TomCo Energy (TOM LN) Shale Oil's New Dawn
Fox-Davies Capital June 13
TomCo Energy – Shale Oil's New Dawn June 2013
Contents Valuation 4 Summary 4 Discount Rate 5 Sensitivity analysis 6 Fox-Davies Company Scorecard 11 Fox-Davies Snapshot Summary 12 Directors & Officers 13 Sir Nicholas Bonsor Director and Non-Executive Chairman 13 Paul Rankine Director and CEO 13 Miikka Haromo Finance Director 13 Oil Shales 14 Classification & Geology 14 Reserves, Resources and Economics 15 Production from Oil Shales 17 The Holliday Block 20 Location & Access 20 Geology 21 EcoShale Capsule Technology 27 Shale Mining, Capsule Construction & Operation 28 Pilot Test and Simplified Process Description 29 Appendix 34 Basis Conditions for valuation 34 General Approach to Valuation 35 Brent/WTI Price Comparison 36 Oil & Gas in the United States 36 Summary of Alternative Oil Shale Technologies 42 Heritage Foundation’s Measurement of Economic Freedom 47 SPE Petroleum Resources Classification Framework 50 Glossary 53 Index of Figures and Tables 58 Research Disclosures 60 Zac Phillips 60 Investment analyst certification 60 Research Recommendations 60 Research Disclaimers 61 Fox-Davies Capital Coverage 62 Oil & Gas 62 Metals & Mining 63 Notes 64
Disclaimer: Important Information 67
Fox-Davies Contact List 68
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TomCo Energy – Shale Oil's New Dawn June 2013
TomCo Energy Shale Oil's New Dawn The Company is awaiting Red Leaf and Total to complete their EPS trial and commercialisation evaluation before proceeding with heavy expenditures. This places
the Company in the most advantageous position, one in which it is best able to NAV: maximise returns. Overall $184mm £118mm Per share 6p EcoShale Technology From The EcoShale process is a hybrid in-situ and ex-situ technology, where the shale is mined and Current Price 456% restored in ground bound capsule, combining the best of both in-situ and ex-situ, resulting in a relatively cheap cost effective solution to accessing the resources. A successful EPS test will de- risk the process and expedite the next stage of TomCo’s development. However, if it is not successful, there are other retorting options available to management.
Stock Data Oil Shale Oil shale is not the same as shale or tight oil. Oil Shales require pyrolysis to liberate the oil. Oil Share Price (p): 1.1p Shale is widespread and where accessible, its principal use traditionally was as a solid fuel. The Market Cap (£mm): 20.2 recent high oil price environment has made oil extraction economic and as such has reignited EV (£mm): 20.5 interest in the pyrolysis of the oil shale for use as a feed stock.
Oil Shale in Uinta The Mahogany shale contains one of the most significant oil bearing series in the Green River Price Chart formation, due mostly to its high organic content. The Green River Formation is pervasive in the Uinta basin which is where TomCo’s Holliday block is located. While there is 1.3trn bbl of 2.00 reserves in the Uinta basin, substantial work is required before a full assessment of the recoverable reserves; work conducted by TomCo identifies 126mm bbl of 2P reserves. 1.75 Current Valuation The current valuation (1.1p per share, £20.2mm - $31.4mm) is not a fair reflection of the value of 1.50 the underlying assets, or the progress that the Company has made in developing its assets but of the fact that there is a hiatus in activity ahead of the announcement of commercialisation by 1.25 Red Leaf (2014) and the start of the Company’s development programme (2015).
1.00 Valuation $184mm (£118mm – 6p) Jun-12 Sep-12 Dec-12 Mar-13 We have valued TomCo’s assets at $184mm (6p), using risk adjusted EMV analysis to account 52 Week Range for the commercialisation risks associated with the EcoShale process; this is some 456% above TomCo’s current price. Should Red Leaf declare commerciality with respect to the EcoShale 0.9p 1.1p 2.0p technology, the valuation should trade towards its un-risked valuation of $321mm (11p).
YE Sep (£mm unless stated) 2012 2013E 2014E 2015E TomCo Energy is an oil shale production company focused Production (m boepd) - - - - on the Holliday block in Utah Revenues 0.01 0.01 0.01 0.01 (United States), where it is targeting the Green River Operating costs (1.00) (0.45) (0.45) (15.44) Formation in the Unita basin, which has resources of 1.3trn EBITDA (1.00) (0.45) (0.45) (7.94) bbl. The Company was PBT (1.57) (0.42) (0.41) (16.04) founded in 1987 and is headquartered in London. Net Income (1.57) (0.42) (0.41) (16.04) EPS (p) (0.13) (0.03) (0.02) (0.96) CFPS (p) (0.09) (0.04) (0.03) (10.64) Source: Company & Fox-Davies
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TomCo Energy – Shale Oil's New Dawn June 2013
Valuation
We have valued TomCo’s assets at $184mm (6p) using risk adjusted EMV analysis. The upside potential from Red Leaf’s declaration of commerciality on its EcoShale amounts to $321mm (11p).
Summary In valuing TomCo Energy we have used a similar approach to that which we use to value conventional exploration assets, namely the EMV approach; we discuss our valuation methodology in the Appendix (General Approach to Valuation – Page 35). However, unlike the valuation of exploration assets, we consider the key risk to be the ability of Red Leaf to be able to convert the relative success of its EcoShale pilot, we discuss the pilot results in the Pilot Test and Simplified Process Description section (Page 29), into a commercial application; the valuation of the Company’s asset is summarised in Figure 1 and Table 1 is broken down further in Table 2; the basis for our valuation is provided in Table 14.
Figure 1 – Breakdown of FDC’s NAV
Breakdown Risked NAV (%) Contribution ($mm)
-1.9% 200
150
187 100
50
- (4) 98.1%
Core Development Exploration (50) & Appraisal Core Development Exploration & Appraisal
Source: Company & Fox-Davies Data
Table 1 – NAV Valuation Summary
Holliday Block Value
Un-risked NAV ($mm) 324.4 Risk Capital ($mm) 2.1 Chance of Success (%) 58% Risked NAV ($mm) 187.2 Source: Company & Fox-Davies Data
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Table 2 – NAV(D) Un-risked and/Risked Valuation Summary
Net
Reserves NAV(D) Block (mm bbl) ($mm) ($/boe) (p/share) Un-risked Risked Un-risked Risked Un-risked Risked Un-risked Risked
Core Balance Sheet Items - - (4) (4) - - (0.1) (0.1) Core NAV - - (4) (4) - - (0.1) (0.1)
Development & Appraisal Utah Holliday Block 126 73 324 187 2.6 2.6 11.0 6.3
Development & Appraisal NAV 126 73 324 187 2.6 2.6 11.0 6.3
Exploration ------
Exploration NAV ------
Total NAV 126 73 321 184 2.5 2.5 10.9 6.2 Source: Company & Fox-Davies Data
Discount Rate In assessing the value of an oil company’s asset we start with a basic discount rate of 10% (“Base Rate”), thereby allowing us to value the oil in the ground, preferring to use sensitivity factors such as production rates, costs and fiscal regimes. In providing our overall Company risk adjusted NAV(D), however, we account for two additional risk premiums by adding to the discount rate; the two additional premiums are: (i) Geopolitical Risk; and (ii) Business Execution Risk.
The assessment of Geopolitical and Business Execution Risks are difficult to quantify as it is subjective and varies from person to person and at what point in time you ask. It is a subjective assessment of a management’s ability to execute its business plan effectively and other operational considerations. For example, an experienced management with a solid track record in benign onshore location near infrastructure will have a higher CoS than an identical asset operated by a less experienced management, in a country with a hostile government in an offshore setting where there is no infrastructure. The overall discount rate is a product of the Base Rate, Geopolitical Risk and Business Execution Risk.
Consequently, we have provided a ready reckoner (Table 3) which details the impact of the variation in the contribution that Geopolitical Risk and Business Execution Risk premiums has on the overall discount rate; to the numbers below the Base Rate must be added to arrive at the overall Discount Rate. This summarises the impact that assigning various levels of geopolitical risk has on TomCo’s valuation; we are currently carrying no geopolitical risk for the United States.
Table 3 – Impact of Variation in Geopolitical Risk and Business Execution Risk Premium on NAV(D)
Business Risk Premium NAV(D) ($mm) (3.0%) (2.0%) (1.0%) - 1.0% 2.0% 3.0%
(3.0%) 488 413 351 298 254 216 184 (2.0%) 413 351 298 254 216 184 156 (1.0%) 351 298 254 216 184 156 132 - 298 254 216 184 156 132 112 1.0% 254 216 184 156 132 112 94 2.0% 216 184 156 132 112 94 79
Geopolitical Risk Premium 3.0% 184 156 132 112 94 79 66 Source: Fox-Davies estimates
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Sensitivity analysis In assessing the value of the Company, we have recognised all of the key parameters that we believe impact the valuation, not only the oil price and capital costs but others such as: (i) timing of development; (ii) Fischer Assay Yield; and (iii) technology risks.
Oil Price We base our oil price deck on Brent, and apply a discount or premium to it, to arrive at a local price; for WTI prices, we have assumed that ~$10/bbl is appropriate, and in line with the recent average discount. Apart from looking at the impact of a number of price decks (flat nominal prices), we have also looked at three price scenarios, these are shown in Figure 2 and are described as follows. The impact that oil price has on NAV(D) is summarised in Table 4.
Figure 2 – Oil Prices Used in the TomCo’s Valuation
210
190
170
150
130
110
90
70 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032
FDC Curve Forward Curve EIA Reference Case
Source: Bloomberg & Fox-Davies Data
1. Forward Oil Price Curve Nominal: forward oil prices were provided by Bloomberg from the International Commodity Exchange (“ICE”); the final forward price quoted is then maintained flat thereafter (the prices are as at 11th June 2013);
2. FDC Curve: Price declines from $110/bbl in 2013, $105/bbl in 2014 and $95/bbl in 2015 onwards; there is no price inflation thereafter.
3. EIA Reference Case: The EIA reference case is taken from the Energy Information Administration’s (“EIA”) Annual Energy Outlook 2013 Reference Oil Price Case, in which the Brent spot oil price decreases from $111/bbl in 2011 to $96/bbl in 2015. After 2015, the Brent price increases, reaching $163/bbl in 2040 in real terms (or $269 per barrel in nominal dollars).
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Table 4 - Impact of Variation in Oil Price on NAV(D)
Oil Price
70 3 80 73 90 147 100 221 FDC Curve 184 Forward Curve 184 EIA Reference Case 725 Source: Bloomberg & Fox-Davies Data
Capital Costs In assessing the capital expenditure it is important to differentiate between those expended for the central processing facility and those for the individual capsules. In our valuation, the capital expenditure for the central processing facility is depreciated over the term of the project. The capsule expenditure costs, however, are expensed as incurred, due to the fact that they have no useful value beyond the production period (12 – 15 months).
Table 5 – Impact of Variation in Capex on NAV(D)
Variation From Base Capex Case (% inflation) NPV(D) ($mm)
(20%) 249 (10%) 216 - 184 10% 151 20% 118 30% 86 Source: Fox-Davies Data
As can be seen in the above, the project is highly sensitive to variation in capital costs. We believe the current costs to be reflective of the fact that the EcoShale Capsule’s construction is on a piecemeal basis, hence not benefitting from economies of scale and repeated construction. Against this, however, we also acknowledge that the technology and construction processes are still in their infancy and as such are under constant review.
Development Delays The Company’s current timetable (Figure 3), currently anticipates the first capsule coming online in January 2016, and includes the completion of the planned early production system (“EPS”), which is being conducted by Red Leaf and Total.
In assessing the impact of delays, we have studied the impact on the value of the first capsule date. As can be seen in Table 6, delaying the first capsule by 2 years results in a decline in 13% in the project’s economics, however, the majority of this movement is accounted for in the impact of the discount rate, with a minor impact due to the additional year of fixed Opex costs at current levels.
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Figure 3 – Timetable to First Capsule
2013 2014 2015 Activity 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
JORC upgrade to Probable Reserve from Measured Resource Permitting applications lodged for large mining and water discharge DOGM approval Notice of Intention to Commence Large Mining Operations DWQ approval Groundwater Discharge Permit Red Leaf/Total JV EPS construction, site mining & commissioning Red Leaf/Total JV EPS heating cycle & commercial production TomCo Holliday Block full development fund raising Red Leaf/Total JV submit plan for continuous commercial development Source: Company & Questerre Energy
Table 6 – Impact of Variation in Date of First Capsule on NAV(D)
Variation in From Base Capex case (% inflation) NPV(D) ($mm)
January 2016 184 July 2016 174 January 2017 163 July 2017 155 January 2018 165 Source: Fox-Davies Data
Initial Capsule Construction Rate We have assumed that from the first year of operation the Company constructs 5 capsules per year. However, we are cognisant of the fact that the EcoShale as still in the development stage, and the construction rate in the first year could be below the expected 5 capsules per year. To account for this we have studied the impact that first year
Capsule Construction rate has on NAV(D); this is illustrated in Table 7.
Table 7 – Impact of First Year Capsule Construction Rate in NAV(D)
First Year Capsule Construction Rate (Capsules per Year) NAV(D) ($mm)
1 146 2 153 3 158 4 173 5 184 Source: Fox-Davies Data
Once the initial teething troubles have been overcome, we believe that the Company will be able to increase the number of capsules that can be constructed annually. While for the base assumption we assume that the capsule construction continues at a pace of 5 capsules per year, we have studied the impact that a potential ramp-up in capsule construction rate has on NAV(D); this is summarised in Table 8.
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Table 8 – Impact on NAV(D) by Changes in Capsules per Year and Year of Programme Start
Commencement of Step-up Programme
2020 2022 2024 2026 2028
5 184 184 184 184 184 8 340 306 280 247 Per Year Capsules 10 340 306 280 261 247 Source: Fox-Davies Data
Technology Risks The EcoShale process, which we describe in more detail in EcoShale Capsule (Page 27), is at the pre commercialisation stage. The next stage for Red Leaf is to resolve the issues that arose in the Pilot test (discussed in the section Pilot Test and Simplified Process Description – Page 29) and develop a commercial solution.
To reflect this risk, we have used a similar approach to that which is employed to value conventional exploration assets, namely the EMV approach; we discuss our valuation methodology in the Appendix (General Approach to Valuation – Page 35).
Unlike the valuation of exploration assets, we consider the key risk to be the ability of Red Leaf to be able to convert the relative success of its EcoShale pilot, we discuss the pilot results in the Pilot Test and Simplified Process
Description section (Page), in to a commercial technology that can be applied. We measure Technology Risk (RT) in terms of Chance of Success, calculated as 1 – RT; the impact of the variation in Technical Risk in Table 9.
Table 9 – Variation in NAV(D) with Technology Risk
Technology Risk (Chance of Success) NAV(D)
50.5% 159 53.0% 167 55.5% 175 58.0% 184 60.5% 192 63.0% 200 65.5% 208 Source: Fox-Davies Data
Effective Capsule Yield
We assume that Effective Yield (“YE”) is a function of the Fischer Assay Yield (“YF”) and Mining Loss (“LM”). Mining Loss is measure of the proportion of the theoretical production that is either consumed by the process, or lost to the system, but either way is deemed unrecoverable. The Fischer Assay is a measure of the recovery of hydrocarbons from wt an oil shale, it a measured in a % yield on a weight basis (% /wt); the definition of the Fischer Assay test is provided in Effective Capsule Yield (Page 9); the impact that variation in Mining Losses has on Effective Yield is illustrated in Table 10.
1
In assessing the impact of recovery we have made a number of assumptions, that: (i) the size and construction of the capsule is unaltered; (ii) the number of capsules remains constant; and (iii) the variation in the Mining Losses yield impacts the recovered hydrocarbons alone, and not any of the operating costs (which we believe is dependent on the amount of shale); the impact of variation in Fischer Assay is illustrated in Figure 4.
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Table 10 – Impact of Mining Losses on Effective Yield
Mining Losses (%) Effective Yield (%)
10% 72% 15% 68% 20% 64% 25% 60% 30% 56% 35% 52% Source: Fox-Davies Data
Figure 4 – Impact on Breakeven Point with Variation in Oil Price and Fischer Assay
X - Oil Price ($/bbl); Y – NPV(D) ($mm); Z – Fischer Assay (% of Fischer Assay)
Source: Fox-Davies Data
As would be expected, the breakeven oil price (top of red band Figure 4) increases in line with rising mining losses; assuming no Mining Loss a breakeven price of ~$63/bbl. Under our base case assumptions, where we assume a 10% Mining Loss, the breakeven point rises to $69/bbl.
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Fox-Davies Company Scorecard Category 5-Star Rating Comment
Exploration The Green River Formation, which contains the target shale series, has been widely studied and is well understood. As a result, we believe that there is little in the way of exploration upside in the traditional sense. Development The Company’s production technology (EcoShale Capsule) still needs to be verified on a commercial scale. Nevertheless, the risks are minimal as Red Leaf and its partner Total are assuming the costs associated with the commercialisation trials. Production Given that the EcoShale Capsule still needs to be verified on a commercial scale, the risks are minimal as Red Leaf and its partner Total are assuming the costs associated with the commercialisation trials. Reserves We believe that the Company’s reserves are better defined and quantified than would otherwise be expected due to the nature of resource base and extraction method. While we have identified little in the way of exploration upside, development of the technology base, and higher oil prices will result in a greater proportion of the resources in place being classified as economically recoverable. Geopolitical risk The US is one of the more stable countries geopolitically. While there are a number of issues that will face the operations ahead of the start of mining operations, the fact that Utah is pro-natural resources supports a relatively low geopolitical risk environment. Earnings Given the hiatus to first production, coupled with the fact that the technology needs to be commercialised, we believe that it is too early to award any stars for the earnings category. However, we acknowledge that once production starts, that it will be able migrate quickly to a cash flow positive position. Management Given the significant mining element associated with this oil and gas project the management team is well suited to executing its development project. Funding With low activity until commercialisation, the Company has reduced all costs to focusing on attaining such approvals and permits to allow it to start mining and producing from its Holliday block once the technology has been verified commercially. Market Support The shareholder base reflects the mining nature of the project, with strong support amongst its largest shareholders.
Overall The Company is awaiting Red Leaf and Total to complete their EPS trial and commercialisation evaluation before proceeding with heavy expenditures. This places the Company is the most advantageous position, one in which it is best able to maximise returns. Source: Company & Fox0Davies Data
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Fox-Davies Snapshot Summary
Income Statement Cash Flow
YE Sep (£mm unless stated) 2012 2013E 2014E 2015E YE Sep (£mm unless stated) 2012 2013E 2014E 2015E
Gas (mm cfpd) - - - - Operations (1.57) (0.42) (0.41)(13.95) Oil (m bpd) - - - - Working Cap (0.06) (0.02) (0.00) 0.30 Total Production (m boepd) - - - - Other 0.65 0.03 0.054.87 Revenue 0.01 0.01 0.01 0.01 Operating cash flow (0.98) (0.41) (0.37) (8.78) Cost of Sales (0.00) (0.00) (0.00) (7.50) Servicing of Finance (0.01) 0.03 0.04 (0.57) Net Revenues 0.01 0.01 0.01 (7.49) Group cash flow (0.98) (0.38) (0.32) (9.35) Operating Costs (1.01) (0.46) (0.46) (0.46) Net Cash Income (0.98) (0.38) (0.32) (9.35) Exploration Costs - - - - Net Cap Ex (0.15) (0.16) (0.16) (164.27) EBITDA (1.00) (0.45) (0.45) (7.94) Net Acquisitions (0.30) - - - DD&A (0.00) (0.00) (0.00) (5.44) Net Divestments - - - - Exceptional Items (0.56) 0.00 0.00 - Net Cash Flow (1.44) (0.16) (0.16) (164.27) EBIT (1.56) (0.45) (0.45) (13.38) Issue of Shares 0.48 1.84 - 150.00 Interest (0.01) 0.03 0.04 (0.57) Net Movement in Debt - - - 50.00 EBT (1.57) (0.42) (0.41) (13.95) Other 0.01 - -- Tax - - - - Net financing 0.49 1.84 - 200.00 Net Income (1.57) (0.42) (0.41) (13.95) Net Cash Flow (1.94) 1.30 (0.48) 26.39 Minorities - - - - Source: Fox-Davies
Dividends - - - -
Retained Income (1.57) (0.42) (0.41) (13.95) Ownership EPS (p) (0.13) (0.03) (0.02) (0.84) Top 5 Shareholders Source: Fox-Davies
Statement of Financial Worth
YE Sep (£mm unless stated) 2012 2013E 2014E 2015E
Intangable Assets 8.10 8.25 8.41 0.62 Tangable Assets 0.01 0.01 0.00 168.75 Fixed Assets 8.10 8.26 8.42 169.38 Cash 0.41 1.69 1.21 27.59 Investments Debtors Current Assets 0.41 1.69 1.21 27.59 Total Assets 8.52 9.95 9.63 196.97 Kenglo One Creditors (0.04) (0.02) (0.02) (0.32) Dominic Redfern and Sarah Cooke* Finance Debt - - - (50.00) Mark Donegan Other - - - - Altima Global Special Situations Liabilities (0.04) (0.02) (0.02) (50.32) Windsor Capital Partners Net Book Value 8.47 9.93 9.61 146.65 Source: Company Source: Fox-Davies
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Directors & Officers Sir Nicholas Bonsor Director and Non-Executive Chairman Sir Nicholas was a member of British Parliament from 1979 to 1999 where he specialised in foreign affairs and defence, and was chairman of the Defence Select Committee from 1992 to 1995 and Minister of State at the Foreign Office from 1995 to 1997. Sir Nicholas is currently appointed as a Non-Executive Deputy Chairman and Director of London Mining plc and Chairman of Metallon Gold Corporation and has been Chairman of Egerton International Ltd since 2004. Sir Nicholas has served on the board of several other companies, including Blue Note Mining Inc. (Canada) from 2006 to 2008 and Cassidy Gold Corp. (Canada) in 2012. He is a Deputy Lieutenant of Buckinghamshire, a freeman of the City of London (1988), a member of the Chartered Institute of Arbitrators and a fellow of the Royal Society of Arts. Sir Nicholas practiced as a barrister specializing in regulatory and commercial law from 1967 to 1975 and from 2003 to 2010. Sir Nicholas was appointed to the Board in March 2010.
Paul Rankine Director and CEO Paul Rankine is a mining finance professional with 28 years of mining and investment experience. He has served as President and Chief Executive Officer of TSX-V listed Cassidy Gold Corp. from October 2011 to July 2012, as the Chief Executive Officer of Zambezi Nickel Ltd from May 2005 to February 2007 and a director of Stellar Diamonds plc from August 2007 to October 2010, both companies listed on the London Stock Exchange's AIM. Paul has 16 years as a mining equities financial analyst and consultant predominantly with JP Morgan Investment Management, Citigroup Asset Management and Altima Partners. This is supported by strong financial and analytical skills from an MBA from the University of Cape Town and an MSc in Mineral Economics from the University of Witwatersrand. In addition, he has 12 years international mining experience in both underground and open pit mining as a professional mining engineer. Paul is a fellow of the Southern African Institute of Mining and Metallurgy and a member of the Society of Mining Engineers Inc. in the USA. Paul was appointed to the Board in September 2011.
Miikka Haromo Finance Director Miikka has 16 years of experience in M&A, fundraising and asset management. Previously he worked as a partner at Middle Europe Investment (Infrastructure Fund) and as a corporate finance director at Collins Stewart Ltd and Williams de Broe (a member of ING Group), in London. Previously he set up and managed BBL Baltic States fund under the BBL/ING fund umbrella. He has Masters in Finance and Applied Mathematics from Helsinki University of Technology and is a CFA charterholder and member of the CFA Society of the UK. Miikka was appointed to the Board in March 2011.
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Oil Shales
Oil shale is not the same as shale or tight oil. Oil Shales require pyrolysis to liberate the oil. Oil Shale is widespread and where accessible, its principal use traditionally was as a solid fuel. The recent high oil price environment has made oil extraction economic and as such has reignited interest in the pyrolysis of the oil shale for use as a feed stock.
Oil shale is an organic-rich fine-grained sedimentary rock containing kerogens, solid organic matter, from which liquid and gaseous hydrocarbons called shale oil can be liberated by pyrolysis. This should not be confused with oil produced from shales which is produced using down hole technologies such as fraccing due to the shales’ low permeabilities, Bakken, Pierre Shale, Niobrara and Eagle Ford shales being examples.
While shale oil is a substitute for conventional crude oil extracting shale oil from oil shale is more costly than the production of conventional crude oil both financially and in terms of its environmental impact. However, despite the higher cost, the prevailing oil price environment has precipitated renewed interest in oil shale, and considerable investment in research on pyrolysis technology that has minimal impact on the environment.
Classification & Geology Classification Most oil shales are fine-grained sedimentary rocks containing relatively large amounts of organic matter known as “kerogens.” Oil shales vary considerably in their mineral content, chemical composition, age, type of kerogen, and depositional history and not all oil shales would necessarily be classified as shales.
The most convenient definition of oil shale is a shale series whose organic matter has low solubility in organic solvents and the generation of liquid organic products on thermal decomposition. This led petrologist Adrian Hutton (“Hutton”) to state that the term “oil shale” was not a geological or geochemically distinctive rock but rather an economic term used to cover a wide range of rocks with different origins and ages. Hutton developed a workable scheme for classifying oil shales on the basis of their depositional environments and components of the organic matter. He divided the organic-rich sedimentary rocks into three groups: (i) humic coals carbonaceous shales; (ii) bitumen-impregnated rock (tar sands and petroleum reservoir rocks); and (iii) oil shale, summarised in Figure 5.
Figure 5 – Oil Shale Classification
Simplified Hutton Classification System
Organic Rich Sedimentary Rocks
Bitumen Humic Coals Oil Shales Impregnated Rocks
Petroleum Terrestrial Lacustrine Marine Reservoirs
Cannel Coal Lamosite Torbanite Kukersite Tasmanite Marinite
Source: Fox-Davies Data
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While oil sands originate from the biodegradation of oil, heat and pressure have not (yet) transformed the kerogen in oil shale into petroleum, which means that its maturation does not exceed the early mesocatagenetic stage. While oil shales are rich in organic matter, overall they contain less organic matter than coals; commercial grades of oil shale the ratio of organic matter to mineral matter lies approximately between 0.75:5 and 1.5:5.
The composition of oil shales’ organic matter is also different from traditional fossil fuel sources. This is measure by the “H/C Ratio”, which is a measure of the ratio of hydrogen to carbon. Oil shales have an H/C Ratio which is 1.2 to 1.8 times lower than for crude oil, but is 1.5 to 3.0 times higher than observed in coals.
Geology Oil shales were deposited in a wide variety of environments, including freshwater to saline ponds and lakes, epicontinental marine basins and related subtidal shelves. They were also deposited in shallow ponds or lakes associated with coal-forming peat in limnic and coastal swamp depositional environments. It is not surprising, therefore, that oil shales exhibit a wide range in organic and mineral composition.
Most oil shales were formed under dysaerobic or anaerobic conditions that precluded the presence of burrowing organisms that could have fed on the organic matter. Many oil shales show well-laminated bedding attesting to a low energy environment free of strong currents and wave action. In the oil shale deposits of the Green River Formation in Colorado and Utah, numerous beds, and even individual laminae, can be traced laterally for many kilometres. Turbiditic sedimentation is evidenced in some deposits as well as contorted bedding, microfractures, and faults.
Most oil shales contain organic matter derived from varied types of marine and lacustrine algae, with some debris of land plants, depending upon the depositional environment and sediment sources. Bacterial processes were probably important during the deposition and early diagenesis of most oil shales, and are believed to have caused the creation of methane, carbon dioxide, hydrogen sulphide, and ammonia. These gases in turn could react with dissolved ions in the sediment waters to form authigenic carbonate and sulphide minerals such as calcite, dolomite, pyrite, and rare authigenic minerals as buddingtonite, and ammonium feldspar.
Reserves, Resources and Economics Resources As source rocks for most conventional oil reservoirs, oil shale deposits are found in all world oil provinces. Estimates suggest that there may be up to 5.2trn bbl of resources, but this figure is believed to be conservative as the oil shale resources of some countries are unreported, while some significant deposits have not been fully studied. The most significant accumulations occur in the United States in the Green River, Piceance and Uinta basins in the US (Figure 6), and a significant amount of work has been conducted into the recoverability of the hydrocarbons within the shales; a summary of the global distribution of the shale series is provided in Table 11.
As with traditional petroleum accumulations, it is important with respect to oil shale to distinguish between resources and reserves, the key differentiating factor being that reserves are those economically recoverable resources that are economic.
Since extraction technologies develop continuously, the amount of technically recoverable hydrocarbons is constantly being revised upwards, while the fluctuation in oil prices and outlook for operating costs (mining costs and processing costs), which is also a function of the process utilised (see Production from Oil Shales - Page 17), influences the proportion of those resources which can be classified as reserves. The SPE-PRMS provides a detailed definition, which is provided in the Appendix (SPE Petroleum Resources Classification Framework Page 50).
Reserves In order to convert from in place resources to potential recoverable reserves, the modified Fischer assay (“Fischer Assay”) is typically used. The Fischer Assay uses a crushed small sample of the oil shale (100g) and heats it to 500°C for a period of time and collecting the hydrocarbons that are pyrolysed.
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Figure 6 – General Location of the US’ Principal Oil Shale Basins
Map Showing the Piceance/Uinta and Green River Basins
Source: USGS, ESRI & Fox-Davies Data
Table 11 – Summary of Oil Shale In Place Resources
Resources Proportion of World Total Country (bn bbl) (%)
Africa 159 3.0% Asia 384 7.3% China 354 6.7% Other 30 0.6% Asia Pacific 32 0.6% Europe 368 7.0% Italy 73 1.4% Russia 248 4.7% Other 47 0.9% Middle East 38 0.7% Jordan 34 0.6% Other 4 0.1% North America 4,215 79.9% US: Piceance Basin 1,500 28.4% US: Green River Basin 1,400 26.5% US: Uinta Basin 1,300 24.6% Other 15 0.3% South America 82 1.6%
Total 5,278 100.0% Source: USGS & Fox-Davies data
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wt The results are expresses as a % /wt basis yield, which is then converted into a gallon per ton (or tonne) of shale basis. According to the USGS a yield in excess of 15gal/ton is considered commercially viable, but this number falls to 6gal/ton in some areas due to low mining costs.
While the in place resources significant, only a handful of oil shale series have been studied sufficiently to allow for an accurate assessment of economic reserves. The last estimate put reserves at 1.0trn bbl which is on a par with the latest traditional petroleum operations Proven reserves of 1.4trn bbl (2011). It is important to remember that the estimate of economic reserves is constantly being revised according to the impact of technology in accessing the respective resources and the prevailing price environment, all of which impact the economics.
Development to date has been supported by non-commercial drivers, such as respective governments’ desire to increase energy stability and security by encouraging the use of domestic resources rather than imported energy, either by way of tax incentives, grants or making imported energy more expensive, using tariffs and the like.
Economics Commercial development has been sporadic and limited to the periods when crude oil prices have been high. The United States Department of Energy estimates that the ex-situ processing would be economic at sustained average world oil prices above $54/bbl and in-situ processing would be economic at prices above $35/bbl, assuming and an average IRR of 15%.
In its World Energy Outlook in 2010 (“WEO 2010”) the International Energy Agency estimated, based on the various pilot projects, that investment and operating costs would be similar to those of Canadian oil sands, which implies a cost of $60/bbl; the WEO 2010 also indicates that a number of Chinese operators were suggesting breakeven oil prices of $25/bbl, but it was not clear on what basis this was on. It is interesting to note that our analysis indicates that depending on the capsule yield (as a percentage of Fischer Assay), the Company will breakeven at $54 – 73/bbl (100 – 70% Fischer Assay) (Page 6).
Production from Oil Shales Most exploitation of oil shale involves mining followed by shipping elsewhere, after which the shale is burnt to generate electricity, or undertake further processing. The most common methods of surface mining involve open pit mining and strip mining (Figure 7), which remove most of the overlying material (“Overburden”) to expose the shale series, which is then extracted; this mining method is only practical when the shales are near the surface. Underground mining of oil shale employs the room-and-pillar method, and is more capital intensive and incurs higher operating costs; underground mining is not often employed.
The application of heat to shales to liberate the oil contained within its pores in not a new technology, and while the first reported extraction of oil is reported in the 10th century, the first recorded application for a patent for a process to extract oil on a commercial scale was 1684. Whether for lack of a market for the oil produced, or high costs, development was slow, the next phase of development took ~200 years to develop.
The focus on shale oil has been cyclical, each time driven by the underlying outlook for the oil price. Against this backdrop it is no surprise that interest fell (especially in the United States) after the discovery of what is now deemed conventional oil in the 1800s and early 1900 in Pennsylvania and Texas, and grew during the 1940s, 1980s and currently.
Shale oil accounts for less than 0.02% of global production (Table 12), which is principally focused on Estonia, Brazil, and China, and while a number of countries have trialled commercial production, namely Australia, the US, and Canada, there has yet to be any serious scale development of oil shale, due principally to high costs and more stringent environmental regulation; more recently, however, Morocco and Jordan have announced their intent to develop their respective oil shales.
There are a number of technologies that have been applied to this process, all of which fall into two basic categories, namely, (i) In-situ, which can be broadly defined as retorting occurring below ground; and (ii) Ex-situ, which can be broadly defined as retorting occurring above ground; this is summarised in Figure 8.
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Figure 7 – Shale Mining Operations
Typical Oil Shale Mining Operation
Source: Jordan Energy Mining
Table 12 – Summary of Oil Shale Production
Oil Shale Production Country Daily Production Proportion of Oil Shale Production Proportion of Oil Production§ (m bpd) (%) (%)
Africa --- Asia 7.6 42.9% 0.009% Asia Pacific --- Europe 6.3 35.6% 0.007% Middle East --- North America --- South America 3.8 21.5% 0.004%
Total 17.7 100.0% 0.020% Source: USGS & Fox-Davies data § - based on average daily production rate of ~88.9m bpd (February 2013)
There has been a significant amount of development surrounding both in-situ and ex-situ processing of oil shales, most of which has been driven by large organisations, who have, by and large, been the only organisations that have been able to meet the costs.
In either case, the chemical process of pyrolysis converts the kerogen in the oil shale to shale oil (synthetic crude oil) and oil shale gas. Most conversion technologies involve heating shale in the absence of oxygen to a temperature at which the kerogen in the shale decomposes (pyrolyses) into gas, condensable oil, and a solid residue.
The process of decomposition begins at lower temperatures (~300°C), but is slow and does not yield appreciable amounts of hydrocarbons, hence temperatures between 450 – 500°C are used. We discuss TomCo’s EcoShale process in EcoShale Capsule (from Page 27), and a summary of the main alternative shale retorting technologies is provided in the Appendix (Summary of Alternative Oil Shale Technologies Page 35).
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Figure 8 – In-situ and Ex-situ Process Comparison
Basic Categorisation of Oil Shale Processing
Above ground
Mining Crushing Retorting
• Open pit • Spalling • Batch • • • P O Strip Ball mill Continuous r i L o l i d q u S Disposal u c h i t a d i l s Fracturing Retorting Recovery o e n • Explosives • Combust’n • Liquids • Hydraulic • Gas • Gas • Steam
Underground
Source: Fox-Davies Data
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The Holliday Block
The Mahogany shale contains one of the most significant oil bearing series in the Green River Formation, due mostly to its high organic content. The Green River formation is pervasive in the Uinta basin which is where TomCo’s Holliday block is located.
Location & Access TomCo’s site is located in Utah (Figure 9), approximately 4 hours’ drive outside of Salt Lake City, approximately 14 miles south of Bonanza and 42 miles north of Cisco (Figure 10). The roads are largely paved, but access to the site is achieved over unsealed roads, such as those shown in Figure 11.
Figure 9 – General Location TomCo’s Assets
Map Showing Utah
Source: ESRI & Fox-Davies Data
Figure 10 – General Location TomCo’s Assets
Map Showing Location of the Holliday Block
Source: ESRI, Utah ARGC & Fox-Davies Data
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Figure 11 – Access to Holliday Site
Typical Unsealed Access Road
Source: Fox-Davies
TomCo is yet to install any infrastructure, so this was a visit to the location and area where the Company has its acreage and intends to construct its production facilities; the Holliday Block is located on the hills on the opposite side of a small valley (Figure 13).
Figure 12 – Proposed Operating Location
The Proposed Operating Location is Above the Holliday Block
Proposed Holliday Operational Block Location
Source: Fox-Davies
Geology The Holliday block is located in the Uinta-Piceance Petroleum Province, which trends west-east, extending from the thrust belt in north-central Utah, on the west, to the southern Park Range and Sawatch Uplift in north-western Colorado on the east. The northern boundary is defined roughly by the Uinta Mountain Uplift, and the southern boundary is located along a line north of the axis of the Uncompahgre Uplift. The province covers an area of about 40,000 square miles and encompasses the Uinta, Piceance, and Eagle Basins. Sedimentary rocks in the basin range in age from Cambrian to Tertiary.
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Figure 13 – Holliday Licence Area
Picture Taken from Opposite Ridge to Best Illustrate Actual Acreage
Holliday Block Proposed Operational Location
Source: Fox-Davies
The Uinta Basin of Utah is about 120 miles long and 100 miles wide, bounded on the west by the thrust belt, on the east by the Douglas Creek Arch and to the north by the Uinta Mountains Uplift. It is believed that more than 30,000ft of Phanerozoic sedimentary rocks may be present, and the presence of ample source rock means that the basin has been a prolific petroleum basin.
Exploration in the province began in the late 1800’s. The first phase mostly consisted of drilling near surface oil seeps. The first field in the province, now called White River was discovered in 1890 and produces from sandstone in the Tertiary Wasatch Formation that has an estimated ultimate recovery of 12bcf. The White River field also produces from sandstone in the Upper Cretaceous Mesaverde Group. A second stage of exploration started in the 1920’s, directed towards drilling obvious surface structures. The first discovery in Utah was made in 1925 in the Ashley Valley Anticline when gas flowed from shallow sandstone in the Jurassic Morrison Formation. The main producing reservoir today is the Permian Upper Weber Sandstone which was discovered in 1948. In the advent of seismic precipitated a new wave of exploration, such that stratigraphically controlled reservoirs were identified.
The data collected from the conventional oil and gas exploration, coupled with the dedicated stratigraphic drilling exploration, has led to a greater understanding of the geology of the Uinta Basin. The Green River Formation (the “GRF”) is the single largest series contributor to the Uinta Basin’s oil shale content such that it is considered that there is no contribution from any other series outside of the GRF (Table 13); the stratigraphy of the Green River Formation is shown in Figure 14.
Table 13 – Organic Content of the Series in the Green River Formation
Oil Content Series (bn bbl)
Bed 76 to Bed 44 169.0 Bed 44 to A-groove 244.7 Mahogany Zone 214.6 R6 176.6 R1, 4 &5 249.3 Other 245.8
Total 1,300 Source: USGS & Fox-Davies data
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The Mahogany zone, named for its deep colouration, is the most easily identifiable series principally responsible for the source for TomCo’s reserves, which is part of the Green River Formation; Figure 15 shows an outcrop of the Green River formation at Evacuation Creek, Utah.
Figure 14 – Green River Formation Stratigraphy
Stratigraphic Nomenclature for Oil Shale Zones
Oil Yield (Gallons per Ton)
Source: USGS
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Figure 15 – Outcrop Green River Formation at Evacuation Creek
Outcrop of Green River Formation Showing Interbedded Rich and Lean Shale Zones
Green River Formation
Source: USGS
When un-weathered the Mahogany formation appears dark against the lighter series (Figure 16) it is interbedded with. The USGS has conducted an extensive study into the Green River Formation utilising drilling results from designated drill holes and the mud logs from oil and gas wells.
Figure 16 – Mahogany Oil Shale
Mahogany Oil Shale as Mined
Source: Fox-Davies Data
This study has delineated the extent of the Green River Formation’s prevalence in the Unita basin (Figure 17 illustrates the extent of the Mahogany Series within the GRF), dipping to the north (Figure 18). More recent work on the economics of mining the richer shales series of the GRF (Table 13) means that the recent work has shown that the more economic open pit mining would be more prevalent to the south. However, as Figure 19 illustrates, this is also largely coincident with richer oil shale content, especially surrounding TomCo’s Holliday block.
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Figure 17 – Uintah Oil Shale – Extent
Map of the Extent of the Mahogany Oil Shale
Source: USGS, ESRI & Fox-Davies Data
Figure 18 – Uintah Oil Shale – Burial
Map of the Burial Depths of the Mahogany Oil Shale
Source: USGS, ESRI & Fox-Davies Data
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Figure 19 – Uintah Oil Shale – Fischer Assay Values
Map of the Fisher Assay Values of the Mahogany Oil Shale
Source: USGS, ESRI & Fox-Davies Data
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EcoShale Capsule Technology
The EcoShale process is a hybrid in-situ and ex-situ technology, where the shale is mined and restored in ground bound capsule, combining the best of both in-situ and ex-situ, resulting in a relatively cheap cost effective solution to accessing the resources. A successful EPS test will de-risk the process and expedite the next stage of TomCo’s development. However, if it is not successful, there are other options available to management.
Red Leaf has developed the EcoShale process that aims to minimise the costs associated with the retorting process, as well as its impact on the environment. The EcoShale process is a hybrid between in-situ and ex-situ processes in that the shale is mined (ex-situ), but then effectively reburied in a prepared capsule (in-situ). While the EcoShale technology has yet to be fully commercialised Red Leaf has completed a “proof of concept” pilot scale test; we discuss the pilot from Page 29. Red Leaf in conjunction with its farm-in partner Total are in the process of designing and constructing Early Production System (“EPS”), which will be 75% of the full size capsule and utilise the findings from the pilot.
One of the principal attractions of the EcoShale process is that it is modular, does not utilise advanced technology and is therefore simple to construct and as a consequence lower cost than some of its peers. The main advantages of the EcoShale process are summarised in Figure 20.
Figure 20 – Advantages of EcoShale
Diagram Illustrating the Principal Elements in the EcoShale Method
Economic Benefits
High API Oil Environmental Benefits Standard Spent Shale Mining Not Handled Equipment
No Process Volume & Water Scalability Rerquirement
EcoShale
Avoids Costly Reduces CO 2 Infrastructire
Protects Carbon Water Bodies Capture
Rapid Surface Reclamation
Source: Red Leaf
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Shale Mining, Capsule Construction & Operation The process starts with the mining of the shale from the ground. Given the low overburden, this is achieved by the significantly cheaper open cast method (Figure 7), where the target shale series can be accessed without the need for more expensive underground operations; TomCo has not started mining operations.
It is worth highlighting at this point, that TomCo’s overburden and stripping ratio of 0.9x (the ratio of the volume of waste material required to be handled in order to extract a volume of ore) are amongst the lowest in the industry, and greatly simplify the mining process and increase the profitability.
While generally the overburden is considered waste material and requires disposal, in the EcoShale process, the overburden is utilised in the construction process as insulating material. The capsule is essentially formed of three distinct units, described below and illustrated in Figure 21.
1. Insulation & Seal: those elements that are directed at maintaining both the temperature and preventing product from leaking out of the capsule;
2. Production: those elements which are aimed at capturing the hydrocarbons liberated during the retorting process; and
3. Health, Safety and Environment: those elements that are directed at maintaining the integrity of the capsule and preventing release to the environment.
Figure 21 – Principal Elements in the EcoShale Capsule
Capsule Description
Insulation & Seal: insulation surrounding a central cell containing the process elements (the “Cell”). The insulation consists of a number of layers, including an internal steel framework inside a flexcrete layer. Production: within the capsule the process elements are relatively few in number and simple in arrangement and construction. Apart from the temperature sensors, the only elements are the Overheads Line, the Bottoms Line and the Heating Elements. The Bottoms Line is a trough with a drop, negating the need for a pump as the liquids flows under its own gravity to an external collection sump. Health, Safety and Environment: in addition to the Insulation, the capsule also utilises a number of impermeable barriers to prevent migration of the liquids and gasses liberated in the retorting process. The overburden generated by the extraction of the shale is utilised, which in conjunction with other materials form an impermeable barrier. The top of the cell has an impermeable membrane, which creates a secondary seal. Any pressure accumulation created by a breach in the Cell’s seal is handled by the Roof Vent Line, which vents directly to the flare system.
Source: Company & Fox0Davies
The capsule is constructed “above ground” using trenching methods widely used in the construction industry to build foundations. Each layer is built upon the last until the whole capsule is completed and all the requisite elements have been installed, including the Process elements; this is illustrated by Figure 22.
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Figure 22 – Construction of the EcoShale Capsule Base Seal & Insulation Heating Element & Shale Stacking
Retaining Wall
Retaining Wall Insulation
Bottoms Insulation Line
Heating Elements
Shale Shale Thermal & Seal Environmental Barrier
Source: Company & Fox0Davies
The left-hand picture shows the first stages with the construction of the bottom seal and Bottoms Line, while the right- hand picture how the shale is stacked and the placement of the heating element within the Cell; the construction period takes approximately 2 months, including testing, after which it is heated. An average capsule life cycle is illustrated in Figure 23 while a simplified process diagram is illustrated in Figure 24.
Figure 23 – Capsule Timeline
Typical Oil Shale Mining Operation
Activity - 2 4 6 8 10 12 14 16 18
Construction & Loading
Heating
Production First Oil Shut-in
Source: Company & Fox0Davies
Once the shale has been loaded and the capsule sealed and tested, the heaters are fired; the optimum temperature for oil shale pyrolysis is between 450 – 525°C. The capsule is heated for a period of 210 days with production starting once the shale cell reaches an appropriate temperature (Figure 23).
The recovery of the produced hydrocarbons is passive in that no moving plant or machinery is required to recover the oil or gas from the Cell. As such, once the Cell has produced its peak oil the heaters are turned off, but production continues beyond this point, often for some months, due to the thermal inertia in the Cell (Figure 23).
Pilot Test and Simplified Process Description Pilot Test The test of the EcoShale technology was carried out on the Green River Formation sourced from its Seep Ridge property in Utah, which is located within the Uintah Basin, and was aimed at validating the technology, modelling and engineering design aspects. The test produced two product streams the Bottoms and the Overheads.
The Bottoms product was approximately 29° API, containing approximately 65% paraffinic and naphthenic components; the hydrogen content was about 12.6%. The Overheads liquids product was approximately 39° API, containing 55% paraffinic and naphthenic components; the hydrogen content was about 12.9%. The overall sulphur wt content was approximately 2,200ppm and nitrogen content was about 1 – 1.2% /wt. One feature of the produced oil was that it contained almost no entrained solid fines from the shale ore.
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Figure 24 – Simplified Process Diagram
Principal Elements in the EcoShale Retorting Process
Source: Fox-Davies Data
Apart from the composition of the Overheads and Bottoms product, the yield was found to be significantly below that observed and expected following the Fischer Assay. This was accredited to the fact that the insulation, which was believed to be impermeable, absorbed the liquids readily; analysis has concluded that the heating mechanism achieved yields in line with Fischer Assay expectations.
Following the pilot test, Red Leaf is revisiting the design of the seal layer to ensure recovered yields are maximised in the EPS. Despite this relatively simple issue to fix, based on the results of the pilot that was conducted at its Seep Ridge site, Red Leaf believes that it will be able to scale up the process to a full-scale Capsule, which will be tested by the EPS (we discuss the risks from Page 8); we believe that the results of the EPS will allow Red Leaf to declare the technology commercial.
Process Description At one end of the capsule, the retaining wall (Figure 25) allows the burners and blower units (Figure 26) to access the Cell. Heating is fuelled by natural gas, and burners heat the exit gas temperature to between 450 – 525°C; the temperature is maintained by the use of gas flow rate and recycled “cooled” gasses from the capsule. The hot gasses are kept isolated from the shale contained in the Cell.
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Figure 25 – Retaining Wall
Retaining Wall Showing General Arrangement of the Burner and Blower Assembly
Capsule End Retaining Wall
Recycle
Blower & Recycle
Burner Gas & Control Mix Chamber Module
Source: Fox-Davies
Figure 26 – Burner & Blower
Burner Assembly Showing Recycle & Mix Chamber Blower Assembly Face on to Capsule
Capsule End Burner Exit Retaining Wall Blower Recycle
Burner & Mix Chamber
Recycle
Burner & Mix Chamber Burner & Mix Burnet Inlet Inlet Chamber Inlet Exhaust Manifold
Source: Fox0Davies
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The liquids flow out of the capsule under gravity into a collection sump (Figure 27), whereupon it is transferred to production tanks (Figure 27). Hydrocarbon vapours exiting the capsule via the Overheads Line are cooled in chiller units (Figure 28) before being separated from any condensed liquids in the separator (Figure 29); liquids are charged to the tank farm while vapour that is not recycled burners is flared.
Figure 27 – Collection Sump & Tank Farm
Bottoms Line Collection Sump Tank Farm
Liquids Transfer Pump
Bottoms Line Collection Sump
Source: Fox0Davies
Figure 28 – Chiller Unit
Chiller Unit Used to Condense Heavier Vapour Fractions
Chiller Unit
Source: Fox-Davies
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Figure 29 – Gas Separator
Separator Showing Liquids Boot
Separator
Liquids Collection Boot
Source: Fox-Davies
Irrespective of whether the EcoShale technology is ultimately commercial, TomCo remains in a strong position, as it will be able to look at the viability of other ex-situ technologies, such as retorts; these are summarised in the Appendix (Summary of Alternative Oil Shale Technologies – Page 42).
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Appendix Basis Conditions for valuation
Table 14 – Base Case Valuation Parameters
Parameter Value
Interests
Working Interest (%) 100% Paying Interest (%) 100% Price
Oil Price Basis ($/bbl) FDC Curve Gas Price Basis ($/mcf) 3.00 Royalty
Red Leaf Royalty (%) 5% SITA Base (%) 5% SITA Escalator (% pa) 1% SITA Exemption (Years) 5.00 Opex
Fixed ($mm/month) 0.50 SG&A ($mm/month) 0.06 Opening Cash Balance ($mm) 2.23 Depreciation
Tangibles (% of Total) 100% Tangible Depreciation Term (Years) 20 Tax
Opening Tax Balance ($mm) (12.00) State Tax Rate (%) 5% State Tax Credit (Years Available) 20 Basis (Date) Jan-16 Tax Credit (% of State Tax) 75% Federal Tax Rate (%) 35%
Shale & Capsule Parameters
Potential Resources (bbl/te) 0.50 Capsule capacity (mm te) 1.70 Effective Yield Value
Base Fischer Assay (%) 80% Mining Losses (%) 10%
Effective Yield (% of Fischer Assay) 72% Yield (mm bbl per capsule) 0.61 Reserves (mm bbl) 126.0 Recovered Reserves (mm bbl) 87.3 Capsules (Count) 206 Construction spread (months between starts) 3 Construction (Months) 1 First Capsule (Date) Jan-16 Capsule Costs ($mm)
Mining & Construction 8.50
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Parameter Value
Transport (to capsule) 6.20 Oil Collection 3.60 Fuel Costs 4.00 Other 3.40 Cost Factor (x) 0.00 Capsule Build Out
Start (Date) Jan 16 Capsule Construction Rate Step-up (year) 2020 Capsule Construction Rate (Per Year) 5 Source: Company & Fox-Davies Data
General Approach to Valuation Valuation of E&P assets reflect not only the value of the cash flow from assets that have reserves or contingent resources assigned to them, but the market also assigns an “option” value to exploration assets particularly when contingent or prospective resources have been defined by drilling, seismic interpretation and other accepted technologies.
Overall, company net asset valuations are made up of the sum of three distinct parts:
(i) Core NAV: “Core” reserves relating to assets already in production or sanctioned for development: these are usually represented as reserves and these can be developed or undeveloped;
(ii) Development & Appraisal NAV: those discovered assets that have been appraised and are awaiting development sanction or discoveries that are awaiting further appraisal: these are usually represented as contingent resources; and
(iii) Exploration NAV: the valuation of “Upside” reserve and resource potential over and above that already included in the reserve or contingent resources category where the asset can be at the exploration, appraisal or development stage: the last category captures the value of exploration assets that are deemed to be prospective resources.
The risk adjusted net asset value (“Risked NAV”) is calculated as the total of the Core NAV plus the Development & Appraisal NAV adjusted for chance of success plus the Exploration NAV adjusted for the chance of success. The total chance of success (“CoST”) for a Development & Appraisal asset or an Exploration asset, is a function of two distinct and separate risk elements:
■ Geological Chance of Success (“CoSG”): which measures the four elements required to have an accumulation of oil or gas, namely, Source, Seal, Trap and Reservoir; and
■ Technical-to-Commercial Chance of Success (“CoSC”): which reflects the likelihood that once found, the
accumulation proves commercial (sometimes CoSC is further broken down into two elements: Chance of Economic Success and Chance of Threshold Economic Field Size).
Fox-Davies makes further adjustments to (ii) Development and Appraisal assets or (iii) Exploration assets (see above) that are not in production by applying an expected monetary value (“EMV”) methodology. We believe that EMV is an appropriate methodology as it reconciles the impact of a successful drilling campaign, against the probability of a success and the cost of getting to a position at which the project’s probability of success exceeds the probability of failure, adjusted for any systemic errors.
EMV returns a value of an asset based on the collective cost and probability outcomes for a range of factors. This values an asset (“NAVD”) as a risk adjustment to its success-based net present value discounted at an appropriate discount rate (subscript “D”) (“NPVD”), corrected for the total chance of success (CoST) and the risk capital (“CR”)
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required to get the asset to the “go / no go” decision. While the risk capital varies by asset as a function of drilling location, depth and expected subsurface conditions, the risk factors vary according to the stage of development.
Brent/WTI Price Comparison Brent oil prices are widely traded on a number of commodity exchanges and delivery is both timely and unencumbered by supply issues. Brent is now recognised as the international benchmark crude oil price and has overtaken West Texas Intermediate (“WTI”) which has been affected by localised production and transportation constraints.
As can be seen in Figure 30, over the last 3 years, there appears to be a correlation between price and average discount to Brent. Given this data we are assuming a $10/bbl discount, which we believe is appropriate given the expected oil price range (FDC Curve).
Figure 30 – Brent/WTI Spread
Brent Oil Price ($/bbl) Vs Brent/WTI Spread ($/bbl)
10
-
(10)
(20)
(30)
(40)
(50) 60 70 80 90 100 110 120 130 140
Source: ESRI & Fox-Davies Data
Oil & Gas in the United States The United States (“US”) is located in North America, bordering both the North Atlantic Ocean and the North Pacific Ocean, is between Canada and Mexico (Figure 31). Britain's American colonies broke with the mother country in 1776 and were recognized as the new nation of the United States of America following the Treaty of Paris in 1783.
Introduction During the 19th and 20th centuries, 37 new states were added to the original 13 as the nation expanded across the North American continent and acquired a number of overseas possessions. The two most traumatic experiences in the nation's history were the Civil War (1861-65), in which a northern Union of states defeated a secessionist Confederacy of 11 southern slave states, and the Great Depression of the 1930s, an economic downturn during which about a quarter of the labour force lost its jobs. Buoyed by victories in World Wars I and II and the end of the Cold War in 1991, the US remains the world's most powerful nation state. Since the end of World War II, the economy has achieved relatively steady growth, low unemployment and inflation, and rapid advances in technology.
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The US has the largest and most technologically powerful economy in the world, with a per capita GDP of $49,800. In this market-oriented economy, private individuals and business firms make most of the decisions, and the federal and state governments buy needed goods and services predominantly in the private marketplace.
Figure 31 – United States of America
US’ Location
Source: ESRI & Fox-Davies Data
US business firms enjoy greater flexibility than their counterparts in Western Europe and Japan regarding decisions to expand capital plant, to lay off surplus workers, and to develop new products. However, this preeminent position is being eroded by the implementation of ever more stringent regulation and an increasingly “bloated” government.
Imported oil accounts for nearly 55% of US consumption. Crude oil prices doubled between 2001 and 2006, the year home prices peaked; higher gasoline prices ate into consumers' budgets and many individuals fell behind in their mortgage payments.
The sub-prime mortgage crisis, falling home prices, investment bank failures, tight credit, and the global economic downturn pushed the United States into a recession by mid-2008. GDP contracted until the third quarter of 2009, making this the deepest and longest downturn since the Great Depression. To help stabilise financial markets, in October 2008 the US Congress established a $700bn Troubled Asset Relief Program (“TARP”). The US is the world’s largest economy and innovation and investment continue to drive GDP. Save for a softening in the economy in 2008 and contraction in 2009, the US’ GDP is marked for its relative consistency (Figure 32).
Reserves Unlike most regions which have a centralised department of administration for licencing extraction, the title holders of the land under which oil is located have the right to licence its extraction independently, i.e. for privately held lands it is private individuals, for state held lands, it is the respective state, and for federal land (land held by the Government of the United States of America) is the Government, via the Bureau of Land Management.
Irrespective of the authority granting the permission to extract the hydrocarbons, prior to the commencement of extractive operations, environmental and operation permits must be gained from the respective state authorities and
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in some cases, subject to certain size tests certain federal agencies, such as the Environmental Protection Agency or the US Corp of Engineers.
Figure 32 – US – GDP
$bn – Current Prices
25,000
20,000
15,000
10,000
5,000
- 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
Estimate - IMF Reported
Source: IMF
US has not disclosed its reserves beyond 2011. However, Fox-Davies has taken the 2011 figure from the BP Statistical Review of World Energy June 2012 and estimated the subsequent period’s reserves as the prior year’s reserves less the year in question’s annualised production. On this basis, the US had ~23bn bbl of proved reserves at the start of 2013, flat in comparison to 2012. The changes in the US’s reserves are shown in Figure 33.
Production, Demand & Exports Production The US produced 10.0mm bpd of crude oil (Figure 34) in 2012, an increase on 10.6% on 2011 production. The Country’s production, provided by the Energy Information Administration (“EIA”), accounted for 11.4% of the global total. Texas was the leading US producing State, accounting for ~28% of US’ production, with Utah accounting 1.2% (Table 15).
In its recent data release, the EIA has commented that unconventional sources of oil and gas, that produced from shale and coal seams requiring the application of new technology, had in some cases doubled since 2008, is responsible for the increasing overall production and is forming a greater percentage of the overall US total; Utah represented 1.2% of the US’ total production in 2012.
Table 15 – Summary of Production by State
State %
Alabama 0.4%
Alaska 7.5%
Arkansas 0.3%
California 7.6%
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State %
Colorado 1.9%
Gulf of Mexico 18.1%
Kansas 1.7%
Louisiana 2.7%
Michigan 0.3%
Mississippi 0.9%
Montana 1.0%
New Mexico 3.3%
North Dakota 9.4%
Oklahoma 3.4%
Pennsylvania 0.2%
Texas 28.3%
Utah 1.2%
Wyoming 2.2%
Other 9.8%
Total 100.0% Source: EIA & Fox-Davies data
Figure 33 – US – Proven Reserves 1980 - 2013 bn bbl
35
30
25
20
15
10
5
- 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14
NOTE: Blue Reported Gold Estimated Source: EIA, BP Statistical Review of World Energy June 2012 & Fox-Davies data Demand & Imports US demand in 2011 was 18.8mm bpd, a decline of 1.9% from 2010’s demand of 19.2mm bpd (Figure 35). US demand accounted for 20.5% of global demand in 2011. The US is a net importer of crude oil. In 2012 the US imported 8.5mm bpd (Figure 36), a decline of 13.7% compared with 2011. At 8.5mm bpd, imports represent ~85% of domestic production.
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Figure 34 – US – Production 1980 – 2012 mm bpd
11.0
10.0
9.0
8.0
7.0
6.0
5.0 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
Source: EIA
Figure 35 – US – Demand 1980 – 2012 mm bpd
22
20
18
16
14
12
10 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
Source: EIA
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Figure 36 – US – Imports 1980 – 2012 mm bpd Imports Estimated by the Arithmetical Difference Between Production and Consumption
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
- 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
Source: EIA & Fox-Davies Data
Overall Country Risk In December 2012, the Federal Reserve Board announced plans to purchase $85bn per month of mortgage-backed and Treasury securities in an effort to hold down long-term interest rates, and to keep short term rates near zero until unemployment drops to 6.5% from the December rate of 7.8%, or until inflation rises above 2.5%.
Long-term problems include stagnation of wages for lower-income families, inadequate investment in deteriorating infrastructure, rapidly rising medical and pension costs of an aging population, energy shortages, and sizable current account and budget deficits - including significant budget shortages for state governments.
The political atmosphere in Congress will remain deeply partisan, especially over fiscal issues. Nonetheless, the country's fiscal path for the coming years has now largely been defined. A moderate fiscal tightening will proceed, and there are signs that the economy is resilient enough to withstand this, helped by a reviving housing market.
The Federal Reserve's monetary stimulus, so called “QE3” will support the recovery, as high household indebtedness and tight credit conditions continue to ease. GDP is expected to grow by 1.9% in 2013 and 3.0% in 2014 (IMF); the estimated growth in GDP out to 2018 is shown in Figure 32.
The US is low risk, with an overall rating of “AA”; S&P rates its sovereign debt as “AA+”. The key criteria are summarised in Table 16.
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Table 16 – US – Country Risk Summary
Category Ranking Comment
Sovereign Risk AA The US will run large but declining fiscal deficits. For now, US Treasuries remain a safe-haven asset, and borrowing costs are near record lows (owing partly to Fed purchases). The short average maturity of Treasuries will eventually leave the US exposed to rising yields. The public finances are unsustainable in the long term without far-reaching reforms to healthcare financing. Currency Risk A Extraordinarily loose monetary policy would ordinarily be negative for the dollar, but the currency will be supported in 2013 – 2014 by its safe-haven status and increasingly by the US economy's relatively stronger prospects. Banking Sector Risk A Large banks are consolidating their balance sheets as part of a multi-year deleveraging cycle. Capital adequacy ratios have risen and regulation has increased. Banks could still suffer losses from the euro's debt crisis. Economic Structure Risk A The need to rebuild household and banking balance sheets and to control public indebtedness could lead to a period of slower than expected growth Political Risk AA Divided government and the ideological gulf between the two parties means that making economic policy will be difficult, and some important policy issues will go unaddressed. The debt ceiling debate implies that the US will periodically flirt with the possibility of a technical debt default. Source: EIU Summary of Alternative Oil Shale Technologies Kiviter Process Ex-situ The Kiviter process is classified as an internal combustion technology. The Kiviter retort is a vertical cylindrical vessel that heats coarse oil shale with recycled gases, steam, and air. To supply heat, gases (including produced oil shale gas) and carbonaceous spent residue (char) are burnt within the retort.
Raw oil shale is fed into the top of the retort, and is heated by the rising gases, which pass laterally through the descending oil shale causing decomposition of the rock. Pyrolysis is completed in the lower section of the retort, where the spent shale contacted with more hot gas, steam and air is heated to about 900°C (1,650 °F) to gasify and burn the residual carbon (char).
Shale oil vapours and evolving gases are delivered to a condensing system, where condensed shale oil is collected, while non-condensable gases are fed back to the retort. Recycled gas enters the bottom of the retort and cools the spent shale, which then leaves the retort through a water-sealed discharge system.
The Kiviter process uses large amounts of water, which is polluted during processing, and the solid waste residue contains water-soluble toxic substances that have been known to leach into the surrounding area.
Alberta Taciuk Process Ex-situ The ATP is an above-ground oil-shale retorting technology classified as a hot recycled solids technology. The distinguishing feature of the ATP is that the drying and pyrolysis of the oil shale or other feed, as well as the combustion, recycling, and cooling of spent materials and residues, all occur within a single rotating multi-chamber horizontal retort. Its feed consists of fine particles.
In its shale-oil applications, fine particles (less than 2.5cm in diameter) are fed into the preheat tubes of the retort, where they are dried and preheated to 250°C indirectly by hot shale ash and hot flue gas. In the pyrolysis zone, oil shale particles are mixed with hot shale ash and the pyrolysis is performed at temperatures between 500°C and 550°C.
The resulting shale oil vapour is withdrawn from the retort through a vapour tube and recovered by condensation. The char residues, mixed with ash, are moved to the combustion zone, and burnt at about 800°C to form shale ash. Part of the ash is delivered to the pyrolysis zone, where its heat is recycled as a hot solid carrier; the other part is removed and cooled in the cooling zone with the combustion gases by heat transfer to the feed oil shale.
The advantages of the ATP technology for shale oil extraction lie in its simple and robust design, energy self- sufficiency, minimal process water requirements, ability to handle fine particles, and high oil yields. It is particularly suited for processing materials with otherwise low oil yields.
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The mechanical transfer of solids through the machine does not involve moving parts and it achieves improved process efficiencies through solid-to-solid heat transfer. Most of the process energy (over 80%) is produced by combustion of char and produced oil shale gas; external energy inputs are minimal. The oil yields are about 85 – 90% of Fischer Assay. The organic carbon content of the process residue (spent shale) is less than 3%. The process produces only small amounts of contaminated water with low concentrations of phenols.
These advantages also apply to its oil sands applications, including increased oil yield, a simplified process flow, reduction of bitumen losses to tailings, elimination of the need for tailing ponds, improvement in energy efficiency compared with the hot water extraction process, and elimination of requirements for chemical and other additives. A complication of the ATP is that retorting operations can reach temperatures at which carbonate minerals within the shale decompose, increasing greenhouse gas emissions.
Petrosix Process Ex-situ Petrosix is one of four technologies of shale oil extraction in commercial use. It is an above-ground retorting technology, which uses externally generated hot gas for the oil shale pyrolysis. After mining, the shale is transported by trucks to a crusher and screens, where it is reduced to particles (lump shale). These particles are between 1.2cm and 7.5cm and have an approximately parallelepipedic shape.
These particles are transported on a belt to a vertical cylindrical vessel, where the shale is heated up to about 500°C for pyrolysis. Oil shale enters through the top of the retort while hot gases are injected into the middle of the retort. The oil shale is heated by the gases as it moves down.
As a result, the kerogen in the shale decomposes to yield oil vapour and more gas. Cold gas is injected into the bottom of the retort to cool and recover heat from the spent shale. Cooled spent shale is discharged through a water seal with drag conveyor below the retort. Oil mist and cooled gases are removed through the top of the retort and enter a wet electrostatic precipitator where the oil droplets are coalesced and collected. The gas from the precipitator is compressed and split into three parts.
One part of the compressed retort gas is heated in a furnace to 600°C and recirculated back to the middle of the retort for heating and pyrolysing the oil shale, and another part is circulated cold into the bottom of the retort, where it cools down the spent shale, heats up itself, and ascends into the pyrolysis section as a supplementary heat source for heating the oil shale. The third part undergoes further cooling for light oil (naphtha) and water removal and then sent to the gas treatment unit, where fuel gas and liquefied petroleum gas (LPG) are produced and sulphur recovered.
One drawback of this process is that the potential heat from the combustion of the char contained in the shale is not utilised. Also oil shale particles smaller than 1.2cm cannot be processed in the Petrosix retort, which accounts for anywhere between 10 to 30% of the crushed feed.
Galoter Process Ex-situ The Galoter process is an above-ground oil-shale retorting technology classified as a hot recycled solids technology. The process uses a horizontal cylindrical rotating kiln-type retort, which is slightly declined, and is similar to the TOSCO II process.
Before retorting, the oil shale is crushed into fine particles with a size of less than 2.5cm in diameter. The crushed oil shale is dried in the fluidised bed drier by contact with hot gases before it is preheated to 135°C. The oil shale particles are separated from gases by cyclonic separation then charged to the mixer chamber, where it is mixed with hot ash of 800°C, produced by combustion of spent oil shale in a separate furnace; the ratio of oil shale ash to raw oil shale is 2.8 – 3:1.
The mixture is moved then to the hermetic rotating kiln. When the heat transfers from the hot ash to raw oil shale particles, the pyrolysis (chemical decomposition) begins in oxygen deficit conditions to prevent oxidation and keep temperatures at 520°C.
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Produced oil vapours and gases are cleaned of solids by cyclones and moved to condensation system (rectification column) where shale oil condenses and oil shale gas is separated in gaseous form. Spent shale (semi-coke) is transported then to the separate furnace for combustion to produce hot ash.
A portion of the hot ash is separated from the furnace gas by cyclones and recycled to the rotary kiln for pyrolysis, while the remaining ash is removed from the combustion gas by dust cyclones and cooled and removed for disposal by using water. The cleaned hot gas returns to the oil shale dryer.
The Galoter process has high thermal and technological efficiency, and high oil recovery ratio. Oil yields of between 85 – 90% of Fischer Assay have been achieved regularly, while retort gas yield accounts for 48m3 per tonne of charged shale. Oil quality is considered good, but the equipment is sophisticated and capacity is relatively low. This process creates less pollution than internal combustion technologies, as it uses less water, but it still generates carbon dioxide as well as carbon disulphide and calcium sulphide. Enfit Process Enefit process is a modification of the Galoter process being developed by Enefit Outotec Technology. In this process, the Galoter technology is combined with proven circulating fluidized bed (“CFB”) combustion technology used in coal-fired power plants and mineral processing. Oil shale particles and hot oil shale ash are mixed in a rotary drum as in the classical Galoter process.
The primary modification is the replacing of the Galoter semi-coke furnace with a CFB furnace. The Enefit process also incorporates fluid bed ash cooler and waste heat boiler commonly used in coal-fired boilers to convert waste heat to steam for power generation. Compared to the traditional Galoter, the Enefit process allows complete combustion of carbonaceous residue, improved energy efficiency by maximum utilization of waste heat, and less water use for quenching. According to promoters, the Enefit process has a lower retorting time compare to the classical Galoter process and therefore achieves greater throughput. Avoidance of moving parts in the retorting zones increases its durability. TOSCO II Process Ex-situ The TOSCO II process is classified as a hot recycled solids technology. It employs a horizontal rotating kiln-type retort. In this process, oil shale is crushed smaller than 1.3cm and enters the system through pneumatic lift pipes in which oil shale is elevated by hot gas streams and preheated to about 260°C.
After entering into retort, oil shale is mixed with heated ceramic beads which raises the temperature from 650°C to 870°C, precipitating pyrolysis in the oil shale. In the pyrolysis process, kerogen decomposes to oil shale gas and oil vapours, while the remainder of the oil shale forms spent shale. Vapours are transferred to a condenser for separation into various fractions.
At the kiln passage, the spent shale and the ceramic balls are separated in a perforated rotating separation drum. The crushed spent shale falls through the perforations, while the ceramic beads are returned to the start of the bead heating process; combustible shale gas is burned in the bead heater. The overall thermal efficiency of TOSCO II process is low because the energy of spent shale is not recovered and much of the produced shale gas is consumed by the process itself. Paraho Process Ex-situ The Paraho process can be operated in two different heating modes, which are direct and indirect. The Paraho Direct process evolved from gas combustion retort technology and is classified as an internal combustion method; the Paraho Direct retort is a vertical shaft retort similar to the Kiviter and Fushun retorts already in use. Nevertheless, compared to the earlier gas combustion retorts the Paraho retort's raw oil shale feeding mechanism, gas distributor, and discharge grate have different designs.
In the Paraho Direct process, the crushed and screened raw oil shale is fed into the top of the retort through a rotating distributor. The oil shale descends the retort as a moving bed. The oil shale is heated by the rising combustion gases from the lower part of the retort precipitating the pyrolysis of the kerogen in the shale; the fuel source for the pyrolysis comes from the combustion of char in the spent shale.
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The combustion takes place where air is injected at two levels in the middle of the retort below the pyrolysis section raising the temperature of the shale and the gas to between 700 – 800 °C. Collecting tubes at the top of the retort carry shale oil mist, evolved gases and combustion gases into the product separation unit, where oil, water and dust are separated from the gases.
For the combined removal of liquid droplets and particulates, a wet electrostatic precipitator is used. Cleaned gases from the precipitator are compressed in a compressor. Part of the gas from the compressor is recycled to the bottom of the retort to cool the combusted shale (shale ash) and carry the recovered heat back up the retort. Cooled shale ash exits the retort through the discharge grate in the bottom of the retort. After processing, shale ash is disposed of. The liquid oil is separated from produced water and may be further refined into high quality products. The mixture of evolved gases and combustions gases is available for use as a low quality fuel gas for drying or power generation.
The Paraho Indirect is classified as an externally generated hot gas technology. The Paraho Indirect retort configuration is similar to the Paraho Direct except that a part of the gas from the compressor is heated to between 600 – 800 °C in a separate furnace and injected into the retort instead of air. No combustion occurs in the Paraho Indirect retort itself. As a result, the fuel gas from the Paraho Indirect is not diluted with combustion gases and the char remains on the disposed spent shale.
The main advantage of the Paraho process is simplicity in process and design; it has few moving parts and therefore low construction and operating costs compared with more sophisticated technologies. The Paraho retort also consumes no water, which is especially important for oil shale extraction in areas with water scarcity. A disadvantage common to both the Paraho Direct and Paraho Indirect is that neither is able to process oil shale particles smaller than about 1.2cm. These fines account for up to 10 – 30% of the crushed feed.
Lurgi-Ruhrgas Process Ex-situ The Lurgi–Ruhrgas process is a hot recycled solids technology, which processes fine particles of coal or oil shale sized 0.6 – 1.3cm. As a heat carrier, it uses spent char or spent oil shale (oil shale ash), mixed with sand or other more durable materials.
In this process, crushed coal or oil shale is fed into the top of the retort. In the retort, coal or oil shale is mixed with the 550°C heated char or spent oil shale particles in the mechanical mixer (screw conveyor). The heat is transferred from the heated char or spent oil shale to the coal or raw oil shale causing pyrolysis. As a result, oil shale decomposes to shale oil vapours, oil shale gas and spent oil shale. The oil vapour and product gases pass through a hot cyclone for cleaning before sending to a condenser. In the condenser, shale oil is separated from product gases.
The spent oil shale, still including residual carbon (char), is burnt at a lift pipe combustor to heat the process. If necessary, additional fuel oil is used for combustion. During the combustion process, heated solid particles in the pipe are moved to the surge bin by pre-heated air that is introduced from the bottom of the pipe. At the surge bin, solids and gases are separated, and solid particles are transferred to the mixer unit to conduct the pyrolysis of the raw oil shale.
One of the disadvantages of this technology is the fact that produced shale oil vapours are mixed with shale ash causing impurities in shale oil. Ensuring the quality of produced shale oil is complicated as compared with other mineral dusts the shale ash is more difficult to collect.
Fushun Process Ex-situ The Fushun process is classified as an internal combustion technology but also includes external gas heating. It uses a vertical cylindrical type shaft retort, with outside steel plate lined with inner fire bricks. The retort has height over 10m and its inner diameter is about 3m. Raw oil shale particles with the size of 1.0 – 7.5cm are fed from the top of the retort.
At the upper section of the retort oil shale is dried and heated by the ascending hot gases, which pass upward through the descending oil shale causing decomposition of the rock. The produced oil vapour and gases exit from the
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top of the retort; hot gases and oil vapours move from the bottom to the top directly, and not diagonally like in Kiviter process.
During the pyrolysis process, oil shale is decomposed to shale coke (char), which together with the ascending air- steam is burnt in the lower part of the retort to heat gases necessary for pyrolysis. These gases are recirculated; after leaving retort, they are cooled in a condensation system, where shale oil is condensed, and re-heated in a heating furnace about 500 – 700°C before reinserting into the retort. The shale ash exits from a rotating water dish that acts as a seal and cooler at the bottom of the retort.
Retorts are operated in sets and have a heat carrier preparation unit and rotating water seals designed for the whole set instead of a single retort as in case of the Kiviter retort. Regenerative furnaces are located next to the retorts and they are operating in two cycles – the combustion cycle and the gas heating cycle. During the combustion cycle, a furnace is heated up to 1,000°C by combustion gases.
After the combustion cycle, retort gases from the condensation system is inserted into a furnace for their heating. By alternating furnaces, one furnace is always available for heating retort gas. Twenty retorts typically share one condensation system and a set of heating furnaces. Advantages of the Fushun process include small investment and stable operation.
The process is characterised by the high thermal efficiency, but due to the addition of air into the retort, nitrogen dilutes the pyrolysis gas, decreasing the efficiency. In addition, the excess oxygen in retort burns out a part of produced shale oil, which also reduces the shale oil yield. The oil yield of the Fushun retort accounts for about 65% of Fischer Assay.
A further disadvantage of this process is the high water consumption, which amounts to 6 – 7bbl of water per barrel of produced shale-oil. As the capacity of single retort is limited, Fushun process is suitable for small-scale retorting plants, and for processing lean oil shale with low gas yield. The Fushun is not suitable of ores with small size and oil content lower than 5%. Shell ICP In-situ The process heats sections of the oil shale field in-situ, releasing the shale oil and oil shale gas from the rock so that it can be pumped to the surface and made into fuel. In this process, a freeze wall is first to be constructed to isolate the processing area from surrounding groundwater.
To maximize the functionality of the freeze walls, adjacent working zones are developed in succession. 610m wells are drilled eight feet apart, are drilled and filled with a circulating super-chilled liquid to cool the ground to -50°C. Water is then removed from the working zone. Heating and recovery wells are drilled at 12m intervals within the working zone.
Electrical heating elements are lowered into the heating wells and used to heat oil shale to between 340 - 370 °C over a period of approximately four years. Kerogen in oil shale is slowly converted into shale oil and gases, which are then flow to the surface through recovery wells. EXXON Electrofrac In-situ Exxon Electrofrac uses a series of hydraulic fractures created in the oil shale formation. Preferably these fractures should be longitudinal vertical fractures created from horizontal wells and conducting electricity from the heel to the toe of each heating well. For conductibility, an electrically-conductive material such as calcined petroleum coke is injected into the wells in fractures, forming a heating element. Heating wells are placed in a perpendicular row with a second horizontal well intersecting them at their toe.
This allows opposing electrical charges to be applied at either end. Laboratory experiments have demonstrated that electrical continuity is unaffected by kerogen conversion and that hydrocarbons are expelled from heated oil shale even under in-situ stress. The shale oil is extracted by separate dedicated production wells.
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Chevron CRUSH In-situ For decomposition kerogen in oil shale, the Chevron CRUSH process uses heated carbon dioxide. The process involves drilling vertical wells into the oil shale formation and applying horizontal fractures induced by injecting carbon dioxide through drilled wells and then pressured through the formation for circulation through the fractured intervals to rubblise the production zone.
For further rubblisation propellants and explosives may be used. The used carbon dioxide is then routed to the gas generator to be reheated and recycled. The remaining organic matter in previously heated and depleted zones is combusted in-situ to generate the heated gases required to process successive intervals. These gases would then be pressured from the depleted zone into the newly fractured portion of the formation and the process would be repeated. The hydrocarbon fluids are brought up in conventional vertical oil wells.
Heritage Foundation’s Measurement of Economic Freedom Introduction The Heritage’s index attempts to take a comprehensive view of the country in question, the overall assessment of a country’s economic freedom is derived by scoring it on the basis of 10 separate areas of economic freedom. Some of the measured aspects of economic freedom are concerned with a country’s interactions with the rest of the world, such as the extent of an economy’s openness to global investment or trade. Most, however, focus on policies within a country, assessing the liberty of individuals to use their labour or finances without undue restraint and government interference.
Each of the economic freedoms plays a vital role in developing and sustaining personal and national prosperity. They are not mutually exclusive, however, and progress in one area is often likely to reinforce or even inspire progress in another. Similarly, repressed economic freedom in one area – respect for property rights may make it much more difficult to achieve high levels of freedom in other categories.
Rule of Law Property Rights The ability to accumulate private property and wealth is understood to be a central motivating force for workers and investors in a market economy. The recognition of private property rights, with sufficient rule of law to protect them, is a vital feature of a fully functioning market economy. Secure property rights give citizens the confidence to undertake entrepreneurial activity, save their income, and make long-term plans because they know that their income, savings, and property (both real and intellectual) are safe from unfair expropriation or theft.
The protection of private property requires an effective and honest judicial system that is available to all, equally and without discrimination. The independence, transparency, and effectiveness of the judicial system have proved to be key determinants of a country’s prospects for long-term economic growth. Such a system is also vital to the maintenance of peace and security and the protection of human rights.
A key aspect of property rights protection is the enforcement of contracts. The voluntary undertaking of contractual obligations is the foundation of the market system and the basis for economic specialisation, gains from commercial exchange, and trade among nations. Even-handed government enforcement of private contracts is essential to ensuring equity and integrity in the marketplace.
Freedom from Corruption Corruption is defined as dishonesty or decay. In the context of governance, it can be defined as the failure of integrity in the system, a distortion by which individuals are able to gain personally at the expense of the whole. Political corruption manifests itself in many forms such as bribery, extortion, nepotism, cronyism, patronage, embezzlement, and (most commonly) graft, whereby public officials steal or profit illegitimately from public funds.
Corruption can infect all parts of an economy; there is a direct relationship between the extent of government regulation or other government intervention in economic activity and the amount of corruption. Almost any government regulation can provide an opportunity for bribery or graft. In addition, a government regulation or restriction in one area may create an informal market in another. For example, a country with high barriers to trade
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may have laws that protect its domestic market and prevent the import of foreign goods, but these barriers create incentives for smuggling and a black market for the restricted products.
Transparency is the best weapon against corruption. Openness in regulatory procedures and processes can promote equitable treatment and greater regulatory efficiency and speed.
Limited Government Fiscal Freedom Fiscal freedom is a direct measure of the extent to which individuals and businesses are permitted by government to keep and control their income and wealth for their own benefit and use. A government can impose fiscal burdens on economic activity through taxation, but it also does so when it incurs debt that ultimately must be paid off through taxation.
The marginal tax rate confronting an individual is, in effect, the government’s cut of the profit from his or her next unit of work or engagement in a new entrepreneurial venture; whatever remains after the tax is subtracted is the individual’s actual reward for the effort. The higher the government’s cut, the lower the individual’s reward—and the lower the incentive to undertake the work at all. Higher tax rates interfere with the ability of individuals and firms to pursue their goals in the marketplace and reduce, on average, their willingness to work or invest.
While individual and corporate income tax rates are important to economic freedom, they are not a comprehensive measure of the tax burden. Governments impose many other indirect taxes, including payroll, sales, and excise taxes; tariffs; and the value-added tax (“VAT”). In the Index of Economic Freedom, the burden of these taxes is captured by measuring the overall tax burden from all forms of taxation as a percentage of total GDP.
Government Spending The cost of excessive government is a central issue in economic freedom, both in terms of generating revenue (see fiscal freedom) and in terms of spending. Some government spending, such as providing infrastructure or funding research or even improvements in human capital, may be thought of as investments. There are public goods, the benefits of which accrue broadly to society in ways that markets cannot appropriately price. All government spending must eventually be financed by higher taxation, however, entails an opportunity cost equal to the value of the private consumption or investment that would have occurred had the resources involved been left in the private sector.
In other words, excessive government spending runs a great risk of crowding out private economic activity. Even if an economy achieves fast growth through heavy government expenditure, such economic expansion tends to be only short-lived, distorting allocation of resources and private investment incentives. Even worse, a government’s insulation from market discipline often leads to bureaucracy, lower productivity, inefficiency, and mounting debt that imposes an even greater burden on future generations.
As many have experienced in recent years, high levels of public debt accumulated by irresponsible government spending undermine economic freedom and stifle growth.
Regulatory Efficiency Business Freedom Business freedom is about an individual’s right to establish and run an enterprise without interference from the state. Burdensome and redundant regulations are the most common barriers to the free conduct of entrepreneurial activity.
By increasing the costs of production, regulations can make it difficult for entrepreneurs to succeed in the marketplace. Although many regulations hinder business productivity and profitability, the most inhibiting to entrepreneurship are those that are associated with licensing new businesses.
In some countries, as well as many states in the United States, the procedure for obtaining a business license can be as simple as mailing in a registration form with a minimal fee. In Hong Kong, for example, obtaining a business license requires filling out a single form, and the process can be completed in a few hours. In other economies, such as India
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and parts of South America, the process of obtaining a business license can take much longer, involving endless trips to government offices and repeated encounters with officious and sometimes corrupt bureaucrats.
Once a business is open, government regulation may interfere with the normal decision-making or price-setting process. Interestingly, two countries with the same set of regulations can impose different regulatory burdens. If one country, for instance, applies its regulations evenly and transparently, it lowers the regulatory burden by facilitating long-term business planning. If the other applies regulations inconsistently, it raises the regulatory burden by creating an unpredictable business environment. Rigid and onerous bankruptcy procedures are also distortionary, providing a disincentive for entrepreneurs to start businesses in the first place.
Labour Freedom The ability of individuals to work as much as they want and wherever they want is a key component of economic freedom. By the same token, the ability of businesses to contract freely for labour and dismiss redundant workers when they are no longer needed is a vital mechanism for enhancing productivity and sustaining overall economic growth. The core principle of any market is free, voluntary exchange. That is as true in the labour market as it is in the market for goods.
State intervention generates the same problems in the labour market that it produces in any other market. Government regulations take a variety of forms, including wage controls, hiring and firing restrictions, and other restrictions. In many countries, unions play an important role in regulating labour freedom and, depending on the nature of their activity, may be either a force for greater freedom or an impediment to the efficient functioning of labour markets. In general, the greater the degree of labour freedom, the lower the rate of unemployment in an economy.
Monetary Freedom Monetary freedom, reflected in a stable currency and market-determined prices, is to an economy what free speech is to democracy. Free people need a steady and reliable currency as a medium of exchange, unit of account, and store of value. Without monetary freedom, it is difficult to create long-term value or amass capital.
The value of a country’s currency is controlled largely by the monetary policy of its government. With a monetary policy that endeavours to fight inflation, maintain price stability, and preserve the nation’s wealth, people can rely on market prices for the foreseeable future. Investments, savings, and other longer-term plans can be made more confidently. An inflationary policy, by contrast, confiscates wealth like an invisible tax and also distorts prices, misallocates resources, and raises the cost of doing business.
There is no single accepted theory of the right monetary policy for a free society. At one time, the gold standard enjoyed widespread support. What characterizes almost all monetary theories today, however, is support for low inflation and an independent central bank. There is also widespread recognition that price controls corrupt market efficiency and lead to shortages or surpluses.
Open Markets Trade Freedom Trade freedom reflects an economy’s openness to the import of goods and services from around the world and the citizen’s ability to interact freely as buyer or seller in the international marketplace. Trade restrictions can manifest themselves in the form of tariffs, export taxes, trade quotas, or outright trade bans. However, trade restrictions also appear in more subtle ways, particularly in the form of regulatory barriers. The degree to which government hinders the free flow of foreign commerce has a direct bearing on the ability of individuals to pursue their economic goals and maximize their productivity and well-being.
Tariffs, for example, directly increase the prices that local consumers pay for foreign imports, but they also distort production incentives for local producers, causing them to produce either a good in which they lack a comparative advantage or more of a protected good than is economically efficient. This impedes overall economic efficiency and growth. In many cases, trade limitations also put advanced-technology products and services beyond the reach of local entrepreneurs, limiting their own productive development.
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Investment Freedom A free and open investment environment provides maximum entrepreneurial opportunities and incentives for expanded economic activity, greater productivity, and job creation. The benefits of such an environment flow not only to the individual companies that take the entrepreneurial risk in expectation of greater return, but also to society as a whole. An effective investment framework will be characterized by transparency and equity, supporting all types of firms rather than just large or strategically important companies, and will encourage rather than discourage innovation and competition.
Restrictions on the movement of capital, both domestic and international, undermine the efficient allocation of resources and reduce productivity, distorting economic decision-making. Restrictions on cross-border investment can limit both inflows and outflows of capital, shrinking markets and reducing opportunities for growth.
In an environment in which individuals and companies are free to choose where and how to invest, capital will flow to its best use: to the sectors and activities where it is most needed and the returns are greatest. State action to redirect the flow of capital and limit choice is an imposition on the freedom of both the investor and the person seeking capital. The more restrictions a country imposes on investment, the lower its level of entrepreneurial activity.
Financial Freedom A transparent and open financial system ensures fairness in access to financing and promotes entrepreneurship. An open banking environment encourages competition to provide the most efficient financial intermediation between households and firms and between investors and entrepreneurs.
Through a process driven by supply and demand, markets provide real-time information on prices and immediate discipline for those who have made bad decisions. This process depends on transparency in the market and the integrity of the information being made available. An effective regulatory system, through disclosure requirements and independent auditing, ensures both.
Increasingly, the central role played by banks is being complemented by other financial services that offer alternative means for raising capital or diversifying risk. As with the banking system, the useful role for government in regulating these institutions lies in ensuring transparency; promoting disclosure of assets, liabilities, and risks; and ensuring integrity.
Banking and financial regulation by the state that goes beyond the assurance of transparency and honesty in financial markets can impede efficiency, increase the costs of financing entrepreneurial activity, and limit competition. If the government intervenes in the stock market, for instance, it contravenes the choices of millions of individuals by interfering with the pricing of capital, the most critical function of a market economy. Equity markets measure, on a continual basis, the expected profits and losses in publicly held companies. This measurement is essential in allocating capital resources to their highest-valued uses and thereby satisfying consumers’ most urgent requirements.
SPE Petroleum Resources Classification Framework Petroleum is defined as a naturally occurring mixture consisting of hydrocarbons in the gaseous, liquid, or solid phase. Petroleum may also contain non-hydrocarbons, common examples of which are carbon dioxide, nitrogen, hydrogen sulphide and sulphur. In rare cases, non-hydrocarbon content could be greater than 50%.
The term “resources” as used herein is intended to encompass all quantities of petroleum naturally occurring on or within the Earth’s crust, discovered and undiscovered (recoverable and unrecoverable), plus those quantities already produced. Further, it includes all types of petroleum whether currently considered “conventional” or “unconventional.” Figure 37 is a graphical representation of the SPE/WPC/AAPG/SPEE resources classification system. The system defines the major recoverable resources classes: Production, Reserves, Contingent Resources, and Prospective Resources, as well as Unrecoverable petroleum.
The “Range of Uncertainty” reflects a range of estimated quantities potentially recoverable from an accumulation by a project, while the vertical axis represents the “Chance of Commerciality,” that is, the chance that the project will be
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developed and reach commercial producing status. Table 17 summarises the definitions that apply to the major subdivisions within the resources classification (Figure 37).
Figure 37 – Resources Classification Framework
Production Reserves
Commercial 1P 2P 3P
Proved Probable Possible
Discovered PIIP Discovered Contingent Resources
Sub-Commercial Sub-Commercial 1C 2C 3C
Unrecoverable Total Petroleum Initially in Place (PIIP) Initially Total Petroleum
Prospective Resources Undiscovered PIIP Undiscovered
Low Estimate Best Estimate High Estimate Increasing Chance of Commerciality of Commerciality Chance Increasing Range of Uncertainty
Source: SPE & Fox-Davies
Estimated Ultimate Recovery (“EUR”) is not a resources category, but a term that may be applied to any accumulation or group of accumulations (discovered or undiscovered) to define those quantities of petroleum estimated, as of a given date, to be potentially recoverable under defined technical and commercial conditions plus those quantities already produced (total of recoverable resources).
In specialised areas, such as basin potential studies, alternative terminology has been used; the total resources may be referred to as Total Resource Base or Hydrocarbon Endowment. Total recoverable or EUR may be termed Basin Potential. The sum of Reserves, Contingent Resources, and Prospective Resources may be referred to as “remaining recoverable resources.” When such terms are used, it is important that each classification component of the summation also be provided. Moreover, these quantities should not be aggregated without due consideration of the varying degrees of technical and commercial risk involved with their classification.
Range of Uncertainty The range of uncertainty of the recoverable and/or potentially recoverable volumes may be represented by either deterministic scenarios or by a probability distribution. When the range of uncertainty is represented by a probability distribution, a low, best, and high estimate shall be provided such that:
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■ There should be at least a 90% probability (P90) that the quantities actually recovered will equal or exceed the low estimate.
■ There should be at least a 50% probability (P50) that the quantities actually recovered will equal or exceed the best estimate.
■ There should be at least a 10% probability (P10) that the quantities actually recovered will equal or exceed the high estimate.
These definitions and guidelines are extracted from SPE PRMS, approved March 2007. The full text of the SPE PRMS Definitions and Guidelines can be viewed at: www.spe.org/industry/docs/Petroleum_Resources_Management_System_2007.pdf
Table 17 – Resources Classification Terms
Term Description
Total Petroleum That quantity of petroleum that is estimated to exist originally in naturally occurring accumulations. It includes that quantity of Initially-in-Place: petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production plus those estimated quantities in accumulations yet to be discovered (equivalent to “total resources”). Discovered That quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production. Petroleum Initially- PRODUCTION is the cumulative quantity of petroleum that has been recovered at a given date. While all recoverable in-Place: resources are estimated and production is measured in terms of the sales product specifications, raw production (sales plus non-sales) quantities are also measured and required to support engineering analyses based on reservoir voidage (see Production Measurement, section 3.2). Multiple development projects may be applied to each known accumulation, and each project will recover an estimated portion of the initially-in-place quantities. The projects shall be subdivided into Commercial and Sub-Commercial, with the estimated recoverable quantities being classified as Reserves and Contingent Resources respectively, as defined below. Reserves: Those quantities of petroleum anticipated to be commercially recoverable by application of development projects to known accumulations from a given date forward under defined conditions. Reserves must further satisfy four criteria: they must be discovered, recoverable, commercial, and remaining (as of the evaluation date) based on the development project(s) applied. Reserves are further categorized in accordance with the level of certainty associated with the estimates and may be sub- classified based on project maturity and/or characterized by development and production status. Contingent Those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations, but the Resources: applied project(s) are not yet considered mature enough for commercial development due to one or more contingencies. Contingent Resources may include, for example, projects for which there are currently no viable markets, or where commercial recovery is dependent on technology under development, or where evaluation of the accumulation is insufficient to clearly assess commerciality. Contingent Resources are further categorized in accordance with the level of certainty associated with the estimates and may be sub-classified based on project maturity and/or characterized by their economic status. Undiscovered That quantity of petroleum estimated, as of a given date, to be contained within accumulations yet to be discovered. Petroleum Initially- in-Place: Prospective Those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations Resources: by application of future development projects. Prospective Resources have both an associated chance of discovery and a chance of development. Prospective Resources are further subdivided in accordance with the level of certainty associated with recoverable estimates assuming their discovery and development and may be sub-classified based on project maturity. Unrecoverable: That portion of Discovered or Undiscovered Petroleum Initially-in-Place quantities which is estimated, as of a given date, not to be recoverable by future development projects. A portion of these quantities may become recoverable in the future as commercial circumstances change or technological developments occur; the remaining portion may never be recovered due to physical/chemical constraints represented by subsurface interaction of fluids and reservoir rocks. Source: SPE & Fox-Davies
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Glossary Term Description
1C Denotes low estimate scenario of Contingent Resources 1P Proved reserves 2C Denotes best estimate scenario of Contingent Resources 2D A group of seismic lines acquired individually, as opposed to the multiple closely spaced lines acquired together that constitute 3D seismic data 2P Proved oil + Probable oil 3C Denotes high estimate scenario of Contingent Resources 3D A set of numerous closely-spaced seismic lines that provide a high spatially sampled measure of subsurface reflectivity. Typical receiver line spacing can range from 300m (1,000ft) to over 600m (2,000ft), and typical distances between shotpoints and receiver groups are 25m (82ft) (offshore and internationally) and 110ft or 220ft (34 to 67m) (onshore US, using values that are even factors of the 5,280feet in a mile) 3P Proved oil + Probable oil + Possible oil Albian Geologic term covering period between 107 and 95 million years ago Amplitude anomaly An abrupt increase in seismic amplitude that can indicate the presence of hydrocarbons, although such anomalies can also result from processing problems, geometric or velocity focusing or changes in lithology. Amplitude anomalies that indicate the presence of hydrocarbons can result from sudden changes in acoustic impedance, such as when a gas sand underlies a shale, and in that case, the term is used synonymously with hydrocarbon indicator API gravity An arbitrary scale expressing the density of liquid (gravity) petroleum products devised jointly by the American Petroleum Institute and the National Bureau of Standards. Oil with the lowest specific gravity at atmospheric conditions and 70 degrees Fahrenheit has the highest API gravity. The measuring scale is calibrated in terms of degrees API. API gravity is the industry standard for expressing the specific gravity (SG) of crude oils. A high API gravity means lower specific gravity and lighter oils 141.5 131.5 @ Aptian Geologic term covering period between 114 and 107 million years ago Arbuckle A subset of the Ordovician period Attic Oil Crude oil located at the top of a reservoir, above the optimal production zone. It can either be extracted via a deviated well from the original production string or spudding a new well targeting the crest of the structure Authigenic Generated where it is found or observed Basin A depression in the Earth's surface, containing the youngest section of rock in its lowest, central part bbl Barrel bcf Billion cubic feet bcfpd Billion cubic feet per day bn billion (1x109) boe Barrels of oil equivalent boepd Barrels of oil equivalent per day bpd Barrels oil per day bpy Barrels oil per year Btu British thermal unit Cambrian Geologic term covering period between 541 to 485 million years ago Campanian Geologic term covering period between 84 and 72 million years ago Cenozoic Geologic term covering period between 65 million years ago to the present Chance of Success The risk factor measuring the likelihood that a prospect being drilled will discover hydrocarbons in sufficient quantities and with a reservoir able to produce such hydrocarbons at commercial rates Chance of Success – Commercial The risk factor measuring the likelihood that once found, an accumulation proves commercial Chance of Success – Geological The risk factor measuring the four elements required to have an accumulation of oil or gas, namely, Source, Seal, Trap and Reservoir
Chance of Success – Overall Overall chance of success, defined as a function of CoSG and COSC:
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Term Description
Clastic Sediment consisting of broken fragments derived from pre-existing rocks and transported elsewhere and redeposited before forming another rock. Examples of common clastic sedimentary rocks include siliciclastic rocks such as conglomerate, sandstone, siltstone and shale. Carbonate rocks can also be broken and reworked to form clastic sedimentary rocks CoS Chance of Success
COSC Commercial Chance of Success
CoSG Geological Chance of Success
CoST Overall Chance of Success Cretaceous Geologic term covering period between 145 and 65 million years ago Darcy A standard unit of measure of permeability. One darcy describes the permeability of a porous medium through which the passage of one cubic centimetre of fluid having one centipoise of viscosity flowing in one second under a pressure differential of one atmosphere where the porous medium has a cross- sectional area of one square centimetre and a length of one centimetre. A millidarcy (mD) is one thousandth of a darcy and is a commonly used unit for reservoir rocks DCF Discounted Cash Flow Delta(ic) An area of deposition or the deposit formed by a flowing sediment-laden current as it enters an open or standing body of water, such as a river spilling into a gulf. As a river enters a body of water, its velocity drops and its ability to carry sediment diminishes, leading to deposition. The term has origins in Greek because the shape of deltas in map view can be similar to the Greek letter delta. The shapes of deltas are subsequently modified by rivers, tides and waves. There is a characteristic coarsening upward of sediments in a delta. The three main classes of deltas are river-dominated (Mississippi River), wave-dominated (Nile River) and tide-dominated (Ganges River). Ancient deltas contain some of the largest and most productive petroleum systems. Desmoinesian Geologic term covering period between 308 to 306 million year ago Devonian Geologic term covering period between 410 and 360 million years ago Diagenesis All chemical, physical and biological modifications undergone by a sediment after its initial deposition DMG Domestic Market Gas. Gas sold to the host government, usually at a discount to the prevailing market price. DMO Domestic Market Oil. Oil sold to the host government, usually at a discount to the prevailing market price. Downdip Located down the slope of a dipping plane or surface. In a dipping (not flat-lying) hydrocarbon reservoir that contains gas, oil and water, the gas is updip, the gas-oil contact is downdip from the gas, and the oil- water contact is still farther downdip Dyke A discordant intrusive rock that is substantially wider than it is thick. Dykes are often steeply inclined or nearly vertical. The expansion of a rock's volume caused by stress and deformation
Dysaerobic Applied to a depositional environment with 0.1–1.0 ml dissolved O2 per litre of water E&P Exploration & Production Eocene Geologic term covering period between 54.8 and 33.7 million years ago Epicontinental Located on a continental shelf EUR Estimated Ultimate Recovery is a term which may be applied to an individual accumulation of any status/maturity (discovered or undiscovered). Estimated Ultimate Recovery is defined as those quantities of petroleum which are estimated, on a given date, to be potentially recoverable from an accumulation, plus those quantities already produced Farm-in The process of buying into a licence block held by another licensee by paying a proportion of the costs, normally in excess to the interest that is finally earned, e.g., earning a 15% interest on a 2:1 basis means that 30% is paid Fault block A section of rock separated from other rock by one or more faults FEED Front End Engineering and Design Fischer Assay A standardized laboratory test for determining the oil yield from oil shale to be expected from a conventional shale oil extraction. A 100 gram oil shale sample crushed to <2.38 mm is heated in a small aluminum retort to 500°C (930°F) at a rate of 12°C/min (22°F/min), and held at that temperature for 40 minutes. The distilled vapors of oil, gas, and water are passed through a condenser and cooled with ice water into a graduated centrifuge tube. The oil yields achieved by other technologies are often reported as a percentage of the Fischer Assay oil yield Fluvial Pertaining to an environment of deposition by a river or running water. Fluvial deposits tend to be well sorted, especially in comparison with alluvial deposits, because of the relatively steady transport provided by rivers ft3 Cubic feet
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Term Description
FTP First Tranche Petroleum: a form of Royalty payment. G&G Geology & Geophysics Gas chimney A subsurface leakage of gas from a poorly sealed hydrocarbon accumulation. The gas can cause overlying rocks to have a low seismic velocity, thereby becoming visible. Gas chimneys are visible in seismic data as areas of poor data quality or push-downs GOR Gas / oil ratio (mm cf/bbl) Graben A relatively low-standing fault block bounded by opposing normal faults. Graben (used as both singular and plural) can form in areas of rifting or extension, where normal faults are the most common type of fault. Between graben are relatively high-standing blocks called horsts. A half-graben is a downdropped block bounded by a normal fault on only one side Horst A relatively high-standing area formed by the movement of normal faults that dip away from each other. Horsts occur between low-standing fault blocks called graben. Horsts can form in areas of rifting or extension, where normal faults are the most abundant variety of fault Igneous Types of rock that are formed through the cooling and solidification of magma or lava Jurassic Geologic term covering period between 215 and 145 million years ago Kerogen The naturally occurring, solid, insoluble organic matter that occurs in source rocks and can yield oil upon heating. Typical organic constituents of kerogen are algae and woody plant material. Kerogens have a high molecular weight relative to bitumen, or soluble organic matter. Bitumen forms from kerogen during petroleum generation. Kerogens are described as: Type I, consisting of mainly algal and amorphous (but presumably algal) kerogen and highly likely to generate oil; Type II, mixed terrestrial and marine source material that can generate waxy oil; and Type III, woody terrestrial source material that typically generates gas kg Kilogram kWh Kilowatt-hour Lacustrine Pertaining to an environment of deposition in lakes, or an area having lakes. Because deposition of sediment in lakes can occur slowly and in relatively calm conditions, organic-rich source rocks can form in lacustrine lb Pounds (avoirdupois) Lead Potential area where one or more accumulations are currently poorly defined and require more data acquisition and/or evaluation in order to be classified as a prospect. A lead will occur within a play Limnic Relating to fresh water Lithology The macroscopic nature of the mineral content, grain size, texture and colour of rocks LNG Liquefied Natural Gas, mainly methane and ethane, which has been liquefied at cryogenic temperatures m Thousand (1x103) m bbl Thousand barrels m3 Cubic meter mcf Thousand cubic feet mD Millidarcy. See Darcy Mesozoic The era with a time span from 250 million to 65 million years ago. This includes the Triassic, Jurassic and Cretaceous periods. The Earth was believed to be warmer with higher sea level and no polar ice during this era. The largest global-scale mass extinction (the Permian Extinction) was believed to occur toward the beginning of the Mesozoic Era, of which new life forms such as dinosaurs and mammals began to dominate the Earth Metamorphic Types of rock that are formed by the transformation of existing rock types, in a process called metamorphism, which means “change in form” Miocene Geologic term covering period between 23 and 5 million years ago Mississippian Lower Carboniferous from 359ma 318ma mm Million (1x106) mm bbl Million barrels mm boe Million barrels of oil equivalent mm scfpd Million standard cubic feet of gas per day NAV Net Asset Value
NAV(D) Net asset value discounted at Discount Rate “D”
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Term Description
NGL Natural Gas Liquids are the components of natural gas that are liquid at in field facilities, or gas- processing plants. NGLs can be classified according to their vapour pressures as low (condensate), intermediate (natural gasoline) and high (liquefied petroleum gas) vapour pressure; examples include propane, butane, pentane, hexane and heptane, but not methane and ethane, since these hydrocarbons need refrigeration to be liquefied. NOC National Oil Company NPV Net Present Value
NPV(10) Net present value discounted at 10% Oligocene Geologic term covering period between 33.7 and 23.8 million years ago. OOIP Original Oil In Place Ordovician Geologic term covering period between 488 and 444 million years ago Orogeny The process of mountain formation, especially by the upward displacement of the Earth's crust Overburden The material that lies above a series of economic or scientific interest. Also called waste or spoil P&A Plugged & Abandoned P1 Proved reserves are those quantities of petroleum which, by analysis of geological and engineering data, Proven oil can be estimated with reasonable certainty to be commercially recoverable, from a given date forward, from known reservoirs and under current economic conditions, operating methods, and government regulations. Proved reserves can be categorised as developed or undeveloped. If deterministic methods are used, the term reasonable certainty is intended to express a high degree of confidence that the quantities will be recovered. If probabilistic methods are used, there should be at least a 90% probability that the quantities actually recovered will equal or exceed the estimate.
P10 The quantity that has at least 10% probability of being exceeded P2 Probable reserves are those unproved reserves which analysis of geological and engineering data Probable oil suggests are more likely than not to be recoverable. In this context, when probabilistic methods are used, there should be at least a 50% probability that the quantities actually recovered will equal or exceed the sum of estimated proved plus probable reserves. P3 Possible reserves are those unproved reserves which analysis of geological and engineering data Possible oil suggests are less likely to be recoverable than probable reserves. In this context, when probabilistic methods are used, there should be at least a 10% probability that the quantities actually recovered will equal or exceed the sum of estimated proved plus probable plus possible reserves.
P50 The quantity that has at least 50% probability of being exceeded
P90 The quantity that has at least 90% probability of being exceeded Paleocene Geologic term covering period between 65 and 55.5 million years ago Paleogene Geologic term covering period between 65 and 23 million years ago Pennsylvanian Geologic term covering period between 320 and 286 million years ago Permian Geologic term covering period between 286 and 248 million years ago Phanerozoic Relating to or belonging to the aeon of geological time that consists of the Palaeozoic, Mesozoic and Cenozoic eras Play Recognised prospective trend of potential prospects, but which requires more data acquisition and/or evaluation to define specific leads or prospects Poikiloaerobic See dysaerobic Post After ppm Parts per million Progradation The accumulation of sequences by deposition in which beds are deposited successively basinward because sediment supply exceeds accommodation. Thus, the position of the shoreline migrates into the basin during episodes of progradation, a process called regression Prospect A project associated with a potential accumulation that is sufficiently well defined to represent a viable drilling target. A project maturity sub-class that reflects the actions required to move a project toward commercial production. Prospective Resources Those quantities of petroleum which are estimated, as of a given date, to be potentially recoverable from undiscovered accumulations. Proved Reserves Often referred to as 1P, also as “Proven” PSC Production Sharing Contract Recovery The fraction of hydrocarbons that can or has been produced from a well, reservoir or field; also, the fluid that has been produced
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Term Description
Reservoir A subsurface body of rock having sufficient porosity and permeability to store and transmit fluids. Sedimentary rocks are the most common reservoir rocks because they have more porosity than most igneous and metamorphic rocks and form under temperature conditions at which hydrocarbons can be preserved. A reservoir is a critical component of a complete petroleum system Rift(ing) The tearing apart of a plate to form a depression in the Earth’s crust and often eventually separating the plate into two or more smaller plates Risk The probability of loss or failure. As “risk” is generally associated with the negative outcome, the term “chance” is preferred for general usage to describe the probability of a discrete event occurring Royalty Royalty refers to payments that may be due to the host government, mineral owner, or landowner, in return for the producer having access to the petroleum. Many agreements allow for the producer to lift the royalty volumes, sell them on behalf of the royalty owner, and pay the proceeds to the owner. A few agreements provide for the royalty to be taken only in kind by the royalty owner scfpd Standard cubic foot per day (at 60°F and 14.7psia) Section A unit of measurement in US land allocation. Equal to 1 square mile, or 640 acres Sedimentary Types of rock that are formed by the deposition of material at the Earth's surface and within bodies of water Seismic Pertaining to waves of elastic energy, such as that transmitted by P-waves and S-waves, in the frequency range of approximately 1 to 100 Hz. Seismic energy is studied by scientists to interpret the composition, fluid content, extent and geometry of rocks in the subsurface Shale A fine-grained, fissile, detrital sedimentary rock formed by consolidation of clay- and silt-sized particles into thin, relatively impermeable layers. It is the most abundant sedimentary rock. Shale can include relatively large amounts of organic material compared with other rock types and thus has potential to become a rich hydrocarbon source rock, even though a typical shale contains just 1% organic matter. STOIIP Stock tank oil initially in place Stratigraphy The study of the history, composition, relative ages and distribution of strata, and the interpretation of strata to elucidate Earth history. The comparison, or correlation, of separated strata can include study of their lithology, fossil content, and relative or absolute age, or lithostratigraphy, biostratigraphy, and chronostratigraphy Stripping Ratio The ratio of the volume of overburden (or waste material) required to be handled in order to extract some volume of ore. For example, a 3:1 stripping ratio means that mining one cubic meter of ore will require mining three cubic meters of waste rock. Syn- At the same time as Taxes Enforced contributions to the public funds, levied on persons, property, or income by governmental authority tcf trillion cubic feet (1x1012 ft3) Tertiary Geologic term covering period between 65 and 2.6 million years ago Thrust fault A reverse fault marked by a dip of 45º or less TOC See total organic carbon ton Short ton tonne Metric ton Total Organic Carbon The term used to describe the level of carbon bound up in the organic compounds found within the source rock. Often referred to as TOC tpa Tonnes per annum Trap A configuration of rocks suitable for containing hydrocarbons and sealed by a relatively impermeable formation through which hydrocarbons will not migrate. Traps are described as structural traps (in deformed strata such as folds and faults) or stratigraphic traps (in areas where rock types change, such as unconformities, pinch-outs and reefs). A trap is an essential component of a petroleum system trn Trillion (1x1012) Turbidite A sedimentary deposit formed by a turbidity current Turbiditic Pertaining to, or arising from turbidite, a sedimentary deposit formed by a turbidity current Turbidity current A fast-flowing downhill current (of air or water) that carries silt Updip Located up the slope of a dipping plane or surface. In a dipping (not flat-lying) hydrocarbon reservoir that contains gas, oil and water, the gas is updip, the gas-oil contact is downdip from the gas, and the oil- water contact is still farther downdip Valanginian Geologic term covering period between 131 and 122 million years ago Vitrinite reflectance A means of measuring the maturity of the organic matter within either the reservoir or the source rock, as regards whether the organic matter has been or could be an effective source rock
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Term Description
Vug A cavity, void or large pore in a rock Working interest A company’s equity interest in a project before reduction for royalties or production share owed to others under the applicable fiscal terms Source: Fox-Davies
Index of Figures and Tables Figures Figure – Title Page
Figure 1 – Breakdown of FDC’s NAV 4 Figure 2 – Oil Prices Used in the TomCo’s Valuation 6 Figure 3 – Timetable to First Capsule 8 Figure 4 – Impact on Breakeven Point with Variation in Oil Price and Fischer Assay 10 Figure 5 – Oil Shale Classification 14 Figure 6 – General Location of the US’ Principal Oil Shale Basins 16 Figure 7 – Shale Mining Operations 18 Figure 8 – In-situ and Ex-situ Process Comparison 19 Figure 9 – General Location TomCo’s Assets 20 Figure 10 – General Location TomCo’s Assets 20 Figure 11 – Access to Holliday Site 21 Figure 12 – Proposed Operating Location 21 Figure 13 – Holliday Licence Area 22 Figure 14 – Green River Formation Stratigraphy 23 Figure 15 – Outcrop Green River Formation at Evacuation Creek 24 Figure 16 – Mahogany Oil Shale 24 Figure 17 – Uintah Oil Shale – Extent 25 Figure 18 – Uintah Oil Shale – Burial 25 Figure 19 – Uintah Oil Shale – Fischer Assay Values 26 Figure 20 – Advantages of EcoShale 27 Figure 21 – Principal Elements in the EcoShale Capsule 28 Figure 22 – Construction of the EcoShale Capsule 29 Figure 23 – Capsule Timeline 29 Figure 24 – Simplified Process Diagram 30 Figure 25 – Retaining Wall 31 Figure 26 – Burner & Blower 31 Figure 27 – Collection Sump & Tank Farm 32 Figure 28 – Chiller Unit 32 Figure 29 – Gas Separator 33 Figure 30 – Brent/WTI Spread 36 Figure 31 – United States of America 37 Figure 32 – US – GDP 38 Figure 33 – US – Proven Reserves 1980 - 2013 39 Figure 34 – US – Production 1980 – 2012 40 Figure 35 – US – Demand 1980 – 2012 40 Figure 36 – US – Imports 1980 – 2012 41 Figure 37 – Resources Classification Framework 51
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Tables Tables – Title Page
Table 1 – NAV Valuation Summary 4 Table 2 – NAV(D) Un-risked and/Risked Valuation Summary 5 Table 3 – Impact of Variation in Geopolitical Risk and Business Execution Risk Premium on NAV(D) 5 Table 4 - Impact of Variation in Oil Price on NAV(D) 7 Table 5 – Impact of Variation in Capex on NAV(D) 7 Table 6 – Impact of Variation in Date of First Capsule on NAV(D) 8 Table 7 – Impact of First Year Capsule Construction Rate in NAV(D) 8 Table 8 – Impact on NAV(D) by Changes in Capsules per Year and Year of Programme Start 9 Table 9 – Variation in NAV(D) with Technology Risk 9 Table 10 – Impact of Mining Losses on Effective Yield 10 Table 11 – Summary of Oil Shale In Place Resources 16 Table 12 – Summary of Oil Shale Production 18 Table 13 – Organic Content of the Series in the Green River Formation 22 Table 14 – Base Case Valuation Parameters 34 Table 15 – Summary of Production by State 38 Table 16 – US – Country Risk Summary 42 Table 17 – Resources Classification Terms 52
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Research Disclosures Zac Phillips Zac has in excess of 17 years’ experience in Oil and Gas and finance, working for companies such as BP, Chevron, Merrill Lynch and ING Barings, where he undertook finance or finance related roles. Given his Chemical Engineering degree and PhD, Zac’s career has focused on the economics of investment, and its assessment, on a range of projects from process change implementation, to operating plants and companies.
Zac’s extensive oil and gas financial and technical experience has ably lent itself to the valuation of exploration and producing oil and gas assets, especially where complex financial structures define companies’ access to the economic benefits of ownership. Latterly, Zac was the CFO to Dubai World’s oil and gas business (DB Petroleum), with responsibility for risk management, valuation and the authoring of investment proposals. During this time, Zac valued in excess of 152 transactions with a combined transaction value of in excess of $35bn.
Zac has an Honours Degree in Chemical Engineering from Wales and a PhD in Chemical Engineering from Bath University. He is a member of the Society of Petroleum Engineers, Institute of Chemical Engineers and the Association of International Petroleum Negotiators; Zac is also an Approved Person under the Financial Services Authority in the United Kingdom.
+44 (0)203 463 5039 [email protected]
Investment analyst certification All research is issued under the regulatory oversight of Fox-Davies Capital Limited. Each Investment Analyst of Fox-Davies Capital Limited whose name appears as the Author of this Investment Research hereby certifies that the recommendations and opinions expressed in the Investment Research accurately reflect the Investment Analyst’s personal, independent and objective views about any and all of the Designated Investments or Relevant Issuers discussed herein that are within such Investment Analyst’s coverage universe.
Fox-Davies Capital Limited provides professional independent research services and all Analysts are free to determine which assignments they accept, and they are free to decline to publish any research notes if their views change.
Research Recommendations Fox-Davies Capital uses a five-tier recommendation system for stocks under coverage:
Buy Recommendation implies that expected total return of at least 15% is expected over 12 months between current and analysts’ target price.
Trading Buy Recommendation implies that the analysts’ expected total return over the short term compared against the target price is positive.
Hold Recommendation implies that expected total return of between 15% and zero is expected over 12 months between current and analysts’ target price.
Trading Sell Recommendation implies that the analysts’ expected total return over the short term compared against the target price is negative.
Sell Recommendation implies that expected total return expected over 12 months between current and analysts’ target price is negative.
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Research Disclaimers Research disclosure as of 17 June 2013
Company Name Disclosure
TomCo Energy (TOM LN) 1, 2 & 7
Investment Research Disclosure Legend:
1. In the past 12 months, Fox-Davies Capital Limited or its affiliates have had corporate finance mandates or managed or co-managed a public offering of the Relevant Issuer’s securities or received compensation for Corporate Finance services from the Relevant Issuer.
2. Fox-Davies Capital Limited expects to receive or intends to seek compensation for Corporate Finance services from this company in the next six months.
3. The Investment Analyst or a member of the Investment Analyst’s household has a long position in the shares or derivatives of the Relevant Issuer.
4. The Investment Analyst or a member of the Investment Analyst’s household has a short position in the shares or derivatives of the Relevant Issuer.
5. As of the month end immediately preceding the date of publication of this report, or the prior month end if publication is within 10 days following a month end, Fox-Davies Capital Limited and / or its affiliates beneficially owned 1% or more of any class of common equity securities of the Relevant Issuer.
6. A senior executive or director of Fox-Davies Capital Limited or a member of his or her household is an officer, director or advisor, board member of the Relevant Issuer and / or one of his subsidiaries.
7. Fox-Davies Capital Limited acts as corporate broker for the Relevant Issuer.
The Investment Analyst who is responsible for the preparation of this Investment Research is employed by Fox-Davies Capital Limited, a securities broker-dealer.
The Investment Analyst who is responsible for the preparation of this Investment Research has received (or will receive) compensation linked to the general profits of Fox-Davies Capital Limited.
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Fox-Davies Capital Coverage Oil & Gas Price Oil & Gas Companies Ticker Recommendation Date Latest Target Difference
Aminex AEX LN BUY 08.10.12 0.02 0.13 436.1%
Afren AFR LN BUY 24.10.12 1.30 2.50 91.9%
Borders & Southern Petroleum BOR LN HOLD 28.01.13 0.14 0.18 25.2%
Bowleven BLVN LN BUY 01.11.11 0.68 2.50 270.4%
Circle Oil COP LN BUY 19.02.13 0.17 0.95 463.0%
Desire Petroleum DES LN UR 20.04.12 0.13 0.40 207.7%
Enegi Oil ENEG LN UR 18.11.10 0.09 0.25 194.1%
Falklands Oil & Gas FOGL LN HOLD 02.05.13 0.26 0.55 109.5%
Great Eastern Energy GEEC LN BUY 21.01.13 2.69 4.40 63.6%
Gulf Keystone GKP LN BUY 09.01.13 1.54 3.50 127.3%
Gulfsands Petroleum GPX LN HOLD 09.04.13 0.74 1.50 102.7%
Hardy Oil & Gas HDY LN BUY 08.11.12 1.14 1.85 62.3%
Heritage Oil HOIL LN BUY 13.12.12 1.43 3.40 138.4%
Jubilant Energy JUB LN BUY 12.02.13 0.14 0.45 221.4%
Matra Petroleum MTA LN HOLD 11.06.13 0.01 0.01 6.4%
Max Petroleum MXP LN BUY 17.08.12 0.04 0.10 153.2%
MEO Australia MEO AU - 13.12.12 A$0.06 - -
Petroceltic International PCI LN BUY 06.02.13 1.47 0.15 -89.8%
Premier Oil PMO LN BUY 17.01.13 3.51 4.85 38.1%
Range Resources* RRL LN - 10.06.13 0.03 - -
Red Emperor Resources*** RMP LN - 21.11.12 0.03 - -
Rockhopper Exploration RKH LN BUY 14.12.12 1.31 3.50 167.2%
San Leon Energy* SLE LN - 31.01.13 0.06 - -
Sterling Energy SEY LN HOLD 20.10.12 0.35 0.35 0.0%
TomCo Energy*** TOM LN - 17.06.13 0.01 - -
Tower Resources TRP LN BUY 31.01.13 0.02 0.05 181.7%
TXO*** TXO LN - 29.01.13 0.00 - -
Victoria Oil & Gas* VOG LN - 06.02.13 0.01 - - * Fox-Davies Capital Limited acts as corporate broker for the Relevant Issuer. ** Fox-Davies Capital Limited acts as NOMAD for the Relevant Issuer. *** Fox-Davies Capital Limited acts as corporate broker and NOMAD for the Relevant Issuer. Source: Bloomberg & Fox-Davies
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Metals & Mining Price Mining Companies Ticker Recommendation Date Latest Target Difference
African Barrick Gold ABG LN HOLD 19.04.13 1.34 3.15 134.5%
Alecto Minerals *** ALO LN - 30.05.13 0.01 - -
Antofagasta ANTO LN BUY 16.05.13 9.14 10.10 10.6%
Aura Energy AEE AU BUY 05.11.12 A$0.07 A$0.80 981.1%
Balamara Resources BMB AU BUY 01.03.13 A$0.07 A$0.25 247.2%
Bushveld Minerals *** BMN LN - 12.04.13 0.09 - -
Centamin CEY LN HOLD 16.05.13 0.38 0.41 8.5%
Colt Resources GTP CN - 09.05.13 C$0.23 - -
EMED Mining * EMED LN - 13.06.13 0.06 - -
Fox Marble *** FOX LN - 28.01.13 0.18 - -
Highland Gold HGM LN BUY 24.04.13 0.82 1.57 92.0%
Hochschild Mining HOC LN HOLD 15.05.13 2.09 2.90 38.8%
KEFI Minerals *** KEFI LN - 12.04.13 0.03 - -
Lemur Resources LMR AU - 03.04.13 A$0.06 - -
Minera IRL MIRL LN BUY 16.05.13 0.15 0.48 220.0%
Randgold Resources RRS LN BUY 03.05.13 48.53 61.85 27.4%
Serabi Gold * SRB LN - 27.02.13 0.06 - -
Stonehenge Metals SHE AU - 02.05.13 A$0.01 - - * Fox-Davies Capital Limited acts as corporate broker for the Relevant Issuer. ** Fox-Davies Capital Limited acts as NOMAD for the Relevant Issuer. *** Fox-Davies Capital Limited acts as corporate broker and NOMAD for the Relevant Issuer. Source: Bloomberg & Fox-Davies
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Notes
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Disclaimer: Important Information
This document is not independent and should not be relied on as an impartial or objective assessment of its subject matter. Given the foregoing, this document is deemed to be a marketing communication and as such has not been prepared in accordance with legal requirements designed to promote the independence of investment research and Fox-Davies Capital Limited is not subject to any prohibition on dealing ahead of dissemination of this document as it would be if it were independent investment research. This document has been issued by Fox-Davies Capital Limited for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. 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