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Investor Linc Newsletter

December 2011 /20


Message from Chief Executive Officer Peter Bond

Welcome to our last issue of InvestorLinc for 2011 - it’s hard to imagine that this is our 20th issue. It’s fascinating to flick through all the archived InvestorLinc editions and follow the journey of Linc Energy all over again. (It’s easy to do – you just need to go to the InvestorLinc tab on our website).  It has been quite a ride when you condense it into 20 readable editions. You really do get a sense of the incredible progress the company has made over these past five years, and how far we've evolved.

Speaking of progress, most of you would have seen the announcement about Linc Energy's acquisition of the ERG oil producing assets in Texas and the Gulf Coast. These assets are producing around 3,300 barrels of oil per day, with significant up-side for increased oil production emanating from further drilling of a number of prospective ERG sites - principally Barbers Hills, Black Bayou and Port Neches.  My immediate aim is to double production of this asset to in excess of 6,000 barrels per day over the next 24 months.

The ERG purchase is the first step in Linc Energy’s push into buying cash flow generating oil assets. The focus is to boost the company's near term cash flow and increase production to maximise an increasing oil price over the months and years ahead. You may recall that my goal for the USA is to gain at least 10,000 barrels per day of oil production and the cash flow that emanates from that oil production. 

With the ERG oil assets producing approximately 3,300 barrels per day and the Glenrock (acquired from Rancher) assets in Wyoming at approximately 300 barrels per day, we are taking meaningful steps towards achieving this goal.  As I write this, we are continuing to explore more oil production to purchase.

On another note I'd like to focus some attention on the future of UCG and its place in the world energy economy.  First, I wish to congratulate the Linc Energy team on the success of commissioning Linc Energy's fifth generation UCG gasifier. This is a smarter, more economical and efficient version of UCG that will become the template for Linc Energy's UCG commercialisation model that will start to be rolled out early next year.

“Well done to everyone involved with this outstanding achievement“.

It is with my eyes firmly planted on the UCG commercial horizon, that I'm now penning this view of the future. In terms of the various commercial options UCG has, it is worth acknowledging how flexible this technology is.  We have the ability to turn UCG syngas into clean diesel and jet fuel, via our own GTL process. Then we have power generation, which is an obvious commercial opportunity, by using UCG gas to run traditional coal fired boilers currently in existence, or we can feed the gas directly to gas turbines for a more efficient and a much lower CO2 footprint.

We can also convert our UCG syngas into pipeline quality natural gas [CH4]. This is called Substitute Natural Gas (SNG). By doing this, UCG syngas can be fed directly into the gas pipelines of the world. By way of example, Europe is taking more and more gas from Russia and needs to explore opportunities like UCG so their gas needs can be met internally by gasifying their own coal, avoiding complete reliance on Russian production. Or perhaps Linc Energy can produce clean gas in China and start to reduce the reliance upon LNG.  There are also countries like South Africa who are basically rationing their power and gas to an ever growing nation.

My vision is that UCG and in particular Linc Energy, will become a key player in fulfilling these immediate gas needs, whether as pure UCG gas for power generation or as SNG produced from UCG to fill the ever growing needs of Asia, India and Europe as a replacement for LNG imports.

Think about locations like India where fertilisers are going to be in huge demand for food production. UCG can be one of the core feed stocks to a fertiliser facility to ensure growth in fertiliser production is met.  And best to do this from UCG gas production and not from the more expensive LNG gas imports which are required for urgent domestic consumption.

This is why I recently opened Linc Energy’s European office in London and why the company is focused on gaining coal assets and alliances in the UK, Poland and Hungary.

The future for UCG is huge and I believe it has the potential to contribute substantially to the gas requirements of Europe, India, Africa and China.

Many countries are budgeting for their energy needs over the next 30 to 50 years and UCG could become a cornerstone of their gas and power requirements. .

What is the future of UCG?  Put simply, I believe its future is magnificent with growth trends being forecast well into the next generation.

The profits will be made in several key areas:
- Gas sales [UCG and SNG];
- Diesel and Jet Fuel production;
- Power Generation; and
- Chemical and Fertiliser production.

Linc Energy has been ensuring we've increased our global footprint to take commercial advantage of this emerging trend in UCG, but most importantly, Linc Energy is the only company in the world who can realistically take advantage of this trend for the foreseeable future.

That's why we've developed our fifth generation of UCG technology in just over four years, why we have over 470 employees, why we have 10 offices around the globe and will open more to support our commercial expansion. It’s also why we continue to develop a better and more economical GTL process and why Linc Energy has invested in hydrogen fuel cells and researching smart UCG to SNG conversion technology.

We have positioned ourselves as the Global UCG Leader and created a UCG model that can be rolled out commercially around the world…granted this has taken many years but the good news is the benefits could last many generations.

UCG is coming of age and Linc Energy has matured at the right time and is in the right place to take advantage of what will be a meaningful shift in the energy economy towards more alternative sources of smarter energy production, just like UCG.

Please spend a touch of your time contemplating that over your Christmas and New Year break.  And remember some investments not only change your financial world for the better, but they change the world for the betterment of everyone. I like to think Linc Energy does both. 

May you have a very Merry Christmas, and a fantastic, safe and extraordinarily prosperous 2012.

Until next time…

Kindest Regards

Peter Bond