Sunday Blog, 4 December 2022
PRD ECO EOG.V HE1 JOG TRP AEX BEY PVR DELT
Catching up on the last two weeks, Predator Oil & Gas (PRD) announced an effective further £1,256,880 raise via the exercise of share options by directors, the placing of those shares and a directors' loan of the difference to be used for the expansion of the MOU-1 testing programme and the placing of orders for MOU-3 long-lead drilling items. The MOU-2 well is expected to commence drilling imminently, aiming to test the range of best estimate and high estimate net contingent gas resources of between 295 billion cubic feet and 708 billion cubic feet. It is intended that MOU-2 will be completed for rigless testing followed by rigless testing of MOU-1. Gas sales and CNG financing agreements will be triggered by release of test results and a corporate transaction to monetise shareholder value will be considered after MOU-2 and MOU-1 testing. PRD has been covered weekly in the private blog since its placing to finance MOU-2 at 5.5p. The MOU-1 drill was previously covered weekly in the private blog from significantly below the 4p placing price at which drilling of that well was financed and the share price moved up to over 22p prior to the spud.
Eco (Atlantic) Oil & Gas (ECO) announced results for the six months ended 30 September 2022. The company was expected to have approximately $17.5 million cash and cash equivalents at the end of November and is progressing plans to conduct a two-well campaign on Block 3B/4B offshore South Africa. A farm-out process of up to a 55% gross working interest has been ongoing, and the company is now, along with its partners, in a farm-out agreement negotiation stage. Eco says it is also witnessing considerable interest in its licences in Namibia and is currently assessing options, including a potential farm-out there. On the Orinduik Block, offshore Guyana, Eco and its partners are currently drawing up plans to drill at least one well into light oil Cretaceous targets in the next petroleum agreement exploration phase which begins in 2023, so plenty of further news coming up here.
Helium One Global (HE1) announced a project update. The company has now signed a memorandum of understanding with Exalo Drilling for the supply of a rig to be utilised in the upcoming drilling operation on the Rukwa licence. The change of drilling contractor follows legal complications which could have impacted upon the timing and availability of the previously announced Predator rig. The spud date is still targeted in the first quarter of 2023. Uncertain yet is whether a fundraising will be conducted before the drill.
Jersey Oil & Gas (JOG) announced that the North Sea Transition Authority has approved an extension to the second term of its Verbier licence, which is now aligned with its Buchan licence with the current phase expiring at the end of August 2023. The company says it is progressing advanced commercial discussions with a select number of counterparties in relation to the Greater Buchan Area farm-out process and the CEO sounds confident, looking forward to a successful conclusion if not by the end of the year then certainly in the first quarter of next.
Tower Resources (TRP) announced a Cameroon financing update. The company has been notified by BGFI Bank Group that the medium term loan of approximately $7 million has been approved by the credit committee of the Cameroon bank, although further approval is still required at BGFI group level. The loan should cover around 40% of the approximate $18 million cost of the well, with a further amount of 25% already having been paid for by Tower. The balance of 35% of the cost of the well remains to be funded by the company. Tower says that long lead items for the well have already been purchased and the environmental and social impact assessment, site survey and site debris survey are complete, therefore, it is in a position to move quickly once finance is arranged and a rig slot is finalised.
Aminex (AEX) announced a Ruvuma commercial update. An addendum to the PSA has been signed, setting out the relevant terms for gas production. Encouragingly, the Tanzanian Minister of Energy has outlined the Government's strong commitment to accelerate Ruvuma's production, and construct a 30 km pipeline to tie the Ntorya gasfield into the existing Madimba processing and pumping station in the next six to nine months. Aminex, with a 25% non-operated interest, is carried throughout the ongoing work programme, which is expected to see the company through to the commencement of commercial gas production from the Ntorya gas field in early 2024, at zero cost.
Barryroe Offshore Energy (BEY) announced that it has executed a funding agreement, in the form of a redeemable convertible secured loan note instrument, with an existing shareholder, Vevan Unlimited Company, to provide the required funding for the work programme proposed in the Barryroe lease undertaking application. The total amount committed is up to €40 million, which covers 100% of the cost.
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. This is what I said about it last year, before the name change from Providence Resources to Barryroe Offshore Energy:
“Providence Resources (PVR) cleaned investors’ clocks again as their latest farm out collapsed. Regular blog readers will know of my scepticism regarding SpotOn Energy Limited, PVR’s £1 capital counter party. Money may have been made by some, however. SpotOn acquired £500,000 of shares at 1.5p and the share price went as high as 8.5p on the ramp. It would be interesting to know whether SpotOn (and others close to the company who subscribed at that level) still have them. This was the second time a farm-out of Barryroe collapsed with the counter-party turning out to be worthless. The previous one was with a company called APEC Energy Enterprises Limited. PVR really always has been one for those who can play it for what it is: a Dublin stock promotion.”
Finally, Deltic Energy (DELT) announced that Pensacola drilling operations have commenced. They are expected to last between 60 and 90 days. Deltic estimates that the prospect, in which it holds a 30% interest, contains gross P50 prospective resources of 309 billion cubic feet of gas, with a 55% geological chance of success. The recent £17 million placing, subscription and open offer at 3.5p will fund Deltic’s share of the next well, Selene. The company holds a 50% working interest in that licence, but will be carried by Shell for 75% of the costs of drilling and testing, up to $25 million. Deltic estimates Selene to contain gross P50 prospective resources of 318 billion cubic feet of gas, with a geological chance of success of 70%. DELT was first covered in the private blog at around 1.6p and the share price reached a high of 4.36p prior to the spud.
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