Reabold Rundown - (RBD)
Time and again it has been suggested here that shares in Reabold Resources (RBD) are way too cheap given the 56% plus stake in the exciting West Newton oil and gas prospect up in Humberside. The shares have responded by simply getting cheaper.
At 0.58p now, the company is capitalized at £39m. Union Jack Oil (UJO), which has 16.665% of West Newton, is capitalized at £32m. UJO is also cheap, but not nearly as cheap as Reabold. Both are on the brink of exciting action as the main rig at the latest West Newton site is about to be assembled, with drilling getting underway early next month, and the prospect of tangible and – possibly terrific – news maybe early in December.
UJO has been hammered by some for raising £7m at 16p to ensure it has cash for all contingencies (including some possibly exciting ventures outside West Newton). The shares have very nearly halved. Anyone upset at the fund-raising now has the opportunity to take full advantage of it by buying almost at the issue price. That could be fun.
Reabold looks as if it could be the most fun, however, but the market stubbornly does not see it that way. The company produced largely irrelevant figures for the half-year to June 30 today, and issued a set of questions and answers dealing with matters which might have arisen should the annual meeting have been allowed to take place instead of being stymied by the coronavirus. See the original at https://reabold.com/investor-relations/agm2020qa/
What follows are edited extracts from both announcements, hopefully capturing the more interesting parts. –
On West Newton – ‘We be expect the project to be extremely attractive to potential industry buyers given its economic potential and its location.’
On making money from West Newton - ‘It is hard to put a time scale on the monetisation of assets. We plan to generate the highest possible return for shareholders in the shortest possible time period.
‘California has been generating cash …due to strong drilling results and low production costs per barrel, meaning this is already a contributor to Reabold’s balance sheet. The extent of the running room across Reabold California and continuous cash generation have to be considered against any decision to sell any of the assets.
In respect of West Newton, we are keeping our options open.’
‘Rathlin (the operator) is currently focussing on progressing activity at West Newton A and West Newton B, the results of which could be transformational for the project. West Newton is likely to require multiple wells from multiple sites over time. Rathlin has therefore submitted Screening Requests for two new well sites.’
In Romania ‘We are confident that we have a successful discovery at IMIC-1 based on data from the well and adjacent historical production. In addition to IMIC-1, however, Reabold is also invested in the IMIC-2 prospect and the broader Parta License.’
‘We continue to focus on generating cash across our California portfolio, particularly given our low cost per barrel, resulting in profitable production even at low oil prices. Although production was affected by the COVID-19 pandemic, all wells are now back on production.
Recent success at VG-6 in West Brentwood has unlocked more running room on the license than we had previously anticipated meaning we are working up further follow-on targets at both West Brentwood and Monroe Swell.’
‘low oil prices actually highlight the excellent economics of our operations here given that fluctuating oil prices do not affect production across California.’
‘Prior to the recent licence round, the entire Corallian portfolio consisted of assets which required industry participation (e.g. farm out) to fund further activity. The reduction in activity in the upstream industry, particularly since COVID-19, has made it difficult for Corallian to attract funding into drilling projects.
We were therefore delighted to see Corallian offered the Victory project in the 32nd license round recently. The Victory project is already appraised, and Corallian expects to be able to progress this project through the FDP stage without the need for additional drilling, and therefore at significantly reduced capital outlay in the near term. This is a meaningful project that can be progressed in the current environment, whilst the exploration and appraisal projects within the Corallian portfolio will hopefully attract more interest as conditions improve.’
‘We are constantly on the lookout for new opportunities where we see the prospect of near-term, high-impact activity which can deliver a return. It could be that the COVID-19 environment presents further opportunities.’
‘Reabold is well funded for all of its upcoming work programme. …We do not consolidate cash invested into the portfolio companies such as Rathlin (and held on their balance sheets) into our own balance sheet. Therefore, the bulk of our economic interest at West Newton, which is held via our Rathlin ownership, is funded from the Rathlin balance sheet as opposed to Reabold’s.’
‘We are also generating cash from the Reabold California assets and have access to a fully undrawn £5 million equity drawdown facility.’
Interim announcement extracts -
‘The Company has invested a total of £20 million in Rathlin Energy (UK) for a 59.5 per cent. interest. Rathlin is the operator and 66.67 per cent. equity interest holder in PEDL183 licence, onshore UK, which contains the West Newton field, potentially the largest hydrocarbon discovery onshore UK since 1973.’
‘The WNB-1 well has the dual objective of appraising the Kirkham Abbey formation and evaluating the Cadeby formation which, if successful in achieving one or more of our pre-drill targets, will substantially upgrade the value of West Newton and Reabold.’
A conductor drilling rig has been successfully mobilised to the WNB-1 site, with a main drilling rig following shortly to appraise the Kirkham Abbey formation and test the Cadeby formation. The conductor rig will drill to a depth of approximately 80 metres into the Cretaceous chalk where steel casing will be installed and cemented to surface. (MW note – now completed).The main drilling rig will then drill the main borehole to 2,000 metres. The drilling operations are expected to continue for six to ten weeks.’
‘We are looking at ways to commercialise future production in Romania and are encouraged by the potential resource upside across the licence, which will be further assessed during the seismic programme across the IMIC-1 and IMIC-2 accumulations later this year. ‘
‘Completion of the testing programme at IMIC-1 in Romania is steadily approaching and we look forward to receiving the results of the flow test in due course.’
‘We are delighted to have drilled our fifth successful well in California and to see strong rates of production from a previously untested horizon. VG-6 was designed to test a new geological horizon at West Brentwood, … success at VG-6 has unlocked a new play with more running room at West Brentwood than anticipated and therefore additional follow on targets.’
‘Reabold's net revenue generated from the sales of hydrocarbons in California over the period was US$718,000 (US$575,000 net of royalties). This equates to a realised price of US$38.1/boe (US$30.5/boe net of royalties). The estimated cash operating cost was approximately US$14.4/boe. ‘
‘During the Period, the Company commissioned Petrotech to update the reserves report,… as at 1 February 2020, and attributed an NPV10 value, net to Reabold, of US$20.41 million associated with the PDPs at VG-3 and VG-4 and the PUD at VG-6, as well as the PDPs at the 2A and 2B locations in Monroe Swell that were brought into production. The PUD at the VG-6 location was brought into production in Q1 2020. The additional prospectivity associated with other potential drilling locations…have not been included in the valuation. These updated reserves correspond to a total capitalised expenditure by Reabold in respect to the PDPs and PUD at West Brentwood and Monroe Swell to 31 December 2019 of US$6.3 million, associated with the drilling and completion.’
‘The Company has invested to date a total of £3.65 million in Corallian for a 34.9 per cent. interest. Corallian holds interests in five basins in the UK: Central Graben, Inner Moray Firth, Viking Graben, West of Shetland and Wessex Basin.’
‘Corallian has been offered 100 per cent. interests in the Victory gas discovery in block 207/1a, the Laxford gas discovery and Scourie prospects in blocks 214/29c and 214/30c, and the Oulton oil discovery in block 3/11a as part of the UK Oil and Gas Authority's 32nd Offshore Licensing Round.
We are delighted…The successful block 207/1a application contains the Victory gas discovery. Victory is assessed to be fully appraised, with potential access to infrastructure and expected submission for the field development plan within 18 months. The potential upside in block 207/1a, alongside Corallian's successful applications in respect of blocks 214/29c and 214/30c, and the appraisal opportunities they bring, means Reabold, via Corallian, will have exposure to significant low risk resources in the West of Shetland.’
‘On 26 May 2020, the Company announced that it had secured additional liquidity in the form of a £5 million discretionary equity line cash facility.’
(MW note – this is in addition to cash and cash equivalents as at 30 June of £5,485,000.)
MW note. I have a holding in Reabold
More on (RBD)
Terms & Conditions |
Risk Warning |
The Michael Walters website is authorised and regulated by the Financial Conduct Authority, registration number 225469.
Michaelwalters.com is at Laddingford Croft, Nr. Yalding, Kent, ME18 6BJ