WTI $72.94 +74c, Brent $74.12 +69c, Diff -$1.18 -5c, NG $3.69 + 9c, UKNG 85.67p +6.04p
By Malcolm Graham-Wood
After all the aggro when Opec+ broke up, oil continues to recover and also watch out for natural gas price, in the US it’s headed towards four bucks and in the UK 100p.
The inventory stats showed another, bigger draw than expected in crude oil, down by 6.9m barrels whilst gasoline was down 6.1m b’s and distillates added 1.62m. With the refinery rate down a few ticks at 92.2% that was needed as gasoline demand went over the magic 10m b/d in a busy driving season.
President has announced a further significant new development with regards to Atome, the Company’s hydrogen and ammonia production subsidiary in which it holds an 85% stake. Atome has acquired a 75% interest in a Northern European based green hydrogen and ammonia Company (HCO) for nominal share value, the acquisition reflects Atome’s strategic desire of being a player in the European market for the supply of green hydrogen and ammonia.
Whilst HCO has no tangible assets at present, it has experienced local management with a reputable CEO in the country where the business is located and whilst yet to start production, HCO is currently in discussions with the respective National power company for power supply as well as a recognised world leader in original equipment manufacturing for the production of green hydrogen and ammonia.
HCO is optimistic that an appropriate power purchase agreement (“PPA”) can be satisfactorily concluded to progress a necessary pilot programme for hydrogen production in the relevant country projected during, at, or around end of 2023 with, subject to that success, a targeted estimated second phase industrial production of 80,000 metric tonnes (“MT”) of ammonia production per year around the middle of the decade.
With the Americas Project, announced on 1 July 2021, Atome has now two separate spheres of interest which, if they both progress to an industrial production stage, have the potential to generate over 250,000MT per year of green ammonia by the end of the decade.
Atome will be responsible for providing a line of credit of up to US$20 million to fund the pilot programme which is currently projected to cost US$12 million and, upon success Atome will lead the mobilisation of funding for the industrial production phase, all being subject to, inter alia, a satisfactory PPA and equipment supply agreement being in place. This represents the second concrete step by Atome in pursuit of its stated business objectives and adds diversified geographical focus to its initial portfolio
Peter Levine, Chairman, commented
“The announcement today further reinforces the determination of President’s subsidiary, Atome, to fulfil its strategic objective to geographically expand its green hydrogen and ammonia portfolio to the important European market ahead of the targeted listing of Atome’s shares on the London Stock Exchange later in the year
“Although at an early stage, discussions are underway in relation to both the purchasing of power and the sourcing of relevant hardware
“This latest development underlines the present and potential future material shareholder value in Atome which we expect the projected forthcoming flotation to realise and unlock for President’s own shareholders as well as providing those coming in on the listing with significant upside in a sector of increasing importance in the drive towards a carbon neutral future.”
Another investment by President’s Atome today, this time into an ‘important European market’ and if Mr Levine is what I think he is there will be more to come. This gives President enough of a difference to other companies in its peer group to really count and investors could quite easily take to this and whilst it is early stage at the moment it is potentially very substantial in its own right and therefore an option that should be considered especially given that it is effectively a free ride in the area.
Empyrean has placed 83,698,498 new ordinary shares at a price of 6.0p to raise £5,021,910. Subscribers to the Placing will also receive 1 warrant exercisable at 12p each for every 2 New Ordinary Shares subscribed. The Placing Warrants have a 12-month term from the date of issue. Further, if the Placing Warrants are exercised within 3 months Subscribers will receive a replacement incentive warrant expiring 15 months from the Placement settlement date with an exercise price of 12p (the “Substitute Warrants”) plus a bonus warrant expiring 24 months from the Placement settlement date with an exercise price of 18p. The Placing and the issue of the Warrants is being completed under the Company’s existing authorities and is not subject to the approval of shareholders. Following the Placing, the Company’s enlarged issued share capital will comprise 573,129,113 ordinary shares of 0.2p each, each with voting rights.
The Placing Price represents a whopping 29.4% discount to the price of the Company’s shares as at close of business on 7 July 2021 (8.5p), a 21.7% discount to the 7-day volume weighted average price (‘VWAP’) and a 13.4% discount to the 30-day VWAP of the Company’s shares which go somewhat to explaining the discount. I am told that the majority of the subscribers to the Placing were institutional and high net worth investors, including both new investors and existing shareholders, as well as NED John (Spencer) Laycock.
Funds raised under this Placing will primarily be used to secure a suitable drilling rig and order long lead items and for the Company’s general working capital requirements as it prepares to drill the Jade prospect at its 100% owned Block 29/11 license in China, scheduled for late 2021. Funds raised from the exercise of any Warrants will be used for drilling preparation activities and drilling of the Jade prospect and working capital.
The Company has previously been quoted US$18.5m to drill the Jade well with testing of any oil column to be in addition to this amount. Following the well engineering and design work completed with AGR, the Company has been working towards securing a rig and finalising costs for the well. The Company will now finalise these negotiations and will make a further announcement in due course.
The 2021 drilling campaign is targeting a world class conventional oil target in the Jade prospect, to which Gaffney Cline assigned a Geological Chance of Success of 32%. Subsequent to this independent assessment, the Company has completed a gas cloud study and post stack seismic inversion study that further mitigate risk. As a result, the Company’s internal assessment of the GCoS for the Jade prospect now stands at 41%.
The Jade prospect has a Gaffney Cline audited mean in place potential of 225 MMbbl and a P10 in place upside of 395 MMbbl. The drilling of the Jade prospect is the first of the three identified prospects within Block 29/11, which also contains the Topaz and Pearl prospects. The combined audited mean in place potential of all three prospects is 884 MMbbl and a P10 in place upside of 1,588 MMbbl.
Tom Kelly, CEO of Empyrean, commented on the Placing:
“We are very pleased to successfully complete this placing which provides the necessary funding to accelerate our preparation activities, including the securing of the rig, for the drilling of the extremely exciting Jade Prospect in China, which we are targeting to occur before the end of the 2021 calendar year, as well as providing working capital funding. The Placing Warrant structure with early exercise incentive Substitute and Bonus warrants also provides a mechanism by which the shareholders can potentially achieve a situation where the well is completely funded without the need for asset sales, joint venture or further placing. It puts the Company’s destiny largely into the hands of shareholders. Whilst asset sales, joint venture or further placing are all worthwhile alternatives to drill Jade, it is the Company’s view that the least dilutive solution, given that any asset sale may not settle before drilling starts, is for the remaining funds to come via warrant exercise. We look forward to updating shareholders on what is shaping up to be one of the most exciting wells drilled by a junior oil explorer this year.”
Long term readers know how much a fan of Empyrean that I am and this funding, whilst not the cheapest ever put together has the added warrant structure whereby shareholders can make their own mind up whether or not to fund Jade in its totality. The increased COS appeals as does the size of the structure which makes it an old fashioned risk/return calculation.
I have been trying to get hold of Tom Kelly for some months, I enjoy speaking to him and havent given up on him yet although his atrocious communications drives me mad sometimes. There are plenty of people in the industry who nickel and dime on investor relations which only works if you do the work yourself, in this case much more silence and I will flick the switch to ‘off’.
One of the biggest weekends of the year but still hit by the virus. In that I mean the Lions tour, tomorrow’s game is off but the team are hoping to play the midweek oppo, the Sharks again. England play Canada and Wales play Argentina tomorrow.
Ahead of next week at St Georges this weekend sees the Scottish Open golf at North Berwick, let’s hope Rory doesnt get his clubs ‘borrowed’.
Wimbledon comes to a close, mens semis today and finals for the Ladies tomorrow and men on Sunday.
Tyson Fury has tested positive for Covid so the fight against Wilder is off for the time being.
Lots of horseracing too, the July meeting continues at Newmarket and tomorrow and joined by Ascot and York then.
And of course on Sunday evening it is the Euro 2020 final between England and Italy…
(The opinions expressed here are those of the author, a columnist for Share Talk.)
Website Link www.malcysblog.com
Disclaimer: Malcy’s Blog is provided for general information about the international oil and gas industry and the companies that operate within it. It does not constitute investment advice and Malcy does not buy or sell shares, warrants or bonds in any company written about within the blog. Information is taken from publicly available sources and any comment is that of the author who does not take any third party comment in the blog
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