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Silvermere Energy Plc (SLME)     

Bob Heston - 17 Dec 2011 14:42

Silvermere Energy Plc - SLME
USA Oil and Gas Producer

Shares In Issue - 20.7 million


Production About to Start in Gulf of Mexico


Silvermere began life on the 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





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.
-------------------------------------------------------

GECR REPORT FROM DECEMBER 2011

Silvermere Energy* – Speculative Buy at 18.5p with a 60p target price

http://sharecrazy.com/beta/Tips/6337/silvermere-energy-speculative-buy-at-185p

Silvermere Energy is a US focused oil and gas development and production company which is on schedule for its first oil production by the end of December 2011. On 6th December 2011, the Company was able to report that preparations for production from the I-1 well on its Mustang Island asset by the operator, Dominion Production Company LLC, are proceeding to plan with the platform construction now in its final stages with load-out operations about to begin in Galveston. The completion of the load-out operations (expected by 13th December) is to be followed by work to lay the remaining 1,250 feet of connecting pipeline.

At the time, Andy Morrison, Chief Executive, commented that, “We are excited about the progress of the project and the approach of production, and we are working closely with the Operator to minimize any delays. Assuming reasonable co-operation from the weather, our objective of production before the end of the year is achievable.”

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. 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.

The firm is an obvious value play in the oil and gas sector. The Competent Person’s Report (CPR) on the Mustang assets published by RPS Energy in August 2011 valued the proven and probable reserves attributable to the Company at £18.4 million with a further £59 million of upside in the possible reserves. The CPR study assumed that three wells would be drilled one after another, whereas in all likelihood these will eventually be drilled over the space of the next two years. Our analysis takes these two variations into consideration in calculating a Net Present Value of $24.8 million or £15.7 million for Mustang Island. Our target price of 60p is calculated on a fully diluted basis.

We therefore recommend the shares as a Speculative Buy with a 60p target price.

Jackson55 - 17 Dec 2011 21:19 - 2 of 69

bob,

Good to see a silvermere energy thread on here,i have been a holder for a little
while now and quietly excited about this company. Its worth noting that the
directors and management have recently bought shares at 20.5p and 30p and
also the largest shareholder t1ps growth fund converted warrants at 25p per
share last week.The well was flow tested earlier in the year on a restricted
choke aperture and gave exceptional results,the directors indicated at the OB
conference that the 2P reserves figures can easily be achieved and exceeded
and are aiming for the maximum 30+ BSCF. Only 20m shares in issue here !



Production expected to start around the 26th / 27th december :-)

Bob Heston - 18 Dec 2011 10:23 - 3 of 69

hi jackson,and thanks for the comments....the I-I well was completed earlier in the
year and flow tested at a healthy rate which the management expect to increase
"significantly" and if needed perforate further zones to increase output yet further.
This well is only the first of 4 planned wells at mustang island and is now ready to
go online for production / sales.

Jackson55 - 18 Dec 2011 12:04 - 4 of 69

cheers bob,

Ceo andy morrison said at the oil barrel conference that they are expecting production
to start on the 27th december ( allow two days either way for weather offshore ).
So we are around a week away according to that :-)

Bob Heston - 18 Dec 2011 12:30 - 5 of 69

jackson55, yes they stated around the 27th with two days either way. I am
expecting there will be alot of buying here this week and some new broker
coverage.There is at least one broker with a 61p near term target price already.

Jackson55 - 18 Dec 2011 14:07 - 6 of 69

afternoon bob,

It think it was GECR that had the 61p near term target price but will check my
files and may post it up later.

Bob Heston - 18 Dec 2011 17:55 - 7 of 69

jackson,yes it was GECR with the 61p near term target price. Dont worry about
posting it up mate as im going to be adding it and others to the thread shortly.

Bob Heston - 18 Dec 2011 17:56 - 8 of 69

jackson,yes it was GECR with the 61p near term target price. Dont worry about
posting it up mate as im going to be adding it and others to the thread shortly.

Anders - 18 Dec 2011 20:40 - 9 of 69

bob heston, i must say this looks like a little GEM that went under my radar !
i will be buying in here tomorrow for sure after researching all day and even
missing my sunday roast !

Bob Heston - 18 Dec 2011 23:31 - 10 of 69

anders,at the moment silvermere is a closely watched and held stock in the city
by a select few that will make huge returns IMVHO,but will soon be hitting the
newswires as they start producing in a matter of days now.With only 20m shares
in issue and a probable 161bcf and 9M Boe from just the first well of four it does
not need a maths degree to see how many multiples of the current market cap
SLME could increase.Check the snippet from proactive investor below :-)



"It is not often that a new oil and gas company joins AIM with a very clear road-map to early, cash generative production.

Silvermere Energy (LON:SLME) is such an outfit. Headed by former Xtract Energy chief executive Andy Morrison, the group owns a 33.3 per cent interest in the Mustang Island gas and gas-condensate field in the shallow waters of the Gulf coast of Texas.

Originally developed by the Samedan Oil Corporation in 1979, it produced almost 140 billion cubic feet of gas until it was abandoned in 1995, a victim of the rock bottom gas prices.

The competent persons report estimates Mustang Island has proven and probable gas reserves of 70bcf, rising to 161bcf of gas and 9 million barrels of oil if you add in possible reserves of gas and condensate.

As Silvermere and its partner, Dominion Production, progress through the development phase, so the confidence in those reserves should increase. This in turn will enhance the value of Silvermeres holding in Mustang Island".

http://www.proactiveinvestors.co.uk/companies/news/33345/Silvermere%20Energy:%20A%20tale%20of%20hidden%20value,%20early%20cashflow%20and%20a%20plan%20to%20be%20a%20%C2%A3100mln%20oil%20and%20gas%20fir

Jackson55 - 19 Dec 2011 00:54 - 11 of 69

Some very good reserves figures there bob,with only 20m shares in issue this is
going to go mental when first production flows announce shortly.

Bob Heston - 19 Dec 2011 08:30 - 12 of 69

jackson55, yes it is going to do very well in my opinion :-)

Jackson55 - 19 Dec 2011 09:19 - 13 of 69

morning bob, i like this bit from the proactive article in ref to CPR you posted.


"It is not often that a new oil and gas company joins AIM with a very clear road-map to early, cash generative production.

Silvermere Energy (LON:SLME) is such an outfit. Headed by former Xtract Energy chief executive Andy Morrison, the group owns a 33.3 per cent interest in the Mustang Island gas and gas-condensate field in the shallow waters of the Gulf coast of Texas.

Originally developed by the Samedan Oil Corporation in 1979, it produced almost 140 billion cubic feet of gas until it was abandoned in 1995, a victim of the rock bottom gas prices.

The competent persons report estimates Mustang Island has proven and probable gas reserves of 70bcf, rising to 161bcf of gas and 9 million barrels of oil if you add in possible reserves of gas and condensate.

As Silvermere and its partner, Dominion Production, progress through the development phase, so the confidence in those reserves should increase. This in turn will enhance the value of Silvermeres holding in Mustang Island".

http://www.proactiveinvestors.co.uk/companies/news/33345/Silvermere%20Energy:%20A%20tale%20of%20hidden%20value,%20early%20cashflow%20and%20a%20plan%20to%20be%20a%20%C2%A3100mln%20oil%20and%20gas%20fir

Bob Heston - 19 Dec 2011 09:42 - 14 of 69

jackson55, morning to you...yes those figures look rather impressive and easily
achieved IMO.

Jackson55 - 19 Dec 2011 10:38 - 15 of 69

bob,my 50k buy from early this morning has just been published ( delayed )

Anders - 19 Dec 2011 10:53 - 16 of 69

morning guys, i took a nice little wedge here this morning,am liking this company
very much and think it could be a real growth stock and near term too.

Bob Heston - 19 Dec 2011 11:31 - 17 of 69

jackson, i have that report we spoke of yesterday


12th December 2011



Analyst: Dr Michael Green
Emailichael.green@gecr.co.uk
Tel: 0207 562 3350





Silvermere Energy* First oil production expected by the end of December 2011. Speculative Buy at 18.5p with a 60p target price

Contact


Andy Morrison 07980 878561




Silvermere Energy is a US focused oil and gas development and production company which is on schedule for its first oil production by the end of December 2011. On 6th December 2011, the Company was able to report that preparations for production from the I-1 well on its Mustang Island asset by the operator, Dominion Production Company LLC, are proceeding to plan with the platform construction now in its final stages with load-out operations about to begin in Galveston. The completion of the load-out operations (expected by 13th December) is to be followed by work to lay the remaining 1,250 feet of connecting pipeline.

At the time, Andy Morrison, Chief Executive, commented that, We are excited about the progress of the project and the approach of production, and we are working closely with the Operator to minimize any delays. Assuming reasonable co-operation from the weather, our objective of production before the end of the year is achievable.

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. Silvermere is not one of those drill or bust casino AIM stocks but more of a US style P&Lfocused oil and gas producer, which seems more to suit the mood of the times.

The firm is an obvious value play in the oil and gas sector. The Competent Persons Report (CPR) on the Mustang assets published by RPS Energy in August 2011 valued the proven and probable reserves attributable to the Company at 18.4 million with a further 59 million of upside in the possible reserves. The CPR study assumed that three wells would be drilled one after another, whereas in all likelihood these will eventually be drilled over the space of the next two years. Our analysis takes these two variations into consideration in calculating a Net Present Value of $24.8 million or 15.7 million for Mustang Island. Our target price of 60p is calculated on a fully diluted basis.

We therefore recommend the shares as a Speculative Buy with a 60p target price.

Jackson55 - 19 Dec 2011 12:26 - 18 of 69

thanks for that bob,very good reading over my cuppa lol

Anders - 19 Dec 2011 12:58 - 19 of 69

bob it looks like this could be moving up nicely this week

Bob Heston - 19 Dec 2011 13:45 - 20 of 69

anders,the recent broker reports and OB presentation hinted at early reserves
upgrades and a move into 2P figure and beyond.If so a serious re-rating will
happen rather quickly in my opinion.

Jackson55 - 19 Dec 2011 14:46 - 21 of 69

bob, i think there are some games being played here as i had a buy of 30k at lunchtime
ad its not been published.Could finish well today i think.
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