LON:TERN | Silvermere Energy Plc - Exciting New Company ?

17th Dec '11 by Antone

4 comments 6271 reads

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…

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JPGH

18th Dec '11

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

JPGH

Antone

19th Dec '11

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

Marc Benjamin

15th Apr '12

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

The Oil Council

26th Apr '12

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

Silvermere Energy Plc - Exciting new Company ?

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Antone

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