While the market has a tough time, as we have been expected for quite some time, one of our featured stock goes from strength to strength. It’s not hard to understand what’s going on. Basically, the downward risk is rapidly diminishing, and people with serious money are waking up to the ‘upward’ risk.
Why? Well, that is also not so difficult to explain.
What only needs to be done to convince the relevant parties (those with money wanting multi-year secure LNG supplies and those with money looking for interesting places to drill) is show via Elk4 that there is enough gas for LNG. We already had two successful DSTs saying there is. And these DST’s have likely hugely underreported the true gas flows, for reasons we explained here.
This is why Netherland Sewell report might come out even ahead of the conclusion of the drilling, we’re not sure about that, but we heard of reports saying that they already had all the data they needed.
Note that EVEN BEFORE Elk4, it was already very likely that there was enough gas for LNG. Estimate ran from 3.5-18.8Tcf (depending on whether there is only fracture porosity or also matrix porosity, and that issue also seems to have been settled in favour of the latter).
Marathon started building an LNG facility with just 1.5Tcf. in Equatorial Guinea. By what we know already, there is more than enough, even for a two train LNG facility.
It’s also entirely backed up by what’s been happening:
- financing was not a problem ($60M and $95M deals at good conditions in very short time)
- daily volume has doubled
- price has rallied from below $20 on that.
There is little other explanation than that there are already big funds moving in, as funny enough, the shorts are still not covering. The latest short count was actually up. We believe the report day was June 10. They will be sorry that they didn’t cover when they had the chance when the stock price was below $20 earlier this year.