Another flash blog I’m afraid, on a pitch in London today…

Touchstone Exploration

Touchstone has announced that on August 16, 2022, the Company received a Certificate of Environmental Clearance (“CEC”) to conduct development operations within the Cascadura area of the Ortoire block from the Trinidad and Tobago Environmental Management Authority. Touchstone has an 80 percent operating working interest in the Ortoire block, with Heritage Petroleum Company Limited holding the remaining 20 percent working interest.

The CEC approves the construction of a multi-well surface production facility with a designed production capacity of 200 million cubic feet of natural gas per day, 5,000 barrels per day of associated liquids and 200 barrels per day of produced water, with a storage capacity of 8,800 barrels of liquids on the Cascadura A wellsite. In addition to the facility, the CEC includes the drilling of eight wells at two well pads (Cascadura B and C) and the establishment of associated pipelines and infrastructure within the Ortoire block.

Construction of the Cascadura surface facility and associated infrastructure required to bring on production from our two existing Cascadura wells will commence immediately, following the required notifications and conditions set out in the approved CEC. The National Gas Company of Trinidad and Tobago Limited has begun activity in the field to commence the construction of the 1.7 kilometre, 20-inch pipeline to the Cascadura facility.

Paul Baay, President and Chief Executive Officer, commented:

“This is a major step forward for the Cascadura project as we progress from the exploration phase to the development and production phase. It has been a thorough process, but the positive outcome now allows us to establish a clear and measurable five-year development plan for the discovery. We are working with our local contractors, and construction is underway at local fabrication shops for various aspects of the facility with all major facility components already delivered to Trinidad. We will provide updates on the project milestones as we move forward.

This is indeed very good news for Touchstone, Trinidad and shareholders alike. Without too much repetition the development’s numbers are worth reiterating, capacity of 200 million cubic feet of natural gas per day, 5,000 b/d of liquids, 200 b/d of produced water and storage capacity of 8,800 barrels of liquids makes this a proper, world class asset.

Just to add to that the CEC includes the drilling of eight wells at two well pads (Cascadura B and C) and the establishment of associated pipelines and infrastructure within the Ortoire block which is again a major feat. 

Put together with the recent moves at the COHO facility and pipeline, which in itself  will be a significant milestone for Touchstone, representing the first natural gas production and expected to double current production on a boe basis, the CEC will complete a massive investment programme by Touchstone who deserve the huge rewards that will be generated this year. 

After the COHO announcement last week I put a new TP of some 275p on for Touchstone which this announcement fully rubber stamps, today as I write, the shares are up another 15.8% at 113.5p which shows that there is still significant upside for investors both existing and new. When I first saw the maps of the Ortoire block with Paul Baay it looked like a huge opportunity, with 80% of this he, and the whole management team deserve credit for bringing that into reality.

Predator Oil & Gas

 Predator has announced a placing to raise £3.3 million

·    Focus on high impact and high reward drilling onshore Morocco

·    Net Best Estimate Contingent gas resources 295 BCF

·    Unrisked NPV of US$592 million

·    Net High Estimate Contingent gas resources of 708 BCF

·    De-risk Contingent gas resources by establishing commerciality for CNG development                

Predator has announced that it has conditionally placed 60,000,000 new ordinary shares of no par value in the Company (the “Placing Shares”) at a placing price of 5.5 pence each (the “Placing Price”) to raise £3,300,000 (before expenses) (the “Placing”).

The Placing was significantly oversubscribed and utilises the Company’s existing headroom shares under the Financial Conduct Authority restrictions for companies on the Official List (standard listing segment) of the London Stock Exchange’s main market for listed securities.

Novum Securities are acting as sole placing agents to the Company.

Use of Proceeds

The Proceeds of the Placing, less expenses, will be spent entirely on high impact and high reward drilling to target the Moulouya Fan penetrated in MOU-1 in 2021.

MOU-2 will target the potential reservoir “sweet spot” for which net Contingent Resources are in the range 295 BCF (Best Estimate) to 708 BCF (high Estimate) as defined in the independent Competent Persons Report by SLR Consulting (Ireland) Ltd. (“SLR”) in 2022.

SLR have assigned an NPV of US$ 592 million net to the Company. Risk is identified by SLR is solely a commercial risk based on a longer term monetisation of a gas-to-power development, whereas the Company now has a faster and cheaper route to monetisation based on the sale of Compressed Natural Gas by truck direct to the Moroccan industrial market. The Company’s management has extensive relevant experience in selling gas to Moroccan end users.

The Company is now fully funded to complete and test the MOU-2 well and to test the MOU-1 well at the same time from existing cash resources.

Successful completion of the drilling and testing programmes will provide the basis for an initial CNG development project and provide a catalyst to potentially finalising a lease financing arrangement as part of overall operating costs. Under the Company’s current commercial model for financing an initial CNG development this is not expected to result in diluting equity interest in the project whereas a conventional farmout option would result in dilution at the project level and possible loss of operatorship and overall control of timing and execution of key commercial objectives.

Stock Lending Agreement

The Company does not presently have sufficient headroom to enable the issue and admission of all of the 60,000,000 Placing Shares which are required to be issued pursuant to the Placing without the production of an FCA approved prospectus.  The Company is therefore proposing to issue and admit 45,000,000 new ordinary shares (up to its existing headroom) (the “New Placing Shares”) and for a director, Paul Griffiths, to transfer by way of a loan of shares (the “Stock Lending Agreement”), 15,000,000 existing shares held by him in order to settle the Placing in a timely manner.

When the Company has the ability to issue further shares the Company intends to issue Paul Griffiths 15,000,000 new Ordinary Shares and will take all necessary steps required in order to issue such shares and make the necessary listing and admission hearing applications.  This will put Paul Griffiths back into the position that existed, in terms of his aggregate shareholding in the Company, had he not made the transfer of Ordinary Shares. For the avoidance of doubt the transfer of shares from Paul Griffiths involves no consideration being paid to Paul Griffiths other than interest accruing under the Stock Lending Agreement.

The transfer of these ordinary shares is expected to be made on or around 23 August 2022.

Under the unsecured Stock Lending Agreement Agreement between the Company and Paul Griffiths the return of 15 million shares loaned to the Company (the “Loan”) are intended to be issued to Paul Griffiths by 31 August 2023.

Interest shall accrue on the Loan at the rate of 6% per annum of the Principal Sum of £825,000, being the market value of 15 million shares at the Placing Price of 5.5 pence per share. The default rate of interest under the Stock Lending Agreement for any sum which is not paid when due is 12 % per annum.

Related Party Transaction

Paul Griffiths is a director of the Company. The Director’s Stock Lending Agreement is considered to be a related party transaction (“Related Party Transaction”).

Lonny Baumgardner, Tom Evans and Alistar Jury, being the independent directors for the purposes of the Related Party Transaction consider that the terms and conditions of the Stock Lending Agreement are fair and reasonable insofar as the shareholders of the Company are concerned.

Completion of the Placing

Completion of the Placing is conditional on, inter alia:-

the Placing Shares being admitted to listing on the Official List (standard listing segment) and to trading on the London Stock Exchange’s main market for listed securities (“Admission”) on or before 23 August 2022 (or such later date as may be agreed by the Company and Novum Securities).

Admission, Settlement and Dealings in the new Placing Shares

Applications will be made to the FCA and to the London Stock Exchange for Admission in respect of all the Placing Shares proposed to be issued on completion of the Placing.  It is expected that Admission will become effective, and that dealings in the Placing Shares are expected to commence, at 8.00 a.m. on 23 August 2022.

The rights attaching to the new Placing Shares will be uniform in all respects and all of the new Placing Shares will rank pari passu, and form a single class for all purposes with, the existing issued shares of no par value in the Company.

Total Voting Rights

Following Admission, the Company has 353,595,477 ordinary shares of no par value in issue, each with one vote per share (and none of which are held in treasury). The total number of voting rights in the Company is therefore 353,595,477.  This figure of 353,595,477 may be used by shareholders in the Company as the denominator for calculations to determine if they have a notifiable interest in the share capital of the Company under the Disclosure Guidance and Transparency Rules, or if such interest has changed.

Paul Griffiths, Executive Chairman of Predator Oil & Gas Holdings Plc commented:

“It was absolutely necessary to take advantage of a narrow window in an otherwise difficult and highly competitive market to raise funds to enable the high impact, high reward MOU-2 drilling to be executed whilst there is still some availability of long lead items required for drilling and before the cost of well services increases further as demand outstrips supply.

As a Company we have to carefully balance the strategic objective of drilling at a time when European gas supplies are likely to be constrained by the Ukraine-Russian crisis, with a resulting gas price spike, versus delaying to complete a pre-drill extended farmout process that might result in significant pre-drill project dilution in our entire licence area.

We are comfortable with the risk versus reward proposition. I am personally delighted to be loaning shares to the Company and to accept the commercial risk that such a transaction creates for me simply on the basis of my extensive oil and gas experience over many years in many different geographic jurisdictions that allows me to identify MOU-2 as a potential company-maker.

Furthermore, the loan of shares to the Company reduces the impact of pre-drill dilution for all our shareholders and allows all shareholders to benefit from a potential uplift of the value of the Company on announcing the drilling results”  

This is an interesting move and the share loan is a good way of getting the raise done ahead of drilling the crucial MOU-2 well in Morocco. Paul Griffiths has carried the project for some years and finally he is making another substantial commitment to the project.