ETE. My investment horizon in ETE is long-term (1+ years, perhaps several years) for the reasons stated below. Today's price per share compared with the potential value of ETE's assets (IMHO) justifies this holding in my portfolio.
Background:
With all due respect, there are a few facts posted in this thread that appear to be misleading, and some are factually wrong. At the same time, some of the statements in the thread are spot on. In any case, I've followed/studied the history of NPR-A dating back to the first wells drilled into the Umiat Oil Field in 1946 when the area was the "Naval Petroleum Reserve - Alaska". Hopefully, those with an eye toward value will find the following information and citations helpful.
Pertinent History:
1946 to 1953: Husky, under contract to the US Navy drilled several oil wells into the Umiat Oil Field. For an overview of the Umiat published in the Oil & Gas Journal in 2010, see:
https://www.ogj.com/articles/print/volume-108/issue-1/exploration-__development/umiat--a-north-slope.html2001: Arctic Falcon LLC engages in permitting to develop the Umiat Oil Field within the southern region of NPR-A. See cover story in Petroleum News Alaska:
http://www.petroleumnews.com/pdfarch/011021.pdf2002: The north half of the Umiat Oil Field (one lease covering the north half of ~one billion barrels OIP) was acquired by two individuals (Zamarello and Craig). The competing bidder was Arctic Falcon, LLC. A couple of years later, Renaissance Alaska LLC acquired this lease.
2007: Renaissance Alaska, LLC, Arctic Falcon, and another partner struck a deal to develop the two Umiat Oil Field leases under one operating company.
http://www.petroleumnews.com/pntruncate/112551196.shtmlMalamute Energy, LLC (a private company) is the successor owner of Renaissance Alaska LLC and is the current operator of the Umiat Oil Field.
http://malamuteenergy.com/NOTE: The BLM leases issued to Arctic Falcon before 2002, and to the lease issued to Zamarello and Craig in 2002 had ten-year terms just like all other NPR-A leases. Renaissance Alaska LLC extended both leases beyond the ten-year term as allowed by the BLM if the owner/operator properly applies for extensions. For Entek investors who may be concerned about the ten-year term of Entek's leases, it appears this does not need to be a point of concern. NPR-A leases have been and can be extended.
2014: Three leases were issue in NPR-A leases immediately to the north of the Umiat Oil Field consequent to the BLM's 2013 lease sale. Contrary to representations in this thread, a review of BLM's records clearly shows the mineral rights contained under those three leases have never been leased by any parties before 2014. If you review the bonus bids from the lease sale held in 2013 and add the annual rentals charged by the BLM for these leases ($3/acre/yr), the math leads to the conclusion that the cash price reportedly paid by Elixir to the sellers is roughly equivalent to the sunk costs in these three leases - a seemingly fair cash consideration. If you want to run the numbers for yourself, start with the following information about the 2013 bonus bids:
https://www.blm.gov/sites/blm.gov/files/uploads/Oil_Gas_Alaska_2013_NPR-A_Bid_Recap_v2.pdf2014 to 2018: Between the time the three leases acquired by Elixir were issued in 2014 and the date of the Elixir transaction in 2018 a lot of value-added announcements occurred within NPR-A. One was the announcement of billions of barrels of reserves at Pikka to the north. Pikka oil is contained within the same Nanushuk reservoir rock that extends from the Umiat Oil Field all the way north to the Beaufort Shelf. For a geological cross-section of the Nanushuk (and the Torok below it, and the source rock below the Torok), see Page 9 (document page 9, not the 9th page of the PDF) of the following USGS report:
https://pubs.er.usgs.gov/publication/b1614
The Horseshoe wildcat well to the south of Pikka was announced during March 2017 representing a southward extension of the Nanashuk reservoir(s). For a review of the Pikka and Horseshoe history, see:
http://www.petroleumnews.com/pntruncate/533556056.shtmlThe Willow (Conoco-Phillips) continued to unfold as a massive reservoir along a Nanushuk cliniform to the west of Pikka. CP has made a series of announcements regarding Willow. Of course, Caelus' Torok discovery at Smith Bay to the NW of the Pikka was yet another exciting multi-billion barrel NPR-A announcement. The Torok is the reservoir rock deposited below the Nanushuk, but above the source rock.
August 2018: The Nanushuk in NPR-A is declared the world's new "superbasin" shortly before Elixir's transaction.
https://www.businesswire.com/news/home/20180821005116/en/Alaska-North-Slope-%E2%80%98Super-Basin%E2%80%99-Ready-OilDecember 2018: After acquiring its first three NPR-A leases, Elixir acquired ten more leases during the December 2018 BLM lease sale. These additional leases appear to be on trend with CP's Willow to the north. All told, the NPR-A leases appear to cover enough east-to-west land to include several drapes (cliniforms) of Nanushuk rock - any one of which may contain large quantities of oil in the topset, bottomset, or both.
If you want to drill down further on the geological merit of Elixir's acquistion of 13 leases within NPR-A (now Entek's assets), a great place to start is:
http://dog.dnr.alaska.gov/Documents/ResourceEvaluation/20180521_DiscovThinking_Decker.pdfPaul Decker (the author of the DOG reported cited above) has left the DOG and has joined Oil Search's team, the current operator of the Pikka Unit.
http://www.petroleumnews.com/pntruncate/100752618.shtmlIt is reasonable to ask, if these 13 NPR-A leases are such a hot commodity in a new "superbasin", why did Elixir sell these leases to Entek.
Elixir's rationale for this transaction is clearly articulated by Richard Cottee during his May 2, 2019 interview:
do not advertise external links.au/companies/stocktube/13185/elixir-petroleum-appoints-richard-cottee-as-chairman-begins-development-of-mongolian-gas-project-13185.htmlAs documented in Elixir's historical PRs, the company worked for a very long time to secure a CBM concession in Mongolia. The Alaska transaction appears to have emerged around the same time that the CBM concession was finally made available to Elixir. Elixir's deal with Entek appears to have been a sensible path forward for each company so that - as Cottee states - Elixir can now focus exclusively on Mongolia, and Entek can focus exclusively on NPR-A in Alaska.
I would agree that nothing amazing is going to happy today or tomorrow in NPR-A for Entek. For that reason, equity can be acquired very inexpensively today by parties who recognize the long-term investment potential of ETE. Warren Buffet didn't get wealthy by buying into frenzies of excitement about the latest "hot" opportunity. Rather, Buffet carefully reviews underlying value and purchases equities that are currently undervalued by the markets. He then sits back and patiently waits for the market to catch up with his analysis.
Yes, Entek faces operational, logistical, and exploratory risks in NPR-A. And, there are many reasons why Entek may be an excellent long-term investment at current pricing. You don't get a position in a superbasin by waiting until all the risk has been removed. A few years from today, Elixir (and now Entek) may be viewed as prescient with respect to having pulled the trigger in NPR-A during 2018. Only time and the drill bit will illuminate this issue.
