Member Info for MALBRAD

Hello V111JAS and Evan 3020
I agree with both your points. Small AIM company share prices are very sensitive to news flow and the lack of it. The CPR is important and will presumably give us a better idea of the likely life and potential evolution of both the existing well and our PB potential as a whole. It ought also to clarify our gas position. Similarly, we do have a timescale for the recent agreement to buy a package of non operated wells and will soon know more bothabout exactly what we have bought and importantly the debt package that goes with it.
Another factor worth mentioning is the general stock market malaise about the impact of the new Covid variant on the World economy.. We have had similar concerns before and come through them but they are clearly not helpful at the moment. A redeeming feature here is that we do have a very experienced management team and Board of Dirctors who between them will have had plenty of experience of turbulence.

My apologies - the website is ADVFN not ADFN.

V111JAS
Like most people on this site I too am frustrated about the share price short term. Whilst I do not think it fully explains what is going on, I am reminded of a posting that I saw earlier today on the ADFN TSX page. The poster pointed out that a lot of oil stocks were down because the price of oil had fallen by about $10 per barrel in recent weeks. ZPHR is fortunate in that it's break even cost of production is quite low. That said with our tax free position I assume that most of any fall in the price of oil will cause a similar fall in our cash flow and profits. It is easy enough to play number games to get a very rough idea of what this implies for ZPHR. For example, if we take production of 1,000 barrels of oil per day for say 350 days a year to allow for some down time ,then a $10 fall in the price of crude oil costs us $3.5 million a year. This is not a forecast, it is simply a bit of arithmatic that those interested can adjust to their own assumptions. The price of oil may of course either recover and rise further or carry on down. As is almost always the case there are so called respected pundits pointing in both directions. Hedging aside, the price of oil is something that ZPHR can do nothing about and I suspect that share markets do tend at least initially to over react to both good and bad news.

I am impressed by the scale of the new well purchases and by the presumably deliberate low percentage interest in a lot of wells which gives us protection against the occasional unexpected production problems at a single well. I also like the very low cash operating costs that should ensure continued production even if the prices of oil and gas fall some time in the future. I also like the way we are exploiting our unused tax allowances quickly and importantly the avoidance of dilution.
It is instructive to compare this deal with the much larger deals done by DEC, who despite a recent pull back in the share price due to adverse publicity about emissions, have a market capitalization of about £900m. In essence they have financial backers who fund the acquisition of big portfolios of operating wells , knowing that DEC will improve performance by imposing their own management systems on how they are operated. The end result is a significant but manageable level of debt and a current dividend yield of 10.48 %. I am not a shareholder in DEC because it is primarily an income stock and I want long term capital gains. However, what both DEC and today's ZPHR deals shows is that there is a highly developed market in the USA for selling and buying wells and sophisticated financial institutions that are happy to fund transactions in that market. ZPHR has an experienced Board of Directors and will have a clear idea of a probably cautious level of debt that they are happy with. It will be interesting to see what financial package we get to fund the purchase. However, I strongly suspect that with good results from the accelerated exploration programme in the Paradox Basin there will be more such deals in a few months time.
As of yesterday our known future news flow was flow rates from our existing well followed by a revised resource estimate. To that we can now add details of the funding package and completion of the non-operated wells package (presumably by 22 December unless a date extension is needed), a revised 2022/3 drilling programme in the PB and the next quarterly report.

Setanta1
Just to confirm that I was referring to the tentative three well programme for 2022/3 announced in October by CH. Hydrocarbons in the Paradox Basin have had a very mixed commercial history in terms of past experience so I am sure that CH is right to put great stress on the proof of concept role of the current well..
Put simply, is the technology now available to ZPHR so good that past experience is no longer a valid guide to what will happen in the future? I presume that a potential buyer or partner of ZPHR will want to satisfy themselves about this point. A CP report will clearly be helpful but I have no idea how long a period of sustained production will be needed to answer the proof of concept question. As stated elsewhere, my current view is that new technology will make a positive difference but I would be surprised if it eliminated technical risk completely.
At a minimum I think these considerations suggest that whilst. selling the company, or taking on board partners on mutually acceptable terms is doable, it will not a simple matter to deal with in practice. Fortunately the senior management of ZPHR does have plenty of contacts and relevant experience Consequently, provided oil/gas prices hold up, continued good news on tfhe performance of the current well can only be helpful.
I think you are right about these considerations helping to keep the share price within the current range. A major share price breakout needs proof of concept and confidence about a rapid rise in future profitability.

Thebhoys
The two publicly accessible websites to which I have drawn attention explain the complex geology of the immature hydrocarbon deposits in the Paradox Basin, note the difficulties experienced by exploration and production companies trying to exploit those resources and give a clear explanation of why Zephyr received pubic subsidies to help fund the current well. This information is fact and independently considered opinion -not lies. It is of course possible that the technology available to ZPHR is so superior to what was available historically that they will never experience any technical problems when operating in the Paradox Basin. For what it is worth I think the technology now available will improve the position but I will be pleasantly surprised if it eliminates all technical risks.
The only question that you raised and that I have not answered is one to which I assumed you knew the answer. The most r cent information about future drilling programme is set out in very tentative terms at the end of the 29 October RNS. Subject to ongoing experience with the current well, two new self funded wells will be drilled in 2022. It is also possible that an additional well to explore a shallower prospect will be drilled in 2022/3.
in my experience this forum has been a pleasure to use in terms of members constructively sharing information, experience and views and I hope that it will remain so. Unfortunately you and I clearly have different ideas about what is acceptable behavior on a public forum. I see no justification for your doubting my integrity or accusing me of telling lies.

Blissful
Thank you for publishing details of the link to the Utah Geological Survey article about the Paradox Basin. I am sure that many members of this forum will find it a helpful read.

Thebhoys
I take a strong exception to your both doubting my integrity and to your persistent failure to face up anything other than positives when commenting on ZPHR. As Grahamesme points out 'ifs and buts are important'. For the record, have 1,920,000 shares, bought in at a bit over 3p and have an average cost of just under 4.5 p as a result of topping up on several occasions. I also have better things to do with my retirement than waste it commenting on shares that I do not own.
As regards evidence of potential issues I refer to the following sources:
Utah's Northern Paradox Basin unconventional oil play (Utah Geological Survey).
As Setanta 1 helpfully points out this is a must read report for new investors here as it explains the difficulties experienced exploring for oil/ gas and extacting it in the PB. It is also very clear about the context in which they helped to fund the current ZPHR well. Early on the report notes ' the drilling history of the Cane Creek play has been fraught with challenges and disappointments'. The report notes that using new seismic data and horizontal well technology Fidelity initiated a
major drilling program ' but the results of that programme were not up to par' (see also below).
Overall the report points to the need for further research given the problems encountered in exploiting what is known to be a major hydrocarbons resource.
Information about the Paradox Basin -Nationsl Gas Intellegence
This site gives more information about the Fidelity debacle. Fidelity's 2014 budget allocated $140m mostly to drilling an additional 17 appraisal and development wells. The site comments 'But the results were not up to par'. The CEO of Fidelity commented on the need for fracking and noted that wells that had been producing 500-800 b/d had seen output fall to 300-500b/d.
On a positive note I assume that our 3D seismic is an improvement on that used by Fidelity and that we are of course using fracking. The better technology is helpful but does not by itself guarantee that problems will not occur from time to time.
Results from the well so far do point to multiple stacks of hydrocarbons of which from memory 8 out of 17 were thought to be exploitable. Similarly, better technology and sorting out leases may lower costs but Fidelity's budget does suggest that a 22 well programme will either raise significant funding issues or take a long time to implement.

Thebhoys
I agree with you that CH has said that he wants to fund opening up our Canyon Creek lease by funding it from the profits made from non operated assets. That said, the modest drilling programme so far announced for next year suggests that unless something changes this could be quite a slow process. We may hopefully be able to grow non operated assets by persuading sellers to accept shares in ZPHR in exchange but otherwise growing non operated assets still requires funding.
ZPHR is by far my largest holding and I would not be invested here if I did not believe that it has very good prospects and is likely to grow on value. However, sadly there is no such thing as a share that is absolutely risk free and it is always important to identify risks and decide whether or not they are acceptable.
In the case of ZPHR I think the risks are acceptable at the moment. The two key risks are the prices of oil and gas and the technical risks involved in exploration and production.
As I have already said on this BB all that CH can do about commodity prices is either hedge future output or sell the company whilst prices are high. Fortunately I do not think that oil and gas prices are a big issue at the moment, they are simply a watch list item to be aware of.
You asked for evidence about technical risks. If you Google Paradox Basin there are quite a few entries about the geology and the history of exploring for and producing oil and gas in the PB. It is particularly worth reading 'Utahs emerging Northern Paradox Basin unconventional oil play' (Utah Geological Survey) and 'information about the Paradox Basin -Natural Gas Intelligence'. These sites record a long history of exploration/ production in the PB including exploration expenditure that was a commercial disaster and wells where output fell suddenly. It is probably this experience and the fall in activity when prices fell in 2015 that prompted the public subsidy for the research element of our well. My take on the position is that all concerned hope that modern 3D survey techniques and fracking will prove to be a game changer in this respect. ZPHR is of course using modern survey techniques and fracking. Consequently, technical problems should be less than in the past but I have not seen any claims that they have been completely eliminated. As you know, I think that if we only have a few wells potential technical problems are a non trivial risk. Hence my preference for a rapid build up in the number of wells,so that the odd technical problem with a well gets averaged out across a large output from multiple wells.

Setanta 1
In an ideal world I would like to see the company larger and the share price significantly higher before ZPHR gets sold. If that were to happen I would also like to keep track of what CH does next with a view to investing on the basis of following good management.
I am not a pessimist but long experience of AIM and oil/mineral exploration companies in particular has made me very aware of some obvious risk factors e.g. country risk (Ascent), delays (TXP), and very dilutive fund raising (UJO). Fortunately country risk is not an issue with ZPHR and so far CH has under promised, over delivered and met date targets- a considerable achievement.
That said, the price of oil is beyond ZPHR's control except in so far as they can hedge future output or sell out whilst oil prices are high. Similarly good management can minimize technical problems but cannot always avoid them. It does not always work but I do try to look at the strengths, weaknesses, opportunities and threats re the companies in which I invest.


hedging future output or selling out at the right moment

Papaduke.
I enjoyed reading your very positive posting which I mostly agree with.
Clearly there is a finance issue to deal with. If we rely on internal cash flow to fund future wells in the Paradox Basin progress will be very slow even if the prices of oil and gas remain high as at present. So yes, we either need a fund raising (with the risk of a price fall as those in the know sell shares that they can buy back at a discount in the placing) or a joint venture. We know that CH does not want to do a placing at a discount but a placing at a full price with either a rigged share price before hand or warrants attached amounts to the same thing and is all to common on AIM. A joint venture is also likely to involve some dilution as the partner(s) will want an incentive to get involved.
That said if modest dilution is needed to grow quickly then so be it. I think it is important that we develop the Paradox lease quickly. There may be over a billion BOE in the ground but the hydrocarbon deposits are immature and technically difficult to exploit. Some time ago CH told us that without fracking only about 8% of the hydrocarbons could be recovered and from memory, that with fracking about 12.5% could be recovered. Thankfully sorting out the number of leases will have cut the capital cost of opening up the Paradox. Two key points follow. Firstly, despite not having a billion plus BOE the CP report should show that we can ultimately hope to recover upwards of 140 BOE. Secondly, other operators in the Paradox Basin have had a long history of technical problems causing production disruptions. Whilst we will have the benefit of better technology we probably remain very likely to face such problems sooner or later. With a lot of wells production delays will even out and not cause big cash flow fluctuations. However, with only a few wells production disruptions are very capably of having a disproportionate impact on cash flow. Hence my preference for rapid development provided we don't get too much dilution or corners being cut.

Thank you Monkey_Junkey for your helpful correction to part of my earlier posting. One of the positive features of this BB is the helpful spreading of knowledge and experience. I find this more useful than the endless infighting on some other BB's that I can think of.

McCangts
Thank you for the reminder about FinnCap and the presentation to analysts. Clearly if new 'inside' information is to be released to analysts, TXP will need to also provide the information to shareholders via an RNS. If so, then as you say, we should hear something very shortly.

I have three reasons for suspecting that Kracken bill will significantly more than $1.5-2 million.
1. My recollection is that the Royston exploration well was optimized for gas exploration - hence the very modest oil flow that reached the surface via an over large well bore.
2. Given the above I assume that the Royston drill will get converted to a gas producing well and
that even if the location is optimal for exploring Kracken a well designed to bring oil to the
surface in commercial quantities will be needed.
2. Depending on what the geologists tell us the Royston well may not be the optimal location from
which to explore Kracken.

55018
The discovery of pool of oilmat the bottom of the Royston drill is clearly good news and no doubt we will need to do more work to establish its likely size. I have seen references to 100million barrels of oil on this board but the estimate is not mentioned in the RNS or the recent Proactive Investors interview with Paul so I have no idea how reliable it is. I presume that at some point TSX will need to follow up this discovery with more exploration.
Whether or not this discovery de-risks Kraken I do not know. On the plus side the deep drilling that Kracken needs will be a lot cheaper to do that if a similar drill were to be done at sea. However, despite all the successful maritime drills into the relevant geological formation we also need to be aware that the number of non commercial wells drilled is also quite large. In short, having a bit of the same geological formation within our license areas is not a cast iron guarantee that our bit will contain oil. We have to hope that all the usual pre drilling exploration procedures soon give us a clearer picture re the realistic chances of success at Kracken. In the meantime we have plenty of low risk exploration leads to follow up on.

Not withstanding a modest dip on profit taking I like the steady way in which TXP's share price rises in response to good news. I first invested late last year and made the mistake of adding too much to my investment as the share price rose. As a result it has taken until the recent operational update for me to be in profit again.
All too often on AIM both good and bad news leads to a price spike up or down during which it is impossible to deal, whereas the market for TXP's shares seems more orderly. We have had a frustrating year in many respects but progress on the ground does now appear to be real and there is a genuine prospect of positive news for some time to come. What I want to see in the next few operational updates is a steady move towards production and a consolidation of the results from earlier exploration. I think long term this will do more for the share price than making a start on big headline grabbing projects such as Kracken , where a success would be stunning but may have a low probability of being achieved.

'IOS' should be 'is' - apologies for the typing error.

Setanta 1 and Theboys
I agree with both of you that simplitying the lease structure makes the company more attractive to a potential buyer or investor and that this iOS likely to be better than the go it alone self funding route. I also agree that in terms of quick capital appreciation the former is the quickest route and the latter (a partner) might be as almost as good provided excessive dilution is avoided. The advantage of putting down a marker about the next steps in a self funded Paradox development is that it makes clear that we do have an alternative. It also implies that we will not be running out of news and prospects once production figures from Paradox are known and the CP resource update is completed.

Agreed. I regard the formation of the WSN as a useful bit of tidying up that will be helpful going forward either on our own or with potential partners. However, i thought the brief details of how the drilling programme at Paradox will develop and be funded going forward was of more immediate importance.
One possibility has always been that interest in the share will sag a bit post production figures from our well, unless of course , shareholders know a bit more about what is coming next. We all probably buy into the proposition that with proof of concept achieved, a partner/new investor will hopefully soon be found that will help us to exploit the WSN quickly. However, it is good to know that we have steps being taken to progress a self funded repeat of what has already been achieved. Clearly the second of these options will help the share price rise but on its own is probably unlikely to get us to the 20-40p range for a while yet. What it does do is confirm yet again that CH is doing the right things well and adding to our credibility with both regulators and potential partners.

Thebhoys
Like most people I have better things to do with my life than wasting my time posting on bulletin boards about companies that I do not hold shares in. For the record I have just over 1.9 million shares, my largest holding by a big margin. Like any shareholder I do have doubts and/ queries from time to time but in this instance they are not sufficient to dent my faith in the company as a long term investment. The odd doubt/question is healthy and helps to ensure that BB's are useful and are not dominated by rampers, de-rampers and endless in fighting between posters (see Union Jack and Reabold as examples of the latter form of self destruction on BB's).