Byron Energy fell from $0.29 to $0.22with most of those losses coming in Friday’s trading after the companyannounced it would plug and abandon its South Marsh Island 74 D14 BP1 well inthe shallow waters of the GOM. The well intersected the target reservoirs onlyto find them water wet. The hydrocarbon shows previously reported in a shallowersand at 13,000 feet were also deemed to be non-commercial.
Metgasco Limited was paying 40% of this wellto earn a 30% interest and its share price too tumbled, down from 4.7 cents to3.0 cents on volume of over 1.5 million shares on Friday after failing to tradeat all over the previous four days.
The original budget estimate was for a US$11.4million dry hole cost which was probably exceeded due to the need to undertakean unplanned sidetrack around a stuck drilling assembly.
Byron had US$13 million in cash at the bank at theend of March. The company has oil and gas production from its 50% interest inthe SM71 field which netted it US$6.7 million in the March quarter after qualityadjustments, transportation charges and royalties. It also has a small revenuestream from SM58 Block which it acquired in the March quarter. Even allowingfor natural field decline we expect net revenues to be much the same in theJune quarter given slightly higher oil prices.
The company expected total cash outflows of US$13.4million in the June quarter including US$12 million on exploration and evaluation.
The company also has a established an approximatelyUS$4.2 million short term loan facility sourced from four of its Directors toconduct its “near-term activities” including the drilling of SM 74. The loan isrepayable on 30 November 2019. Nice to see Directors willing to support theircompany.
Byron Energy has amassed an extensive andimpressive portfolio of permits in the Gulf of Mexico. The company’sexperienced and highly professional executives are for the most part GOMspecialists a number having previously worked with Terry Fern’s PetsecEnergy whenit was a GOM focused company.
Byron’s next well in its currentexploration program will be SM58 #11 expected to spud in mid-August. Byron completed the US$4.25million acquisition of the South Marsh Island 58 Lease Block in March 2019including the SM 58#1 producing wellbore and the SM 69E platform and flowlines.
Byron has 100% working interest in the Block to adepth of 13,639 and 50% working interest below that. It also has a 53% workinginterest in the associated non-operated producing assets being the SM 69EPlatform, the E1 wellbore and the E platform to B platform pipelines in SM 69.
The SM 58 #1 well has been fast tracked because itis considered a low risk, oil prone well that can be brought into productionrelatively quickly via existing infrastructure if successful.
With 695 million shares on issue the company has amarket cap of approximately A$152 million at a share price of $0.22. It nowlooks undervalued.
The above from this weekend's edition of the Oil & Gas Weekly. The company has wisely decided to locate the next well on a less risky but equally attractive well in SM 58. Should bounce back to 24/25 cents this week.
