Member Info for MALBRAD

I had a small holding in CHAR but just about broke even when I lost patience and got out. Gas prices in Morocco are good but it is a lot more expensive and potentially higher risk operating out at sea than on land. What also worried me was the succession of non binding understandings with potentially interested parties. Such understandings are a cheap way of giving the impression that something positive is happening but are easy to get out of. I recall a similar series of such agreements during the Xcite Energy debacle and now tend to see them as a warning sign.

Satanta 1
I cannot comment on the Idea that our share price is damaged because of some shareholders experiences with Rose Petroleum as I never had shares in Rose. A possible explanation is that if you Google Paradox Basin you can track down one previous bad experience by a company called 'Fidelity', who spent a lot of money drilling multiple wells in Cane Creek and had disappointing production results. It is not clear whether they simply damaged the reserves they drilled or found that to get results they had to do more fracking than they wanted to. It may be that this experience is what encouraged the relevant state agency to subsidise our drill and treat it as a research project. Our management team must be well aware of this back history and presumably have good reason to expect that they can do better. In that context the full results of the core analysis, the independent resource estimate and the initial production results are all key confidence thresholds that will either confirm hopes of 10p by the end of the year or set back the share price if they go wrong. A key feature of oil exploration companies is that unfortunately as far as the market is concerned you are as good as your last set of drill results. For confirmation of this look at the experience of Touchstone, a seemingly well run company in which I hold shares. The share price rose for months on the back of good exploration results and then crashed, not withstanding good long term prospects, as soon as a set of well results were delayed and then turned out to be below expectations. I am a long term holder in ZPHR and suspect that the current share price reflects the immediate lack of news, selling from the recent placing, recognition that exploration can be a bumpy rider and the need for reassuring news before the next leg up.

Am I missing something. An all share offer to up our stake in Corallian does not provide them with additional funding if that is what they need. Conversely an all share offer just before RBD shareholders expect their share price to rise implies that we are paying too high a price to up our stake.

Am I missing something. An all share offer to up our stake in Corallian does not provide them with additional funding if that is what they need. Conversely an all share offer just before RBD shareholders expect their share price to rise implies that we are paying too high a price to up our stake.

To really benefit big time from the increase in oil prices a company needs to already be a big producer and have increases in output confidently known to be happening in the near future. Future oil prices are always uncertain, not just because of fundamental supply and demand issues but also given that key role of OPEC + in rigging the price and uncertainty about the key roles of Saudi Arabia and Russia. An inevitable consequence of this situation is that stock markets are very likely to heavily discount 'jam tomorrow' scenarios and focus on short term prospects.
I have what for me is a significant holding in Touchstone. Up until January this year the progress of the share price clearly reflected shareholder acceptance of a very credible 'jam tomorrow' scenario and a strong belief that the company was well managed. The 'jam tomorrow' scenario is in my view still intact even though it may now contain a different mix of gas and oil than originally envisaged.
What has been lost is confidence in the ability of Touchstone to deliver results to their own quoted timescales and some doubts at least about their geological expertise and technical ability when drilling wells. Sadly confidence is a fickle concept and it will take both time and more than one success to rebuild in this instance. Touchstone is right to stress that exploration is a bumpy ride, arguably needs to be more realistic about timescales that are not within its control and focus on getting production increasing so that it remains self financing. In the meantime shareholders need to focus on the potential long term value and stop imagining that each RNS will create instant big profits via huge increases in the share price.

Thank you Edgar222.
Malbrad

I am a long term shareholder in Aminex and still very much in a loss making position. I have tended to focus on the rest of my portfolio on the assumption that nothing much is going to happen here before early next year. However I have noted the significant rise in the share price since about 29 March and given the absence of any new information via an RNS am puzzled by what has happened. Is there significant new information that is not in an RNS or has the share been the subject of a tip by a respected commentator. I have seen no rumours of an impending take over bid and note that the company will soon need to either borrow money to meet running costs or do a share placing. Comments welcome.

Thebhoys
I have now had the chance to revisit the January RNS and listen to the very positive CH interview.
You are clearly right about other layers of hydrocarbons not being included in the 12 million resource estimate. I note that Malcy made a point of clarifying the matter with CH who is clearly both excited by the prospect and keen to keep focused on it rather than digress very much into bids for new assets.
As regards dilution it clearly exceeded the nominal 2.5% mention in the RNS and by CH. The problem here is that with hindsight (a wonderful thing) the recent 3p price was clearly frothy so given an over estimate of dilution. Conversely, the recent near 2p price was clearly created to make the funding possible, so gives an underestimate of dilution. All rather arbitrary but if we assume that in the absence of fund raising the share price would have fallen back to say 2.5p we get dilution of about 26% if my arithmetic is correct. Not trivial by any means but in my view acceptable given the high return likely on the project and the superb distressed sale that we will gain so much from.
Also of interest in the interview was the comment from CH that within the current quarter we are likely to hear more about the other hydrocarbon layers and how they will be exploited.
All very positive for future increases in the share price.

Tonnacombe and Tidd83
Thank you both for the comment re gas not being wanted at the time Shell drilled Royston looking for oil. Clearly very relevant to the case for Touchstone now drilling Royston for gas. That said if Touchstone were regarding the work they reported on today as information gathering without much hope of a major discovery they should have said so. Credibility does depend a lot on managing expectations, particularly when they get out of hand.

Ezhik
I agree with your view that the real damage from the RNS is the loss of credibility. Judged by results Touchstone's management has been widely regarded as the gold standard amongst small exploration companies. Despite the explanation given the delay in announcing drill results has damaged the share price over the last three months and although we have been warned that all drill results will not be a success the current RNS does cast doubt on their technical credibility. I also note the way in which the RNS tries to distance Royston from the results by pointing out correctly that it is in a different geological formation. Whilst I do accept that the comment is correct I do feel that the loss of credibility is such that we now need a very detailed and realistic explanation of the case for the Royston drill. As matters stand the inference is that either Shell were clueless/unlucky or that new technology has thrown up possibilities that Shell could not be expected to have known about with the tools then available.
Going forward we need to see production started up as planned and on time, the testing programme delivering results (next lot due in perhaps a bit over four weeks) and a full explanation of the case for each new exploration well.
Reputations take a lot of effort and time to build up but can be lost quickly. Touchstone need to be seen to grasp the importance of restoring credibility quickly.

Thebhoys
I don't' think our views differ very much. Websites such as this always include a few posters who go over the top on future valuations. What I see here is the likelyhood of a gradual rise in the share price as the profile of ZPHR rises and we get regular updates about progress going according to plan. What I do not see clearly at the moment is a definite single event that will treble the share price in a couple of days and would consequently appeals to investors who move their funds quickly between companies to try and hunt such events. One possible exception that I am not clear about is that I had read earlier RNS as implying that the companie's estimate of a 12million barrel resource related to all the hydrocarbon bearing layers explored by the current Paradox well. At one point during his Proactive Investors interview I thought Colin implied that potential resources in the other layers were not included in the resource estimate. Whilst it may not be a commercial proposition to drain all these layers, some will almost certainly be worth exploiting. A
significant resource increase here and an NPV estimate might well give the share price a decent boost, as also might more quick payback, hIgh IRR aquiitions.
Having suffered at the hands of too many badly managed AIM companies I share your positive view of the management team and CH in particular.
As regards timescale I am sure that the share price will rise significantly this year but see much more to come next year onwards when the building blocks are well established and new possibilities emerge.

Trig 72.
You asked what might cause the next price rise. Assuming the price of oil and stock markets hold up I cannot see the share price going down much from here and have done a small top up at 2.28p
( all that I can afford at the momen). I suspect that we ought soon to benefit significantly from the share getting favourable mentions by commentators such as Malcy's Blog and Simon Thompson of the Investors' Chronicle.. Beyond that I think it is important that we do not get any delays or unexpected events ( look what delays have done to the price of the otherwise superb Touchstone Petroleum). As has already been posted we are then likely to get more information about drilling results, a CPR on resources and news on the build up of production. All of these positive events should move the price up but I am not sure that on their own they will lead to some of the more optimistic prices mentioned by some posters. I suspect that we need either more good deals, much better than expected resource estimates, or a new exploration possibility to move the share price into serious multi-bagger territory. That said, the evidence points to Zephr having an able and dynamic management and the prospects over say a 2-3 year timescale are surely very positive.

Yes - clearly the market makers took the price down to make the deal possible. Given that the recent 3p approx maximum share price was ahead of events, it is difficult to judge how much dilution has occurred. Interestingly the warrants used to pay for the funding can be exercised within three years at 3p. I am sure that we will hit 3p soon in the absence of any unexpected shocks.
The RNS makes much of the current $60 oil price relative to the $45 on which the new assets deal was based. Given the unstable nature of the OPEC plus cartel and unknowns about how the World Economy recovers from Covid 19 future oil prices are difficult to predict. That said, the new assets have a very quick payback period and are designed to get us to self funding at Paradox before being exhausted. In that sense they are an ingenious quick fix but not a significant long term earner.
Interestingly analysis of core material remains ongoing so more information about Paradox still to come. Clearly we will be getting a series of RNS this year about our growing knowledge of the Paradox resource and productionat both Paradox and our new assets. Whether we will have the energy to pursue a few more similar deals in the next few months remains to be seen. Looking at 75 possible deals in recent months must have been quite demanding in terms of management time!

We know that management envisage the well as being in production by early Summer. That outcome clearly depends on being able to raise the finance needed. I suspect that any partner will want more information about the prospect than has so far been published and the assurance that the data has been independently verified. Whilst finance negotiations and resource verification can be done mostly simultaneously I share Setanta1's view that the clear implication is that we are likely to get more information from the company soon. I also share his view that the 3p share price may have delayed the financial negotiations. The new partner has to be able to see a clear route to profit and will be looking at likely oil and gas prices over the life of the project, so will not be in a rush to do a deal just because these prices have improved recently. There will also be considerations such as whether the new partner is a passive investor, or has relevant expertise and expects to be a key player in future decision making re the project. I suspect we are more likely to get the latter, which suggests both that ZPHR will want to strengthen its position before getting into detailed negotiations and that a deal is unlikelly to be an overnight event.

Hi Northern Magic
An attempt to answer your questions so far as I can.
1. In this instance oil and gas is locked into multiple layers of rock from which core samples have been taken. Some but not all of the cores have been analysed and similarly there remains work to be done correlating this information with that from the wire line logs and the 3D survey. As was made clear in the original results RNS some layers will not be commercially because they are too thin, have insufficient hydrocarbons or are too tightly held in the rock. Of interest given the companies 'green' ethos is the extent of natural fracturing that will make it possible to extract hydrocarbons without using as much high pressure water and chemicals. Although enough work has been done to get the existing resource estimate, there remains more material to analyse and hopefully clarify what can be extracted and how. I presume that at some point this work will have to be independently verified - what we have at the moment are management estimates.
2. As regards borrowing the issue credibility. What guarantee can the company give that the loan can be repaid. ZPHR does not have an asset that can be used as collateral if the well turns out not to be commercial. That said there are two positive aspects here. Firstly, a lot of money has already been spent on the project and an independent resource estimate will add technical credibility. Secondly, it is possible to give the lender some potential upside if the project succeeeds. For example, the lender could be given warrants to subscribe for shares at a future date on favourable terms. Such warrants do imply some dilution but then so does a further round of equity raising,. Either way the obvious comment is that the better the technical story and the closer we are to production the less the dilution ought to be. The real world illustration of these issues at the moment is Hurricane who have so far failed to extract as much hydrocarbons as they expected given their interpretation of the drilling results.
3. The tax losses are only useful if you have profits to set them against. In this instance the infer nice is that in due course Zepyhr can avoid paying the American equivalent of Corporation tax on profits of $16m -say a gain of $4m if the tax rate were 25%. I do not know much about the details of American company taxation but the benefit can be looked at in two ways. Either Zepyhr pays a lot less tax on its profits for several years to come, or Zephr mergers with a company that has significant earnings but nothing to set them against. In the latter case they would then be able to take early advantage of the tax losses. A UK example occurred some years ago when P and O had large unused allowances resulting from its investment in ship and merged with a property company that had earnings but no allowances.
Hope this is helpful and that others will comment if there are any errors above.

I share Setantal's view that unfounded rumors aside, a major rise in the share price will not happen until we get an RNS with some significant new information and an interview/ presentation by CH. The new information could result from further work on the drill cores giving insights into what resources exist / can be recovered in the hydrocarbon rich stacker layers or from news about finance. Notwithstanding lots of preparation work being done , my understanding from earlier presentations is that ZPHR simply does not currently have the finance needed to see the project through to production. Consequently , sooner or later there will have to be a finance RNS irrespective of whether we are talking about borrowing, another issue of shares or a partner. It is of course possible that a single RNS etc will deal with both issues at the same time. What I do not have is much idea about timing e.g before the end of April or May/June. I suspect that two separate announcements are more likely as CH imay want more information about the size of the resource and a better share price before concluding finance negotiations .However, all that is simply my opinion and the company may have a different view.

I share Setantal's view that unfounded rumors aside, a major rise in the share price will not happen until we get an RNS with some significant new information and an interview/ presentation by CH. The new information could result from further work on the drill cores giving insights into what resources exist / can be recovered in the hydrocarbon rich stacker layers or from news about finance. Notwithstanding lots of preparation work being done , my understanding from earlier presentations is that ZPHR simply does not currently have the finance needed to see the project through to production. Consequently , sooner or later there will have to be a finance RNS irrespective of whether we are talking about borrowing, another issue of shares or a partner. It is of course possible that a single RNS etc will deal with both issues at the same time. What I do not have is much idea about timing e.g before the end of April or May/June. I suspect that two separate announcements are more likely as CH imay want more information about the size of the resource and a better share price before concluding finance negotiations .However, all that is simply my opinion and the company may have a different view.

Thank you corpse for the link to the very well put together webinar. All very positive and sensible re delays and long term developments.
On an immediate basis I noted that Royston seems to have moved from an April to a May start. I would also welcome comments from others about the timing of well testing results. We were told that well testing was about to start and would take about a month but Paul also stated that results would be announced as available and not held over until all results were to hand. Is it reasonable to assume that we could have a first set of results on say two weeks time and the remainder in mid-April or am I being over optimistic?

Thank you Setantal. Stake building is a positive in that it shows acceptance of the investment case and reduces the amount of stock available to purchase assuming that the stake builder remains on board. The tax credit is clearly useful long term.
I remain a bit puzzled by the failure of the last two progress reports to move the share price. A possible contributory factor is the lack of much actual new information (a lot of updating of DCF calculations and positive vibes mostly). Interestingly the two most recent progress reports have not been accompanied by interviews/live presentations so perhaps the breakthrough will come when ZPHR decide that enough progress/real new information has built up to justify an RNS being accompanied by an interview/presentation.

We know that ZPHR do not have enough money to finance the well through to production , let alone buy distressed assets other than on a pure ************** basis. At various points the company has clearly stated that talks with potential partners are ongoing. A buy- in to the project would clearly add credibility to a timetable through to production that is otherwise amount to little more than wishful thinking. That said a buy- in or a share placing will very likely involve dilution and inevitably scale back some projections of the future share price. Perhaps not surprisingly for this type of project I do not recall mention of debt as a significant contributor to meeting expenditure on the project. That said, the DCF projections do imply cash flow before the end of the year and a relatively short payback period. I do not know what others think but I suspect the market will respond more positively to progress reports once financing is resolved.