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SEFTON RESOURCES INC - UNDERRATED OIL PRODUCER (SER)
ptholden
- 04 Aug 2006 19:53
Sefton Resources is an independent AIM quoted Oil and Gas company operating in the US. The companys principal current assets are two producing oilfields in California (Tapia Canyon Field and Eureka Canyon Field); it is also in the process of buying up prospective coal bed methane acreage (CBM) in Kansas.
Update from July 2007 AGM
Finance
I revealed in my annual statement that discussions were well advanced with
Banking institutions. The final phase of the agreement with a suitable bank
without complex and restrictive terms is now very near. This is weeks away
rather than months.
Oil
Oil production at Tapia has averaged 4,100 BO during the last five months. Which
is in line with last years levels. Once this finance is in place we will be able
to move ahead with drilling.
Drilling
We have stayed close to drilling contractors and we are ready to move forward
quickly when this finance is available.
Steam generation
The equipment is now in place at Tapia. Preparation time is needed to connect
the equipment and carry out the necessary trials required to get the main work
started. We anticipate this steaming will start in the next couple of months. If
successful a significant amount of oil resources will move into the Proven
Producing Reserves category.
Joint Ventures
Discussions continue with a number of interested parties to develop our Anderson
counties gas assets.
New finance team
A new CFO has been appointed with good knowledge and experience of the oil
industry. A new assistant to undertake all the daily needs has also been
appointed.
SWOT ANALYSIS
STRENGTHS:
Sefton has two oil fields, both producing. One is already profitable, and the other is breaking even. This should generate good cashflow for the company over the medium term.
Sefton owns 100% of both its major oil interests and is now demerging its non-controlled oil interests in order to concentrate on those where it has full control (Sefton has recently disposed of its Canadian assets for CDN450k cash).
Sefton is establishing a track record of using modern extraction technologies to improve the efficiency of its fields.
WEAKNESSES:
Sefton has suffered from a number of one-off factors. While these were out of the companys control the problems it has faced since 2002 have held back development and taken up management time. Investor disenchantment may account for the current low rating.
OPPORTUNITIES:
Sefton has acquired acreage for CBM (coal bed methane) in Kansas. CBM gas production is a thriving market and Sefton believes it has acquired the acreage at advantageous prices. While this is a longer term prospect it is an exciting one and could eventually eclipse the oil interests.
There are a number of other fields in the Ventura Basin and more generally in California as a whole that Sefton may look to target now its cash flows are stronger.
Eureka is a semi-exploration play which may contain further upside. This cannot yet be evaluated.
At this valuation the company may prove an attractive target for a larger player.
THREATS
Owing to its geographical location the company continues to be exposed to the threat of bush fires, canyon floods and geological interruption (earthquake risk). Sefton is taking steps to mitigate this risk by investing in Kansas and although Forest Basin area is susceptible to tornados - gas facilities have a minimal surface footprint.
LINKS:
Sefton Resources Web Site
Quarterly Update (Mar 08)
Operations Update Dated 14 January 2008
Hardman Report
Final Results - Year Ended 31 Dec 2006
2007 AGM & Update
In The News - Oil Barrel Dated 31 January 2007
Daily California Crude Oil Prices (MIDWAY SUNSET 13)
Mine Man - 26 Jul 2007 07:42 - 841 of 2350
Morning all! A question to start the day, probably more for SEC as I think he did the figures on the other side a little while ago.
There's been some uncertainty about the amount of money they are looking to source, JDM told me about 3m, but not hether that was pounds or dollars.
If pounds, then we are loooking at 6m dollars.
What, based on say, to be fair 6 of the new wells producing as per present production, would Sefton be reasonably able to repay?
I was just wondering whether part of the delay has been down to acquiring a larger sum in order to do a bit more that we expect?
There's been some uncertainty about the amount of money they are looking to source, JDM told me about 3m, but not hether that was pounds or dollars.
If pounds, then we are loooking at 6m dollars.
What, based on say, to be fair 6 of the new wells producing as per present production, would Sefton be reasonably able to repay?
I was just wondering whether part of the delay has been down to acquiring a larger sum in order to do a bit more that we expect?
RAS - 26 Jul 2007 09:01 - 842 of 2350
No trades today - suspended or what?
Mine Man - 26 Jul 2007 09:33 - 843 of 2350
Yeah, apparently there was a five well blow-out that destroyed the new steamer, Jims Caddy and all the storage tanks. Hope to do a listing for 500 billion shares at 1p later this afternoon and back in business with 1 well in Jan 2010. Time for a top up perhaps lol!
SECRUOSER
- 26 Jul 2007 09:46
- 844 of 2350
Mine Man,
The thought had crossed my mind and I believe they could probably afford to service a higher amount, but in a way I would prefer it if they only took on as much debt as was required for Tapia drilling and built up the revenues from that before maybe drawing down more. It's possible they will get a facility where they can draw down funds as and when required.
But as a rough estimate with very conservative parameters, and assuming they have no cashflow from existing production that could be used to service debt:
6 new wells @ 23bpd = 140bpd. Assuming $10 lifting costs and $55 oil price, Sefton will be getting $190k extra revenue per month.
Lets also assume general/admin costs increase by $30k/month due to the larger operation.
This leaves $160k/month.
A $3m loan at 10% interest would be $25k/month and a $6m loan $50k/month.
So imo still affordable.
The thought had crossed my mind and I believe they could probably afford to service a higher amount, but in a way I would prefer it if they only took on as much debt as was required for Tapia drilling and built up the revenues from that before maybe drawing down more. It's possible they will get a facility where they can draw down funds as and when required.
But as a rough estimate with very conservative parameters, and assuming they have no cashflow from existing production that could be used to service debt:
6 new wells @ 23bpd = 140bpd. Assuming $10 lifting costs and $55 oil price, Sefton will be getting $190k extra revenue per month.
Lets also assume general/admin costs increase by $30k/month due to the larger operation.
This leaves $160k/month.
A $3m loan at 10% interest would be $25k/month and a $6m loan $50k/month.
So imo still affordable.
Mine Man - 26 Jul 2007 10:02 - 845 of 2350
The likelihood is that if they are setting in place a larger amount, we will see a mezzanine loan imo.
A mezzanine loan is a relatively large loan, typically unsecured. Maturities usually exceed five years with the principal payable at the end of the loan term. In a standard offer, the loan carries a detachable warrant (the option to purchase a certain number of shares of stock or bonds at a given price for a certain period of time) or a similar mechanism to allow the lender to share in the future success of the business.
This would account for the comments from HDM about the loan not being restrictive in any way as the idea behind the interest structure is to postpone burdening a borrower with the full interest cost of such a loan until the due date, effectively betting on substantially increasing cash flows, which would be the case with the additional wells.
In addition, mezzanine loans typically carry some refinancing risk, meaning that the cash flow of the borrower in the repayment period will usually not suffice to repay all monies owed if the company does not perform excellently. By that definition, mezzanine lenders prefer borrowers with strong growth potential.
The last comment is particularly relevant because we all believe that Sefton DOES have high growth potential, so if the bank believes it too, I am happy with that!!!
A mezzanine loan is a relatively large loan, typically unsecured. Maturities usually exceed five years with the principal payable at the end of the loan term. In a standard offer, the loan carries a detachable warrant (the option to purchase a certain number of shares of stock or bonds at a given price for a certain period of time) or a similar mechanism to allow the lender to share in the future success of the business.
This would account for the comments from HDM about the loan not being restrictive in any way as the idea behind the interest structure is to postpone burdening a borrower with the full interest cost of such a loan until the due date, effectively betting on substantially increasing cash flows, which would be the case with the additional wells.
In addition, mezzanine loans typically carry some refinancing risk, meaning that the cash flow of the borrower in the repayment period will usually not suffice to repay all monies owed if the company does not perform excellently. By that definition, mezzanine lenders prefer borrowers with strong growth potential.
The last comment is particularly relevant because we all believe that Sefton DOES have high growth potential, so if the bank believes it too, I am happy with that!!!
Mickey Take - 26 Jul 2007 13:03 - 846 of 2350
Hi MM- Just thought I would call in to see how things are on the other side lol
Mine Man - 26 Jul 2007 13:31 - 847 of 2350
Hi Mickey, a lot quieter but room to build! The moderation by MoneyAm is much better so the chances of a BB being demomlished is a lot less. Apart from one telling off for relating what went on over at the dark side it's been great lol!!!
SECRUOSER
- 26 Jul 2007 14:13
- 848 of 2350
Hi MT,
Much more sensible on here, but it looks like we now have a sensible thread (unionhall's new one) as well as a silly thread (the old one) over there. Long may it continue.
Much more sensible on here, but it looks like we now have a sensible thread (unionhall's new one) as well as a silly thread (the old one) over there. Long may it continue.
pianoman - 26 Jul 2007 15:55 - 849 of 2350
For the past 2 weeks I have been shorting Sefton. I do not believe they will secure funding and I do not believe the management will go from under performing to achieving positive results.
I attended the AGM and heard some nasty whispers off the back of this I will continue to go short.
I attended the AGM and heard some nasty whispers off the back of this I will continue to go short.
Mine Man - 26 Jul 2007 15:58 - 850 of 2350
All entitled to trade a stock as we see fit, I think you are a very brave or foolish person at this stage, but you never know, they could say finance talks collapse, but I can't see any way this will drop below your short if it began two weeks ago!
capetown
- 26 Jul 2007 16:00
- 851 of 2350
If there is any good news i hope it will not be this week as market woes will overshadow and impact on any increase in SP.
SECRUOSER
- 26 Jul 2007 16:02
- 852 of 2350
Au contraire, that may help the shareprice. As hot money will be looking for somewhere to shove their cash.
capetown
- 26 Jul 2007 16:04
- 853 of 2350
SECRUOSER,i hope you are right!,if i had any hot money i would keep it in my pocket just now.
SECRUOSER
- 26 Jul 2007 16:06
- 854 of 2350
"I attended the AGM and heard some nasty whispers off the back of this I will continue to go short."
LOL, a classic.
Squelched!
LOL, a classic.
Squelched!
capetown
- 26 Jul 2007 16:08
- 855 of 2350
Did anyone else attend the agm and here the alledged whisper??
Mine Man - 26 Jul 2007 16:09 - 856 of 2350
As they say, Friday is not necessarily the best day to release news anyway and something as important to Sefton as this would probably be better early on in the week to alow plenty of time to play! Saying that, having the weekend allows people to digest the information and equate just the impact on the company future, which would slow the day traders from their charge into the fray and then out again a few hours later!
Mine Man - 26 Jul 2007 16:10 - 857 of 2350
SEC, I wish Mickey and the guys had heard those whispers too and told us. Do you think they did and he, Flea and the rest are getting out before us? lol
pianoman - 26 Jul 2007 16:16 - 858 of 2350
There was only a small number at the AGM, easy to pick up on stuff.
capetown
- 26 Jul 2007 16:18
- 859 of 2350
schhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh.
driver
- 26 Jul 2007 17:22
- 860 of 2350
SER is holding up well , most of the oil stocks on my watch list are down today.
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