Renergen’s share price jumped 10% to R15.50 after the producer of natural gas and helium published its quarterly update for the three months to end September 2023.
The share has recovered significantly from a low of R9 in October, albeit that it is still far off its 12-month high of above R31.
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The drop in the share price from its earlier highs coincided with news that the development and construction work at its natural gas plant was going slower than expected – when does construction not taken longer than planned? – and the breakdown of a unit that extracts helium from the natural gas.
Repair concluded
Management says the problematic helium extraction unit has now been repaired and put back into commission.
“Post the repair of the helium cold box, it was returned to site with all utility and process piping reconnected; the system was leak-checked under ambient conditions and purged of impurities using first nitrogen and then externally sourced gaseous helium,” according to the update.
Listen/read: What’s going on at Renergen?
“Prior to the repair of the helium cold box module, the system produced liquid helium but was unable to sustain efficient long-term production due to a loss in the vacuum of the cold box, which led to a loss of insulation and subsequent temperature rises in the system,” says management.
Read: Helium will be produced ‘this calendar year’ says Renergen
“We have recommissioned and run the helium module by injecting gaseous helium into our buffer tank, testing the liquefaction capability and stability profile of the system since the repairs were completed.
“During the cool down and liquid helium production, the vacuum space was monitored for loss/leak over a period of several consecutive days, and during this time, liquid helium was produced, transferred to the storage tank and vaporised for return to the system inlet within a closed loop cycle thus ensuring all components are operating within design specification.
“We are, therefore, confident in the repair and are now looking to progress with final system integration so that commercial liquid helium production can commence,” it adds.
“Our customer will be moving their helium ISO container back to the site in order for us to fill it directly to improve filling time.”
Optimising the resource of time
Renergen also informs shareholders that it took the critical decision to bring forward routine annual maintenance of the natural gas process plant while the helium part of the plant was out of commission.
“During maintenance, operations are halted to service the moving parts such as compressors, which is what has resulted in the drop in production for the quarter,” it says.
“Production will recommence shortly. With the annual maintenance having been completed, we anticipate stable production for the next year, which will include helium production. The team has used this time to test our systems, procedures and processes and to implement several design optimisations to the process plant following observations from the first 12 months of LNG operations.
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“It is believed these interventions will lead to increased long-term uptime and production efficiency and put us in good stead as we continue to ramp the plant up into full production,” it adds.
Cash flow
The cash flow figures reported in the update include figures for the first nine months of calendar 2023.
It takes careful study as the company is changing from a developing and exploration company to an operational entity – with its accountants charging all costs to the income statement rather than capitalising them as development costs.
As such, the cash flow information indicates that Renergen might still show a big loss when it publishes its annual results for the year to February 2024.
In the six months to August, it reported that revenue increased from a mere R1.2 million to R23.8 million, but the loss increased to R43.5 million.
Renergen’s principal asset is a 100% shareholding in Tetra4, which holds the first and only onshore petroleum production right in SA to produce natural gas. The gas project is located in Virginia, in the Free State.
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Renergen says that its natural gas reserves contain some of the richest helium concentrations in the world. It also claims that its natural gas is very pure with an average of over 90% methane, reducing the complexity of liquefying the gas cation.
The quarterly update also discloses that a new exploration borehole has discovered gas. The new gas well is producing approximately 115 000 standard cubic feet of gas per day, with a helium concentration of 3.3%, according to the report.
Renergen is continuing its exploration work and has started on seven other boreholes, none of which had reached the targeted depth at the time of the report.
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