Linc Energy

[Boon]

http://infopub.sgx.com/FileOpen/Linc%20E...eID=324934

EBITDAX fell by almost 1/3

Bottomline boosted by sale of royalty that IIRC was lower than expected as well...

Not Vested
GG

Ha-ha! It was a bit of “cheat” really IMO, but debatable – Sale of Royalty was recognized in 1Q2015 (ending 30-Sep-2014) while the first tranche of AUD 90 m payment only come in on 13-October-2014, after the reporting period. 1Q2015 would have been making a loss if the sale royalty were recognized in 2Q2015 (ending 31-Dec-2014) instead. Cash flow wise, there is no difference, the sales proceed were booked under trade receivable.

Linc is relatively a small E&P company. I think Linc is good or may be lucky at E - It managed to get its fingers on a few good assets. But to date, Linc has yet to prove its capabilities in turning any of these good assets into P which could generate positive FCF.

Most of these assets (Clean energy, Sapex shale, Umiat and coal) require substantial capital investments and time to develop. However, disappointedly, Linc doesn’t seem able to grow it production at Gulf Coast – that partly explains the fall in EBITDAX besides other factors such as falling oil price.

Cash flow wise, OCF from operation, excluding financing cost, is positive for the quarter.

Carmichael Royalty had been sold.
Linc is in the process of selling its conventional coal assets.
If the price is right, selling away its O&G business in the USA is not a bad idea.

As at 30 September 2014, Linc has unutilised sources of liquidity amounted to AUD72.9 million. – which is the balance of its cash and cash equivalents at reporting date, excluding the sale royalty. If its conventional coal assets could be sold before year end for another AUD 155 million, liquidity would be further improved. This would put Linc in a position to cope with the potential full redemption of USD 200 m convertible notes by its holders.

If Linc is no good at P, let’s just concentrate on E. “Proven” assets could be sold to others who could manage P better – not a bad business model, I reckon.

Selling assets at “discount” is still ok, as long as there is still plenty left for shareholders after the discount. ha-ha !

Looking forward to positive news on sales of conventional coal assets and positive drilling results from Arckaringa basin.- imagine drilling down 2,345 m ( 8.4 x height of UOB Plaza One)

http://lincenergy.listedcompany.com/news...9TSG.1.pdf

(vested)

[greengiraffe]

Yo Buddy,

I salute your spirit... you are a tough bloke... at least u know what u are toughening out for...

GG

http://infopub.sgx.com/FileOpen/Linc%20E...eID=324934

EBITDAX fell by almost 1/3

Bottomline boosted by sale of royalty that IIRC was lower than expected as well...

Not Vested
GG

Ha-ha! It was a bit of “cheat” really IMO, but debatable – Sale of Royalty was recognized in 1Q2015 (ending 30-Sep-2014) while the first tranche of AUD 90 m payment only come in on 13-October-2014, after the reporting period. 1Q2015 would have been making a loss if the sale royalty were recognized in 2Q2015 (ending 31-Dec-2014) instead. Cash flow wise, there is no difference, the sales proceed were booked under trade receivable.

Linc is relatively a small E&P company. I think Linc is good or may be lucky at E - It managed to get its fingers on a few good assets. But to date, Linc has yet to prove its capabilities in turning any of these good assets into P which could generate positive FCF.

Most of these assets (Clean energy, Sapex shale, Umiat and coal) require substantial capital investments and time to develop. However, disappointedly, Linc doesn’t seem able to grow it production at Gulf Coast – that partly explains the fall in EBITDAX besides other factors such as falling oil price.

Cash flow wise, OCF from operation, excluding financing cost, is positive for the quarter.

Carmichael Royalty had been sold.
Linc is in the process of selling its conventional coal assets.
If the price is right, selling away its O&G business in the USA is not a bad idea.

As at 30 September 2014, Linc has unutilised sources of liquidity amounted to AUD72.9 million. – which is the balance of its cash and cash equivalents at reporting date, excluding the sale royalty. If its conventional coal assets could be sold before year end for another AUD 155 million, liquidity would be further improved. This would put Linc in a position to cope with the potential full redemption of USD 200 m convertible notes by its holders.

If Linc is no good at P, let’s just concentrate on E. “Proven” assets could be sold others who could manage P better – not a bad business model, I reckon.

Selling assets at “discount” is still ok, as long as there is still plenty left for shareholders after the discount. ha-ha !

Looking forward to positive news on sales of conventional coal assets and positive drilling results from Arckaringa basin.- imagine drilling down 2,345 m ( 8.4 x height of UOB Plaza One)

http://lincenergy.listedcompany.com/news...9TSG.1.pdf

(vested)

[greengiraffe]

Adani faces hurdles in Galilee coal bid
ANDREW FRASER THE AUSTRALIAN NOVEMBER 22, 2014 12:00AM

Chairman of the Adani Group, Gautam Adani. Source: News Corp Australia
WHEN the Indian Prime Minister and one of the country’s richest men sat down to breakfast with Campbell Newman at Brisbane’s Customs House on Monday to talk about coal in the Galilee Basin, it wasn’t the first time that the duo had presented to an overseas politician.

Narendra Modi was only elected in May, and his first overseas trip as leader of a trade delegation was to Japan in August, where Gautam Adani was by his side when the two fronted Prime ­Minister Shinzo Abe.

But the relationship between the politician and the businessman goes back quite a way, to more than a decade ago when Modi was governor of Gujarat province in western India, where Adani has constructed the world’s biggest coal unloading port at Mundra with a special economic zone around it which has been the basis for his personal wealth of around $8 billion.

Among other things, Adani runs power stations in India, and wants a reliable supply of coal for them. Hence his preferred model of total vertical integration, which in Australia means that not only does he own the coalmine, but also the railway, the port, the ships that transport the coal back to India, the port in India, the railway and the power station.

Tapping the potential of the Galilee Basin made good economic sense back in 2009 when Adani purchased the Galilee holdings off Peter Bond’s Linc Energy. It was a time when the world coal prices were high and there was a race among miners to get their hands on as much as possible of what was then black gold.

The Galilee is about 200km further inland in central Queensland than the existing coal precinct, the Bowen Basin, but there is no infrastructure to get the coal to port. The existence of good-­quality coal in the area has been known for years — in the late 1980s, Lang Hancock and Joh Bjelke-Petersen hatched a bizarre scheme to sell coal from there to the Romanian dictator, Nicolae Ceausescu. But the extra distance from port always made its development problematic.

In the past few years it has also faced strong protests from the environmental movement over global warming and fears that the development of the port where most of the coal is to be shipped out, Abbot Point, will damage the Great Barrier Reef.

So the breakfast on Monday morning showed very much where the development of the ­Galilee Basin is right now. With banks baulking at funding the ­billions needed to build the mines, railway and upgraded ports facilities necessary for the export of coal from the Galilee to go ahead, it’s the politicians who need it to go ahead who are waving around the money.

Newman said the Queensland government would be prepared to put money into the railway line that Adani proposes building from the Galilee to connect with the network in the Bowen Basin, but he wouldn’t say how much, although “hundreds of millions” was mentioned.

Newman’s backing led to Adani getting a $1bn line of credit from the State Bank of India.

The problem with using government money, at least in democracies, is that with a government you also get an opposition. And in both India and Queensland, the opposition parties smelt a rat. In India, the Aam Aadmi Party called for the country’s Reserve Bank to put the arrangement under scrutiny, saying it was “nothing but a sweet deal for the Adani Group”.

In Queensland, Labor’s Treasury spokesman, Curtis Pitt, said the cost to taxpayers of the support could be more than $1bn for the $2.2bn railway line, and the government had simply “handed over a blank cheque” to Adani.

The Galilee is now well past being a commercial deal, it is a political deal. One of Modi’s key election promises is to give power to all Indians. Consequently, he has a huge vested interest in Adani’s Australian project proceeding so its power stations can send out electricity over the grid to India’s poorest.

And Newman also has a huge vested interest. Queensland has the highest unemployment in Australia as the mining boom winds down, and it will get worse when the construction of three giant LNG export plants at Gladstone — employing 10,000 people with accompanying downstream support — are finished next year. Earlier this year, when looking over the plants at Curtis Island and asked where the workers would go when the work was finished, Newman said “the Galilee”.

But against this political imperative is a commercial reality. When Gautam Adani paid Peter Bond $1bn for the coal in 2009 it was a good deal, but it’s not now. India has coal deposits of its own, mostly mined by Coal India, another government-owned corporation. Energy Minister Piyush Goyal has challenged the company to double its coal production over the next few years, and while this might seem ambitious, there will almost certainly be more coal in India.

Coal from Australia on the Newcastle benchmark is selling for $71 a tonne and, with the added cost of transporting it to India, it would be about $86 a tonne. Coal India’s 12-month average cost published two weeks ago is about $28 a tonne. But the chair of the State Bank of India, Arundhati Bhattachary, told an Indian newspaper this week that coal from Australia was “available” at $48 a tonne — still considerably more than the domestic Indian price.

A few years ago, there were proposals for about 12 projects in the Galilee, but the only ones that now seem active are Adani’s and fellow Indian company GVK. GVK, which is in partnership with Gina Rinehart’s Hancock Mining, is at least 12 months away from a final investment decision.

The other holder of big deposits in the Galilee is Clive Palmer, but he seems to have other things on his mind, and he has had little contact with the government about the matter.

For all the political will that exists for the Galilee to be developed, it still seems economically questionable, to say the least. And the final decision will not be made by politicians, but by business people looking at a bottom line.

[greengiraffe]

Political stars align but funding a big ask for Adani coal project
THE AUSTRALIAN NOVEMBER 25, 2014 12:00AM

Richard Gluyas

Business Correspondent
Melbourne
FUNDING discussions are soon to get under way for Indian company Adani Enterprises’ ambitious, $7.2 billion coal project in Queensland, which means the separation of fact from fiction in the project’s hothouse political environment can only get harder.

A successful Galilee Basin deal is not just critical for Adani. As the nation’s self-appointed coal industry ambassador, Tony Abbott has some serious political skin in the game, as does Queensland Premier Campbell Newman, who will invest taxpayer funds in a 388km rail link to the Carmichael coalmine and dreams of transitioning a 10,000-strong workforce into productive employment on the project.

That’s after they’ve finished the job of pulling together three LNG export plants at Gladstone.

It’s no surprise, then, that reports are starting to emerge of “helpful” calls to potential financiers from various ministerial offices in Canberra, seeking to clarify claims by the environmental movement that the expansion of the port at Abbot Point poses a risk to the Great Barrier Reef.

This to-ing and fro-ing comes at a delicate time. The nation’s biggest coal financier, ANZ Bank, is probably spoken for elsewhere, as it is a financial adviser to Indian conglomerate GVK, the majority shareholder of Gina Rinehart’s rival Alpha coal project, also in Queensland.

As for National Australia Bank, which was originally a joint financial adviser, it’s given up that role, albeit for commercial rather than environmental reasons.

One banker who is no friend of the greens predicted yesterday that it won’t be long before the calls from Canberra start to move to the next stage of active encouragement and subtle arm-twisting.

The stakes in the Adani project are, after all, incredibly high.

New Indian Prime Minister Narendra Modi is close to Adani principal Gautam Adani, one of the country’s richest men whose network of coal-fired power stations will help deliver Modi’s pledge to provide 300 million of his people with an electricity connection.

The circle of influence is effectively completed by Abbott’s special relationship with Modi. Last week, the Indian PM told a joint sitting of federal parliament that Australia was at the centre of India’s vision of a prosperous regional order.

Given the critical importance and high international profile of Carmichael, it’s hard to imagine a greater triumph for the green movement than torpedoing the project by invoking a mortal threat to the reef.

Meanwhile, funding preparations are under way, with an information memorandum for potential backers believed to be quite close.

It’s going to be a challenge to make Carmichael’s economics stack up, given thermal coal prices have plunged 27 per cent this year to seven-year lows and market leaders like BHP Billiton are postponing new projects.

The IM on the project will reportedly divide it into two separate funding deals — $4bn for the mine and $3.2bn for the expanded port and its rail connection.

Opponents have targeted global resources-industry lenders, claiming victory each time a financier says it won’t back the Abbot Point expansion or cites a lack of consensus between the Coalition Government and UNESCO on the future of the reef.

The truth, however, is that a lot of the lenders haven’t been asked by Adani to participate.

Also, the decision to dump the dredge waste from the port expansion onshore rather than in the Great Barrier Reef park could influence UNESCO’s key decision next year on whether the reef is in danger.

Since Adani’s purchase of a 99-year lease on the Abbot Point terminal from the Queensland Government in 2011, there have been “ins” and “outs” in its line-up of backers.

Indian and Australian lenders are sure to play a key role in the looming discussions about the project’s funding.

In March 2012, Adani refinanced its original bridge loan with a $1.225bn, five-year project financing deal provided by Commonwealth Bank, Westpac, NAB, Bank of Tokyo-Mitsubishi, Mizuho Bank and OCBC Bank and Standard Chartered.

CBA and Westpac renewed their exposure in a $750m, five-year loan in October 2013 that partially refinanced the March 2012 facility.

The rest of the facility was refinanced by a $500m, five-year bond arranged by the two, along with Deutsche Bank.

Interestingly, one of the “outs” was NAB, which handed over its position as joint financial adviser to CBA.

Standard Chartered and State Bank of India (SBI) are the other joint advisers.

Last week, Adani signed a memorandum of understanding with SBI, the country’s largest lender. The MOU provides for a $US1 billion credit facility, subject to a detailed assessment of the project.

Adani country head Jeyakumur Janakaraj said the agreement, along with others that were nearing conclusion, would send a clear signal to the market that the project was on track for its first coal shipment to India in 2017.

Carmichael, he said, would deliver 10,000 jobs and $22bn in taxes and royalties to a revenue-starved Queensland government, and help to deliver cost-efficient power in the Indian market.

Janakaraj’s optimism is understandable.

It’s understood that Adani hasn’t given up on any financiers, including NAB and ANZ, believing that all options remain on the table.

But in the current environment and widespread stress in the coal industry, it would be a very big ask indeed to reach a final investment decision at the end of next year and have the mine up and running in two years.

[Boon]

It is still early days, but nevertheless interesting.

The estimated thickness of 143 m is thicker than that of Eagle Ford and Bakken..............

(Vested)
________________________________________________________________________________________________________________

27 November 2014
Linc Energy Finds Oil Shows in its 1st Exploration Well
in the 103 Billion Barrel* Arckaringa Basin
(Arckaringa Basin Drilling Update No.3)
• Oil shows in Stuart Range formation in Pata 1 exploration well, with fluorescence showing Hydrocarbons below 1039m (3408ft) in depth with the shale estimated at 143m (470ft) thick................

http://infopub.sgx.com/FileOpen/2015.11....eID=326193

[specuvestor]

^^ Interesting comparison in this table that shows depth and porosity is superior to Eagle Ford but guess it is much more "scattered" (based on estimated BOE / area) that will affect the lifting cost.

http://www.rigzone.com/news/oil_gas/a/13...n/?pgNum=1

Thanks Boon for these interesting updates

[greengiraffe]

Queensland approves fifth mine for Galilee Basin
ANDREW FRASER THE AUSTRALIAN DECEMBER 03, 2014 12:00AM

THE Newman government has approved a fifth coal mine in central Queensland’s Galilee Basin despite the precinct still not having the necessary infrastructure to export the coal to port.

Queensland’s Deputy Premier and State Development, Infrastructure and Planning Minister Jeff Seeney yesterday said the South Galilee project had been ticked off by the state’s Co-Ordinator General but with 110 conditions attached.

The project is a joint venture between the AMCI Group and Bandanna Energy and is planned to export 17 million tonnes a year.

It is the smallest of the region’s projects to be given the green light by the Newman government, with the four projects already approved each having the capacity to export upwards of 30 million tonnes a year.

Those projects are mines proposed by Indian company GVK and Gina Rinehart’s Hancock Coal, Alpha Coal and Kevin’s Corner, another project proposed by Indian company Adani, the Carmichael Coal Mine and Rail Project, as well as Clive Palmer’s Galilee Coal Project.

Mr Seeney said the construction of the new mine has the potential to create up to 1600 jobs and about 1300 ongoing operational jobs.

The South Galilee Coal Project will be located 12 kilometres southwest of the small town of Alpha and about 180km west of Emerald. It is estimated to have a 33-year operational life.

AMCI is proposing the project will be delivered in three stages. Stage one is the open-cut Epsilon stage where coal will be transported on the Central Western Railway for export through the Port of Gladstone.

While the project has state government approval it still has to receive the necessary federal approvals.

[Boon]

1) A step in the right direction I reckon - focussing on deleveraging of the balance sheet.
2) Not a bad deal - pay 2% more interest cost but Linc gets more flexibility and optionality.
3) Linc should have no problem in full redemption after the sucessful divestment of conventional coal assets (at reasonable price of course)- if that happened, then, all other business segments (with the exception of the conventional O&G business segment in the USA) of Linc would be debt free.

Looking forward to non-core asset divestment news and more positive Arckaringa drilling results. Will see !

(vested)
________________________________________________________________________________________________________________
PROPOSED US$50M REDUCTION & AMENDMENT TO CONVERTIBLE NOTES
• Amendment terms agreed with the holders of a majority in principal amount of US$200 million 7% convertible notes due 2018 (the "Notes"), subject to requisite approval process.
• Key terms: US$50 million redemption to reduce the principal amount of outstanding Notes from US$200 million to US$150 million, the existing noteholders put option to move from 10 April 2015 to 10 April 2016, and a call option will be exercisable by the Company up to 10 April 2016.

Key Terms
The key terms of the proposed amendments are as follows:
1. The Company will redeem US$50m of existing deal at par plus accrued interest.
2. The noteholders' put date is moved back 12 months to 10 April 2016.
3. The Company has an immediate right to repurchase any and all outstanding Notes at a "Make Whole Price" (“MWP”) up to original 10 April 2015 put date subject to a notification period ("1st Call").
(MWP for the 1st Call means par value of the notes plus current accrued interest plus interest that would have accrued but remains unpaid up to 10 April 2015.)
4. After April 2015, the Company has the right to repurchase any and all outstanding Notes at MWP to the new put date subject to a notification period until 10 April 2016 ("2nd Call").
(MWP for the 2nd Call means par value of the notes plus current accrued plus interest that would have accrued but remains unpaid up to 10 April 2016.)
5. Coupon will increase from 7% to 9% per annum paid semi-annually commencing on 10 April 2015 if the notes have not been fully repaid beforehand.
6. The conversion price of the notes will be reset to S$1.3411 immediately upon approval of the amendments.
7. On 10 April 2015, the conversion price will be reset to the lower of 115% of spot reference price (being the average of 10 days VWAP preceding 10 April 2015) or the existing conversion price ("2nd Reset"). The 2nd Reset is subject to a conversion price floor of S$0.77.


Company Commentary
Peter Bond, Executive Chairman of Linc Energy, stated, “The Company is focused on deleveraging its balance sheet and we are delighted to reduce the size of the convertible notes by US$50 million and delay the noteholders put option to 10 April 2016. Importantly, the Company has negotiated a call option until the revised put date to give it the ability to repay the convertible notes at its discretion. This is beneficial given the previously announced discussions that the Company is having with a variety of parties with respect to the divestment of some of its non-core assets”.

“Linc Energy now has the flexibility and optionality to move forward with its strategy in a financially prudent manner. We look forward to updating the market on our operational activity including the current Arckaringa drilling program and our non-core asset sale discussions in due course.” Mr Bond said.

http://infopub.sgx.com/FileOpen/2014.12....eID=327244

[propertyinvestor]

6th update on the drilling of the arckaringa basin doesnt look very hopeful. I wonder if they are drilling the right area...

[Boon]

Linc has announced its 2Q (1H20141231) results and divestment of its conventional coal assets:

Unaudited Second Quarter and Six Months to December 2014 Financial Statements Announcement
http://infopub.sgx.com/FileOpen/Linc_Ene...eID=334932

16 February 2015
LINC ENERGY SELLS ITS CONVENTIONAL COAL BUSINESS TO UNITED MINING GROUP & RETAINS RIGHTS TO A POTENTIAL US$590M IN FUTURE REVENUE
http://infopub.sgx.com/FileOpen/LNC%20se...eID=335162

For the second quarter ended 31 December 2014, the Group has recognized a loss before tax of AUD$165.4 million. This is primarily as a result of an internal impairment assessment recorded against Gulf Coast assets triggered by a downward movement of oil prices during the quarter. It should be noted that a significant percentage of this impairment could be reversed as oil prices improve (under IFRS accounting standards).

An impairment expense of AUD$117.8 million has been recorded for the second quarter 31 December 2014 primarily due to the impact of lower oil prices on the book valuation of the Company’s Gulf Coast and Wyoming assets. The impairment is not driven by a decline in Proved reserve volumes which have not changed materially since the last reserves report.

Net cash (outflow) from operating activities for 1H = - AUD 34.163 million (consists mainly of financing cost)

As at 31 December 2014, unutilised sources of liquidity amounted to AUD 103.7 million which is the balance of cash and cash equivalents at reporting date.

Subsequent to the quarter end, the Company has redeemed USD 50 million (about AUD 61 million) of the Convertible Notes at par plus accrued interest on the 5th January 2015.

The second tranche of sales proceed of AUD 65 million from Carmichael Royalty is due to be received on or before 9 October 2015.

Hence, I don’t see Linc being in any short term liquidity problem – not for the calendar year of 2015 at least - beyond that it is harder to predict..........................

That said, I was a bit disappointed with the terms of the divestment of its conventional coal assets to the United Mining Group – with upfront cash of AUD 5 million only – the rest of the "payment" is in the form of future revenue sharing (royalty) potentially worth USD 590 million – like the Carmichael Royalty, there is lack of certainty on the timing of future cash flow……………………..making valuation very difficult indeed……………..one thing good about the Revenue Sharing Agreement is it does not require any further capital expenditure by Linc.

As I have said before, being an E&P company, if Linc is no good at "P", let’s just concentrate on "E". “Proven” assets could be sold to others who could manage P better – not a bad business model, I reckon.

Selling assets at “discount” is still ok, as long as there is still plenty left for shareholders after the discount.

The revenue sharing business model is not a bad model if Linc does not have to come out with any capital expenditure – as long as there is greater certainty on the timing of cash flow which is critical……..

Well, with the conventional coal assets being “divested” now ………………………..may be the next one should be conventional oil assets in the USA ……………

“Post completion of the Umiat 23H horizontal well in Alaska, the Company received expressions of interest from a number of parties interested in participating in the development of the Umiat project. The Company continues to engage with these parties in confidential negotiations while continuing to progress its permitting and development plans for the field.

During January 2015 (subsequent to quarter), the Company completed a pre-appraisal Project Cost Estimate for the Umiat project using consultants NANA Worley Parsons. The report reinforced the viability of the project, concluding that a development scenario for a 30 year, 50,000 BOPD facility with nitrogen injection, including twenty-four (24) production wells and eleven (11) injection wells requires capital expenditure, net of tax rebates, of approximately US$1bn (2015 US dollars) including contingency.”

May be another potential “Revenue Sharing” opportunity in the making………………….revenue from 50,000 BOPD at USD 55 a barrel is about USD 1 billion a year…………………..interestingly the report reinforced the viability of the project...............wondering what is the cost of production?……………….

Meanwhile, "E" work is still ongoing in Arckaringa Basin- it is still early day to draw any meaningful conclusion………..

(vested) - warning.............high risks counter............