22 Oct 2019 07:00
Attis Oil & Gas Ltd / Index: AIM / Epic: AOGL/ ISIN: VGG6622A1057 / Sector: Oil and Gas
22 October 2019
Attis Oil & Gas Ltd ('the Company')
New Acreage in Texas, New Drill Programme, Reserve Report
Closing of Bridge Loan Facility & Issue of Equity
Highlights:
·; Secured first acreage in the proven Red Cave formation in line with growth strategy focused on the development of the Company's activities in the Texas Panhandle centred around its headquarters in Borger
·; The Bivins 115 lease ("Bivins") includes 17 identified proved undeveloped drilling locations with a present value (PV10) of US$8.15m @ US$55 oil price (net to Attis) based on figures produced jointly by the Company and KLF Geolgical Consulting LLC, a qualified third party
o Assumes 945,585 BOE produced over 20 yr life of wells
·; 12 well drill campaign scheduled, subject to securing further funding, to commence early Q2 2020
·; Closing of a non-dilutive interim Bridging Loan Facility ("Bridging Loan") of £420,000 to fund pre-drill development of Bivins and working capital. The loan funds will be drawn over the next 4 weeks as required for development funding.
·; The Company has also issued 102,450,160 shares at 0.1 p £102,450 to three advisors for accrued fees and certain Directors for accrued salaries (together the 'Settlement Shares')
o Mr Charlie Wood, CEO and Mr Paolo Amoruso, Executive Chairman & Ms Sarah Cope have not drawn salaries for the past 3 months, Mr Russell Lamming has not drawn a salary since joining the board.
·; In line with re-postioning and the divestment of non-core assets, sales package prepared for Austin Field to monetise part of the NPV10 of US$7.6M assigned to proved and probable reserves by recent independent Reserve Report, covering all existing assets, being Austin, Zink Ranch and Fort Worth
·; MOU signed with large acreage holder to allow the Company to conduct due diligence over additional Red Cave leases
Attis Oil and Gas Ltd (AIM: AOGL), the AIM listed oil and gas company, is pleased to announce an update on its activities including the acquisition of the Bivins 115 lease, the Company's first acreage in the proven Red Cave formation in the Texas Panhandle close to Attis' headquarters in Borger, Texas. This follows the completion of the Company's successful 'Put-on-Pump' delivery outlined below, and the ensuing asset and services review. Further, the Company has completed a Bridging Loan Facility of £420,000 supported by existing shareholders, the COO and the Chairman of the Company to fund working capital and development work to prepare the Bivins property to be drill-ready for an eight well programme once the operational weather window reopens in Q2 2020.
The Company intends to use Bivins as a platform to build a strategic position in Borger/Amarillo (Texas) and the surrounding Texas Panhandle by leveraging its established relationships with local mineral and working interest owners, operators and contractors, and roll-out an aggressive multi-well drill programme targeting the Red Cave formation. In order to achieve this, the Company will seek to monetise its current portfolio to fund an initial eight well programme in April 2020.
Pursuant to this, the Board commissioned Moyes & Co., an independent third party, to undertake a Reserves Report covering all the Company's existing assets, being Austin, Zink Ranch and Fort Worth. The results confirm the portfolio's monetising potential, and include a PV10 of US$7.6M assigned to proved and probable reserves. The Company is now seeking to divest the Austin Field in the near term, while the Zink Ranch and Fort Worth fields are also under review with regards to ascertaining the potential to redeploy funds to further advance the Company's Red Cave focus.
In line with this refocus, the Company has entered into a Mutual Non-Disclosure Agreement and accompanying 30 day Memorandum of Understanding ("MOU") with an owner and operator of approx. 25,000 leasehold acres in the Texas Panhandle. The MOU allows the Company to conduct due diligence over the acreage, determine feasibility, and, if satisfactory, enter into good faith negotiations on structure, and mutually acceptable terms for a potential transaction.
As well as providing field development capital, the divestment strategy allows a more focused, cost effective approach centred around the Borger headquarters and Bivins acerage. Further, Attis is undertaking a corporate restructuring and cost reduction programme and will update the market on this in due course.
Red Cave: de-risked profitable oil and gas development play
Bivins represents the Company's first acreage acquisition in the Red Cave formation, a formation which has been steadily producing high quality natural gas since 1916 with over 3.61 million barrels of oil and 74.55 Billion Cubic Feet ("BCF") of high BTU gas produced since 2006. Covering approximately 60,000 acres around Borger and Amarillo in the Texas Panhandle, Red Cave is primarily drilled for its liquids rich and high BTU ("British Thermal Unit") content natural gas, but advancements in fracking technology have opened up opportunities in the tight siltstone formation. The oil play, which covers just 10,500 acres, sits in a 28 square mile area, 30 miles to the north of Amarillo, and remains largely intact as drilling has historically targeted the deeper and larger Brown Dolomite formation. With low drilling costs and low geological risk, Red Cave represents an opportunity to generate significant cash flow in the near term.
The natural gas produced obtains an average US$2.75 premium per Million Cubic Feet ("MCF") above spot price. On a barrels of oil equivalent conversion, according to the field and well economics outlined in the table below, the Company expects to generate compelling returns on its investment, subject to the availability of additional funds to undertake the proposed drilling campaign. Drilling and development at Bivins and elsewhere in 2020 and beyond is expected to be funded from a combination of cashflows, asset consolidation, reserve based lending and strategic joint ventures.
The below modelled economics have been prepared in conjunction with KLF Geolgical Consulting LLC, a qualified third party geological consultant group enaged by the Company.
Oil price Gas Price held flat @ $5.65/MCF |
$50 |
$55 |
$60 |
$65 | |
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Lease Size | 115 acres |
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Drill Sites | 17 |
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Working Int. | 100% |
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Net Revenue Int. | 75% |
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Cost per well | $295,000 |
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EUR per well (BOE) | 55,623 |
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Field EUR (BOE) | 945,585 |
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Undiscounted Cashflow @ $50/bbl + $5.65/MCF (17 wells) | $26,934,571 |
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Post Tax IRR |
| 58.3% | 65.4% | 72.5% | 79.9% |
PV10 per well |
| $426,985 | $479,530 | $532,074 | $584,618 |
17 well PV10 |
| $7.25m | $8.15m | $9.04m | $9.93m |
Aggressive drill-out: objective to drill all 17 well locations at Bivins
Based on seven-acre spacings, 17 well locations have been identified on the Bivins 115 lease. Subject to funding, Attis is focused on an aggressive drill-out of this Red Cave property during 2020; topside completion planning, site preparation, infrastructure build out and tank battery installation are well underway. Negotiation for the acquisition of a disposal well is complete and drill slots with Quest Drilling Services have been secured for a maximum eight well programme in April 2020 and a further four well slots through Q3 in 2020.
Wider Portfolio Reserve Report: PV10 of US$7.6M assigned to existing proved and probable reserves
The Company has had a Reserve Report prepared by petroleum consultants, Moyes & Co., based on production data as at 1 September 2019. Dated 1 September, the report was commissioned to catagorise the existing producing reserves and future potential. Moyes & Co. has estimated the net reserves and future net revenue for the Company's interest in the properties: Austin Field, Fort Worth Field, Zink Ranch Field. The estimates of reserves and future revenue in the report have been prepared in accordance with SPE/WPC/SPEE/PRMS guidelines.
Grand Total Reserves As Of 1st September 2019
| Reserves | Net Cash Flow | |||||||
| Gross Oil | Gross Gas | Net Oil | Net Gas | Future Net Revenue | Future Net OPEX & Taxes | Future Net Capital | Future Net Cash Flow | NPV (10) |
Reserve Class/Category | (Mbbl) | (MMscf) | (Mbbl) | (MMscf) | ($M) | ($M) | ($M) | ($M) | ($M) |
Proved Developed Producing | 58.0 | 859.0 | 45.3 | 649.4 | 4,195.8 | 2,294.6 | 1,774.5 | 126.6 | 252.1 |
Proved Developed Non-Producing | 4.9 | 421.4 | 3.9 | 296.7 | 994.1 | 496.3 | 302.7 | 195.1 | 188.5 |
Proved Undeveloped | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
Total Proved (P1) | 62.9 | 1,280.4 | 49.2 | 946.1 | 5,189.9 | 2,790.9 | 2,077.2 | 321.7 | 440.6 |
Probable Undeveloped | 374.3 | 545.3 | 289.1 | 443.1 | 15,758.4 | 2,070.3 | 2,558.0 | 11,130.2 | 7,199.3 |
Proved + Probable (P2) | 437.2 | 1,825.7 | 338.3 | 1,389.2 | 20,948.3 | 4,861.2 | 4,635.2 | 11,451.9 | 7,639.9 |
NOTES TO RESULTS
1. The Reserve Report is not a revision of the Company's CPR dated November 2012. No property listed in the 2012 CPR are currently owned by the Company.
2. The Company's net future gas revenues reflect the depressed prices and future forecasts.
Bridging Loan Facility and Issue of Warrants
The Company has agreed a short-term, five-month senior secured funding facility of £420,000 with 5 shareholders and the Company's COO, Thom Board and Chairman, Paolo Amoruso. The material terms of the facility comprise interest of 10% per annum accruing monthly and paid with principal at the end of the five month term, a fixed and floating charge over the Company's Zink and Austin assets, and the issue of 420 million five-year warrants priced at 0.1 pence per share ("Warrants"), which is a premium of 17.5% premium over the Company's closing mid-market share price on 21 October 2019. The Bridging Loan will be due for repayment on or before 21 March 2020 and will have a preferential right of repayment from any future financing secured by the Company.
The purpose of the Bridging Loan is to cover working capital while the Company seeks to complete the sale of the Austin assets and finalise the financing package for the development of the Bivins Ranch property.
On completion of the Bridging Loan, Paolo Amoruso & Thom Board will be interested in the following warrants:
Participants | Number of Warrants being issued | Total number of Warrants held including this issue** | Shareholding upon exercise of total number of Warrants held | % of issued share capital upon exercise of Warrants‡ |
Paolo Amoruso | 60,500,000 | 60,500,000 | 181,886,952 | 4.7% |
Thom Board* | 25,000,000 | 25,000,000 | 120,135,443 | 3.1% |
* Held by JAM & Sons Limited, a company in which T. Board has a 49% interest | ||||
** Not including unvested employee options |
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Related Party Transaction
Paolo Amoruso and Thom Board, as directors of the Company, are considered to be "related parties" as defined under the AIM Rules and, accordingly, the Bridging Loan constitutes a related party transaction for the purposes of Rule 13 of the AIM Rules.
The Directors independent of the Bridging Loan, being Charlie Wood, Sarah Cope and Russell Lamming consider, having consulted with Beaumont Cornish, the Company's nominated adviser, that the terms of the Bridging Loan are fair and reasonable insofar as the Company's shareholders are concerned.
Charlie Wood, Attis CEO said, "The acreage secured at Bivins represents the culmination of the Company's 12-month strategic review and delivery. One year ago, 11 October 2018, at Mayan's AGM, the Company proposed to take stock of the current assets, assess near term revenue potential and future opportunity. Following Attis' review, at the time an independent company, the Company pursued an aggressive 'put-on-pump' transition to production and cashflow. The acquisition of Attis in April of this year completed the transition to a full discipline North American oil and gas owner and operator. The securing of this non dilutive funding facility provides additional working capital, which allows us to complete preparation works on Bivins Ranch, exit Austin field and work towards a funding package for the drilling of Bivins in 2020.
"These last few months have been a continuation of the Board's commitment to grow the business and return increasing shareholder value. With the existing properties in production, we have utilised our in-house experience to undertake commercial and technical reviews of new business opportunities. The incorporation of Attis' oilfield services division demonstrates the depth of our operational resource and market penetration in the Texas Panhandle. Our local knowledge and relationships has further translated into commercial success by securing Bivins, a cornerstone property for our Red Cave development play. The rationale for our decisions one year ago has been delivered and I'm delighted to present the new Company strategy."
Further Information
Terms of Bivins 115 Lease
The Bivins 115 lease provides for a US$25,000 signature bonus and a 25% royalty payment on production. The Company is required to drill a well during the primary term of 18 months of the lease and remains in force thereafter as long as oil or gas are produced from the lease in paying quantities. In order to retain the lease beyond the primary term, Attis is required to (i) drill and complete at least one (1) well and (ii) drill and complete at least one (1) Commercial Well or Dry Hole during each year, following the end of the primary term of the lease.
The Company can confirm the following is completed at Bivins:
·; Eight well locations surveyed, staked; four location permitted by the Texas Rail Road Commission
·; Agreed acquisition of depleted gas well on the Bivins 115 lease for conversion to water disposal well.
·; Draft oil and casinghead gas gathering contracts in place.
Directors Fees
51,700,160 Ordinary Shares will be issued 0.1p ( 17.5% premium to mid market at close on 21 October 2019 ) in relation to the settlement of accrued Director fees to the Company's CEO, Charlie Wood, Chairman, Paolo Amoruso, Russell Lamming & Sarah Cope for accrued unpaid salary ("the Settlement Shares"). Following the issue of the Settlement Shares the directors will have the following holdings:-
Director | Settlement Shares | Holding Post Settlement Shares | % equity |
Russell Lamming | 9,266,670 | 211,380,337 | 5.5% |
Paolo Amoruso | 25,793,650 | 121,386,952 | 3.1% |
Charlie Wood | 13,684,000 | 44,632,767 | 1.2% |
Sarah Cope | 2,955,840 | 2,955,840 | 0.1% |
Advisor Fees
50,750,000 Ordinary Shares will be issued at 0.1p in relation to the settlement of accured fees to three advisors ("the Settlement Shares").
Admission of Settlement Shares
The Settlement Shares ("New Shares"), which will rank pari passu with the existing Ordinary Shares, are to be admitted to trading on AIM (the "Admission"). It is expected that Admission will become effective and dealings in the New Shares will commence on or around 28 October 2019.
Total Voting Rights ("TVR"):
Following the issue of the New Shares (being the Settlement Shares), the Company's issued share capital will consist of 3,876,742,468 Ordinary Shares with voting rights. No Ordinary Shares are held in treasury at the date of this announcement and therefore following the Admission, the total number of Ordinary Shares in the Company with voting rights will be 3,876,742,468.
The above total voting rights figure may be used by shareholders as the denominator for the calculation by which they will determine if they are required to notify their interest in, or a change to their interest in the Company.
**ENDS**
For further information visit www.attisog.com or contact the following:
Charlie Wood | Attis Oil & Gas Ltd | +44 20 7236 1177 |
Thom Board | Attis Oil & Gas Ltd | +44 207236 1177 |
Roland Cornish | Beaumont Cornish Ltd | +44 20 7628 3396 |
James Biddle | Beaumont Cornish Ltd | +44 20 7628 3396 |
Frank Buhagiar | St Brides Partners Limited | +44 20 7236 1177 |
Megan Dennison | St Brides Partners Limited | +44 20 7236 1177 |
Colin Rowbury | Novum Securities Limited | +44 20 7399 9400 |
About Us
Attis Oil & Gas Ltd is an AIM-traded (London Stock Exchange) North American-based energy company. It is actively pursuing a primary recovery oil strategy focused on re-stimulating wells within mature producing basins with immediate cash flow from projects that are shallow, low risk with low levels of capex and infrastructure already in place. Attis is also seeking to develop new drill opportunities within both existing & new acreage.
Technical Sign Off
All of the technical information, including information in relation to reserves and resources that is contained in this announcement has been reviewed by, Mr Thom Board. Mr Board is a member of the Society of Petroleum Engineers who is a suitably qualified person with over 24 years' experience operating and developing oil and gas assets. Mr Board has reviewed the release and consents to the inclusion of the technical information.
Glossary
NPV | Net Present Value is the value of all future cash flows. The statement of cash flows acts as a bridge between the income statement and balance sheet (positive and negative) over the entire life of an investment discounted to the present |
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PV10 | is the present value of estimated future oil and gas revenues net of estimated direct expenses and discounted at an annual discount rate of 10% |
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EUR | Estimated Ultimate Recovery |
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PUDs | Proven Undeveloped Drills |
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MBbls | One thousand barrels of crude oil. |
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MBoe | One thousand barrels of oil equivalent. |
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Mcf | One thousand cubic feet of natural gas volume. |
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BOE | Barrel of Oil Equivilent |
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