Orient Petroleum PP

[Taipan]

Originally Posted by Babs_O

@crtide.

The closing date is 31-Dec-07. See Vanguard.
Vanguard Online Edition - Orient Petroleum Resources shops for N12b

I actually talked to one of their contacts in UBA, and she said that it will go on until they have the amount they are looking for. The impression i got is that they have quite some demand already and the offer could well close tomorrow! It seems they are looking more to institutional investors for this one. If you are observant, you would have noticed that the memorandum was terribly well prepared. Obviously, someone made lots of effort to make this thing a success.
So what can i say? Buy as soon as possible before you get shut out.

[Taipan]

OPR-Refining & Petrochemicals Company Limited (OPR-R&P) was incorporated as a subsidiary of Orient Petroleum Resources Plc (“OPR”) on 22nd July, 2005 for the purpose of establishing a refinery to process crude oil produced by OPR from its oil and gas concessions into refined petroleum products. OPR conceived the refinery project as a means of harnessing the vast but largely untapped mineral, agricultural and human resources, especially hydrocarbon deposits in Anambra State, for the industrialization of the area and improvement of the socio-economic well being of the people.
The establishment of the Orient Refinery was in direct response to the invitation of the Federal Government of Nigeria following government’s resolve in 2001 to seek alternatives to fuel importation. One of its decisions was to break the monopoly of the
NNPC in the downstream petroleum industry by several measures, including throwing open the refining business to private entrepreneurs and privatizing the state owned refineries.
Orient Petroleum Resources Plc (OPR) was one of 18 successful private companies, out of 65 applicants, to be granted the license to establish refineries in Nigeria in May 2002.
In February 2004, OPR became the first Nigerian company to obtain a license from the Federal Government of Nigeria (FGN) to construct a private petroleum refinery in
Nigeria. OPR was also granted two petroleum prospecting license blocks by the FGN, to provide a dependable source of crude oil feedstock to the Orient Refinery and thus provide long term security for the huge investment in the refinery. OPR, having completed successfully the Environmental Impact Assessment (EIA), has obtained EIA certification from the Federal Ministry of Environment to proceed with the construction of its refinery, again the first company in Nigeria to achieve this milestone.
The scope of operation of OPR-R&P will cover the following core business areas: petroleum products refining, marketing, distribution and power generation.

Shareholding structure
Beneficial Owners No. of shares %
Orient Petroleum Resources Plc 638,088,400.0 94.1
Anambra State & 21 Local Govts. 32,331,316.0 4.8
Nigerian citizens and other investors 7,580,284.0 1.1
Total 678,000,000.0 100.0

The Refinery Project
The proposed Orient Refinery, with a proposed installed capacity size of 55,000 barrels per day, will be located at Nsugbe-Umuleri, on the eastern bank of Anambra River. The main source of feedstock supply to the Refinery will be the oil and gas fields in Oil Prospecting License (OPL) blocks 915 and 916.
The Orient Refinery schedule commenced in year 2000 with the acquisition of land, surveying, Environmental Impact Assessment (EIA), acquisitions of oil blocks, granting of Approval to Construct to the Refinery and other preliminary activities which will culminate in the start-up and commencement of production by late 2008. The Orient refinery will produce gasoline, diesel, kerosene, jet fuel and LPG, which are scarce in the country and are currently being imported in large quantities from overseas.
The location of the proposed Orient Refinery within 30 km of the oil and gas fields discovered in the relatively unexplored Anambra basin has given added impetus to the development of land-locked hydrocarbon reserves, by improving vastly the economics of developing these fields.
Pre launch capex for the refinery to date is estimated at US$22,760,000 (N2, 958,800,000). This covers the costs relating to Front End Engineering Design (FEED) by Shaw Stone & Webster of the United States of America (US$3million), site preparation by Julius Berger Nigeria Plc (US$7.61 million) Feedstock Supply Assurance (US$10.5 million) and Engineering, Procurement, Construction and Commissioning (EPC) mobilization payment to Beijing Petrochemical Design Institute (BPDI), China (US$1.65m).

[newton]

Yeah. The prospectus doesn't carry the closing date. A lady frm UBA global markets (Sara Duncan) confirmed that it'll be on till abt end of january.
I seem to like the board composition (Anyaoku, Ekwueme, Mbanefo), but it seems an all eastern affair.
The forecast for 2009-20011 seem to be quite tite, PE ratio of 2 and earnings/div yield of 45%/25% respectively.

[kiibaati]

I think Orient Refinery makes sense. And the pple behind it are grade 1(Anyaoku, Ekwueme, Mbanefo), .Not the kind of pple to mess up. I think by putting it in anambra, they are trying to develop their state and any investor can be assured that the usual South-south risks won't come up.

[newton]

Yeah I concur. You see, most guys dont even go thru d prospectus b4 concluding on the if an offer is good or otherwise. There's no doubt that this offer could be a potential money spinner to investors ready to take full advantage of the opportunities it provide

[DaInvestor]

Originally Posted by kiibaati

I think Orient Refinery makes sense. And the pple behind it are grade 1(Anyaoku, Ekwueme, Mbanefo), .Not the kind of pple to mess up. I think by putting it in anambra, they are trying to develop their state and any investor can be assured that the usual South-south risks won't come up.

Not trying to be sceptical or be a critic but i really dont care only about who sits at the board, thanks to transcorp even if u argue about their negative publicity, dont care either whether they are developing their state cos if the location is not good the intentions dont matter too, and im not too sure about ur assurance that the usual SS risks wouldnt come up cos these things do come up overnight unless well planned for, and remeber Anambra is not the safest of places in Nigeria, especially with the challenge of this their musical chairs concerning their Govs... just wanted u guys to be concious of these things b4 investing based on sentiments, im more concerned about the facts and figures after that sentiments can follow thats what determines how north or south the price can go but the facts datermine whether its north or south. just my personal take, over to u guys... and compliments of the season

[Taipan]

Originally Posted by DaInvestor

Not trying to be sceptical or be a critic but i really dont care only about who sits at the board, thanks to transcorp even if u argue about their negative publicity, dont care either whether they are developing their state cos if the location is not good the intentions dont matter too, and im not too sure about ur assurance that the usual SS risks wouldnt come up cos these things do come up overnight unless well planned for, and remeber Anambra is not the safest of places in Nigeria, especially with the challenge of this their musical chairs concerning their Govs... just wanted u guys to be concious of these things b4 investing based on sentiments, im more concerned about the facts and figures after that sentiments can follow thats what determines how north or south the price can go but the facts datermine whether its north or south. just my personal take, over to u guys... and compliments of the season

Point taken. But as I like to say, dyou know something we dont know or does your analysis tell you that Orient is a bad deal? If so, please share it with us.

[Apache]

Originally Posted by DaInvestor

Not trying to be sceptical or be a critic but i really dont care only about who sits at the board, thanks to transcorp even if u argue about their negative publicity, dont care either whether they are developing their state cos if the location is not good the intentions dont matter too, and im not too sure about ur assurance that the usual SS risks wouldnt come up cos these things do come up overnight unless well planned for, and remeber Anambra is not the safest of places in Nigeria, especially with the challenge of this their musical chairs concerning their Govs... just wanted u guys to be concious of these things b4 investing based on sentiments, im more concerned about the facts and figures after that sentiments can follow thats what determines how north or south the price can go but the facts datermine whether its north or south. just my personal take, over to u guys... and compliments of the season

I think the numbers have been looked at and they are not looking bad. Also, for a PP where there's no history abt the company to benchmark, the importance of the people who constitute the board cannot be overemphasized. Also location is very important in business of which citing the refinary in the same area where the raw materials are located makes good sense. I think this is a good deal for those that are interested.
Personally for me (even though i consider myself a long term Investor), i always like my investments to be liquid, so i think i will jump in whenever they decide to list although if i have spare cash, i might pick up some units

[newton]

Well, d offer is still very much on. Actually there's no closing date on the form and per discussion wt uba global market contact the offer is on 1st come 1st serve basis.

[Avocado]

In order to part-finance the establishment and construction of a private refinery, following the liberalization of the downstream sector of the oil & gas industry, OPR-R&P had in 2005/2006 issued 150 million shares of 50 kobo at N100 per share through a private placement of which only 7.5 million, representing 5% of the issued shares, were subscribed. Towards making up the difference, the company is now offering 120 million ordinary shares of 50kobo each at N100 per share through another private placement.

(Last paragraph, page 1 of UBA GLobal Markets document)

Question: Why did this PP raise only 5% of the target? Why are institutional investors not swooping on this?

Orient’s OPL blocks 915 and 916 will serve as the main source of feedstock supply, which will ensure steady supply of crude oil to the refinery as well as saving the company the likely costs arising from frequent modification of the refinery on the back of changing composition of oil feedstock

This is one reason this PP doesn't appear attractive. The feedstock will be dependent on prospecting licences? There's lots of uncertainties here. Where is the hydrocarbon resource base documents for these blocks?

In January 2005, a prospect evaluation was done for OPL 915; the engineering report from that work is essential for one to evaluate the prospect of the company. Orient does not have the technology to operate an OPL; who will they be partnering with? This is a long-haul investment. The UBA Global Markets report is very misleading in making projections for 2009. Unless Orient gets foreign partners, the refinery will not fly.
.

[Taipan]

Originally Posted by Avocado

Question: ... Why are institutional investors not swooping on this?

This is one reason this PP doesn't appear attractive. The feedstock will be dependent on prospecting licences? There's lots of uncertainties here. Where is the hydrocarbon resource base documents for these blocks?

In January 2005, a prospect evaluation was done for OPL 915; the engineering report from that work is essential for one to evaluate the prospect of the company. Orient does not have the technology to operate an OPL; who will they be partnering with? This is a long-haul investment. The UBA Global Markets report is very misleading in making projections for 2009. Unless Orient gets foreign partners, the refinery will not fly.
.

You're quite right in ur assessments. But we dont know what the institutional investors are doing right now and this investment is fully long-term.
But 915 and 916 arent the only feedstock supply options:

Crude Oil Feedstock Supply
To guarantee regular supply of crude oil feedstock, Orient Refinery design is based on
three (3) alternative sources of crude namely;
􀂟 barging Brass blend crude up from the Niger and Anambra rivers;
􀂟 construction of a bye-pass from the NNPC Auchi to Enugu pipeline; and
􀂟 development of nearby oil and gas fields in Oil Prospecting Licenses (“OPLs”)
915 & 916.

The above is from pg11 of the same memorandum.
And finally, UBAGM isnt trying to mislead anybody. They stated quite clearly that about 85% of the needed capital is being sourced from China EximBank on which interest will be paid. It is based on the success of this offer (which will go a long way in determining whether the loan goes through or not) that those projections are made.

[Avocado]

The last paragraph of page 11 reads:

The main source of feedstock supply to the Refinery will be the oil and gas fields in Oil Prospecting Licence (OPL) blocks 915 and 916, part of the Anambra River geological basin surrounding the refinery location. (Emphasis mine)

And its eitherthe UBA-GM researchers are sloppy, of they plain don't understand what an OPL means: it is inconsistent (and misleading) to make projections for a refinery for 2009 based on an OPL. They make the caveat that this is not an invitation to invest, yet they don't lay enough emphasis on the uncertainties regarding the main source of the feedstock for planned refinery.

China Eximbank will provide US$467.5 million or 85% of the required total project cost as a loan, while OPR Plc will provide its oil concession licences (OPL 915 and 916) as collateral for the loan. The parent company is also required to provide the balance of 15% of the project cost amounting to US$82.5 as internal counterpart funding for which OPRR& P will pay up to US$207,193,372 as financial charges over a period of 8 years (average
of US$25,899 per annum).

In otherwords, investors will lose their monies if the refinery doesn't come on stream if the OPL isn't converted to an OML which is dependent on the discovery of commercial quantities of oil. Hmnn. Where is the investment for developing the licence if commercial quantities of crude oil are discovered?

Supply of Feedstock Risk
The supply of feedstock risk is mitigated as the company plans to secure its feedstock supply by vertical integration with the upstream petroleum business; and this has been guaranteed by the award by the Federal Government to OPR-R&P (the holding company) of two licence blocks, OPLs 915 and 916 adjacent to the refinery site. In addition, the Federal Government (through NNPC) has equally agreed to supply crude from the
NNPC/Agip Joint Venture Operation in Brass, as a back-up.

The agreement (in principle) to supply crude from Brass is good; but that's "back up", meaning that the success of the OPLs 915 and/or 916 is essential to the success of the project. Tricky thing.

To suppose that these plans and projects can be completed in time for a N45 EPS for FY 2009 is quite laughable.
.

[Dragon123]

The current price per litre of petrol in Nigeria is highly subsidised. How will they be able to make profit if they are to sell their product in the local market? Personally, I am not too keen.

[chineduz]

Link Update on Orient....The NEWS - News

[Taipan]

Originally Posted by chineduz

Link Update on Orient....The NEWS - News

Wow, I havent had such good news in quite a while. Avocado, dyou think this changes anything?