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Joshua Rodriguez
Joshua Rodriguez
Articles (32) 

For Mirage Energy, Everything's Big in Mexico

The company is working to bring the 1st underground natural gas storage facility to the country

July 26, 2017 | About:

With the revival of the oil and gas exploration industry, it's no secret that many emerging companies are finding innovative and economical ways to extract the precious minerals from the ground.

What was once a game for the oligopolist giants in the industry has become a far more level playing field, allowing small and emerging companies to utilize innovative and inexpensive synergies that offer great opportunity to capitalize on either production or storage initiatives.

What hasn't changed, though, is that the oil and gas exploration business is still a boom or bust prospect. Even so, the rewards for success can be a thousand times greater than the loss, and opportunity is ripe for the taking on a global scale. Speaking of the global opportunity, a particular company is putting the pieces in place to undertake one of the most ambitious multibillion-dollar midstream projects ever to be constructed in Mexico, and you're entitled to an introduction. Meet Mirage Energy Corp. (NASDAQ:MRGE).

Now, what Mirage is working to put in place is no run-of-the-mill project. In fact, the uber-ambitious plan being spearheaded by longtime oilman Michael R. Ward won't require his company even to purchase a pump or use 3-D seismic technology or utilize any of the new innovative instruments that some companies are using to hedge their bets and stay away from dry holes. No, Mirage wants to do something far less risky; it simply wants to store natural gas product for its customers.

Since natural gas is continuing to be brought to the surface for sale to a growing marketplace, Mirage's business strategy is likely to be met with strong demand. What should make the project more enticing to investors is that Mirage is attempting to do what no other company has ever done before in Mexico and once implemented has the potential to return to the company a billion-dollar payday. Even better, the project can be duplicated by Mirage throughout Mexico.

The project is expensive, but with creative financing options, Mirage expects to place the first underground natural gas storage facility inside the Mexican borders within the next 18 months. To accomplish this aggressive pace of construction, Mirage needs permits, and it's reassuring to note that Mirage has nearly all of the permits ready to file.

With these allowances lining up for project commencement in late 2017, Mirage's historic project may reap enormous benefit from its almost three-quarters of a billion BCF gas storage unit that producers have shown tremendous interest in using. So much so that Mirage has told the markets that the completed storage unit is expected to be fully leased based on current interest.

The project isn't simple, but the company is well on their way to fulfilling their objective by taking advantage of strong relationships within the Mexican regulatory agencies and from expertise provided by a host of reliable and well-respected industry contractors. If all plays out according to plan, Mirage is expected to have the project completed by late 2018 and, here's how the project should flow.

What's in the pipeline?

Before we get into the details, allow me to provide a summary of what the company plans to do and why it has the potential to return a huge profit for investors. As stated earlier, Mirage intends to construct a massive natural gas storage facility in Mexico, allowing the company to provide a much-needed service to producers and suppliers of natural gas. The project is scheduled to construct an initial underground storage field with capacity set to house 52 BCF of natural gas in the first phase of the project. Upon completion, storage capacity is expected to house roughly 786 BCF, making it one of the largest natural gas storage facilities of its kind.

The scope of the project provides for an integrated pipeline that can transfer and store natural gas for any entity willing to pay the storage fee, making it both accessible and available to any production or supply company. The transmission pipelines, which deliver the gas, are being designed to add 800 mmcf per day in Mexico. This increase is necessary because currently less than 70% of Mexico's consumption of natural gas is produced in the country, making the market unstable and potentially prone to disruption for its infrastructure requirements. What Mirage is looking to do, besides creating significant shareholder value, is to provide a means for Mexico to secure itself with energy security and stability by allowing for reserve replacement and price effective marketing.

The Mirage project should pique the interest of those with an understanding of Mexico's current economic climate, as the country's government is working to improve self-stability and growth in the wake of rising U.S. import costs. Fearing a dependence on U.S. natural gas imports, Enrique Peña Nieto, the president of Mexico, has passed 11 national reforms to strengthen the country's self-sufficient capabilities. Mexico plans to invest over 170 billion pesos (roughly $9.6 billion) into over 10,000 kilometers of new pipelines during the next few years, a plan designed to accommodate the country's continuously increasing supply of natural gases. Projections suggest that natural gas needs are expected to rise to 10,400 million cubic feet (mcf) in 2025 from the current 5,700 mcf. With all this in mind, investors should be able to see that projects focused on natural gas opportunities in Mexico are ripe for the taking, and Mirage has entered the sector at a fitting time.

Now, Mirage may have taken on an ambitious strategy to build this facility, but the company management does have the skill to back up its plans. Ward, the company's president and CEO, has over 45 years of experience in the oil field and has laid down a solid foundation for the future at Mirage. Well in the process, Mirage is close to securing all necessary permits through Mexico's regulatory agencies for natural gas storage and expects to receive final approval to begin construction by the last quarter of 2017. Already, Mirage has been steadily acquiring the required documents to file by working through the administrative procedures with CNH, CENAGAS, SENER, and CRE, the governing oversight which all play a crucial role in granting permission for the project to commence.

The company has also already started work on structural procurement and plans to continue doing so for the next few months. Of course, the process of building a natural gas storage facility requires a substantial sum of cash, and Ward has already set numerous plans in motion to help Mirage secure an adequate supply of funding to realize the company's goal without any unexpected setbacks. For example, the company is likely to see funds coming in through new partnerships or working interests that may become likely later in the construction schedule; Ward has even spoken about laying off some of his ownership of the company as collateral should it prove necessary.

Startup plans in September

Construction, estimated to commence in September, is the next step in Mirage's playbook. The company has selected six preferred contractors and is in the process of negotiating the most beneficial contract to maximize profit. Each contractor that Mirage has engaged is experienced and well-respected in the business, specializing in pipeline and industrial plant construction.

Exterran, one of the company's top choices, is well known as a premiere contractor in the industry. Headquartered in Houston, Exterran offers solutions to nearly all of Mirage's construction needs, from the pipeline to the facility. Arendal, another preferred contractor to Mirage, is a respected contractor headquartered in Monterrey, Nuevo León. Having participated in over 63% of pipelines built in the last 10 years, Arendal is committed to developing Mexico's energy infrastructure through its construction of pipelines, industrial plants and other civil works.

Along with these two companies, Mirage also has a slew of subcontractors and other vendors to choose from should additional services prove necessary. Regardless of who Mirage continues to work with, the options in place provide confidence in allowing the company to complete its project plans in line with its aggressive schedule.

Clearly, Mirage Energy is a small company with massive plans, which is a combination that may raise the eyebrows of many investors. But, as shown by its detailed timeline and already considerable progress, Mirage knows what it is doing and is dedicated to action. And, if everything continues to fall into place for Mirage, profit for the company and investors could be substantial.

Ambition plus demand equals enormous potential

Taking the sum of the parts, the project by Mirage may seem mighty ambitious for a small company. But Mirage may have found the right niche, the right country to pitch the plan and a customer base that is eager to use the facility. Investors who failed to recognize oil field ingenuity have lost many historic paydays, and not taking Mirage seriously may again lead to missed investment windfalls. No, this deal is not a sure thing, but investors who have been around for awhile have learned to not judge an investment from its name only, but to look beneath the surface of a deal to see hidden opportunity that can return gains along the way.

Perhaps that is what is intriguing about this deal. With Mirage already well into the licensing process in Mexico, the company opens itself up to partnership opportunity from much larger players that join the vision and understand the potential of the completed project. Keeping in mind that this is only the first storage facility planned, the revenue opportunity can grow exponentially when accounting for potential future development.

With company management having the ability to make deals and incorporate creative ways to finance the project, chances lay in favor of Mirage completing the storage project. Once done, it becomes a cash cow, and managing a facility has far less risk than owning a rig, pump or fracking drill. All in all, investors who believe that Mirage can raise the capital, either through partnership, leverage or capital raises should find an investment in Mirage a potentially lucrative opportunity. For those who usually watch from the sidelines, the view may get somewhat frustrating, especially when pieces of this project begin to come together in a meaningful manner.

Avoiding ambitious projects remains a mainstay to investors with a conservative investment style. For those who keep a portion of their investment dollars set aside for high-risk, high-reward opportunities, Mirage may be the ideal candidate to deliver exponential gains. As with all investments, though, only risk what you can afford to do without, and always stay apprised of news and company developments. With the Mirage project set to undertake multiple phases before completion, investors can expect to be kept informed on project milestones, allowing for accretive gains in shareholder value along the way.

Disclosure: I/We have no positions any any stock mentioned herein.

This article was originally published on CNA Finance.


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