Oneiro Energy (LON: ONE) launched its London Main Market IPO on 25 May 2023. The energy company raised £1.2 million and started trading publicly with a market cap of £2.226 million. Oneiro listed a few days before the regulator increased the minimum from £700,000 to £30 million.
At the time, Chair Robert Jones enthused that ‘this is just the beginning. The Company is focused on acquiring assets that can bring swift cash flow generation and provide early business stability. Whilst listing is an important milestone, the Board now looks forward to the task of bringing our collective experience to bear in identifying significant acquisition opportunities to drive long-term shareholder value.’
The IPO price was 5p, but the share has more than doubled to 10p, and there could be further to run.
Of course, as with all exploratory companies, only volatility can be reliably guaranteed.
Oneiro Energy: seven things to know
As a virtually unknown entity, I had a delightful chat with co-founder Rod Murray to get more of a feel of what Oneiro is all about. As a brief summary, the below is a good place to start:
1. Directors and Management Team
The company is led by a team of seriously experienced professionals, with successful track records in the energy and financial sectors.
The directors have executed many, many transactions within the oil and gas industry, and bring a wealth of expertise in identifying strategic investment opportunities, conducting due diligence, and optimising the operational performance of acquired assets.
This includes for a roster of majors including FTSE 100-listed BP and Shell.
2. Investing Strategy
Oneiro will focus on the acquisition and development of assets in the energy sector, with a particular emphasis on upstream gas exploration and appraisal.
The directors believe that natural gas will play a crucial role in the global energy market’s transition towards cleaner and more sustainable sources — in particular in developing countries which are currently reliant on coal.
3. Fundraising
The Main Market company raised an initial £51,000 from its founders in March 2021 to establish operations, before raising an additional £360,000 from early-stage investors three months later. The recent £1.2 million raised at the IPO will be used for the identification and acquisition of a suitable target in the energy sector.
4. Acquisition Strategy
Oneiro intends to acquire a company or interest within 24 months of its admission — or by May 2025. The directors would rather acquire 100% ownership to maximise growth potential but may consider acquiring a lesser equity interest for the right project.
Additional financing — more than the raised £1.2 million — may be required to complete any acquisition, and the issuance of new shares for cash cannot be ruled out. However, this is a normal and healthy part of early stage investing.
5. Due Diligence
Before making any acquisition, the company will conduct comprehensive due diligence on the potential target.
This will involve evaluating the target’s current management team, assets, contracts, financials, and growth potential. The company is leveraging the directors’ extensive network of contacts in the energy and financial sectors to identify suitable acquisition targets.
6. Post-Acquisition Strategy
Once an acquisition is completed, Oneiro will optimise its capital structure, implement operational improvements, and strengthen the management team as necessary. The directors already have incentives tied to achieving attractive returns for shareholders.
7. Sustainability Focus
While the Main Market company recognises the importance of gas in the energy transition, it is also mindful of sustainability considerations.
It aims to contribute to the global energy transition efforts by prioritising cleaner alternatives as time goes by, starting with gas and then potentially moving on to renewables.
For context, coal accounts for 36% of global energy generation. 33% of Germany’s energy generation came from coal in 2022, and the EUU country is still developing lignite mines, the worst coal by environmental standards, after having shunned nuclear.
Backed by industry professionals
As you can likely surmise, Oneiro’s key attractant is its directors on the board. The company’s three founders have discovered multibillion-barrel hydrocarbon fields in the past, and also managed multi-billion-dollar projects at a global scale:
- Roderick ‘Rod’ Murray has thirty years of experience in the oil industry, covering every stage from small-scale to multi-billion exploration, and predominantly in developing countries. Rod has managed a whopping 200 projects, working for majors including BHP, BP, Mobil, Chevron, Amoco, and Shell. Unsurprisingly, he’s built up a solid network of relationships.
- John Treacy is the legal side of the triangle, focusing on capital markets and mergers. Treacy is a well-known figure in the UK brokerage scene, having worked as an adviser on numerous initial public offerings, acquisitions, debt restructurings and placings for growing companies. In particular, he is vaunted as a reverse takeover specialist.
- Robert Jones is ‘a seasoned oil & gas professional and geophysicist with four decades of experience.’ Jones is currently in non-executive director roles at Caithness Petroleum and Tristone Energy but has also led exploration activity with FTSE 250-listed Cairn Energy, as well as at Tullow and Clyde Petroleum. He has delivered 150 — yes 150 — projects including new ventures, exits, reorganisations and major discoveries across multiple continents, and is widely regarded as a legend in the hydrocarbon community.
The game plan
Oneiro, pronounced ‘OWN – ERO,’ is taken from the Greek meaning ‘to dream’ and is the etymological root of the English word ‘oneiromancy.’ And there’s nothing better than an archaic classical language when naming a business.
While perhaps a little on the nose, christening your own company is part of the appeal — and the three founders have a game plan. One thing that stands out is that the team has enjoyed an ‘expensive education,’ derived from many years of practical hands-on experience with hydrocarbon exploration and development.
Rod notes that one key advantage is that the company can grow from the ground up.
An immediate step was to improve the board — on 5 September, after a brief trading suspension — Oneiro appointed Andrew Yeo (better known as Andy) as Non-Executive Chairman. Yeo is already well-known in the small-cap market as the CEO of Baron Oil, though this is only the latest appointment in a varied career including years in private equity and corporate advisory.
The new Non-Exec Chair will receive 1.5 million warrants to subscribe for the Company’s ordinary shares of 0.85p each, exercisable at a price of 10p per Ordinary Share. These warrants will only be issued upon successful completion of a reverse takeover and will have a term of 3 years from the admission to trading of the Ordinary Shares following the RTO.
Yeo enthuses that ‘it is a great opportunity to join Oneiro Energy at the early stages of their journey in the public markets. They have a very strong technical team, supportive shareholders and as such should find themselves well positioned for a transaction.’
Meanwhile, Jones is ‘are delighted to welcome Andy to the board of Oneiro. In the last few years, he has created significant shareholder value at Baron Oil as he has taken the Chuditch discovery up the value curve ahead of a future appraisal well.’
In summary, Oneiro is looking to secure the license of a potentially misinterpreted asset, and thereafter, it’s a case of drilling an appraisal and an exploration well, proving the resource, and then selling the asset off to a major. The team has compiled a list of ten assets they would consider with a preferred confidential target in mind.
If this sounds all too simple, then that’s probably because it is. There are of course risks — the company might be working on offshore deepwater drilling, which is expensive, and getting licences in the first place is not guaranteed. Then there’s the downside scenario where Oneiro drills for gas and comes up empty — a not-impossible scenario.
Of course, the expense of drilling means that the company will need access to serious cash. Given the pedigree of the founders, there’s a good chance that they already have access to credit on reasonable terms.
Investors considering Oneiro Energy shares are essentially buying into the experience, connections, and capabilities of the founders to deliver. At present — and with no further detail — this makes Oneiro a speculative buy for higher-risk investors.
But once the first asset is secured, funding will likely start to come in, and in theory, the shares will rise. But like almost every company I cover, this will be a volatile stock, and any asset sale, and subsequent special dividend, will be at least two years away. High risk, high reward cuts both ways.
But the very earliest stage of exploring, hydrocarbon assets can be highly lucrative.
This article has been prepared for information purposes only by Charles Archer. It does not constitute advice, and no party accepts any liability for either accuracy or for investing decisions made using the information provided.
Further, it is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
