Booming production is leading to a 21st-century “land rush” for mineral rights in the Anadarko Basin, an oil and natural gas industry analyst reported on Thursday.
IHS Markit, a publicly traded data and analysis firm, estimates the basin holds more than 16 billion barrels of oil and more than 200 trillion cubic feet of natural gas within reservoirs that can be drilled and produced using today’s technologies.
The report notes that horizontal wells that were drilled and completed the past decade within the basin, which extends north and west from southern Oklahoma into parts of Texas and Kansas, already created a tsunami of growing production that doesn’t appear will slow anytime soon.
It adds that IHS Markit analysts estimate only about 20 percent of “sweet spot” locations within one of its plays, the STACK, have been drilled so far.
“The play is still in its early stages of unconventional development,” said John Roberts, IHS Markit’s global subsurface operations executive director. “We can easily envision an additional 4,000 to 5,000 horizontal wells drilled.”
Roberts and IHS Markit report co-author Prithiraj Chungkham, its director of unconventional resources, said they have identified 41 stacked plays within the Anadarko where unrisked resources likely could be found.
Predictably, the report states that IHS Markit has noticed frenzied activities on the part of both company-owned and independent land offices seeking to obtain rights involving those plays before any wells are drilled.
“We are now witnessing a new kind of Oklahoma land rush,” Roberts said. “But unlike what happened in 1889 when lands were opened to settlement, this time the competition is for access to the energy resources that lie below the surface.”
Joel Dumaresq has been the CEO of Molori Energy Inc. (CVE:MOL) since 2016. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Then we’ll look at a snap shot of the business growth. And finally – as a second measure of performance – we will look at the returns shareholders have received over the last few years. This method should give us information to assess how appropriately the company pays the CEO.
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How Does Joel Dumaresq’s Compensation Compare With Similar Sized Companies?
Our data indicates that Molori Energy Inc. is worth CA$2.3m, and total annual CEO compensation is CA$292k. (This number is for the twelve months until 2017). We think total compensation is more important but we note that the CEO salary is lower, at CA$240k. We looked at a group of companies with market capitalizations under CA$268m, and the median CEO compensation was CA$158k.
As you can see, Joel Dumaresq is paid more than the median CEO pay at companies of a similar size, in the same market. However, this does not necessarily mean Molori Energy Inc. is paying too much. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.
You can see a visual representation of the CEO compensation at Molori Energy, below.
TSXV:MOL CEO Compensation January 18th 19
Is Molori Energy Inc. Growing?
Molori Energy Inc. has increased its earnings per share (EPS) by an average of 80% a year, over the last three years (using a line of best fit). In the last year, its revenue is down -33%.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. The lack of revenue growth isn’t ideal, but it is the bottom line that counts most in business.
We don’t have analyst forecasts, but you might want to assess this data-rich visualization of earnings, revenue and cash flow.
Has Molori Energy Inc. Been A Good Investment?
Most shareholders would probably be pleased with Molori Energy Inc. for providing a total return of 67% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
In Summary…
We examined the amount Molori Energy Inc. pays its CEO, and compared it to the amount paid by similar sized companies. We found that it pays well over the median amount paid in the benchmark group.
However we must not forget that the EPS growth has been very strong over three years. In addition, shareholders have done well over the same time period. As a result of this good performance, the CEO remuneration may well be quite reasonable. Whatever your view on compensation, you might want to check if insiders are buying or selling Molori Energy shares (free trial).
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements. The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
TULSA, Okla., Dec. 17, 2018 (GLOBE NEWSWIRE) — Jericho Oil Corporation (“Jericho”) (TSX-V: JCO; OTC PINK: JROOF) is pleased to announce that the lender under its USD$30 million Senior Secured Revolving Credit Facility (the “Facility”), East West Bancorp, has reaffirmed its borrowing base at $7.5mm following the Company’s regularly scheduled semi-annual redetermination process. There were no other material changes to the terms of the Facility resulting from this borrowing base redetermination.
The Company also reports that it has opportunistically restructured its commodity hedge positions to eliminate upside caps on its realized price for crude oil, in addition to raising the floor which protects the Company’s realized price to the downside.
Brian Williamson, CEO of Jericho Oil, stated, “We are encouraged by the outcome of our recent redetermination process, which we believe to reflect the quality of our Mid-Continent position and the economics associated with our continued investment,” adding, “we appreciate the support of our lending bank and their commitment to partner with us as we continue to add to our proved reserves base and execute on our growth strategy throughout 2019.” About Jericho Oil Corporation
Jericho Oil (www.jerichooil.com) is focused on domestic, liquids-rich unconventional resource plays, located primarily in the Anadarko basin STACK Play of Oklahoma. Jericho’s primary business objective is driving long-term shareholder value through the growth of oil and gas production, cash flow and reserves. Jericho has assembled an interest in 55,000 net acres across Oklahoma, including an interest in ~16,000 net acres in the STACK Play. Jericho owns a 26.5% interest in STACK JV.
Jericho’s current operations are focused on the oil-prone Meramec and Osage formations in the STACK. The Jericho team applies advanced engineering analyses and enhanced geological techniques to under-developed resource areas.
Jericho, with operational headquarters in Tulsa, Oklahoma, trades publicly on the TSX-Venture Exchange (JCO) and OTC Markets (JROOF). Jericho owns its net acre position in Oklahoma through, and participates in the STACK JV through, one or more wholly owned subsidiaries.
Cautionary Note Regarding Forward-Looking Statements: This news release includes certain “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and Canadian securities laws. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual events and results to differ materially from Jericho’s expectations include risks related to the exploration stage of Jericho’s project; market fluctuations in prices for securities of exploration stage companies; and uncertainties about the availability of additional financing.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
CONTACT:
Adam Rabiner,
Director, Investor Relations
1.800.750.3520 investorrelations@jerichooil.com
TULSA, Okla., Dec. 10, 2018 (GLOBE NEWSWIRE) — Jericho Oil Corporation (“Jericho”) (TSX-V: JCO; OTC PINK: JROOF) announces through its Oklahoma STACK Joint Venture (“STACK JV”), that it has brought online a second high-rate single-mile lateral Meramec oil well within its contiguous Blaine County acreage position.
The Valkyrie 19-12-06 1H well is located within the STACK JV’s approximately 16,000 net acre position of the normally-pressured oil window of the STACK play. The Valkyrie achieved a peak 24-hour rate of 725 oil-equivalent barrels (“BOE”) per day (55% oil). The 30-day normalized rate (IP30) for this ~4,500 ft perforated lateral well was 625 BOE per day (52% oil). Initial rates of productivity from the Valkyrie continue to strongly support the Company’s confidence in its multi-zone developments and the overall value of our coveted STACK acreage position. The Valkyrie, in addition to the STACK JV’s previously announced Wardroom Meramec well, located 2 miles to the southeast, show consistent performance of the STACK resource, crucial to our Company’s long-term net asset value.
Jericho’s STACK JV owns a 24% working interest alongside Staghorn Petroleum II LLC (Staghorn) in the Valkyrie.
As a reminder, the Meramec and Osage formations, the principal targets of the STACK play, represent a combined oil-rich thick column of approximately 700 feet. Our experience throughout 2018, by way of drilling and participating in both target-zone formation wells, has provided our STACK JV the proper catalysts of data to leverage into the Company’s 2019 development program.
Brian Williamson, CEO of Jericho Oil, stated, “Our focus in participating with best in class operators is working and we are extremely encouraged with the results of the Valkyrie and surrounding Meramec wells, proving the extent, both geographically and geologically, of the formation. In addition to the Meramec, we continue to execute on successfully proving-up the large resource potential of the regionally deposited Osage formation. Ultimately, 2018 has been an extremely productive year which has allowed our Company to have ever-increasing confidence in repeatable, multi-zone development of our STACK resource which, over time, should benefit our strong shareholder base.” About Jericho Oil Corporation
Jericho Oil (www.jerichooil.com) is focused on domestic, liquids-rich unconventional resource plays, located primarily in the Anadarko basin STACK Play of Oklahoma. Jericho’s primary business objective is driving long-term shareholder value through the growth of oil and gas production, cash flow and reserves. Jericho has assembled an interest in 55,000 net acres across Oklahoma, including an interest in ~16,000 net acres in the STACK Play. Jericho owns a 26.5% interest in STACK JV.
Jericho’s current operations are focused on the oil-prone Meramec and Osage formations in the STACK. The Jericho team applies advanced engineering analyses and enhanced geological techniques to under-developed resource areas.
Jericho, with operational headquarters in Tulsa, Oklahoma, trades publicly on the TSX Venture Exchange (JCO) and OTC Markets (JROOF). Jericho owns its net acre position in Oklahoma through, and participates in the STACK JV through, one or more wholly owned subsidiaries.
Cautionary Note Regarding Forward-Looking Statements: This news release includes certain “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and Canadian securities laws. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual events and results to differ materially from Jericho’s expectations include risks related to the exploration stage of Jericho’s project; market fluctuations in prices for securities of exploration stage companies; and uncertainties about the availability of additional financing.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
CONTACT:
Adam Rabiner,
Director, Investor Relations
1.800.750.3520 investorrelations@jerichooil.com
Keith Schaefer, publisher of Oil & Gas Investments Bulletin, profiles a small-cap oil and gas firm active in the Oklahoma STACK that he believes stands out from the pack.
Oil stocks will be a screaming buy sometime between now and Dec. 31. Tax loss selling pressure will add to the pressure of lower oil prices, and some crescendo of selling will hit in the coming weeks, if not days.
So where do I look to buy into this fear?
I’ll tell you why I’m looking at Jericho Oil Corp. (JCO:TSX.V; JROOF:OTC)
They’ve hit on a couple monster wells in the last quarter, validating all their acreage. They’re in Oklahoma, which enjoys some of the best oil prices in North America. And Encana’s $5.5 billion buyout of Newfield tells me the industry loves this play.
All these producers will have a reflex bounce up come January—just from the mindless selling pressure of tax loss time ending. There is a “gimme” of 20-30% coming in early January.
But I think you have to be analytical to figure out where The Big Winners will be.
Pricing power has actually become A Big Deal for oil producers. Oklahoma is getting GREAT pricing, just $1.50/b off WTI.
The Big Oil Plays in North America are suffering from severe price discounts. Permian producers got scorched early this year as the amount of oil being produced overwhelmed infrastructure and West Texas oil prices tumbled to first $8, then $12 and finally $20/b lower than WTI pricing.
The Bakken in North Dakota had been enjoying a premium to WTI after the Dakota Access Pipeline went into service last year—but surging production there has already filled it and that premium has rapidly fallen to a $20/b discount on some days recently.
One of the largest producing basins is the Canadian oil sands, and those barrels have had a $50/b discount some days. That’s really ugly.
So I’m looking to invest where I can get the best bang for my buck—and that’s the U.S. midcontinent. STACK Drilling Results Far Better Than Lofty Expectations
Jericho got into the STACK play in textbook fashion—it spent 2015/2016 patiently buying assets for pennies on the dollar, a rare company armed with cash in a world full of desperate sellers.
2018 was the inflection point where Jericho Oil switched from asset accumulation mode to production growth mode. The early results for Jericho’s STACK wells have vastly exceeded management’s own lofty expectations.
Jericho’s first well was the Wardroom 13-19N-13W #1H well, which was put on production early this summer.
The well targeted the Meramec formation within the STACK and the results knocked the ball out of the park.
This was a monster well. Where Jericho Has Been Drilling Source: Jericho Oil Corporate Presentation
The Meramec well came on production at an eye-popping 950 boe/day. That was a top decile result for the entire basin and Jericho did it on their very first attempt. Today—after 230 days—the well has verified the quality of Jericho’s acreage.
Jericho’s second well was the Swordspear 15-23N-10W location. This well targeted a second formation within the STACK which called the Osage. The Osage is quite different than the Meramec because it is a conventional reservoir.
Conventional means lower rates of initial production, but also much lower decline rates. This is the kind of production that generates stable cash flows that most junior growth companies don’t have access to.
Jericho’s Swordspear well came on at an excellent production rate of 500 boe/day. Since then production from the well has remained exceptionally strong. After 30 days the well was still doing 450 boe/day.
Just yesterday they said the well has averaged 330 boepd after 160 days. Having the Osage as a low-decline, second formation provides the perfect complement to the big initial production rates of the Meramec.
These 2018 drilling results from Jericho really couldn’t have been better. And while the results have been excellent they really aren’t all that surprising.
Competitors including Alta Mesa, Chaparral, Devon, Continental, Newfield, Exxon Mobil and Staghorn have been drilling excellent wells all around Jericho.
The economics of this acreage are equal to the best in the industry. Source: Newfield Exploration Presentation
Not surprisingly, leasing activity in the play has increased by 1,800% over last year. . .making STACK acreage more highly coveted. The industry wants this play badly.
We don’t have to look any further than the $5.5 billion that Encana (ECA-NYSE/TSX) just agreed to pay for Newfield Exploration (NFX-NYSE) for proof of that.
So we’ve got:
Good oil prices
Great wells
And now for 3. . .a land value underpinning the stock that’s worth 2-5x what the stock is trading for. This kind of valuation is really only relevant on a buyout, but it’s the kind of valuation that lets me sleep at night. Jericho and Partners’ 16,000 Net Core Acres in the STACK Source: Jericho Oil Corporate Presentation
Today Jericho and its partners are sitting on 16,000 net acres of highly coveted STACK acreage. On average, Jericho was able to acquire that land for $2,300 per acre.
What is that land worth today? It isn’t hard to determine.
With companies now rapidly acquiring acreage all around Jericho we have a steady flow of documented arm’s length data points available to do such a calculation. Documented STACK Transactions Source: Chaparral Energy
Adjusted for production, STACK acreage has been trading hands at prices ranging from $8,500 to $20,938 per acre.
That is hard, verifiable, data.
This provides us with a range of values, many of which were established when oil prices were much lower than today and when the play was much less proven.
What these data points show us is that acreage today is worth 4 to 10 times what Jericho paid for it. Jericho’s “buy when there is blood in the streets” strategy has allowed the company to make multiples on their investment.
That’s why I’m looking to increase my position in Jericho.
To conclude, I would add a couple soft points. JCO has a smart, deep-pocketed and tightly held shareholder base. These shareholders include unusually heavy hitters like Ed Breen, the CEO of Dow DuPont. It is a shareholder group that screams of credibility and long-term thinking.
These insiders own a full 46% of Jericho’s shares. These people all get paid one way. . .if Jericho’s share price goes up over the long term.
All of this is a recipe for commodity development success. Buy good assets when commodity prices are low, then develop those assets and sell the production when commodity price rise. Keith Schaefer is editor and publisher of the Oil & Gas Investments Bulletin, which finds, researches and profiles growing oil and gas companies that Schaefer buys himself, so Bulletin subscribers know he has his own money on the line. He identifies oil and gas companies that have high or potentially high growth rates and that are covered by several research analysts. He has a degree in journalism and has worked for several Canadian dailies but has spent over 15 years assisting public resource companies in raising exploration and expansion capital.
Disclosure:
1) Keith Schaefer disclosures are below.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Jericho Oil. Click here for important disclosures about sponsor fees. An affiliate of Streetwise Reports is conducting a digital media marketing campaign for this article on behalf of Jericho Oil. Please click here for more information.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
4) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article until three business days after the publication of the interview or article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Jericho Oil, a company mentioned in this article. Keith Schaefer and Oil and Gas Investments Bulletin Disclosures:
DISCLOSURE: I am long Jericho Oil.
Management at Jericho Oil has reviewed and sponsored this story. The information in this newsletter does not constitute an offer to sell or a solicitation of an offer to buy any securities of a corporation or entity, including U.S. Traded Securities or U.S. Quoted Securities, in the United States or to U.S. Persons. Securities may not be offered or sold in the United States except in compliance with the registration requirements of the Securities Act and applicable U.S. state securities laws or pursuant to an exemption therefrom. Any public offering of securities in the United States may only be made by means of a prospectus containing detailed information about the corporation or entity and its management as well as financial statements. No securities regulatory authority in the United States has either approved or disapproved of the contents of any newsletter.
Keith Schaefer is not registered with the United States Securities and Exchange Commission (the “SEC”): as a “broker-dealer” under the Exchange Act, as an “investment adviser” under the Investment Advisers Act of 1940, or in any other capacity. He is also not registered with any state securities commission or authority as a broker-dealer or investment advisor or in any other capacity.
Charts provided by the author.
Best-in-Class Well Productivity and Low Decline Rate Further Validates Company’s Northern STACK Acreage
TULSA, Okla. and VANCOUVER, British Columbia, Dec. 03, 2018 (GLOBE NEWSWIRE) — Jericho Oil Corporation (“Jericho”) (TSX-V: JCO; OTC PINK: JROOF) is pleased to provide an update regarding its ongoing participation in its Oklahoma STACK Joint Venture (“STACK JV”). The Swordspear 15-23N-10W #1H, the STACK JV’s first Osage formation well, has now been on production, since running an electrical submersible pump (capable of handling high fluid volumes), for 160 days and has produced, on average, 330 BOE per day (50% oil). The strength and, more importantly, the longevity of the Swordspear well’s production profile has given the Company great confidence in its northern STACK acreage position.
Well positioned around significant activity from ExxonMobil and Alta Mesa Resources, the STACK JV’s northern STACK acreage, has pushed the boundary for where the Osage formation has been successfully proven with modern horizontal hydraulic stimulation. To achieve a strong well, it takes significant investment in actively drilling new wells in the same oil field, studying the geology where these wells exist and honing in on a repeatable completion technique. The Swordspear well, in addition to our non-operated positions in nearby peer wells, will provide a continual flow of data which will inform and improve our deep inventory of future multi-zone developments and the overall value of our coveted STACK resource.
The Company’s 2018 development plan within the STACK continues to focus on defining and proving up its acreage position for the Meramec and Osage formations through horizontal drilling. Currently, the STACK JV now has an interest in four Osage formation wells and two Meramec formation wells.
Brian Williamson, CEO of Jericho Oil, stated, “The Company, as evidenced by the Swordspear well production, continues to provide operational excellence by delivering best-in-class well productivity in this world-class play. Our current well results, 2019 planned development, coupled with surrounding marque peer wells planned for Q4-2018 and Q1-2019 will provide a springboard of net asset value for our STACK JV. While extremely satisfied with the result of this first Osage formation well, we will look to improve even further upon our future development as we continuously integrate real-time drilling, completion and production data into our geology and engineering models.”
About Jericho Oil Corporation
Jericho Oil (www.jerichooil.com) is focused on domestic, liquids-rich unconventional resource plays, located primarily in the Anadarko basin STACK Play of Oklahoma. Jericho’s primary business objective is driving long-term shareholder value through the growth of oil and gas production, cash flow and reserves. Jericho has assembled an interest in 55,000 net acres across Oklahoma, including an interest in ~16,000 net acres in the STACK Play. Jericho owns a 26.5% interest in STACK JV.
Jericho’s current operations are focused on the oil-prone Meramec and Osage formations in the STACK. The Jericho team applies advanced engineering analyses and enhanced geological techniques to under-developed resource areas.
Based in Vancouver, British Columbia, with operational headquarters in Tulsa, Oklahoma, Jericho trades publicly on the TSX-Venture (JCO) and OTC (JROOF). Jericho owns its net acre position in Oklahoma through, and participates in the STACK JV through, one or more wholly owned subsidiaries.
Cautionary Note Regarding Forward-Looking Statements: This news release includes certain “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and Canadian securities laws. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual events and results to differ materially from Jericho’s expectations include risks related to the exploration stage of Jericho’s project; market fluctuations in prices for securities of exploration stage companies; and uncertainties about the availability of additional financing.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
To state that Oil has been through some tough sledding in recent sessions would be a colossal understatement. After recently hitting the skids for an unprecedented twelve consecutive sessions, this decline represents a rout never before witnessed.
chart courtesy of Stockcharts
Looking at this chart, you’d think global demand had fallen off a cliff.
Aside from Trump telegraphing warnings to OPEC not to cut production, there seems to be a perception out there that oil is fast becoming obsolete, that it’s going away, that the global shift toward a greater reliance on EV’s (electric vehicles) will render it a useless commodity overnight.
Not true. Not by a highway mile. The Big Three automakers continue to crank out traditional gas-powered vehicles, producing more in a single day than Tesla will in an entire year. Global oil consumption could top 100 million barrels per day going into 2019.
This next oil chart depicts the last five years of trading. The $50 level looks as if it could represent a fairly decent support zone. It’s also a big round number.
The market often succumbs to these big round numbers as if by some powerful gravitational pull.
My take of this support zone (horizontal line drawn in blue): a decent bounce from here, if not a bottom, could be in the cards short term.
chart courtesy of Stockcharts
For sure, the rumblings coming out of the Whitehouse and OPEC will continue in the weeks and months to come. For sure, the volatility we’ve witnessed recently will have made its masterpiece by year-end (Bill Shakespeare voice). But this current situation could represent a rare opportunity to back up the truck on asset rich companies at deeply discounted prices.
The evolution of an aggressive small-cap oil company…
Jericho Oil Corp (JCO.V), a micro-cap in the oil space, is one of those rare company’s that had the foresight to stoke up its treasury while the going was good, before the market imploded several years back. With roughly $13M in the company coffers, it went looking for the right opportunity.
That opportunity came along in the mid-continent of the US – Oklahoma. Today, the company boasts an enviable land position of some 55,000 acres, including 16,000 acres in the Anadarko basin STACK play of Oklahoma.
If you are small – relative to the size of the true giants in the industry – you need to be focused. You need to appreciate the opportunity-set in front of you. And you need to know the marketplace you plan to execute in.
By focusing on Oklahoma, they’ve completely mitigated the risk of any sudden systemic governmental shift that could take away their business. Local and state governments are more apt to move Heaven and Earth to see that wells get drilled, and assets get developed.
Nearby communities are tied to oil production. They’re immersed in the culture and fully appreciate the many dividends oil production can generate.
Jericho acquired their position in the STACK for an average of $2,300 per acre. Today, those acres are fetching better than $15k per.
All of the these acquisitions have been drilled in the past. Jericho know there’s a significant resource there. They know the field is productive. They know the oil is extractable.
While the company was in the process of picking off properties on the cheap, they gained the support of three significant shareholders, each taking down a > 10% interest in the company. The names include the likes of…
The Breen Family Trust, with patriarch Ed Breen, former president of Motorola, ex-Chairman, CEO and liberator of Tyco International, current CEO DuPont… you get the idea.
Make no doubt about it, this 10% plus club represents solid votes of confidence in Jericho’s underlying fundamentals. They represent long-term shareholders, smart money, and strong hands.
Another benefit of engaging these strategic shareholders: No investment banks. No finders fees. With this management team, every penny is a prisoner.
The STACK…
Named after the counties of Sooner, Trend, Anadarko, Canadian, and Kingfisher, the STACK has evolved into a premier North American horizontal development play.
The acronym also represents the multiple, stacked productive formations present in the area:Chestermanning, Meramec, Osage, and Woodford.
This a prolific hydrocarbon system. The STACK’s hallmark: high oil and liquids-rich natural gas content, multiple horizontal target horizons, extensive production history, and historically high drilling success rates.
It’s important to understand that the area is dominated by a handful of large producers – Continental Resources, Devon Energy, Marathon Oil, Alta Mesa Resources, Newfield Exploration, and Chesapeake Energy. These companies have poured billions of dollars into developing their STACK assets. Jericho has positioned itself in the land of giants.
The recent takeover involving Newfield’s assets pound home the intrinsic value here – the price producers are willing to pay for these STACK assets.
The chart below helps demonstrate why these assets are so damn desirable…
The STACK is among the lowest cost basins on the entire continent. The region is flush with infrastructure. The area has good takeaway capacity – there are good pipes in the ground. Good takeaway capacity means exacting the best possible price for extracted oil.
Another factor driving investment in the region: your typical 1-mile horizontal well produces approximately 500,000 to 1,000,000 barrels of oil equivalent with rates of return greater than 75%. These are serious numbers.
The shift…
The pennies-on-the-dollar bargains Jericho scooped up in 2015 thru 2017 are not there today. As the market for acres shifted from dirt cheap to overpriced, so has the company’s focus. There have been no acquisitions since September of last year. The company’s focus is now on development. And they have heaps of development runway.
Developing a well is not an overnight process. From a scientific POV, a lot of thought and methodical planning need to go into it. Be that as it may, the company has two wells in the bag and two more coming on.
The wells…
Producing Operations:
Wardroom (Meramec formation):
Jericho holds a 47.5% Working Interest.
currently producing at 220 Gross BOE per day (40% oil; 227 days since first oil production)
Swordspear (Osage formation):
Jericho holds a 47.5% Working Interest.
currently producing at 351 Gross BOE per day (50% oil; 128 days since first oil production)
Drilling operations:
Trebuchet (Operator: Armor Energy; Major County – Osage formation)
Jericho holds a 48.0% Working Interest.
Drilling ahead and building the curve from vertical to lateral section.
Valkyrie (Operator: Staghorn Petroleum; Blaine County – Meramec formation)
Jericho holds a 23.5% Working Interest.
Drilling ahead and nearing total measured depth of approximately 13,500 feet
The company also has a small working interest in two additional Osage formation wells, Ula and Hilltop, operated by ExxonMobil and Alta Mesa Resources respectively. Jericho’s participation in these wells is primarily to gain a greater understanding of the underlying subsurface geology.
Here, the company reported progress on the drilling, completion, and flowback of their most recent Osage and Meramec wells:
The highlights from this news release are as follows…
Drilling Operations:
Trebuchet (Operator: Armor Energy; Major County – Osage formation):
Jericho holds a 48.0% Working Interest.
Drilling ahead in the lateral section – ~90% of the planned total measured depth.
To date, the company has seen tremendous strides in the rate-of-penetration (“ROP”) on the Trebuchet relative to their first Osage formation well (the Swordpear) attributable primarily to an improved drilling-bit set-up and specific lateral geo-steering.
The ROP in the lateral on the Trebuchet is approximately 1.6x-1.8x the Swordspear at the same measured depth putting downward pressure on total rig days for the well.
The fracture stimulation of the well is expected to begin in late-November / early December.
Flowback Operations:
Valkyrie (Operator: Staghorn Petroleum; Blaine County – Meramec formation):
Jericho holds a 23.5% Working Interest.
35 fracture stimulation stages successfully performed and currently in flowback.
After only a few days onflowback, the company is extremely pleased with the resulting downhole pressures and total fluid flowback.
Brian Williamson, CEO of Jericho Oil, had this to say regarding these recent developments:
“The Company continues to deliver on its two-pronged strategy of delineating and de-risking our STACK acreage for the Meramec and Osage formations,” adding, “our second Meramec and Osage formation wells have given our team the added knowledge and confidence in our world-class acreage position. We continue to learn from each well and have put forth best practices on our Trebuchet well to decrease drilling costs in the lateral section. We are excited to provide further updates on the production of these wells by year-end.”
Though Jericho’s current focus is in de-risking and proving-up its 16,000 acres in the STACK, significant upside also exists within the company’s asset portfolio – some 40,000 acres – outside of the STACK. Their drill ready Osage Extension play in northeast Oklahoma is the only one example of a project with significant upside potential.
Equity Guru’s Chris Parry, during a recent conference call with the company, offered this take on the company, its assets, and development strategy. To paraphrase Chris…
‘Jericho has taken a MONEYBALL approach. They got in when everyone else was getting out. They got some nice assets on the cheap. They saved themselves the trouble and expense by purchasing assets that had already been explored and tapped into. They have competitors coming into the area and purchasing assets next door at significantly higher valuations to the prices they paid. They’re treating their money like it’s valuable. All of the above lowers the risk and sets up a nice growth play, even if the price of oil doesn’t cooperate.’
Nice summary. Accurate too.
With 128.7 million shares outstanding and a sub-fifty cent share price, Jericho has an extremely modest market-cap of $61M. This price weakness is unlikely to last.
The company could be on the verge of dramatic production growth. Newsflow should be strong going forward.
Ultimately, Jericho’s goal, via a systematic and methodical approach to development, is to build a world-class blue-chip energy company.
We stand to watch.
END
~ ~ Dirk Diggler
Full disclosure: Jericho Oil is an Equity Guru client.
Disclaimer: ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.
TULSA, Okla. and VANCOUVER, British Columbia, Nov. 12, 2018 (GLOBE NEWSWIRE) — Jericho Oil Corporation (“Jericho”) (TSX-V: JCO; OTC PINK: JROOF) is pleased to provide an update regarding its ongoing participation in its Oklahoma STACK Joint Venture (“STACK JV”). The Company’s 2018 development plan within the STACK continues to focus on the delineation and de-risking of its acreage position for the Meramec and Osage formations. Currently, the STACK JV now has an interest in four Osage formation wells and two Meramec formation wells. An update is provided below on the drilling, completion and flowback of our most recent Osage and Meramec wells:
Drilling Operations:
Trebuchet 21-23N-10W #1H (Operator: Armor Energy; Major County – Osage)
— 48.0% Working Interest
— Drilling ahead in the lateral section – ~90% of the planned total measured depth
— To-date, we have seen tremendous strides in the rate-of-penetration (“ROP”) on the Trebuchet relative to our first Osage formation well (the Swordpear 15-23N-10W #1H) attributable primarily to an improved drilling-bit set-up and specific lateral geo-steering.
— The ROP in the lateral on the Trebuchet is approximately 1.6x-1.8x the Swordspear at the same measured depth putting downward pressure on total rig days for the well
— The fracture stimulation of the well is expected to begin in late-November / early December
Flowback Operations:
Valkyrie 6-19N-12W #1H (Operator: Staghorn Petroleum; Blaine County – Meramec)
— 23.5% Working Interest
— 35 fracture stimulation stages successfully performed and currently in flowback
— After only a few days on flowback, we are extremely pleased with the resulting downhole pressures and total fluid flowback
The STACK JV’s operations on its second Meramec formation well (the Valkyrie) on its western flank and a second Osage formation well (the Trebuchet) on its northern most STACK acreage is a continuation of the Company’s delineation plan for the STACK.
Brian Williamson, CEO of Jericho Oil, stated, “The Company continues to deliver on its two-pronged strategy of delineating and de-risking our STACK acreage for the Meramec and Osage formations,” adding, “our second Meramec and Osage formation wells have given our team the added knowledge and confidence in our world-class acreage position. We continue to learn from each well and have put forth best practices on our Trebuchet well to decrease drilling costs in the lateral section. We are excited to provide further updates on the production of these wells by year-end.”
Jericho also reports that it has retained Equity Guru Media Inc. for a 6-month editorial marketing contract. Chris Parry owns www.equity.guru and is a two-time Webster Award winning journalist who has been featured in the pages of The Vancouver Sun, The Province, National Post, Spin, Hollywood Reporter, FHM, Stuff, and Stockhouse. He was the first business journalist to identify and focus on the move to marijuana as an investment opportunity, and started Equity.Guru as a venue for honest, no punches pulled coverage of the North American public markets. The terms of the contract are for C$8,333.33 per month for 6 months of coverage commencing November 1, 2018. About Jericho Oil Corporation
Jericho Oil (www.jerichooil.com) is focused on domestic, liquids-rich unconventional resource plays, located primarily in the Anadarko basin STACK Play of Oklahoma. Jericho’s primary business objective is driving long-term shareholder value through the growth of oil and gas production, cash flow and reserves. Jericho has assembled an interest in 55,000 net acres across Oklahoma, including an interest in ~16,000 net acres in the STACK Play. Jericho owns a 26.5% interest in STACK JV.
Jericho’s current operations are focused on the oil-prone Meramec and Osage formations in the STACK. The Jericho team applies advanced engineering analyses and enhanced geological techniques to under-developed resource areas.
Based in Vancouver, British Columbia, with operational headquarters in Tulsa, Oklahoma, Jericho trades publicly on the TSX-Venture (JCO) and OTC (JROOF). Jericho owns its net acre position in Oklahoma through, and participates in the STACK JV through, one or more wholly owned subsidiaries.
Cautionary Note Regarding Forward-Looking Statements: This news release includes certain “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and Canadian securities laws. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual events and results to differ materially from Jericho’s expectations include risks related to the exploration stage of Jericho’s project; market fluctuations in prices for securities of exploration stage companies; and uncertainties about the availability of additional financing.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Nov 08, 2018 12:28 pm
By Tekoa Da Silva
I had the chance to sit down once again with Rick Rule, the president and CEO of Sprott U.S. Holdings, Inc. The topics of discussion covered what can often “go wrong” with general and administrative expenses, change of control provisions, changes in corporate strategy (referred to as “mission drift” in this context), and uniquely structured insider private placements.
“Many junior mining companies don’t regard shareholders as partners, they regard them as unsecured creditors,” explained Rule. “[So] anticipating outcomes based on the self-interest of the executives is the best way to understand [how] things are going to unfold.”
Commenting on general and administrative expense items, Rule noted that, “I have seen several circumstances where $10 million market cap companies with $800 thousand in the treasury were paying the CEO $450 thousand a year. In other words, the CEO’s salary alone was taking up 5% of market cap — on an annual basis. That means the CEO, him- or herself (if you assume they have $800 thousand left in the company), will bankrupt the company in [less than two years].”
Speaking toward change of control provisions, Rule recounted that, “Many people raise money from private parties with the view that they’re going to make a discovery and sell the discovery. And what you learn is that many management teams get paid twice. I have seen, in a number of circumstances, management teams [install] change of control provisions … where if the company is sold (which was their stated intention), they get compensation on sale equal to five years of their average salary and bonus expense, and five years of ancillary expenses — things such as rent and health benefits.”
“That’s one of the reasons why some management teams are willing to entertain merger and acquisition,” Rule added, “where their only participation in the company is as option holders. I’ve had a lot of bad experience, frankly, with change of control provisions, which is one of the reasons I study them.”
On the subject of oddly structured insider private placements, Rule explained that, “Private placements, where the company loans the executives the money to [buy] the private placement, … [are] the private placements … I really dislike. In other words … the private placement is just a recycle that allows the management team to sell the stock and strip the warrant — which is an artificial way of increasing their [own] options position. And that’s fairly common.”
When asked how one can protect themselves from the aforementioned (and more), Rule explained that, “One of the ways you can defend yourself … is by limiting your speculations (irrespective of apparent prospectivity or promotion) to companies that are headed by people who have been serially successful in the past … With a class-1 team at the helm [you’re] more likely to be successful.”
“As a speculator,” Rule concluded, “your gains are [usually] hard won. I’m reminded of the scientists’ observation that the harder they work, the luckier they get.”
To watch the full video interview with Rick Rule, the president and CEO of Sprott U.S. Holdings, Inc. click here. Read in browser »
Sprott U.S. Media, Inc. is a wholly owned subsidiary of Sprott Inc., which is a public company listed on the Toronto Stock Exchange and operates through its wholly-owned direct and indirect subsidiaries: Sprott Asset Management LP, an adviser registered with the Ontario Securities Commission; Sprott Private Wealth LP, an investment dealer and member of the Investment Industry Regulatory Organization of Canada; Sprott Global Resource Investments Ltd., a US full service broker-dealer and member FINRA/SIPC; Sprott Asset Management USA Inc., an SEC Registered Investment Advisor; and Resource Capital Investment Corp., also an SEC Registered Investment Advisor. We refer to the above entities collectively as “Sprott”.
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Generally, natural resources investments are more volatile on a daily basis and have higher headline risk than other sectors as they tend to be more sensitive to economic data, political and regulatory events as well as underlying commodity prices. Natural resource investments are influenced by the price of underlying commodities like oil, gas, metals, coal, etc.; several of which trade on various exchanges and have price fluctuations based on short-term dynamics partly driven by demand/supply and also by investment flows. Natural resource investments tend to react more sensitively to global events and economic data than other sectors, whether it is a natural disaster like an earthquake, political upheaval in the Middle East or release of employment data in the U.S. Low priced securities can be very risky and may result in the loss of part or all of your investment. Because of significant volatility, large dealer spreads and very limited market liquidity, typically you will not be able to sell a low priced security immediately back to the dealer at the same price it sold the stock to you. In some cases, the stock may fall quickly in value. Investing in foreign markets may entail greater risks than those normally associated with domestic markets, such as political, currency, economic and market risks. You should carefully consider whether trading in low priced and international securities is suitable for you in light of your circumstances and financial resources. Past performance is no guarantee of future returns. Sprott Global, entities that it controls, family, friends, employees, associates, and others may hold positions in the securities it recommends to clients, and may sell the same at any time.
