Replies to post #86813 on MMEX Resources Corp (MMEX)

[CEOs]

Wow if you could find that reference for us, I’d really appreciate it. ETC..ok

Mmex

[jmjjw]

For a single moment, giving MMEX some benefit of doubt that it is anything other than a share-selling scheme (and it is not), for MMEX to have pipeline capacity in place for supply or off-take, there is significant cost involved.

The ETP gas transmission line that passes nearby and through MMEX’s piece of desert paradise is of no significant consequence - if MMEX were a real company, they could finance the distribution tap to ETP’s pipeline, and purchase natural gas, for use as fuel, from the market just like any commodity purchaser. Someone would have to pay for the tap, almost certainly MMEX, in the form of a long-term fuel purchase contract from a supplier at the Waha Hub.

The supply and off-take problem is more significant.

In the mid-stream business, a pipeline operator acts in one or more of the following roles:

- a “common carrier,” providing a transportation service to move product between one or more suppliers,
and one or more customers

- a private pipeline operator, moving product on behalf of the operating company and an affiliate, from
a source to a destination

Business models vary, from pure mid-stream, where the pipeline operator provides only common carrier services, to private operators, supporting vertically integrated business operations.

Energy Transfer is a hybrid. In the natural gas sector, ETP/ETC operating companies transport natural gas as a commodity from a source to a destination, for fee. These contracts are typically take-or-pay - which means the entity purchasing the natural gas pays for the transportation capacity on the pipeline, whether or not the purchaser actually uses the gas - i.e. the purchaser either takes the gas, paying the supplier and the pipeline operator, or they “pay,” providing just the transportation fee to ETP/ETC without actually purchasing, or using the natural gas. It is “win-win” for ETP. The cost to build the pipeline is shared in a JV/SPV entity formed as the pipeline operating company, under a fee arrangement with the JV parent(s), which include ETP.

For crude oil, and condensate, things are a bit different - ETP, through its parent ETE, owns its own refining and distribution company - Sunoco. Crude and condensates from field sources flow through ETP/Sunoco owned and operated pipelines, to Sunoco facilities for processing - ETP rarely supplies crude or condensates to other downstream entities. The economics of natural gas vs. liquids systems are very different, and natural gas is a relatively low-value commodity, compared to crude and crude liquids.

For any mid-stream operator to construct a pipeline, the customer and/or supplier will partner, usually in some JV/SPV model to finance the construction cost - at the bandied-about numbers, of $250K/mile for an 8-inch crude transmission line a 30-mile pipeline to supply MMEX from the nearest crude terminal would cost at a minimum $7.5-million. Under some structure, MMEX would have to convince a supplier/mid-stream that it was financially stable enough to warrant a $7.5-million investment, over a 10 - 25 year period, to construct and operate such a pipeline. The contract would almost certainly be a take-or-pay deal, because no one would front something like MMEX or its fantasy Pecos County Refining entity nearly $10-million (the more realistic all-in cost). Almost all mid-stream companies are MLP’s, publicly traded, with actual voting shareholders, independent boards, and finance committees - they would evaluate such a deal before it got done, to avoid the problem of stranded corporate assets - the case where some dope built a pipeline for a bankrupt, or insolvent company like MMEX that had no ability to either take, or pay.

There are pretty few absolute dopes and idiots in the mid-stream business, and most would look at MMEX, and quickly conclude “stranded asset” - because an insolvent company with a bad plan, like MMEX could never pay over the long term. So no pipeline, supply, or off-take, would ever be built.

Yes it is normally locked in at a specific price and in the case of the company that I work for, ours is reviewed and updated yearly. There is mention of Energy Transfer in one of the filings as the supplier of natural gas, In my area where I work, I have found that when ETC lays a gas line they have an oil line close to the same RIGHT OF WAY. So I would not be surprised if they didn't become the oil supplier for MMEX.