Reabold Resources plc (LON:RBD), the AIM investing company which focuses on investments in upstream oil and gas projects, has provided its audited results for the year ended 31 December 2019.
2019 Highlights:
· £26.6 million raised before costs, primarily from institutional investors to support the Company’s strategy
· Discovery at West Newton appraisal well operated by Rathlin Energy (UK) Limited (“Rathlin”), potentially the largest hydrocarbon discovery onshore UK since 1973
· Further investment of, in aggregate, £17.0 million in Rathlin to increase Reabold’s interest to 59.5%
· Significant gas discovery at Danube Petroleum Limited’s (“Danube”) IMIC-1 appraisal well with operator volumetrics increased to 20 billion cubic feet (“bcf”) of Contingent Resources from 6.1 bcf of Contingent and 12.7 bcf Prospective Resources
· Further investment of, in aggregate, £3.1 million in Danube to increase Reabold’s interest to 50.8%
· Two commercial oil discoveries on West Brentwood licence in California
· Proven reserves of 0.98 million barrels of oil equivalent attributed to Reabold’s net interest at West Brentwood, with associated value of US$19.3 million (NPV10), as at 1 August 2019
· Two commercial oil discoveries on Monroe Swell licence in California
· Corallian Energy Limited (“Corallian”) awarded five new licences by the Oil and Gas Authority (“OGA”) as part of the 31st Offshore Licensing Round in the UK
Highlights post period end:
· Site works commenced for drilling of the West Newton B-1 well
· Additional commercial discovery on West Brentwood licence in California
· Opportunistic conditional acquisition of a direct 16.665% interest in the West Newton field from Humber Oil and Gas Limited (“Humber”) for consideration of 350,000,000 new Ordinary Shares and £1.4 million in cash; taking the Company’s effective economic interest in West Newton to circa 56.4% from 39.7%
· Secured additional liquidity in the form of a £5 million discretionary equity line cash facility to provide the Company with further financial flexibility and strength
· Cash assets of the Company as at the date of this report of £5.6 million
Stephen Williams and Sachin Oza, co-CEOs of Reabold Resources, said:
“We are highly encouraged by the success we have had so far in the implementation of our strategy to invest in low-risk, high impact, upstream oil and gas projects. With a portfolio that contains interests in the Danube, Corallian and Rathlin prospects, all of which had appraisal campaign drilling in 2019, and the further drilling programmes in California following the success in the US to date, together with a number of other projects currently under review, the Board is confident that its shareholders can look forward to an exciting 2020 and beyond.”
Chairman’s Statement
The year ended 31 December 2019 has once again been a positive transformational period for Reabold Resources Plc with significant progress achieved, as Sachin Oza and Stephen Williams, the Co-Chief Executive Officers, lead the Company and its subsidiaries in advancing our investment strategy in the oil and gas exploration and production (“E&P”) sector.
As an investor in upstream oil & gas projects, Reabold aims to create value from each project by investing in undervalued, lower-risk, near-term upstream oil & gas projects. This has been achieved through investments across our portfolio of assets in the UK, US and Romania. 2019 has seen multiple successes with the drill bit, the growth of profitable production in California, and the discovery of what is potentially the largest oil and gas field onshore UK since 1973.
We have a fully funded, high impact work programme planned for the remainder of 2020 and we look forward to sharing the results of these key drilling and testing activities in the near term.
The impact of Covid-19 on the oil and gas industry is undeniably dramatic. However, it is crucial to remember that the entire basis of the Reabold model is to invest in undervalued assets that would be able to deliver profitably under any reasonable oil and gas price assumption, are at the lower end of the industry cost curve and will be competitive against other sources of hydrocarbons. The Reabold portfolio is well positioned to not only survive through the Covid related downturn, but to continue to progress and expectedly thrive throughout 2020 and beyond.
2019 saw the drilling of eight wells across the Reabold portfolio, in California, Romania, the UK offshore and the UK onshore. Seven of these wells resulted in discoveries, resulting in considerable value creation for the Company and its shareholders.
In California, two successful wells at West Brentwood in 2018 were followed by a pair of successful wells at the Company’s other California oil asset, Monroe Swell. At the end of the year, Reabold and its partners returned to West Brentwood to drill the VG-6 well, opening up a new geological horizon at the field. All of these wells were subsequently put onto production. The Californian assets are characterised by low operating costs and continue to be cash generative amidst the lower oil price environment being experienced in 2020.
In Romania, Reabold continued to increase its investment in Danube, reaching an equity position of 50.8%, having provided funding for two wells within the Parta licence. The first of these wells, IMIC-1, was successfully drilled in 2019 and resulted in a discovery ahead of expectations. The planned work programme for 2020 includes the testing of IMIC-1, the drilling of IMIC-2, and a carried seismic acquisition programme. We believe that Romanian natural gas will be an attractive market in which to be operating in the coming years, and remain optimistic about the opportunities for the growth of Danube going forwards.
The early part of 2019 saw Corallian, in which Reabold has a 34.9% equity interest, conduct a two well drilling programme at Wick and Colter in the UK offshore. Wick was the riskiest well in the Reabold portfolio, being characterised as initial exploration as opposed to appraisal, and this well resulted in a dry hole. The second well saw a discovery made at Colter South, to which the Corallian management had attributed an estimated mean recoverable volume of 15mm bbls.
The single most material event of 2019 for Reabold was the successful discovery at the West Newton A-2 well in the Humber valley, onshore UK. In 2018, Reabold made an investment into Rathlin, operator of the licence, in order to fund this well. The result was significantly ahead of expectations, with both the estimated volumetrics increasing significantly, as well as the emergence of a dominant oil component as opposed to the gas that had been expected. This asset has the potential to be transformational for the Company, and the well result led to the decision to invest a further, in aggregate, £17 million into Rathlin taking Reabold’s interest to a 59.5% equity position. These proceeds will provide funding for two more wells to be drilled at West Newton, to further appraise the discovery and move towards monetisation.
Capital reduction
On 30 July 2019, the Company’s shareholders approved the resolution for a capital reduction at Reabold’s Annual General Meeting (“AGM”), which was subsequently approved by the High Court of Justice on 27 August 2019, and to cancel its share premium account. Accordingly, the amount standing to the credit of the Company’s share premium account at that time was cancelled. The capital reduction has enhanced the Company’s ability to return surplus capital, undertake share buybacks and pay dividends to shareholders in the future.
Placings and joint broker appointment
In October 2019, the Company was delighted to complete a very significant fund raising of £24 million (before expenses) through the issue of 2,666,666,666 new ordinary shares of 0.1 pence each in the capital of the Company (“Ordinary Shares”) at a price of 0.9 pence per share, to support the Company’s investment strategy, facilitating, inter alia, the £16 million further investment in Rathlin. This fund raising was led by Stifel Nicolaus Europe Limited, and we were delighted to announce their appointment as joint corporate broker to the Company on 1 November 2019.
We were also pleased to complete in July 2019 a fund raising of £2.65 million (before expenses) through a placing of 240,909,091 new Ordinary Shares at a price of 1.10 pence per share for further strategic investment into the Company’s portfolio.
The Company was delighted by the support provided by institutional investors in the placings, and welcoming significant new institutions to the share register.
Post reporting period
On 26 May 2020, the Company was pleased to announce the opportunistic acquisition of an additional 16.665% interest in the West Newton field from Humber for the consideration of 350,000,000 new Ordinary Shares (“Consideration Shares”) and £1.4 million in cash.
On completion, Reabold’s acquisition of Humber’s 16.665% licence interest in PEDL 183 onshore UK, which holds the West Newton field, will increases the Company’s effective economic interest in PEDL 183 from 39.7% (through its 59.6% equity investment in Rathlin, operator and 66.67% licence holder of PEDL 183) to approximately 56%.
Reabold has signed a conditional Sale and Purchase Agreement (“SPA”) to acquire Humber’s interest in PEDL 183, with completion conditional upon, inter alia, approval of the transfer of Humber’s interest in PEDL 183 to Reabold by the OGA. Pursuant to the SPA, Humber has agreed to a lock up over 66.67% of the Consideration Shares for a period of three months from the date of admission to trading on AIM of the Consideration Shares and an orderly market restriction for a further period of three months once the lock-in period expires.
The Company’s balance sheet is in a strong position with sufficient financial resources to meet its planned work commitments across its portfolio, including those following completion of the acquisition of Humber’s stake. However, current macro circumstances underscore the benefit of ensuring sufficient financial flexibility is available, particularly ahead of a major drilling campaign such as that planned for West Newton this year. Reabold has therefore enhanced its liquidity position by securing a £5 million discretionary cash facility with Acuitas Capital, LLC (“Acuitas”). This discretionary cash facility is seen, by the Directors of the Company, as a prudent measure to provide increased liquidity without the need to dilute shareholders unduly by way of an equity fundraise whilst the share price significantly undervalues Reabold’s portfolio due to the current low oil price environment and the Covid-19 lock-down.
The cash facility is in the form of an Equity Line Agreement (“ELA”) for a period of 24 months with Acuitas, whereby Reabold will have the right, at its sole election, but not obligation, to issue new shares in Reabold to Acuitas at a subscription price as determined under the ELA for an aggregate amount not exceeding £5 million. In consideration for making the ELA facility available, the Company paid Acuitas a £100,000 commission, satisfied by the allotment and issue of 16,351,625 new Ordinary Shares.
For details on the terms and pricing mechanics of the ELA, please refer to note 30 to the financial statements.
Outlook
Whilst we face unprecedented challenges with the Covid-19 virus, the Company’s financial position is strong and our investee companies fully funded for their 2020 work programmes.
We look forward to reporting further in due course on the progression of our investee companies and take this opportunity to thank our shareholders for their continued support.
This report was approved by the Board and signed on its behalf:
Jeremy Edelman
Chairman
