Member Info for MALBRAD

Setantal
I agree with your disappointment about the company not telling us until the last moment about not being able to follow testing 16-2 by starting production. I do seem to remember all sorts of postings where assumptions were being innocently made by shareholders about the likely level of production and income from 16-2 during 2022. That said, we have 2c reserves from 16-2, the prospect of gas/oil production in the next few months and did not get a duster.

Agreed Setantal.

Last line should be ‘by’ not ‘but’ -apologies for the typo.

The results from the non operated assets are exactly as expected. It is important to recall that their purpose after repaying the money we borrowed to finance them is to fund our exploration programme. Most but not all of these assets are short lived, so do not expect the cash flows to keep on growing unless we either buy some more wells (possible if the price is right) or the current downtrend in the oil price reverses (possible but not certain).
As others have argued, the key positive share price drivers are likely to be drilling results in the next few months, unless there are unexpected delays or the cryptocurrency mining fails to materialize. A take- over bid is always possible but I would rather put my faith in CH to deliver than see us taken out at a small premium to the current share price. The key defense here is probably the significant blocking stake held but CH and his backers.

Molotovboy
The RNS of 20 December clearly talks about structured debt finance and makes no mention of a placing being needed as part of the funding package to pay for our latest acquisition of non operated assets.

Correction - “wishes” should read “is”. My apologies for the typing error.

The key point here is that TP claim that the CPR wishes expected to be published early next week. As Zephyr’s broker they have presumably already seen the CPR amd should be aware of the RNS/ publicity timescale.

maestro1
I am assuming that drilling is intended to happen towards the year end. In theory at least the partnership will have had time to analyze the survey data and get the equipment into place. That said, investors in oil and gas exploration companies have plenty of experience of dates that slip due to the need for regulatory approval, bad weather, Covid or equipment sourcing/transporting problems. The experience of Touchstone Exploration in Trinidad and the resulting impact on their share price of a failure to meet published deadlines has been a clear. example during the last year. We are not exempt from these risks and they should have been included in my previous posting. That said we do have a good buy-in deal and the survey work is underway - all positive after years in the wilderness.

maestros
I have unfortunately made the mistake of being in this share since Aminex operated assets in the USA and should have got out completely years ago. Despite a lot of averaging down in the last few years I need the price to rise to 1.78p to break even let alone make a profit. It has been clear for a while that something had to be done to fund the company through to the point where exploration converts to production so I had been holding off averaging down again. Given that all the key decisions will be made by the dominant partner, the only excuse that I can imagine for our current running costs is the need to get something moving on our non-partnership assets before we lose them due to a failure to be seen to exploit them. I suspect that nothing will happen re our other assets until after our first drill results are in. At that point, given a higher share price another funding exercise to make us a credible partner to exploit our other assets may be on the cards.
I hope to average down again in the new ISA year in the hope of a good rise in the share price in the run up to drilling. The obvious risks to that strategy are either country risks (possible but by no means certain) and a general collapse in stock market prices (not certain but a real possibility).

Setantal
Hopefully the rumors that Thebhoys has picked up in the USA are correct. CH has a good record of under promising, over delivering and meeting published timescales. We do have to remember that this CPR is a big ask for Sproule in credibility terms. The Paradox Basis has a long record of very mixed drilling and extraction results. Our proof of concept well challenges that record by showing that modern technology has at least two impacts. Firstly, layers of oil that were previously considered too thin for commercial extraction to be viable are now potentially in play. Secondly, fracking using long horizontal pipe work reduces the number of wells needed to exploit a given land area.These developments both increase the percentage of the oil in place that can be extracted and improve the IRR. Sproule will be very well aware that if it gets this wrong it’s commercial credibility will take a big hit, particularly if at the same time a big investor is considering a partnership with Zephyr. In short, part at least of the delay may be because Sproule are demanding a lot more information than was originally envisaged.

Company comparisons are at best difficult. For example Diversified Energy, a mature oil and gas producer in the USA that grows by acquisition rather than exploration has a dividend yield of 11.24% despite being located in what most investors would regard as an investor friendly country. Conversely WEN has a dividend yield of 7.24% despite being located in a country that has historically had a poor record in terms of its treatment of foreign investors. Aminex share the same country risk as WEN but is a minority shareholder in its key asset and will have to raise capital if it is to do something soon with its other assets . Thereby avoiding thevdanger of losing them due to its lengthy lack of doing anything significant with them.

Not withstanding our superb long term prospects the market clearly was not impressed by our reserves update RNS. Did they expect a much bigger increase in reserves? Surely not given some mixed results and delays. Production delays will not have helped both on credibility grounds and because our ability to take
advantage of the oil price spike is limited. Are potential investors put of by the prospect of needing a lot of small low output wells rather than say each well doing 5000 barrels a day? TXP is no different than it’s peers in that delays and unexpected technical problems are endemic. Perhaps if the price of oil stays high for long enough and we start to see the long promised wall of cash we will start to see a re-rating of the share price.

Sharehead
Whilst crude oil is priced on a global basis this is not true of all natural gas. Unless it can be got to distant markets via long pipelines or converted to LNG and moved by ship, natural gas sells for what it can get in local/regional markets. What we will be able to sell gas for will be based on how the economy of East Africa develops and not on prices in Europe, unless an LNG plant and port is built to open up export markets.

It has been clear all along that exploiting our Paradox Basin reserves will need a lot of capital and that not withstanding the success of the proof of concept well, development would be very slow if we had to rely on cash flow from the PB. Consequently, any plausible growth strategy has to involve either raising more equity capital or finding a partner. Given the need to provide an incentive to new shareholders some dilution of the stake held in the company by existing shareholders is therefore inevitable. In this respect Zephyr is simply in the same position as any other company that has profitable opportunities that cannot be funded from cash flow.
In this instance, the funds are clearly going to be profitably deployed and the loan element of the funding package is on much better terms than many that I have seen offered to small oil companies in the past. What I find more difficult to get a handle on is the dilution implied by our lower share price. We can clearly ignore the briefly available 8p plus share price as being a spike caused by the inevitable tendency of AIM to overreact to news in both directions. Similarly some of the recent fall in the share price will reflect the general market weakness due to considerations such as Covid and the Ukrainian situation. All that said, if purely for example, we assume that without the new share issue the price might be say about 6.5p then the cost of the deal to any shareholder needing to sell now is not trivial. I say for example, simply because I do not know of a reliable way of separating out market wide issues from company specific issues in our case. On a positive note the fact that the price has so far held above 5p implies that the market sees merit in the deal. As others have pointed out, other things being equal the CPR and some positive quarterly reports will help to rebuild the share price before speculative buying starts in a big away ahead of drilling in the second half of 2022.

mbarnholdt
I agree with your view that then key priority now should be to get production underway and a clearer understanding of what we already have, before we get involved in speculative projects such as Kracken. The market needs its confidence restored in the proposition that there is a wall of cash just round the corner. It is also worth remembering that our gas will be sold under an existing contract at a known price, whereas oil prices could potentially move in either direction in 2022.

Apologies for a silly error. The 140mb is recoverable oil not oil in place. That said , the key point about the very successful proof of concept well increasing the % of oil in place that we can recover remains.

Ignoring the newly acquired 12,000 acres for which I am not aware of any reserve figures, I presume that Sproule will essentially confirm the earlier 140mb oil in place estimate. The key issue relates to the recovery percentage estimated earlier to be in the 8-12.5% range. The outstanding success of our proof of concept well ought at a minimum to push our recoverable reserves up towards the top end of the range and perhaps to an even higher recovery percentage.

Like others I had hoped that proof of concept and the ongoing evidence of a competent and pro- active management would have pushed the share price into a higher range by now. Uncertainty about the terms on which the money will be borrowed to finance our purchase of non-operated assets will not have helped but that said our Board of Directors have enough experience and financial interest in the company to make that arguably a non issue. A more plausible explanation is stock exchange weakness generally due to worries about the impact of Covid on the growth of World GDP and international trade and weakness in the price of oil at the moment. Hopefully we should get an update soon on output and financials during the last three month. Leaving aside any further deals or more information about the 2022 drilling programme, the updated independent resource estimate due from memory by late January looks very likely to be a major game changer.

Agreed highlandmatt
From memory, I think that what has been found so far at Royston is at a lower depth than Shell looked at. I must admit to being surprised that TXP considered a 2D rather than a 3D survey good enough for Royston. I do not know enough about the technology and the respective costs so others who know more about than me might like to comment. Perhaps wrongly,I assumed that 3D cost more than 2D but gave you more and clearer information about the underlying geology.
Something that you might need if the geology was likely to be complex.

My recollection is that Shell found lots of gas when they drilled Royston but abandoned the well as they did not want gas at the time. We have a secure contract to sell a lot of gas. Arguably TSX could do a lot worse than open up Royston for gas and leave high risk oil exploration until they are a larger and more financially secure company.