12th October 2018
- In Brief:
- TomCo (LON:TOM) 9p – Water, Water Everywhere…: While disappointing, today’s news that the programme has been paused due to the ingress of water is not unexpected, especially as we highlighted it as a potential issue as early as the 9th of April. Consequently, that no provision was made for the ingress of any volume is a disappointing lack of foresight or understanding of the system that would be encountered. The hydrostatic pressure, while not an issue in engineering terms (approximately half mains pressure), there are two elements that now need to be addressed, the mass flow (how much water is flowing) and the size of the motive force. This last one is perhaps the most important, as at the bottom end of the scale it is an isolated water body that just needs to drain, while at the other end of the spectrum, if it is connected to an aquifer, in the context of these operations and what they’re aimed at achieving in the rock volumes involved, the motive force and water availability, is infinite. We are not going to repeat our comments of the 9th, but it does bear remembering that in respect of the heating/pyrolysis and recoverability efficiency, the presence or absence of an aquifer is (to our mind) the key determinant of the commerciality.
- Frontera Resources (LON:FRR) – 0.42p – Too Little, Too Late: Today’s announcement is interesting on a number of fronts. The first that anybody (major or otherwise) has shown sufficient interest to direct the Company to test the wells is a positive. Second, is that the Company, after all this time and money, don’t have adequate evidence that the asset base is investable, which just underlines the fact that the money invested by the company’s shareholders has clearly not gone into the asset base. To our mind, this is the first time the company will attempt to do a serious well test, which again confirms to us that there is a serious mismatch between the progress that the management team have said has been done on the assets, and what has actually been done on the assets. All of this yet again supports the belief that the management team have no idea what they need to do, and that all the protests that the Company is sufficiently staffed to undertake such a programme is beginning to look like fantasy. Were they adequately skilled, we have no doubt that the testing and appraisal programme that would have been undertaken to prove commerciality of the assets, would have been completed before now. It must be humiliating that the management has needed to be directed by a third party to do the job that it should have been doing since is floated for the first time over 12 years ago. This reinforces our belief that the Company’s leadership team is not fit for purpose. Ultimately, we do not believe that the Company presents a compelling investment story to justify further cash resources, which are surely required, and that Georgia’s energy ministry should continue to assert its rights under the PSC to terminate.
We may provide a further update on one, or all, of the stories above later today. However, if there is anything that you would like to discuss, please feel free to contact us.