Sparky Not investment advice and but here are some of my...

Sparky

Not investment advice and but here are some of my thoughts….

I like to focus on the short, medium and long term prospects of asset monetisation which would justify the share price based on dividends.

I see the construction of import terminals as inevitable and this will tend to create an equilibrium between local and international gas prices which, driven by demand from China will almost certainly rise.

Whilst this rise in international prices is in CTP’s favour, this will create direct competition in line with international gas prices for the Sydney & Melbourne markets which will make it harder for CTP taking into account their haulage costs.

In our region, Shell is building the world’s largest floating structure off WA to produce LNG and New Guinea is set to export LNG.

The last annual APA report does not foreshadow upgrading of the Amadeus or Carpentaria pipelines but they have been quick to respond with a 700TJ/day line out of the potential Crib Point Export Terminal.

An extension of the NGP1 from Mount Isa to Wallumbilla is nearing FID so I seriously doubt the feasibility of the “new pipeline dedicated to domestic market” mentioned in the recent CTP presentation.

In the short term the NT GSA’s are already in place and will not be affected and the immediate future of CTP prices will be largely dependent on negotiations with IPL and remaining spare to the spot market which, in CTP’s favour should remain robust.

CTP’s ability to take advantage of high local gas prices is limited by the capacity of the Mereenie Spur connecting to the Amadeus pipeline, the NGP1 and the Carpentaria pipelines and this will probably take say 2-4 years to remedy.

A preliminary FDP (Field Development Plan) model of the QLD PLR201718-1-1 indicates that CTP’s investment should be profitable but not enough to be a real game changer. I do have some concerns however on the economics of such relatively small scale development.

In any case, IMO given the constant need for development capital, (Deletion of 1 Mereenie well to pay for surface facilities & the $5M increase in our credit facility combined with modest notional profits in the last 2 quarterlies) will almost certainly mean that the CTP share price will be driven by sentiment based on the prospect of a takeover offer rather than dividends.

I see the need for shareholders being asked to put in more development capital and have had to make my own assumptions on amortisation of existing debt in the absence of information from CTP.

I have modelled (Across all O&G investments) on import facilities impacting on the local GSA prices and work on the basis that over the next 3-5 years that local gas developments will start to come on stream complimented by the import terminals.

Suppliers located closer to export terminals will of course have an advantage over CTP.

In summary we have the elephant in the room of a slowly rising international gas price which is good for large scale LNG investment but downward pressure on the East Coast prices from imports which will mitigate the “Monty Python” combination of Declining Bass Strait production, environmental lobby tenement destruction, demand destruction and politicians “Delaying the inevitable indefinitely”.

Regards

OGP