GNE - Genesis Energy

[Beagle]

Monday 3rd Aug is the D day Roger.

Yep, thought it was so as I'm away all day in Napier that day so I thought I'd better rock up and make my TAB investment today, opps meant GNE At least it'll be a quick death if it's coming, hopefully not and we can set sail northwards

[xafalcon]

Monday 3rd Aug is the D day Roger.

That's what we all thought 1st July was supposed to be......

If you change a deadline once, you can change it again. Decision paralysis.

That market has had to endure another month of unnecessary indecision, which has only played into Rio's hand

[sb9]

True, they might very well postpone one more time. Especially seeing that the reporting season kicks off very soon...

[Snoopy]

Time for the first 'base case' variation. The table below assumes all oil is sold at USD55 per barrel. But 56% of Genesis's sales for 2015 are hedged at USD99.60. Assuming everything else is sold at USD55, this gives an average sale price of:

0.56*USD99.60+0.44*USD55 = USD79.98

The exchange rate used is $NZ1 = NZ66c

Year	No. of Oil & LPG	Oil Barrel	Kupe Condensate	Resource Depreciation	Net
	Equiv barrels	Price USD	Revenue	and Amortization	Proceeds
2015	60000	79.98	$72,705,454	$33,381,206	$39,324,248
2016	44000	55	$34,100,000	$31,044,522	$3,055,478
2017	44000	55	$31,713,000	$28,871,405	$2,841,595
2018	44000	55	$29,293,090	$26,850,407	$2,642,683
2019	42000	55	$26,181,820	$24,970,878	$1,210,942
2020	46000	55	$26,668,054	$23,222,917	$3,445,137
2021	44000	55	$23,722,973		$23,722,97
2022	44000	55	$22,062,365		$22,062,365
2023	42000	55	$19,585,363		$19,585,363
2024	44000	55	$19,081,740		$19,081,740
2025	46000	55	$18,552,655		$18,552,655
2026	44000	55	$16,503,797		$16,503,797
2027	42000	55	$14,650,870		$14,650,870
Total	5.86E06		$355,021,183	$168,431,335	$186,679,848
PV per share					$0.19
PV per share (tax paid)					$0.13

FY2015 is now done, although not quite dusted from a dividend perspective. But it is now time to look ahead to the current year.

This case assumes 80% of FY2016 fuel sales are hedged at $US84.50 per barrel. This means we can calculate the average oil sale price, assuming the balance is sold on the spot market at USD55 as follows:

0.8*USD84.50+0.2*USD55 = USD78.60

Year	No. of Oil & LPG	Oil Barrel	Kupe Condensate	Resource Depreciation	Net
	Equiv barrels	Price USD	Revenue	and Amortization	Proceeds
2016	44000	78.6	$45,505,263	$33,381,206	$12,124,057
2017	44000	55	$34,100,000	$31,044,522	$3,055,478
2018	44000	55	$31,713,000	$28,871,405	$2,841,595
2019	42000	55	$28,152,495	$26,850,407	$1,302,088
2020	46000	55	$28,675,327	$24,970,878	$3,704,449
2021	44000	55	$25,508,574		$25,508,574
2022	44000	55	$23,722,973		$23,722,973
2023	42000	55	$21,059,530		$21,059,530
2024	44000	55	$20,510,000		$20,510,000
2025	46000	55	$19,949,092		$19,949,092
2026	44000	55	$17,746,018		$17,746,018
2027	42000	55	$15,753,624		$15,753,624
Total	5.26E06		$312,403,896	$145,118,418	$167,285,477
PV per share					$0.17
PV per share (tax paid)					$0.12

USD/NZD Exchange rate is held constant from the previous example. The exchange rate used is $NZ1 = NZ66c

Result: Compared to the previous years' estimate, the value of Kupe Oil has shrunk by 1cps. This is not unexpected as the resource is depleting as the oil is extracted.

SNOOPY

[Snoopy]

After much cross website surfing I feel I now have a good estimate as to how much GNE are losing/making on their share of the gas output from their shareholding in Kupe. There are quite a few assumptions in the results table I present here. I will go over those later. I will be prepared to rerun my spreadsheet model using different assumptions if others are interested. Below is my assessment of the present value of Genesis's 31% holding in the Kupe gas field.

Year	Kupe Gas	Value	Resource Depreciation	Net
	(GJ)	Received	and Amortization	Proceeds
2015	6.5E06	$48,360,000	$23,018,794	$25,341,206
2016	5.3E06	$36,671,760	$21,407,478	$15,264,282
2017	6.1E06	$39,252,622	$19,908,955	$19,343,667
2018	6.1E06	$36,504,938	$18,515,328	$17,989,610
2019	5.3E06	$29,497,187	$17,219,255	$12,277,932
2020	5.3E06	$27,432,384	$16,013,907	$11,418,477
2021	5.3E06	$25,512,117	$0	$25,512,117
2022	5.3E06	$23,720,269	$0	$23,726,269
2023	5.3E06	$22,065,430	$0	$22,065,430
2024	5.3E06	$20,520,850	$0	$20,520,850
2025	5.3E06	$19,084,390	$0	$19,084,390
2026	5.3E06	$17,748,483	$0	$17,748,483
2027	5.3E06	$16,506,089	$0	$16,506,089
Total	7.17E07	$362,882,518	$116,083,717	$246,798,801
PV per share				$0.25
PV per share (tax paid)				$0.18

That last figure on the right is the important one. Genesis's 31% share of Kupe means that every Genesis share today contains 18c of 'value' directly attributable to the equity holding that Genesis has in Kupe. Because that value is positive, we can conclude that Genesis is making money (not losing money) from the natural gas attributable to their shareholding in Kupe. 18c is the wholesale market value to Genesis. This wholesale gas can be resold, and Genesis can clip the ticket again on this.

Kupe also has rights to all the other partner's gas production from of Kupe. But this gas will have to be bought at a market price from those joint venture partners. How well Genesis utilises this gas is a separate question that I may address later.

Time to revalue the 'gas' part of the Kupe resource from a current financial year perspective.

Year	Kupe Gas	Value	Resource Depreciation	Net
	(GJ)	Received	and Amortization	Proceeds
2016	5.3E06	$39,432,000	$23,018,794	$16,413,206
2017	6.1E06	$42,207,120	$21,407,478	$20,799,642
2018	6.1E06	$39,252,622	$19.908,953	$19,343,667
2019	5.3E06	$31,717,405	$18,515,328	$13,202,077
2020	6.1E06	$33,949,592	$17,219,255	$16,730,337
2021	6.1E06	$31,573,121	$0	$31,573,121
2022	5.3E06	$25,512,117	$0	$25,512,117
2023	6.1E06	$27,307,592	$0	$27,307,592
2024	6.1E06	$25,396,061	$0	$25,396,061
2025	5.3E06	$20,520,850	$0	$20,520,850
2026	6.1E06	$21,965,053	$0	$21,965,053
2027	6.1E06	$20,427,499	$0	$20,427,499
Total	7.00E07	$359,261,032	$100,069,810	$259,191,223
PV per share				$0.26
PV per share (tax paid)				$0.19

Something needs explaining here. Why, when the gas wholesale price used has remained the same, has the value of the gas resource gone up, even though a year's worth of extractions have happened since the last gas field valuation a year ago? The answer is that when scaling my gas production values from the NZOG annual report, the amount of gas forecast to be pumped has increased. Yet the quantity of oil reserves has not increased. I don't fully understand how this can be. But I have to go with the values implied in the NZOG annual report.

SNOOPY

[Traderx]

Tiwai deal done @ current load. MEL with direct contract supported by side deal with CEN. Looks like GNE has got out of "paying" to keep the Tiwai load in the system in the short term at least. My take - good result for GNE.

Disc - small GNE posit

Edit: Note MEL announcement say support from "parties" so there is CEN (announced to market) - who else?

[Xerof]

CEN have only taken 80 of the 172. Still might be other party involved?

but yes, massive news for the sector, southland, Mayor Tim, and Bill English


http://www.nbr.co.nz/article/tiwai-s...ty-jr-p-176519

[Traderx]

CEN have only taken 80 of the 172. Still might be other party involved?

but yes, massive news for the sector, southland, Mayor Tim, and Bill English

edit: no, seems not. CEN get a better price overall, and appear to have 'farmed out' just the 80

Perhaps GNE is involved but just a small amount that is deemed immaterial for the purposes of a market announcement?

[Xerof]

Perhaps GNE is involved but just a small amount that is deemed immaterial for the purposes of a market announcement?

traderx, yes, perhaps so

“While other generators have differing views as to the impact of a smelter exit on their competitive position, Meridian has been able to gain sufficient support from some parties to warrant it covering this extra volume from 2017,” said Mr Binns.

[Cricketfan]

https://nzx.com/companies/GNE/announcements/267833

Genesis Energy Limited announced today that it has signed a contract with Meridian Energy to support the provision of electricity required by New Zealand Aluminium Smelters (Tiwai) with the following key terms:
- 50MW
- Two years commencing 1 January 2017
- Delivery from the Huntly node
“Genesis Energy is pleased that this two year term, provided to support Tiwai and the Southland economy, is a positive solution for all parties while maintaining our own flexibility,” said Albert Brantley, Genesis Energy’s Chief Executive.