BIG NEWS for Renergen

Interview with CEO Stefano Marani regarding the latest developments.

My personal take on the interview: 

• Renergen has now transitioned from an exploration company to a production company.
• I believe the share price will continue to be volatile due to the inherent risk to invest in a project this early in its life cycle. BUT, being early goes both ways: High risk, high reward. OR high risk, no reward. Time will tell.
• Revenues will start picking up now as the company starts to commercialise and sell helium. Its still only phase one though, so revenues wont hit the lights out yet. Were patiently waiting for phase two.
• All in all, if you are a Renergen fan, you have to be here for at least the next 3-5 years. We have to be patient.
• Helium has massive potential. I back the team, I back the project, and I back helium as a commodity. Renergen remains one of my biggest holdings. Im not buying more just yet, but Im definitely not selling either.

Interview with Stefano Marani:

What were the necessary factors that needed to fall in place to get to this point?

We've been working on this project since we originally bought the field back in 2013. A lot had to fall in place, from regulatory approvals to finding the gas and making the accidental helium discovery. There were numerous hurdles - it certainly wasnt a quick process. 

The narrative over the last two months was focus and attention on maintaining the integrity of the pipeline system and making sure that there were no leaks in the system.  Leaks would be devastating it could have led to potential explosions and fires at the plant and undoing everything that we have done thus far.

Practically: it was about 

• Getting the formulation right for the mixed refrigerant 
• getting the formulation right for the wash to scrub out the carbon dioxide so that we didn't clog out any of the turbines 
• making sure that the storage facilities were at the customer sites
•  making sure that the gasifiers were fully operational
• Ensuring complete coordination between our plants and their operations for the receiving of the gas

What does production mean in practical terms?

Production at this stage means that we are now filling up tanks. Essentially this is now a fully commercial operation on the LNG side. That means that LNG is now being produced from the wells and at the plant in order to be able to sell to customers to generate revenue. 

What effect will this have on revenues

Up to now, we have been an exploration company. Exploration companies typically tend to burn through cash, and they go and explore and try to find what's under the ground. Nine times out of ten, small explorers will try and prove up the reserve in the bankability of a particular piece of dirt and then they will try and flip it out to a larger shareholder.

In our case, we've actually taken this thing through the value chain and we're bringing it into commercial operations ourselves. We're now at the point where this project is now revenue generation. All be it on a small scale because we all know phase one was always the pilot project for the phase two project. 

The fact is that this is still going to be a profitable venture for the company and so you can now start to expect a very different view of financial statements.  While we're not been anticipating phase 1 to blow the lights out, is going to be a profitable year. It's a complete game-changer for us.

What is the next step/goal for Renergen?

The next milestone for us in the very near term is finalizing the helium module to be able to flick the switch and have a cooldown. LNG is where all of the risks are because it's flammable as a hydrocarbon, whereas helium is completely inert so there's no danger to the plant turning the helium plant on. 

It is a case of making sure that everything is ready, connected, and good to turn on. 

• short-term: Turning on the helium models to start filling up the helium tanks
• medium-term: Starting to ramp-up phase one production and then more importantly wrapping up the final financing facilities for phase two in 2023

How does the current helium market look like?

The current helium market is still massively constrained. While the BLM did come online and start to produce some helium which is given some reprieve, there's a big question mark hanging over its head as to whether or not the BLM is going to continue production. I think from our side were going to sit on the side line and monitor the situation, but that's going to have a major impact on what happens. 

From the Russian side I dont believe that its going to come online probably until around 2025 with its initial volumes and we also know that Qatar is still intermittent in terms of its production. So, helium supply is still in an incredibly constrained position

To add insult to injury - the passing of the 500-billion-dollar stimulus bill in the United States for semiconductors also had an impact on the demand side. So, it's not likely to abate anytime soon were still seeing incredibly high prices in helium, both for the long-term take-or-pays as well as the spot market.

What should investors look for?

News on updates on the plant and then more importantly the ongoings with regards to the preparations on phase two. Keep watching this space. There are a lot more exciting things to come, but were not quite letting the cat out of the bag on anything just yet.