Easter Blog, 9 April 2023
88E EEENF PANR PTHRF MATD BEY PRD ECO JOG HE1 NHE PTAL PTALF I3E ANGS COPL TRP IGAS GBP WTE LBE HUR ZPHR CHAR CEG RKH
NEW: I’m activating the chat feature on Substack to enable all subscribers to ask questions and join in the conversation. Feel free to take part.
I’ve also removed the paywall from the Core Information section on the website. It’s sad to read on Twitter and the message boards about the mistakes some people are making and the misconceptions they labour under. Take the time to read this and you’ll understand exactly how the market really works.
There’s been some interesting news since the last issue of the Sunday blog. 88 Energy (88E) announced that Hickory-1 had reached total depth having intersected all reservoir targets at slightly higher than anticipated depths and with gross reservoir thicknesses equal or greater than pre-drill interpretations. Multiple pay zones are said to be indicated throughout the Hickory-1 well and preliminary net pay will be confirmed by wire-line logging and side wall coring. Regarding the share price, the control group played the drill differently this time on the financial and promotional side, announcing a spud date prior to actual funding, letting the less informed buy thinking the drill was financed and the share price would run up from that point, apparently selling into that buying and covering on the placing which was only announced shortly before the spud date, keeping the market profit previously granted to investors. The initial lack of drill finance, then the limited time for the placing stock to churn was warned about weekly in the private blog.
Next door neighbour, Pantheon Resources (PANR), also had an interesting time, more or less halving in price (yet again) as it issued various operational updates, while blaming interest rates and social media commentators for the decline. As anticipated, shares ended up being issued under the “hard floor” price to pay off convertible bonds, starting a potential downward share price spiral. Many paid for third party reports have been announced, but as yet there is zero evidence of any interest from majors. That now is critical for the project to proceed, unless there is to be a very heavily discounted placing. Currently 24.1p, I’ve been bearish on PANR all the way down.
On the brighter side, Petro Matad (MATD) announced that its Velociraptor 1 well is scheduled to spud in June 2023 as soon as the rig is released from its current programme. All required equipment for the well is in country, field work has commenced to make ready the water supply and site construction will commence during May. The well is expected to take around 30 days to drill to an expected total depth of around 1500 metres. Now 4.175p, MATD has been covered in the private blog every week since its placing at 2.5p.
Barryroe Offshore Energy (BEY) announced execution of a convertible loan note funding agreement of up to €40 million. It is essential for them in order to obtain Government consent to the Barryroe project, but a disaster for existing shareholders (who have to approve the deal at an EGM), which is why agreement was delayed to allow “certain shareholders” to participate in the virtually guaranteed profits of the funding mechanism. This is what I said about the terms previously:
The loan notes bear a coupon of 10% per annum, rolled up, and are convertible into ordinary shares at the lower of €0.015 (1.29p) and the closing price of an ordinary share on the trading date immediately prior to conversion. Additionally, Barryroe has agreed to grant Vevan the right to subscribe in cash at a consideration of €0.001 (0.086p) per share for 113,780,076 shares (valuing BEY at just £974,762). Vevan will also be granted 10 year warrants to subscribe in cash for 1.5 ordinary shares for each conversion share issued on conversion of the loan notes at a consideration per share equal to the lower of €0.015 (1.29p) per share and the closing price of an ordinary share on the trading day immediately prior to conversion.
The terms of the investment potentially create a massive, virtually endless, death spiral in which the existing shareholders end up with essentially nothing. This type of deal, though, is probably all that Barryroe could get from someone who actually has the cash; previous “investors” could not come up with the money promised, although that did not stop aggressive promotion of the shares and the resulting investor losses.
LATEST: BEY announced on Friday a proposed placing and open offer to raise up to €20 million at an issue price of €0.015 per share. It’s an investment for the foolhardy only with those convertible loan notes in the background. The market reacted negatively with the share price closing at just 1.45p (remember, convertibles were a major factor in bringing down PANR and many others).
Back to the positive, Predator Oil & Gas (PRD) announced a £2 million placing at 5.5p to fully fund drilling of the MOU-3 well, which will target all prospective and contingent gas resources starting in the first week of May. PRD is a regular performer and has been covered twice previously in the private blog as a company of interest, first, from the 4p placing level to finance the MOU-1 well (the share price reached a high of 22.5p prior to the MOU-1 spud) and, second, from the 5.5p placing level to finance the MOU-2 well (the share price reached a high of 12.3p prior to the MOU-2 spud). Now 7.9p, PRD and MOU-3 have been covered weekly in the private blog since the latest 5.5p placing.
Eco (Atlantic) Oil & Gas (ECO) announced proposed offshore exploration in Block 3B/4B of the Orange Basin, South Africa. ECO, with a 26.25% interest, and its partners are applying for a permit to drill one well and one contingent well (and potentially up to five wells) within an area of interest in the north of the Block. Key though is the negotiation of a farm-out of up to 55% gross working interest in the Block to provide finance. The company says it is in negotiations with various potential parties.
Jersey Oil & Gas (JOG) announced the farm-out of a 50% interest in the Greater Buchan Area licences to NEO Energy, a major UK North Sea operator. The transaction delivers cash payments, funding through to field development plan approval and a 12.5% development expenditure carry to first oil for the 50% interest retained by the company. JOG intends to farm-out additional equity in order to ultimately retain a 20-25% carried interest.
Helium One Global (HE1) announced a drilling rig update. Alongside Noble Helium (ASX:NHE), the company has entered into a letter of intent with Tunisian Drilling Contractor, SOFORI, for the provision of the Drillmec HH102 oil and gas rig for their drilling campaign at Rukwa. HE1 describes this as an encouraging step towards its proposed spud date in the third quarter of this year and the company has now placed orders for long lead items.
PetroTal (PTAL) announced 2022 year-end financial and operating results. Key are the highlights subsequent. On March 24, 2023, PetroTal repaid the remaining $55 million of bonds, allowing for shareholder return commencement, and under base case production guidance, EBITDA is projected to be $220 million, generating after-tax free funds flow of $55 million. Now long-term debt free, PTAL intends to purchase up to 10% of its public float over twelve months and commence payment of an annualised dividend of $0.06 per share. At 45.25p, it’s now up nearly six times since I highlighted it at 7.6p.
Rounding off, i3 Energy (I3E) announced its Canadian subsidiary’s year end 2022 reserves. Proved plus probable developed producing reserves increased 9% to 65.7 million barrels of oil equivalent, total proved reserves increased 10% to 93.5 million barrels of oil equivalent and total proved plus probable reserves increased 18% to 181.5 million barrels of oil equivalent. Angus Energy (ANGS) announced news of its Saltfleetby sidetrack. The well flowed at 2.1 million cubic feet of gas per day shortly after start up and flow rates increased over 60 hours to 4 million cubic feet of gas per day with a near constant 30 barg wellhead pressure. Canadian Overseas Petroleum (COPL) announced 2022 financial results and an operations update. There’s going to be little in any of this for the company’s shareholders. Tower Resources (TRP) announced a share issuance to Energy Exploration Capital Partners. The company drew down $150,000, issuing shares at 0.12p. IGas Energy (IGAS) announced full year results for the year ended 31 December 2022. The company anticipates net production of around 2,000 barrels of oil equivalent per day in 2023. Global Petroleum (GBP) announced an increase in the prospective resources estimate for the Marula prospect in Namibian Licence PEL0094. Following further analyses of the existing 3D seismic data, the unrisked gross prospective resources have increased from 218 to 411 million barrels mean, an increase of 89%. Westmount Energy (WTE) announced interim results. The Canje and Kaieteur JV partners continue to work towards identification of optimal targets and environmental permitting, with drilling decisions anticipated from the second half of this year. Longboat Energy (LBE) announced audited full year results to 31 December 2022. The Velocette exploration well is expected to spud in the third quarter and acquisition and growth in 2P reserves and production remains a key objective. Hurricane Energy (HUR) issued various announcements. The shareholder meeting to approve the recommended offer for the company will be held on 18 April. Zephyr Energy (ZPHR) announced that the State 36-2 LNW-CC well production test is to commence. The results are awaited with interest. Chariot (CHAR) announced an Anchois update. Development drilling planning is said to be ongoing which can further evaluate the potential of an additional 754 billion cubic feet of 2U prospective gas resources for minimal additional cost. Challenger Energy (CEG) announced an update on the sale of Cory Moruga. Buyer is Predator Oil & Gas (PRD). Finally, Rockhopper Exploration (RKH) issued a Sea Lion update. An independent resource report conducted by Netherland Sewell & Associates shows reduced upfront capex, reduced life of field costs, and increased recoverable resources.
Thank you for reading and I wish a happy holiday weekend to all. Please note the Private Blog will be published tomorrow, Monday 10 April 2023.