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LNC - Linc Energy

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As suggested by Smurf, Lucky Paul and myself there is a looonnng way to go before this shale oil find is proved commercially significant. But really the value for LNC lies in completing the Teresa sale, getting the American and Alaskan oil fields into production and making the EOR systems operational. Big bucks from Arckaringa would be welcome naturally and really I think they will find some decent underground coal seams in all that space.

I suggest the rise today was an enthusiastic and desperate relief rally after the recent collapses. And certainly on any currently rational analysis LNC (and many other shares) are undervalued.

But then the overall world picture is far more problematic. What is the point of being the winner in the last poker game on the Titanic ? I can see Lucky Pauls perspective when he announced his exit from LNC. Really believe LNC needs to become cash flow positive as quickly as possible...
 
The main problem I see with LNC is that they are becoming a "jack of all trades, master of none" by trying to do everything at once.

Imagine if Woolworths had built opened every supermarket, liquor store, service station, fashion and electronics retailer that they own all at once. No, what they actually did is start fairly small in one aspect of retail and then built themselves up from that base. Same with Coles.

Or what if Richard Branson (Virgin) had gone into the music, banking, airline, railway, mobile phone etc businesses by launching the whole lot all at once? The odds are very high that he'd have made a mess of the whole lot. Instead, he started with one then moved on to the next and so on. A quick Google search reveals an 18 year period between his first attempt at business (apparently unsuccessful) and then eventually launching an airline after having found success in the music business in the meantime. At no point did he try doing everything all at once.

Now consider Linc. Trying to find coal. Trying to find oil and gas. Trying to gassify coal underground. Now wanting to gassify oil shale in situ as well. Supposedly going to turn the gas into diesel. And wanting to build a few power stations as well.

I'd feel much happier if they just concentrated on getting something, anything, actually up and running before trying to become an energy conglomerate.

Are they in the business of exploring for coal, oil and gas then selling the discovery to someone else?

Are they in the upstream oil and gas business with the intention of producing oil and gas?

Are they in the business of gassifying coal and turning it into diesel?

Are they in the business of generating electricity for sale to utilities? (Or will their next venture be to themselves become an electricity utility?).

And now they've added oil shale to the list. What next? Hydro-electric dams and wind farms? Uranium mines and nuclear power stations? Setting up a solar panel factory?

I'd just like to see something up and running before they try and overtake the likes of Shell, Exxon or even your local distributor of bottled gas. Just get something up and running...
 

I do agree Smurf, that Linc have moved away from their original game plan of specialising in producing liquid fuels from stranded coal. Mainly because of the lack of political approval, and perhaps the realisation of the capex involved. Hence the decision to design modular units going forward.

Having read extracts from the latest annual report, Linc say they have now re organised into three groups.
It all sounds good on paper, and hopefully this new structure will help develop the business in the long run.
With the announcement that the next coal sale may happen "hopefully" by the end of this year, what next to keep current investors, and new ones interested in the company?
The latest idea of somehow extracting the hydrocarbons from the newly discovered shale find, creates an image of desperation to please share holders.

Having said all this, it was a very short time ago, before the recent market turmoil that the +/-$3 a share, appeared fair, and many of us were bullish for a further rise, and the prospects the company.

Very frustrating times
 
I think LNC is in the business of making money from energy development and sales .. and is quite willing to look outside the square in the process.

Certainly Peter Bond started with the coal to diesel concept. I think the reality of how much effort it would take to refine the UCG process and then build cost effective GTL plants has been a very sobering experience. The decision to develop and sell off unneeded coal mines to basically provide working capital was opportunistic but highly effective in protecting LNC's financial situation. Having a $300m bank account with possibly another $4-500m coming in a few months is an outstanding outcome. (and lets not forget the 20 year coal royalty stream worth .... well lots and lots...)

The decision to buy into depleted oil wells and use CO2 injections to boost production is, IMO, quite inspired. LNC has the UCG technology at its fingertips so what would cost other companies a bundle will effectively be done in house at inhouse costs. Given the lead times for GTL development the opportunity to obtain relatively quick returns from these oil fields seems an excellent idea. The fact that they obtained the fields at quite modest costs is just another feather in their cap.

The fundamental game changer in my view is the investment in the AFC fuel cell technology and the Pyromex above ground gasification process which would then enable use of the AFC fuel cell. Being able to use coal either below ground or above ground to produce baseload electricity with no CO2 emissions and no high water use would be a stunning achievement.

If properly handled it could potentially replace every coal fired power station in the world and be one of the most far reaching ways of tackling greenhouse gas emissions at a cost effective price.

The new shale developments ? I can see a long lead time and a lot of development costs in that project - but then there is the potential value of 8bboe. And this is in a world that rapidly reaching peak oil. It is also worth appreciating that the UCG technology is probably a fair way down the track in terms of turning oil shale into flowing oil. It might only take a few tweaks to get this operational.

I think the mechanism of (metaphorically) splitting the company into three divisions makes good organisational sense. It then requires each division to have the talent and working capital to grow their babies. But in the bigger picture they are part of a coherent plan.

The possible log jam could come at executive decision making levels. How many processes can Peter Bond be involved in at once ? Are there other effective decision makers in the company who can be the final go to man ?

Finally however the one thing we do want to see is positive cash flow ASAP from the American oil fields (or our own if we strike it lucky!!)
 
The main reason I'm not overly excited about shale is simply that there's heaps of it around and nobody else really wants it.

Locally, there's a lot in Qld and also known deposits in NSW, SA, WA and Tas. That's to the point that it's a waste by-product of another mine in SA that is simply disposed of as waste. And in Tas there's so many known deposits that it's beyond a joke really - there's even a unique type with the official (internationally recognised) name of Tasmanite. Looking futher afield, there's massive amounts of the stuff in the USA and other countries have significant reserves also, including Russia.

But with the sole exception of Estonia which relies heavily on oil shale burned directly to generate electricity (in the same manner as coal - used "as is" without extracting any actual oil), it's not a major energy source anywhere else.

A few of the major oil companies had a go at setting up production in the US but couldn't get it working in a profitable manner (after also making it safe and environmentally acceptable) so they abandoned it. Likewise there was an operating plant in Qld that in due course closed, largely due to persistent production problems and associated environmental issues.

Meanwhile it's still a waste product in SA and here in Tas the only interest has been from various government organisations who thought it worthwhile to document the resource for the sake of it. Nobody actually wants the stuff.

Now, maybe Linc are really onto something but if it was going to be easy then I have to ask myself why doesn't someone like BP or Shell (or BHP or Rio Tinto) want it? Surely they'd at least have bought rights to the reserves or something like that if they thought there was a viable way of using it?

So in short, finding oil shale doesn't excite me in the slightest. If they could demonstrate a practical, safe and profitable way of using it then that would be another story. But simply finding shale is a bit like saying you just found a heap of sand - so what? Given that nobody else seems to want it, simply buying up existing known oil shale deposits ought to be fairly easy and cheap.

I still hold a small quantity of stock as a somewhat speculative investment, but I'm increasingly worried about what their actual business plan is over the long term.
 
Comment from my mate Greg regarding Linc's supposed plan to burn oil shale in situ:-

Can't see how that would work as shale has less carbon than coal. Eg about 7pct max in shale. Energy input would be huge.
Click to expand...

Hmmm! lets hope the newspaper got it wrong and it wasn't Mr Bond losing his touch on reality.

Greg also joked Linc are drilling in the wrong place! They should have tried Blackpool, England http://www.worldoil.com/Largest_UK_shale_find_claimed.html.

I too, echo Smurf in that they have diversified too much too soon. I am rather scared they did this because they cannot bring their wonderful Coal to Liquids to commercial scale??

Last we heard was that a team was scouring Asia to find a place to build the necessary CTL modules, saving money on the expensive costs of building bits in Australia. Perhaps if they had saved cash on adding bells and whistles to the coal sale and buying back shares http://www.lincenergy.com/data/asxpdf/ASX-LNC-350.pdf, they would have had enough cash to build the bloody plant in Oz and be half way through the project by now.

Very frustrating but even more so as I have also, on several occasions, sent Linc links to a UK company that already has a scalable gas to liquids processer they are rolling out at a commercial scale http://www.oxfordcatalysts.com/. Oxford Catalysts also have an existing catalysts business that could seriously add to Linc's commercial capabilities and further their claim to a new niche market! Current Market Cap of OCG is just over GBP 54 million based on 60p per share (todays price).

Oh well, back to my shorting (not Linc, that would be sacrilege - just the world in general)! :horse:

p.s. Currently not a holder in LNC or OCG
 
Linc are either very clever having a buy back now knowing something is in the pipeline in the near future (Teresa) or they are very stupid and naive IMO!!!!
 
mexican said:
Linc are either very clever having a buy back now knowing something is in the pipeline in the near future (Teresa) or they are very stupid and naive IMO!!!!
Click to expand...

Teresa is no surprise package. It is not home yet and needs to be discounted until the money is in the bank but it seems fairly solid.

But that aside LNCs cash assets and royalty deals with Adani are probably worth the current SP. But in the current market situation we are close to panic selling where there will be no consideration of nominal values and very few buyers.

Trying to put a floor under LNC's SP makes sense in terms of supporting the thousands of shareholders who are still leaving their money in the company. And again, on the current cash position and royalty assets it seems a good value purchase.
 
Mr Z said:
FWIW 27.5% of yesterdays turnover was short selling. They are leaning on lots of commodity stocks here. I'd have thought it is over done generally, covering could provide some motivated buying.

View attachment 44714
Click to expand...

Thanks for that. Very illuminating.

I'm wondering how the range and volume of short selling compares to more settled times? Certainly seems like a factor in helping drive shares down even further.

__________________________________________________________________

Re LNC share support/buyback program. What Peter Bond would obviously like to see is a couple of institutions recognise that LNC looks like a safe, excellent, long term buy and therefore decide to start buying into weakness at the current levels. (Which is what the company is effectively doing at the moment..)

Rather than putting orders in for 1m shares and force the price up they simply decide to accumulate stock as people lose their nerve.
 
Not that I chart it but my sense is that we are very much at the upper limits in terms of % turnover sold short. I should start collecting and charting the data.

 
Some members may be wondering how the highest price of share buybacks is calculated as per Rule 7.33 as quoted in the LNC daily announcements.

I've set up a new thread in "The beginners lounge" section of ASF that deals with Chapter 7 of the ASX Listing Rules.

For ease of reference, this is the link to Chapter 7-

http://www.asxgroup.com.au/media/PDFs/Chapter7.pdf

Rule 7.33 states-

"A company may only buy back shares under an on-market buy-back at a price which is not more than 5% above the average market price for securities in that class. The average is calculated over the last 5 days on which sales in the shares were recorded before the day on which the purchase under the buy-back was made."
 
Teresa project (20% of our current LNC DCF valuation) development continues towards 8mt/a of Low Rank
PCI coal production by 2014 (Ref: LNC 8/8/’11). We expect announcements on infrastructure (Port, Rail) in the
next few months. This is likely to add value to project and flush out the buyer of the project in our view. We value
at Teresa at $0.80/share ($409m).
http://www.lincenergy.com/data/analysts_reports/LNC-Analysts-Report-21.pdf


Would that be Wiggins? Yancoal flushed out?


BMA?


[video]http://wicet.com.au/[/video]


Blackwater System

The 2009 QR Coal Rail Infrastructure Plan states that when the currently endorsed projects for
the Blackwater system are completed the track will be fully duplicated between Rocklands and
Burngrove and the network capacity will be in the order of 85Mtpa with the use of 8,000tonne
capacity trains. (The throughput for the Blackwater system in 2009/10 was 58.3Mtpa.)

QR Network has commenced expansion of the Blackwater electrification system.

This work is planned to be completed in 2013, prior to the commissioning of stage 1 of the
Wiggins Island Coal Terminal.

http://docs.google.com/viewer?a=v&q...xB8yHr&sig=AHIEtbSYPKvLT-gfVORxsaYQ9_PpwlV3QA


http://www.google.com.au/url?sa=t&s...2ZXnBw&usg=AFQjCNHu3Vm3ZR-tC76qD3VpO_bJ2Y5KGA


http://www.chdc.com.au/documents/Re...ration_Activity_Emerald_Regio n_Mar_2010.pdf


Refering to the sale.. Did PB say 90 days in August 11?

Was he refering to the FIRB process?

http://www.firb.gov.au/content/notices.asp
Formal notification of a proposal under section 25, 26 or 26A activates a time clock and, if the Treasurer does not take action within 30 days and notify the parties of this action within a further 10 days, the Treasurer loses the ability to either prohibit the proposal or to impose conditions. The normal 30 day examination period may be extended by up to a further 90 days by the issue of an interim order (sections 22 and 25(3)).
 
Nice research Jonathan. Hope you are reading the right chicken entrails.

It's interesting that the "value" for Teresa has been bandied around from $500m to $$600m and now down to $400 m over the last couple of years. Perhaps with the dropping of the Australian dollar in the last month there could be an edging up in price ?

(Lets just get a sale finalised before the merde hits the fan !!)
 
Yes, very informative research, Jonathon.

I have a suspicion that the top bid is from a Chinese group and is awaiting FIRB approval. While the Feds approved the Adani deal without delay, it appears the Chinese situation is different,a la Rio.

The latest LNC ASX announcement on Teresa was made on 8/8/11, a very auspicious date for the Chinese- they opened their Olympics on this date in 2008. In the statement LNC said they had narrowed down the bidders to 4. I seem to recall that it was mentioned they were overseas bidders but I can't find a reference.

Regarding sale price of Teresa, Bas, most references are of $500M gross, but some mention a net amount (after tax) of $400+M. PB once said recently that they had an offer of $500M from a Hong Kong entity suggesting that he was looking for more.

So, my reading of the chicken entrails is that we will have a sale to a Chinese entity for around $600M by 8th November 11, in time for PB to receive many "pats on the back" at the AGM. LOL !!!!
 
Another good day for LNC- S/P up 11c to $2.15. Over the last 3 trading days the S/P is up 32c (16%).
There seems a reluctance by sellers to sell below their preferred price. No doubt the share buyback has had some influence on this. Also more sellers may be confident that the Teresa sale is imminent and therefore are reluctant to sell before it is announced.

These factors appear to have stopped the shortsellers for the moment.
Here are the short sales from 28/9-

28/9 578,012 27.48%
29/9 376012 25.78 %
3/10 459440 29.63%
4/10 300200 22.84 %
5/10 287091 27.73%
6/10 202346 17.34%
7/10 nil
 
I attended the Linc 50 years UCG celebration in Brisbane last night. PB mentioned that they were down to 2 bidders for Teresa. He stated he had to be very careful in what he said and could tell us everything as long as he could keep us in the room until the announcements were made (presumably without mobile phones, i pads, or lap tops) some time in the future.

He did mention that the carbon tax, minerals tax and the Greek debt dramas were the cause of the bidders reassessing their positions on at least 2 separate occasions in recent times.

PB also said they were close to finalising the ERG deal and they could extract approx 6,000 bpd from the ERG fields for several (7 ?)years before using CO2 injection to obtain a similar amount of oil. I think 20M boo was mentioned for each.

The latest AFC model was currently being tested in Germany and the trial will be completed in 90 days. There will be one in Chinchilla early next year. They may use it to supply power to the LNC site. They have no plans to enter the power market in Qld because the cost of power is estimated to be comparably cheap for several years (in part because of CSG which won't be 100% exported).

In response to a question, PB stated "Wait till we have the announcement of the Teresa coal sale before talking about another special dividend. It will be a board decision. Personally I am in favour of it."

Sounds good to me.

All in all it was a great night. Great venue overlooking the river with spectacular views of the Story Bridge, good beers wine and champagne and yummy food.
 
Nice one Mickel. Sounds like a great evening.

Noticed the reference to Greek debt dramas (and obviously the bigger Euro debt picture as well) as a reason for the delay in the Teresa coal sale. Getting a signature and the money on this deal could be touch and go in the present climate.
 
Mickel Thanks for the update. I'm a UK investor and have a significant investment in AFC Energy. I'm actually going to the investors day at AFCs HQ tomorrow. I was just wondering was there anything else said or discussed regarding Lincs future plans with AFC yesterday or any other comments or discussions on AFC? Thanks. Best wishes Jeremy
 
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