For bwldforbucks1...
Sorry for getting back to you this late, but I've been on vacation for the past several weeks and off internet. I'll try and answer some of your questions.
Could you provide your general thoughts on how you see the infrastructure (topping facility, wells, pipelines, etc.) coming together in concert with necessary equity / debt raises?...
...the question is, what is the timing of these expenditures and where does it come from? I understand that until they have proven a viable asset (oil reserves) and cash flows most of this will probably have to come from SNV equity.
Once that is established, could they potentially project finance a topping facility and / or pipeline etc., if they have established viable offtake contracts? Or will it be a slower, more gradual approach that focuses on slowly building out wells / production and building up internally generated cash flow and expanding development in that manner. Or will they JV and share capital costs?
PIPELINE SYSTEM
Let's talk about the pipelines first. Iraq already has a pipeline system, although archaic. There are two major and several minor pipelines. To give you an indication of where these are located, please go to Google Maps:
IRAQ-TURKEY PIPELINE
The first major pipeline is the Iraq-Turkey pipeline which runs north-south. It starts in Bagdad, follows the highway northbound through Samarra, Tikrit, west of Mosul into Cizre (Turkey). It basically goes right through Sonoro's first prospect oil field.
IRAQ STRATEGIC PIPELINE
The other major pipeline runs from the shipping port in Basra northwest (again following the highway) to Karbala, and then a straight line from there past the two lakes to Ramadi (directly west of Bagdad). From there on, it follows the highway to Al Haqlaniyak.
IRAQ-SYRIA & KIRKUK PIPELINES
At Al Haqlaniyak, the Iraq Strategic Pipeline joins up with the Iraq-Syria & Kirkuk pipelines.
The Iraq-Syria pipeline runs northwest from Al Haqlaniyak, following the highway (#12 on Google Maps) into Al Bukamal (Syria).
The Kirkuk pipeline runs eastwards from Al Haqlaniyak, north of Tikrit, into Kirkuk. The Kirkuk pipeline intersects with the Iraq-Turkey pipeline just to the south of where SNV will be drilling its first prospect.
Now having said all of the above, I asked Richard at the AGM if they will be using Iraqi's pipeline system. I got the general sense from him that they will not (at least not initially).
While starting up, they will be selling their oil into the domestic market (this has already been stated several times in their news releases). What he means by this is that local entrepreneurs will be arriving at the drill site with their own personal tanker trucks. He then fills up their trucks by selling them oil at a discount. These locals then drive their trucks and re-sell the oil at refineries located either in Jordan or Turkey.
Nevertheless, the sale is made at the site, not when the trucks arrive at the refinery (Sonoro will not be selling their oil to refineries... Sonoro sells the oil to the local entrepreneurs, who in turn transport the oil and re-sell it at a profit for themselves to refineries located in other countries).
As such, since Sonoro is selling the oil at a discount directly into the local market, there will be no capital requirement towards the transportation of the oil.
TOPPING FACILITY
In the future, the plan is to re-direct the oil towards their own diesel/kerosene Topping facility. At the AGM, they talked about several ways of financing the Topping facily. A 5,000 bbd facility will cost them around $30 Million. A 30,000 bbd facility will be in the neighbourhood of $75 Million.
Once they have a proven reserve, they will be able to some debt financing. The amount of financing will depend on the size of the reserve. Another option they are contemplating is a JV on the topping facility (with the partner footing the bill for the entire facility).
Whichever option they choose, the Topping facility will not be ready until the Fall of 2012. As such, you can count of them selling their oil into the domestic market (local entrepreneurs with their own tanker trucks) for at least the next year.
