Next events and timelines30 Jan 2022 13:53
I think it’s fair to say that OEX has caught many an eye these past few weeks and the volume of trading we have seen is testament to that with over 3.6bn shares traded since the placing. Putting that into context that’s over half the shares in issue and will have seen £7-8m change shareholders hands. So what next?
Next week we should see both a production and environmental clearance RNS, combined as one as there will be little time delay between written confirmation of clearance and the production taps being turned on. From what we have been told 2 wells are due to be switched on C77 and C73. These wells have been shut in for 3 years so there could be a build up of pressure, and the expectation is that these could produce up to 1mmscfd. This is prior to any new fracture stimulation techniques. What does this mean in terms of revenue?
C73 and C77 producing 1mmscfd each could generate a combined revenue of approx $8600 per day based on the current off take agreement in place. So $261k per month. Let’s allow for some production down time and perhaps lower flow rates than anticipated and drop that figure by 20% as a contingency, still would generate us $209k per month. Let’s now look at the current cash-burn and see how this revenue will help.
December recent quarterly report shows us last quarter expenses were AUD $ 1.09m (USD $763k), so USD $254k per month. I would expect these expenses to increase as we commence production so let’s assume these increase to USD$300k per month. Our adjusted contingency production income of USD$209k will cover 70% of our monthly expenses. Much better than today where we have no income whatsoever.
What’s next in the news flow timeline? After commencement of production we should see the following ;
> announcement of successful tender for the refrac equipment. Early February.
> preparation of C77 for commencement of the refrac activities. We are told this is quarter one, so let’s expect refrac activities to commence in March.
> announcement of initial re-commencement flow rates from C73 and C77. We may see some numbers in February.
> refrac outcomes and increased flow rates (hopefully) from C77. April onwards.
> based upon production numbers and refrac outcomes we may see an updated CPR produced.
> financing for two new wells is required. First well to be drilled H2 2022. We are told that these two wells are likely to form part of a farm-out of the licence. What could a farm out deal look like? I suspect Oilex will need to relinquish at least 50% of the whole Cambay licence if not more, to fund the next two wells and give continued working capital for the development of the field. It’s too early to speculate what numbers could be achieved for a farm out.
As we can see there is a plethora of news due. Each one of these could help drive appreciation of the market capital and share price. Is that a given, no, but for those with high risk appetite I don’t see us at £14m market cap for much longer.
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