Silvermere Energy Plc - Exciting new Company ?

Saturday, Dec 17 2011 by
1

SILVERMERE ENERGY PLC - SLME

Market Capitalisation - £3.3M
Shares in Issue - 20.4M
Market - Ftse Aim
Currency - GBX
Epic - SLME

( Production about to commence in mustang island field - end december 2011 )

Silvermere began life on July 14 2011 when Chalkwell Investments was renamed, and had its sights trained on the oil and gas sector after the acquisition of its current interest in the Mustang Island 818-L field in the Gulf of Mexico, Kleberg County, Texas. Silvermere has a 33.3 per cent WI and 20.83 per cent NRI in the Mustang assets, except for the I-1 well where it has a 33.3 per cent WI and 16.65 per cent NRI. The I-1 is a re-entry well that was completed and will be tied into production by the end of 2011. Testing of the well flowed at up to 2 mmscfpd, but Silvermere expects 3-4 mmscfpd and 84-160 bopd once the well is stabilised, cleaned up and has an initial 45-60 day production period under its belt. Should production fall short of expectations, additional zones can be perforated to increase output to more acceptable levels.

An independent evaluation of 3D seismic and well bore data by RPS Energy estimated total net (to Silvermere) reserves of 4.73 Bcfe in the 1P category, 11.53 Bcfe in the 2P category and 30.38 Bcfe in the 3P category. The high amount of Possible (3P) Reserves is due to the fact that RPS were unable to attribute their production to individual sands, and thus Silvermere is confident that once production commences, these reserves will be capable of being upgraded into a higher category. Indeed, the intention is to get RPS back post production to re-analyse I-1, rather than waiting for the drilling of the 3 new wells to improve the reserve profile.

Mustang Island Figures net to Silvermere:

Proven reserves (1P)...........4.73 Bscf - value - $4.49m / £2.84m* or 15.5p/share
Probable reserves (2P).........11.53 Bscf - value - £24.87m / £15.73m* or 85.7p/share
Proven and Probable (1P+2P)...16.26 Bscf - value - $29.36m / £18.58m* or 101.2p/share
Possible reserves (3P).........30.38 Bscf - value - $94.36m / £59.67m* or 325p/share
Total Potential Reserves................£78.25m or £426p* per share

*Based on Exchange Rate of 1 GBP = 1.58007 USD

MUSTANG ISLAND

The I-5 sands are the initial production horizon estimated at hosting 19.5 feet of net pay, while the G-3 sands are for the medium-term where there is also the potential to upgrade and enlarge current reserves. Three new wells (in addition to I-1) are expected to be drilled over the next 2 years, with the first pencilled in for the 2nd quarter of 2012. The 3 wells will test the structural highs of 3 fault blocks identified from historical 2D seismic run by Samedan Oil Corp in the 1980s. Silvermere’s share of these drilling and associated costs is US$8 million, the funds for which will need to be found, but given the company has US$5.8 million in existing warrants outstanding, as well as a range of other financing methods at its disposal (farm-in, debt, equity), CEO Andy Morrison does not foresee any issues.

Confidence in such claims is no doubt founded on its recent fund raising history, where the company raised £1.52 million through the issue of equity at 25p in August and £750,000 in convertible loan notes issued in June. The former was used for tie-back costs (£600,000), working capital (£400,000) and RPS’s CPR, due diligence and Silvermere’s re-admission to AIM having been suspended since January (£500,000). Mustang Island was acquired from convertible loan note issue.

 

Silvermere’s strategy is to acquire US onshore and shallow offshore oil and gas assets which are value for money, near production and capable of having their resources easily upgraded. To this end the company expects Mustang Island to develop into its cornerstone asset, throwing off sufficient cash flows to enable it to acquire and develop other assets without diluting shareholder capital unduly. Due to the ongoing financial crisis in the US, there is a significant shortage of capital for small development projects in that country, meaning there are tremendous opportunities to acquire quality assets at low prices. These circumstances have Silvermere rubbing its hands, and the company is already looking to acquire material, but minority interests in assets meeting its criteria, as it looks beyond Mustang Island. Working alongside the operator appeals to Silvermere at the moment, not only due to the fact that its skill set is financial, administrative and managerial, but it also allows the company to remain lean and flexible.

 

Board of Directors and Management:

 

Chief Executive - Andy Morrison - Morrison has spent his entire career in the oil and gas industry. From 1982 until 1999 he worked for Shell in a number of commercial roles in the UK as well as Asia and South America. Subsequently he went onto work for BG and then BOC in new business development and strategic roles. From 2007 to 2010, he was the CEO of Aim-quoted Xtract Energy plc, which manages a portfolio of projects in oil and gas exploration and production.

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Non-Executive Chairman - Frank Moxon - Moxon is an experienced corporate financier who has specialised in natural resources. In all he has over twenty five years' experience including fourteen years in natural resources. In the past, he was Head of Corporate Finance and Head of Natural Resources at William De Broe plc at the time it was acquired by Evolution Securities. Now he practises through his own firm Hoyt Moxon. He has holds a number of Non-Executive Directorships including AIM-quoted Cove Energy plc. TSX-V listed Whetstone Minerals Ltd and PLUS-quoted Imperial Minerals Plc. Moxon is a Fellow of the Energy Institute and a Member of the Petroleum Exploration Society of Great Britain.

 

Non-Executive Director - Stewart Dalby - Dalby is the founding editor and Managing Director of Oilbarrel.com, a website for small cap and mid-tier oil and gas companies which was acquired by Rivington Street Holdings in 2008. He has more than forty years' experience as a journalist and commentator on the oil and gas industry. Previously he had worked as a stockbroker and investment analyst.

 

Non-Executive Director - Bruce Evers - Evers has more than 27 years' City experience focused on oil and gas sector as an analyst, specialist salesman and corporate broker. In the past he has worked at Panmure Gordon, Schroders, Yamaichi, Investec and Evolution. Evers has advised and raised money for numerous oil and gas companies operating in many parts of the world.


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Tern PLC, formerly Silvermere Energy plc, is an investment company in oil and gas assets. The Company focuses principally on exploration, appraisal and production opportunities in the United States. As of December 31, 2011, the Company had 16.65% interest in I-1 Well. The Company focuses on the Mustang Island 818-L field, which is located in offshore Kleberg County, in Texas. As of December 31, 2011, it owned a 33.3% working interest in the Mustang Island 818-L Field. On June 29, 2011, the Company’s subsidiary Silvermere Energy Inc (SE Inc) was incorporated. On August 30, 2011, the Company completed the acquisition of the Mustang Assets. In September 2014, Tern Plc announces acquisition of Cryptosoft Ltd. more »

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4 Posts on this Thread show/hide all

JPGH 18th Dec '11 1 of 4
1

Any reason why SP dipped from 60p to 25p towards end August?

JPGH

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Antone 19th Dec '11 2 of 4

In reply to JPGH, post #1

JPGH, thats when silvermere energy was re-listed on aim from another company and placings ect were done

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Marc Benjamin 15th Apr '12 3 of 4

Growth Equities Report - First Oil Production

 

Silvermere Energy is a US focused oil and gas development and production company. The board is acquiring a portfolio of US oil and gas licence interests onshore and in shallow offshore water, where the team is on the lookout for near term production to provide early cash flow. The first asset that has been acquired is at Mustang Island which meets all these requirements and also brings with it the opportunity to upgrade the resource and reserve portfolio, another key requirement of the board. Mustang Island is a joint-venture with operator Dominion Energy.

Today, Silvermere looks like a real value play in the oil and gas sector. The Competent Person's Report (CPR) on these assets published by RPS Energy in August 2011 valued the company’s attributable proven and probable reserves at £18.4 million (equivalent to approximately 100.2p per share) with a further £59 million (approximately 321.4p per share) of upside in the possible reserves. These are numbers that Andy Morrison highlighted in a recent announcement, which also concerned the raising of £150,000. This new money was raised from existing investors with £75,000 coming from warrants being exercised at 30p plus £75,000 in a placing at 16p as the vendors of the Mustang Island had failed to honour commitments to exercise 250,000 warrants at 30p.It is a positive sign that Andy Morrison has agreed to reinvest £9,600 of salary due to him by exercising of 32,000 warrants at 30p per share, taking his holding to 161,560 shares (0.88%).

There is little doubt that Silvermere is not one of those drill or bust casino AIM stocks but more of a US style P&L–focused oil and gas producer, which seems more to suit the mood of the times. Even given the more conservative approach, there is plenty of upside potential at Mustang Island for two reasons. Firstly, a substantial amount of the reserves in the CPR found their way into the 3P (Possible) category (£57 million) and there seems good scope for these to move up the value chain to the 2P (Proven and Probable) and the true value to be independently determined on the back of further work. This conservative approach had to be adopted as in the 1980s when Mustang Island was previously in production, the operator Samedan Oil co-mingled the production from the various sands and so there was a real lack of historical data available to show what each of the sands produced. This is a pity considering that there seems to be layers of sandstones with good quality 2D and 3D seismic. Secondly, beneath the current structures there may be further reservoirs that as yet have not been drilled.

Investors are witnessing the birth of a US energy business. The corporate strategy is to acquire and develop a portfolio of low risk, near production oil and gas assets onshore and shallow offshore in the US with a clear focus on Texas/Louisiana. The economic assessment provided by the CPR clearly demonstrates Mustang Island provides a sound initial base with its low entry cost coupled early production and additional upside potential from appraisal programme. This cornerstone will provide the cash flow on which Silvermere can finance and develop further assets and Mustang Island acts as a good blueprint for the coming acquisitions.

 

Full Report - http://uk-analyst.com/shop/page-article/action-article.show/id-130014702

 

 

 

 

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The Oil Council 26th Apr '12 4 of 4
3

I've just done an interview with Andy Morrison, CEO of Silvermere for our magazine Drillers and Dealers. Available here: http://www.oilcouncil.com/index.php?page=drillersanddealers

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