REG - Mosman Oil & Gas - Operations Update and Placing

Mosman Oil and GasAnnouncement

29/11/2023 08:15

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RNS Number : 0568V  Mosman Oil and Gas Limited  29 November 2023

29 November 2023

Mosman Oil and Gas Limited

("Mosman" or the "Company")

Operations Update and Placing

Mosman Oil and Gas Limited (AIM: MSMN) the hydrocarbon, helium and hydrogen
exploration, development, and production company, provides a project update on
its US and Australian projects and confirms it has today raised £250,000
(before expenses) by way of a placing of 2,000,000,000 ordinary shares (the
"Placing").

Review of Business Plan and Funding

The new Board has considered the business strategy and sees the way forward as
adding value by continuing to selectively develop producing oil assets in the
US, then monetising them, and maximising the helium, hydrogen and hydrocarbon
opportunity at the exploration permits in Australia.

In Australia, the recent farmin agreement on EP145 with Greenvale Gold Pty Ltd
("Greenvale"), which remains subject to completion, provides a reference see
through valuation of the EP 145 asset; based on the farmin expenditure of at
least circa AUD7.5 million to earn a 75% interest in the lease indicates the
Company's remaining 25% has significant value.

In the USA, the Cinnabar leases are held by production, have Reserves and
significant value that can be realised with further technical work and
investment. The Board considers that given the upside potential at Cinnabar,
this should be the focus area in 2024.

At Stanley, jet pumps have demonstrated that higher flow rates are possible.
The surface equipment has been modified and is now expected to be more
reliable. Whilst it is too early to provide meaningful production data, the
modified system should result in higher production with a target of 100 boepd
(gross) .The two obvious ways to commercialise this asset are through ongoing
cashflow, or through a future sale of this asset once production has been
optimised. The Board believes there is currently strong local demand for oil
production assets and based on general industry valuations of Texas assets
based on boepd, the market value of Stanley (and associated leases) is
potentially significant in the context of the current market capitalisation of
the Company. If a decision were taken on a future sale of Stanley, it has the
potential to provide capital for re-investment in other growth projects, for
example at Cinnabar.

Cost control remains a focus of the Board, and Australian overhead costs have
been reduced by approximately 40% including the reduction from two Executive
Directors to one.

Certain one-off costs in relation to the business re-structuring, as well as
some unexpected costs at Stanley, have depleted cash reserves. While the EP
145 farmin agreement includes a cash payment of AUD160,000 upon Completion,
this is subject to government approval, hence the timing is not within our
control. In the meantime, there are value adding opportunities that have
significant short-term upside, including workovers to increase production at
Stanley and installing artificial lift at Cinnabar. The Board therefore
resolved that this placing of shares was appropriate in order to take
advantage of these opportunities.

Details of the Placing

 

The Company has raised £250,000 (before expenses) by way of a placing of
2,000,000,000 new ordinary shares of no-par value in the capital of the
Company ("Placing Shares") through CMC Markets UK Plc, at a placing price of
0.0125p per share (the "Placing Price").

The net proceeds received from the Placing will be used for:

·      Workover(s) at Stanley to optimise production and cash flow;

·      Technical work and installation of artificial lift to optimise
production at Cinnabar to increase understanding of the reservoir and
production issues;

·      EP145 operating costs until farmin Completion; and

·      Working capital requirements.

 

Directors intention to participate

 

In addition to the Placing, two Directors have indicated their intent to
subscribe for up to a further AUD30,000 (the "Director Subscription") on the
same terms and conditions as the Placing to demonstrate their ongoing
commitment to the Company. The proposed Director Subscription will be subject
to disclosure as a Related Party Transaction in accordance with the AIM Rules
for Companies and the requirements of the Australian Corporations Act which
includes shareholder approval. A further announcement is expected to be made
shortly.

 

Warrants

 

1,000,000,000 warrants have been granted by the Company on the basis of 1
warrant for every 2 Placing Shares, with an exercise price of 0.025p and
two-year expiry, issued to the Placees.

 

Additionally, 120,000,000 broker warrants have been granted to CMC Markets UK
Plc, exercisable at the Placing Price and with a two-year expiry.

 

Admission to AIM and Total Voting Rights

 

The Placing is conditional on, inter alia, the Placing Shares being admitted
to trading on AIM. Application has been made to the London Stock Exchange for
the Placing Shares, which will rank pari passu with the Company's existing
issued ordinary shares, to be admitted to trading on AIM and dealings are
expected to commence at 8:00 a.m. on or about 5 December 2023.

 

Following the issue of the Placing Shares, the Company's share and total
voting rights will comprise 9,811,047,141 Ordinary Shares of no par value and
the Company does not hold any shares in treasury.

 

Consequently, the above figure may be used by shareholders in the Company as
the denominator for the calculations by which they will determine if they are
required to notify their interest in, or a change to their interest in, the
share capital of the Company under the Company's Constitution

Andy Carroll, CEO of Mosman commented: "The business plan for the US is to
focus management time on the significant upside at Cinnabar, and monetise
producing assets by cash flow or sale. In Australia, we look forward to the
completion of the Greenvalue farm in at  EP145 which will put us in the
position of funding for both permit/permit application beieng managed by
farmin agreement."

US projects

Stanley (34.85% to 38.5% WI)

Positive progress has been made at Stanley to resolve the production
challenges and the jet pump surface facility has been changed to use natural
gas engines rather than diesel or natural gas fired electrical power
generation and electric pumps. This change will result in lower operating
costs due to reduced rental costs and no fuel costs since the wells produce
sufficient associated gas to run the natural gas engines. Importantly, system
downtime is expected to improve as the natural gas engines are direct drive to
the pumps, eliminating the intermediate electrical power generation that had
frequent shut-downs for various reasons, resulting in lower production.

There were two operations that took management time and incurred one-off
costs. The water injection well failed a pressure test and required a workover
to meet regulatory requirements. This had an adverse effect on production as
this well is the primary means of water disposal, and hence the higher water
producing wells were shut in. There was also a regulatory requirement to
abandon one of the shut-in wells.

Now that the water injection well is back in service and the modified jet pump
equipment is less susceptible to downtime, it is expected that target
production of 100 boepd (gross) will be achieved in December.

Cinnabar (75% WI)

As previously announced, all three wells produce oil and gas but do not
maintain continuous flow; once shut-in, pressure builds and then the wells
will flow again. As is common in the USA, it seems that artificial lift is
required. The most appropriate method for this situation is a modest
investment in a traditional pump-jack. The cost of acquisition and
installation is circa USD 50-70,000 per well. The economics are compelling
with short term payout of the investment. Importantly, this will provide more
information on the reservoir and help to plan future development and
production of the considerable Reserves.

Australian projects

EP 145

The farmin agreement with Greenvale Gold Pty Ltd ("Greenvale") signed in
October 2023 will, subject to completion, deliver a strong Joint Venture
partner to work with in Australia which will fund exploration and is
validation of the helium, hydrogen and hydrocarbon potential of EP 145. The
farmin will become effective from Completion at which point Greenvale will pay
AUD160,000 and ongoing operating costs.

Documentation has been submitted and Norther Territory government approval is
anticipated in the near future. The seismic acquisition programme is planned
for the first half of 2024, with results due and a well location announced
before end of Permit Year 3 in August 2024, followed by drilling in the
following Permit Year.

Market Abuse Regulation (MAR) Disclosure

 

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 ('MAR') which has been incorporated into UK law by the
European Union (Withdrawal) Act 2018. Upon the publication of this
announcement via Regulatory Information Service ('RIS'), this information is
now considered to be in the public domain.

 

Enquiries:

 Mosman Oil & Gas Limited                                             NOMAD and Joint Broker

 Andy Carroll                                                         SP Angel Corporate Finance LLP

 CEO                                                                  Stuart Gledhill / Richard Hail / Adam Cowl

 acarroll@mosmanoilandgas.com (mailto:acarroll@mosmanoilandgas.com)   +44 (0) 20 3470 0470
 Alma                                                                 Joint Broker

 Justine James                                                        CMC Markets UK Plc

 +44 (0) 20 3405 0205                                                 Douglas Crippen

 +44 (0) 7525 324431                                                  +44 (0) 020 3003 8632

 mosman@almastrategic.com

 

Updates on the Company's activities are regularly posted on its website:
www.mosmanoilandgas.com (http://www.mosmanoilandgas.com)

 

Notes to editors

Mosman (AIM: MSMN) is an oil exploration, development, and production company
with projects in the US and Australia. Mosman's strategic objectives remain
consistent: to identify opportunities which will provide operating cash flow
and have development upside, in conjunction with progressing exploration of
existing exploration permits. The Company has several projects in the US, in
addition to exploration projects in the Amadeus Basin in Central Australia.

 

 

 

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