This post represents my best guess of a medium term prognosis for CTP and I am sure that there is no way it is correct because I have had to do a lot of guessing.
Shareholders should not have make CTP investment decisions based on guesses based on social media posts and various localised media releases.
We should be well informed by CTP as to the Companies forward strategy, associated risks and their mediation and the Board’s appraisal of industry developments and trends which are pretty hard for shareholders to assess objectively
As I see it, the strategy behind the latest CTP Gas Acceleration Program (GAP) aimed at tripling the existing 125.9 PJ of 2P Reserves is either to overcome the difficulty in obtaining finance to grow the organisation OR to position the organisation for another takeover attempt.
The additional 2P reserves to CTP target is stated in the Entitlement Raising Booklet as 352-541 PJ.
There is a reasonable chance that the drilling of the 4 appraisal wells will result in certification of at least an additional 300 PJ of 2P reserves but it is my guess that sustainable commercial flow rates are the underlying problem that no one wants to talk about.
In the last year we have come from a glowing picture of increasing reserves painted at the Noosa Mining conference to the depressing scenario documented in the SOA.
For a long time I have been concerned at the extent of the medium term investment needed to produce gas at commercially sustainable flow rates and the expert reports in the SOA supported this view.
Put bluntly, I was pretty disappointed that CTP was focused on touting reserves and did not communicate to shareholders that there were underlying problems with sustainable gas flow rates, cost of additional surface facilities and a bottleneck right though to Ballera of 100 TJ/day which would cap our potential earnings upside.
I still have a gut feeling that the Gap between the pictures presented by the Noosa Conference and the SOA played a part in the rejection of the SOA by shareholders.
Presently the prime focus appears to be on increasing certified reserves and It concerns me that there has been little or no communication to the shareholders of the scope, cost and timing of a forward plan to effectively monetise the reserves and even if the appraisal drilling plan is moderately successful and I wonder if history is going to repeat itself.
I am also concerned that nothing has been said about Macquarie’s contribution or involvement in the GAP and must consider the fact that this is not an accidental omission on CTP’s part.
It appears that CTP’s share of remaining 60TJ/Day capacity of the NGP and Carpentaria pipelines to the East Coast market will probably be remain as factor limiting vital early and medium term gas sales for 2-3 years or more after NGP is commissioned late 2018.
It looks like Beetaloo gas is the prime driver for upgrading the pipeline delivery chain and this certainly not going to happen overnight.
After NT gas sales cover break even overheads a net profit to CTP of say $3.00/GJ the 60TJ/Day choke point in the path to market to would limit their annual profit to about $30M per annum, say $50M at best.
Drilling and evaluation of enough appraisal wells to be assured long term flow rates is a constant balancing act and I am a bit worried that more appraisal may be needed to make well informed decisions on the profile of the scope of associated surface facilities.
I am also concerned that horizontal Mereenie wells are dependent on the lottery of the properties of natural fractures and that their sustained flow rates may not be as predictable as horizontal fracked wells.
The proposed Western Slopes pipeline aimed at servicing Santos Narrabri Gas Project is already under a Project Development Agreement with APA and at a nominal capacity of 200 TJ/Day of potentially low cost production to market would go a long way to servicing the round figure 400 TJ/day NSW consumption. Santos are unashamedly declaring an objective of being a low cost gas producer.
The potential Crib Point AGL import facility has the potential to short circuit East Coast gas prices to parity with export gas.
There will no doubt be a number of emerging initiatives over the next 5 years which will provide increasing competition for of CTP’s potential East Coast gas sales.
It is a simple fact that in the past, optimistic CTP shareholders have had their fingers well and truly burnt. To Sum up I believe that there are a number of constraints and risks in optimising the GAP Field Development Plans for the next 5 years to secure safe commercial returns that will persuade a sceptical share market.
The Time Frame to Increase the Capacity of the CTP Pathway to East Coast Markets
“Assets such as Ooraminna and the potential workovers and re-completions at of Mereenie field could unlock 120PJ (2C) in the Stairway Sandstone reservoirs which lie above the producing Pacoota Formation, but success requires a pathway to market.”
The following is a montage based on a snapshot of the AEMO Natural Gas Services Bulletin Board (http://www.gasbb.com.au/) combined with a CTP graphic, NGP & Future extension and nameplate capacities for pipelines.
My best guess….
The proposed NGP Stage 2 Mount Isa to Wallumbilla will probably end up being extended in capacity to 700 TJ/day.
Until this happens there is little point in increasing the capacity of the NGP since the APA Carpentaria Pipeline from Mt Isa to Ballera presently has a 119 TJ/day capacity and would also need to be upgraded as well. As I understand it there are no present plans to do this.
This increase will need to involve compression/looping of the stage 1 NGP.
The mid line compressor station to facilitate compression is not in the present NGP scope of works.
Until the NGP and Carpentaria pipelines are both increased in capacity the pathway to the East Coast market for CTP/MAC is limited to 90TJ/day and 30 are already taken by PWC down the NGP & say 200K of the Carpentaria Pipeline for gas sold to Phosphate hill which will only leave a pathway capacity of about 60 TJ/day.
Page 123 of the SOA says that in 2016 that Gas Export Ex Gladstone was 971 PJ so in 2016 the NSW market of 134 PJ was 18% of the Gladstone Exports.
The present remaining NGP capacity after Phosphate Hill is taken out is say 20 PJ which is about 14% of the NSW market.
Beetaloo would either liquefy and go straight offshore or find its way to the upsized NGP.
Other NT gas would also be captured by the NGP.
This Easterly gas flow to Wallumbilla and thence to export markets is the main commercial driver for the significant investment need to upgrade and extend the NGP.
Given that Jemena have already front ended the NGP at a very rapid pace limited mainly by approvals and that they have always maintained that they have funds available I would be surprised if there is a commercial case for the Alice Springs to Moomba pipeline.
In any case it would take a number of years to sort out FID and gain approvals Etc.
Best Regards
OGP
CTP Price at posting:
9.8¢ Sentiment: None Disclosure: Held
