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APA - APA Group

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I note that APA has written down the value of the Moomba - Sydney ethane pipeline due to the closure of Quenos' manufacturing operations, they being the only consumer of ethane in Sydney.

APA hasn't proposed it but I'll add my thoughts that alternative options do exist for it and there are two obvious ones.

One is to supply ethane, normally used as petrochemical feedstock, as industrial fuel eg power generation or other heavy industrial use, via this dedicated pipeline. Technically that's straightforward and nothing precludes it, it's just not normally done since the ethane has higher value for other uses but it certainly can be used as fuel and there's no particular reason not to do so other than economic value. But if those other uses no longer exist well then it doesn't now have an alternative economic use and that being so, using it as fuel becomes a case of less bad. That also has relevance to the gas producers especially Santos.

The other option is to repurpose the pipeline as natural gas transport and storage, noting the existing constraints on getting gas between Queensland and the other states. The Moomba - Sydney ethane pipeline effectively covers half that route, it would just need increased capacity to be built Queensland - Moomba.

Meanwhile the share price:

1722369303402.png
 

APA Group signs gas transport agreement for Senex Energy’s Surat Basin expansion​

APA Group has today announced the execution of a 20-year firm gas transport agreement with Senex Energy for its Atlas natural gas development in Queensland’s Surat Basin.

Under the two-decade agreement, APA will provide capacity for 60 TJs per day of natural gas transport along APA’s Reedy Creek Wallumbilla Pipeline to the Wallumbilla Hub, supporting much needed additional gas supply into the east coast gas market expected from the end of 2025.

Execution of the agreement follows Senex’s final investment decision on its expansion at Atlas after they received final environmental approvals for the Atlas East gas project from the Federal Government.

As part of the contract executed, APA will invest approximately $20 million on increasing capacity on APA’s Reedy Creek Wallumbilla Pipeline and Wallumbilla Hub to support Senex’s Atlas expansion.

 
basilio said:
There are a number of articles on Australian gas supply on teh APA website. Glad I found it,.

Well worth checking out.

Click to expand...
If you are interested to see live changes through out the day of how much gas demand comes on and off as changes in solar and wind supply happen check this link out, if you click “fuel mix” it shows you a live graph of what the east coast electricity grid is using.

Solar and wind come on and off according to the weather, and Gas and hydro are ramped up of idled back supporting them. The coal is pretty constant, but is steadily being retired, so more gas will be needed to back up the wind, solar and batteries that will replace the coal.


https://aemo.com.au/energy-systems/...ricity-market-nem/data-nem/data-dashboard-nem
https://aemo.com.au/energy-systems/...ricity-market-nem/data-nem/data-dashboard-nem

you can see in these two photos as wind tamped up gas and hydro idled back and vis versa.

IMG_2422.jpeg
IMG_2358.jpeg
 
Another one for which the market didn't like the results announcement:

1725049933008.png


Not a crash but still, it went down rather than up.

In regards to physical operations and specifically gas, without disagreeing with the other posts above, I'll point out that a large portion of gas consumed isn't used to generate electricity. For whatever reason Australian public discussion of energy is extremely focused on generation, but a lot of gas is used for other purposes in homes and industry.

Gas used for electricity generation as a % of total natural gas consumption in 2022-23. This is Australian Government official statistics so should be accurate:

Qld = 31%
NSW = 17%
Vic = 10%
SA = 50%
NT = 45%
WA = 43%
Tas = highly variable year to year due to a low baseline, 29% in 2022-23.

Noting that's % of gas used for electricity and is not % of electricity from gas.

So especially in NSW and Vic, gas is mostly used in homes and businesses rather than power stations. Noting that APA has a lot of involvement in these states.

Total volume of gas used by state for all purposes as follows:

Qld = 290.5 PJ
NSW = 134.3 PJ
Vic = 215.2 PJ
SA = 74.8 PJ
NT = 91.3 PJ
WA = 704.8 PJ
Tas = 7.2 PJ

Note those figures exclude exported gas. :2twocents
 
Smurf1976 said:
Another one for which the market didn't like the results announcement:

View attachment 183461

Not a crash but still, it went down rather than up.

In regards to physical operations and specifically gas, without disagreeing with the other posts above, I'll point out that a large portion of gas consumed isn't used to generate electricity. For whatever reason Australian public discussion of energy is extremely focused on generation, but a lot of gas is used for other purposes in homes and industry.

Gas used for electricity generation as a % of total natural gas consumption in 2022-23. This is Australian Government official statistics so should be accurate:

Qld = 31%
NSW = 17%
Vic = 10%
SA = 50%
NT = 45%
WA = 43%
Tas = highly variable year to year due to a low baseline, 29% in 2022-23.

Noting that's % of gas used for electricity and is not % of electricity from gas.

So especially in NSW and Vic, gas is mostly used in homes and businesses rather than power stations. Noting that APA has a lot of involvement in these states.

Total volume of gas used by state for all purposes as follows:

Qld = 290.5 PJ
NSW = 134.3 PJ
Vic = 215.2 PJ
SA = 74.8 PJ
NT = 91.3 PJ
WA = 704.8 PJ
Tas = 7.2 PJ

Note those figures exclude exported gas. :2twocents
Click to expand...


I'm keenly interested in the gas used for electricity generation because I believe it represents a significant growth opportunity amidst the broader trend of 'electrification of everything.' While gas demand for other purposes may remain stable or gradually decline over the next 30 years, I see electricity generation as a burgeoning sector. Some may view Victoria's ban on new gas installations in homes as a threat to APA's assets, but I disagree. The existing gas infrastructure will continue to support a robust demand base for decades to come, while APA can pivot towards electricity generation, transmission, and other green energy ventures, positioning themselves for long-term success.

It’s also important to note that APA own Gas fired power plants, so they gas used in home represents them being paid for transporting the gas to the home, how ever some of the gas fired electricity used represents APA being paid to transport the gas and create the electricity. They also own solar and wind farms and transmission lines, which plays into my comments about renewables and gas working together to offset coal.
 
Smurf1976 said:
I note that APA has written down the value of the Moomba - Sydney ethane pipeline due to the closure of Quenos' manufacturing operations, they being the only consumer of ethane in Sydney.

APA hasn't proposed it but I'll add my thoughts that alternative options do exist for it and there are two obvious ones.

One is to supply ethane, normally used as petrochemical feedstock, as industrial fuel eg power generation or other heavy industrial use, via this dedicated pipeline. Technically that's straightforward and nothing precludes it, it's just not normally done since the ethane has higher value for other uses but it certainly can be used as fuel and there's no particular reason not to do so other than economic value. But if those other uses no longer exist well then it doesn't now have an alternative economic use and that being so, using it as fuel becomes a case of less bad. That also has relevance to the gas producers especially Santos.

The other option is to repurpose the pipeline as natural gas transport and storage, noting the existing constraints on getting gas between Queensland and the other states. The Moomba - Sydney ethane pipeline effectively covers half that route, it would just need increased capacity to be built Queensland - Moomba.

Meanwhile the share price:

View attachment 181732
Click to expand...
ahhh , the karma

i was quite happy owning EPX stock .. before APA rushed in to take it over

oh well i crystallized a nice profit
 
Smurf1976 said:
I note that APA has written down the value of the Moomba - Sydney ethane pipeline due to the closure of Quenos' manufacturing operations, they being the only consumer of ethane in Sydney.

APA hasn't proposed it but I'll add my thoughts that alternative options do exist for it and there are two obvious ones.

One is to supply ethane, normally used as petrochemical feedstock, as industrial fuel eg power generation or other heavy industrial use, via this dedicated pipeline. Technically that's straightforward and nothing precludes it, it's just not normally done since the ethane has higher value for other uses but it certainly can be used as fuel and there's no particular reason not to do so other than economic value. But if those other uses no longer exist well then it doesn't now have an alternative economic use and that being so, using it as fuel becomes a case of less bad. That also has relevance to the gas producers especially Santos.

The other option is to repurpose the pipeline as natural gas transport and storage, noting the existing constraints on getting gas between Queensland and the other states. The Moomba - Sydney ethane pipeline effectively covers half that route, it would just need increased capacity to be built Queensland - Moomba.

Meanwhile the share price:

View attachment 181732
Click to expand...
They wouldn’t use it to transport ethane unless it’s for a feedstock, because the Ethane that it has transported in the past is separated out of natural gas, they can just avoid going through the separation process and just send natural gas (methane and Ethane combined) down the pipe.

They are weighing up options, but yes you are right it’s either going to be

1, increase gas transport volumes

Or

2, storage
 
I've snatched at this falling knife a couple of times during the last 12 months. Of course, it just keeps dropping.

I think the business is fundamentally sound and well run, but not sure that I want to have another grab.
 
Ferret said:
I've snatched at this falling knife a couple of times during the last 12 months. Of course, it just keeps dropping.

I think the business is fundamentally sound and well run, but not sure that I want to have another grab.
Click to expand...
It’s currently selling on a dividend yield of 7.7% which is historically high for it, however during the GFC I was able to pick up some at over a 10% yield.

I think some where around a 5.25% yield represents pretty fair value for this kind of company, given that the inflation link growth in earnings and the pet out ration of 70% leaves decent cashflow in the business each year for new investments.

So while there is no guarantee that if you purchase at todays prices the share price won’t fall further, but there is a very good likely hood that if you purchase on a yield of 7.7% today and hold it, you will earn a 7.7% cashflow on you invested capital, and the share price may rise over time back to a level that makes the dividend yield some where is the 5’s again.
 
Value Collector said:
They wouldn’t use it to transport ethane unless it’s for a feedstock, because the Ethane that it has transported in the past is separated out of natural gas, they can just avoid going through the separation process and just send natural gas (methane and Ethane combined) down the pipe.
Click to expand...
Where this gets more complex is with the definition of "feedstock".

Conventionally, ethane is separated from natural gas for use as petrochemical feedstock or simply left in the natural gas stream so long as the concentration doesn't exceed specified limits but it's also very usable as fuel as an isolated gas. Not easily for household use, simply because gas appliances generally aren't set up for it, but it certainly can be done in the context of heavy industry or electricity generation since it's relatively straightforward to adapt a small number of very large end users if there's a reason to do so.

Noting that APA could itself become the end user simply by building a power station at a suitable location on the pipeline. As an example of that approach, Esso does have three small gas turbines running on surplus ethane in Victoria. So whilst relatively uncommon, it's an "off the shelf" idea as such, it's not something nobody's done before.

That's not to say that will actually be done, I'm just noting the technical viability is there and that being so, it's another possible use of the pipeline and upstream ethane gas itself in the event some other use doesn't work out. Add that to the other more conventional possible uses and there's no reason it ought end up a stranded asset.

Looking at the share price, that has trended up over the past 3 or so weeks:

1727633513931.png
 
Smurf1976 said:
Where this gets more complex is with the definition of "feedstock".

Conventionally, ethane is separated from natural gas for use as petrochemical feedstock or simply left in the natural gas stream so long as the concentration doesn't exceed specified limits but it's also very usable as fuel as an isolated gas. Not easily for household use, simply because gas appliances generally aren't set up for it, but it certainly can be done in the context of heavy industry or electricity generation since it's relatively straightforward to adapt a small number of very large end users if there's a reason to do so.

Noting that APA could itself become the end user simply by building a power station at a suitable location on the pipeline. As an example of that approach, Esso does have three small gas turbines running on surplus ethane in Victoria. So whilst relatively uncommon, it's an "off the shelf" idea as such, it's not something nobody's done before.

That's not to say that will actually be done, I'm just noting the technical viability is there and that being so, it's another possible use of the pipeline and upstream ethane gas itself in the event some other use doesn't work out. Add that to the other more conventional possible uses and there's no reason it ought end up a stranded asset.

Looking at the share price, that has trended up over the past 3 or so weeks:

View attachment 185091
Click to expand...
The ethane pipeline does run beside the Moomba to Sydney pipeline all the way from Moomba to Sydney, so it is highly likely it will just be used as extra natural gas capacity or storage.
 
Joined the APA holders over the last couple of days.

- Good divie - over 7% partly franked
- Gas is out of Labor's naughty corner
- Lower interest rates should help with the debt.

With the rampant inflation of late, happy to hold good infrastructure.
 
Don't like it. Still think it's worth $6 at best. Possible long range chart target of even lower than that.
Using CommSec summary stats:
Book value FY16 = 2.67
Book value FY24 = 2.53
i.e. Going nowhere
Median ROE over 9 years = say 11%?
Worth say 2 x book value = 5 bucks
That's without discounting something notional for massive net gearing = 379%
Add something maybe for security of income which a lot in the market would like but ..
Div FY16 = 41c
Div FY24 = 56c
i.e. not a high rate of increase and low franking.

long range chart has a possible double top in effect with the trough between the tops at about $8 unsuccessfully challenged so far.
A confirmed break of 7.50 would be a bad look. JM0.

Not Held

Screenshot_20241001_133703_Chrome.jpg


MONTHLY All Data
big (79).gif
 
finicky said:
Don't like it. Still think it's worth $6 at best. Possible long range chart target of even lower than that.
Using CommSec summary stats:
Book value FY16 = 2.67
Book value FY24 = 2.53
i.e. Going nowhere
Median ROE over 9 years = say 11%?
Worth say 2 x book value = 5 bucks
That's without discounting something notional for massive net gearing = 379%
Add something maybe for security of income which a lot in the market would like but ..
Div FY16 = 41c
Div FY24 = 56c
i.e. not a high rate of increase and low franking.

long range chart has a possible double top in effect with the trough between the tops at about $8 unsuccessfully challenged so far.
A confirmed break of 7.50 would be a bad look. JM0.

Not Held

View attachment 185205

MONTHLY All Data
View attachment 185204
Click to expand...
None of the book value or return on equity figures mean much when it comes to APA.

The best way to value APA is to just base your valuation on an estimate of free cash flows and dividends.

The both book value and net profit are artificially low due to the high level of depreciation they are allowed to expense.

It’s a bit like the tradie that is allowed to write off the full cost of his UTE the year he buys it, the book value of his UTE is suddenly zero and his earnings that year drop by $70,000. But in reality the UTE is not worth zero and his earnings were not $70K lower.
 
houtman said:
Joined the APA holders over the last couple of days.

- Good divie - over 7% partly franked
- Gas is out of Labor's naughty corner
- Lower interest rates should help with the debt.

With the rampant inflation of late, happy to hold good infrastructure.
Click to expand...
Not my proudest buy!

APA downgraded to a Sell by UBS today, citing possible downgrade of credit rating due to debt.

Share price reacted accordingly.
 

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