Fourth quarter from October to December
- – Net sales for the fourth quarter amounted to tSEK 2558 (3786)
- – Operating profit for the fourth quarter amounted to SEK thousands -3478 (-3673)
- – Of which oil business tSEK -1917 (15)
- – Fourth -quarter profit after tax amounted to SEK thousands -23,579 (-14,451)
- – EBITDA for the fourth quarter amounted to SEK thousands -2583 (-2756)
- – Of which oil business tSEK -1 023 (-931)
- – Earnings per share before dilution amounted to -1.64 (-1.38)
- – Shareholders’ equity per share before dilution amounted to SEK 6.32 (9.43)
Period January to December
- – Sales for the year amounted to SEK thousands 14 112 (18 104)
- – Operating profit amounted to SEK thousands 4835 (30974)
- – Of which oil business tSEK 11,479 (40,441), of which 14 055 consists of the reversal of previously recognized impairment losses (48 633).
- – Net profit after tax amounted to SEK thousands -24,939 (16,852)
- – EBITDA for the period amounted to SEK thousands -4438 (-11 889)
- – Of which oil business tSEK 2 201 (-2 426)
- – Earnings per share before dilution amounted to SEK -1.96 (2.39)
Highlights during the fourth quarter
Commodity Quest decided in mid-October to increase ownership in Benchmark Oil & Gas.
Commodity Quest acquired through non-cash issue 50.000 shares in Benchmark Oil & Gas. The purchase price was 468,000 new shares, equivalent to a price of USD 6.50 per share in the Benchmark Oil & Gas. Following the acquisition of these additional shares rose Commodity Quest’s holding to 76.4% of the shares in Benchmark Oil & Gas.
The process to separate the so-called sands project was completed during the second half of December through the distribution of Commodity Quest’s shares in Delta Minerals AB. The distribution of shares approved by the Extraordinary General Meeting of 13 December 2013 (see below).
Investors have exercised warrants of series 2013:1 in Commodity Quest AB (publ). At the board meeting March 21, 2013 approved a private placement of 3,000,000 shares and 3,000,000 warrants. The warrants expire on 30 September 2014, and gives the right to subscribe for one new share at EUR 3.40. Warrants of series 2013:1 has now exercised to subscribe for 860,000 new shares in Commodity Quest. In addition, there remain 2,140,000 unexercised warrants issued.
The share capital of Commodity Quest came after the registration of the shares for the exercised warrants will be approximately 48,750,974 divided between 14,338,521 shares
In the middle of October started drilling for oil field Concord Dome. TD for the wells is between 4500-4800 ft. All drilling is performed on Tomahawk Humble B Unit, which is considered to have lower potential than Unit A. Some agreements are missing before we own 100% of Unit A , because some contracts had expired at the time of purchase of the field.
Drilling of Tomahawk Humble B # 8 was closed on 22 October, with successful results. The well reached its target depth of 4600ft. Logging subsequently made shows two main zones of oil bearing on together about 40ft. We own 100% of this well and has about 85% NRI . Drilling has shown better results than expected. The main zone shows more than 20ft of oil bearing sands. In the middle of November ended drilling of Tomahawk Humble B # 10 successfully drilling reached its target depth of 4750ft and logging which is then made showing oil-bearing sand at 25 – 55ft. All wells will be tested and put into production.
Three wells of three has succeeded, which is unusual. The last well showing a zone that is well over 25ft and should in our view have never produced oil before. The infrastructure needs to be expanded more to quickly see the flows from each well. Further drilling at Tomahawk Humble B Unit, and A Unit planned and there is potential for more wells in the field. It is the first oil found on Concord Dome since 1961 and the first for our company since 2007.
We will also draw lessons learned from this drill program at our field in Orange. We await prospectus from analyst Geotrace to drill near the old, larger, producing wells.
Commodity Quest sold the rights in Concord Dome at Benchmark Oil & Gas for 25.5 million on October 31. The regulation of the purchase price has been made half in cash and the other half in shares of Benchmark Oil & Gas. Commodity Quest through the store received 200,000 shares, thereby increasing its shareholding in the Benchmark Oil & Gas further to 76.4%.
In mid- December, a flow test of the well Tomahawk Humble B #10 in the oilfield Concord Dome. Well Tomahawk Humble B #10 was put into trial production in one day and produced for about three hours total of 27 barrels of oil with a by-production of 100 barrels of water. The well exhibited stable characteristics at constant flow levels of 1900 feet in depth, and a pressure of 1200 psi. The results were good and in theory is the possibility of the production rates of over 100 barrels per day. We expect a sustained level of 30-50 barrels per day when the flow is stabilized. To further improve the production explores the possibilities to reduce the by-production of water and thus increase oil production. Bottom of the well pressure of 1200 psi is close to the perfect “virgin pressure” for the production of wells with B #10’s nature.
In mid-December presented the planned drilling program and production guidance for 2014. Drilling program includes 5-9 potential structures at Tomahawk Humble A and B unit at Concorde Dome, and 5-10 potential structures at Orangefield. The expectation is that production will reach / exceed , 600 barrels per day. On the Concorde Dome planned implementation 5-9 wells in the next year 2014. 2-3 drilling sites will be built and based on the early results, decide if the bores localization.
At Orangefield planned 5-10 wells with implementation in 2014. Through a partnership between Geotrace and Benchmarks geologist has three highly interesting structures identified. All structures have the potential for several wells on the oil are encountered. The strategy also includes the implementation of new wells in the vicinity of existing wells where full potential is not utilized. The strategy is similar to the one we are currently working on the Concorde Dome. Drilling programs will be financed by equity.
Well Tomahawk Humble B #8 was put into test production one day; 2 x 4 hours and produced on a daily basis about 290 barrels of oil with a share of 70%. The well showed a ground pressure of 1250 psi and a certain admixture of gas. During the test period, the oil share of stable, which makes us confident that the production level will be above 150 barrels per day.
The plan is to achieve maximum production of all wells and get stable production during the first quarter of 2014 and then begin the next drill program
At the EGM held December 13, 2013 the following was resolved:
The decision to distribute all shares in Delta Minerals Ltd
The company owned 70% of the capital of the majority of shares in Delta Minerals Ltd
The EGM resolved on the distribution in kind of all of the Company held shares in Delta Minerals Ltd on the following terms. Proposal was for the shareholders of the Company for one (1) existing share in the Company received one (1) share in Delta Minerals AB. Delta Minerals Ltd owns the rights and is planning to implement a mineral project in the Philippines. Delta Minerals aims to record his share of suitable market in 2014.
Delta Minerals ABs book value of the Company amounted to 7,628,546 crowns, resulting in a dividend representing approximately 0.52 per share in the Company. The distribution thus decreased the unrestricted equity of the Company with a total of 7,628,546 crowns. The number of distributed shares was 14,806,521 Series B shares corresponding to 70% of the capital of Delta Minerals AB.
The record date for dividend entitlement of the shares of Delta Minerals ABvar December 23, 2013 . Last day including the right to receive the dividend was December 18.
The decision to issue new shares
The Extraordinary General Meeting decided on a directed issue of up to 1,638,227 shares with a par value OM3, 40 per share, implying an increase of the share capital by a maximum of 5,569,971.80 SEK. The proposal comprised partly of shares that were paid by offsetting 4,799,998 kronor (equivalent to 1,411,764 shares) and partly shares paid in cash 769,974 kronor (equivalent to 226,463 shares). The new shares were subscribed by the former bondholder through settlement of their respective claims in respect of convertible bonds subscribed and paid for in cash.
Events after the reporting period
Benchmark Oil & Gas included in the beginning of January 2014 a “letter of intent” to acquire 100% of skiffergasfältet KYTX, located in Corbin, Kentucky.
The field consists of 55 producing wells from Devonian Shale formation on an area of 41 square kilometers. The total production of shale gas amount to 300 000 MCFPD, equivalent to 75 barrels of oil equivalent per day. An additional 120 wells are planned and will be exploited. Valuation Institute Ralph E. Davis estimates the proved reserves at an undiscounted value of $ 5 million, and the probable reserves at an additional 7 million. The existing infrastructure consists of 40 km of pipeline and has a capacity of up to 9 million MCFPD . The pipeline is also directly connected to the buyer, Delta Natural Gas Co. There are also a fleet of estimated value of approximately $ 2 million. Since the field was put into production in 2006 is approximately $ 12 million invested in development and infrastructure. The company has in the current situation stable cash flows and a 10% premium to the spot price on the NYMEX Natural Gas. Benchmark Oil & Gas intends to acquire KYTX from the owner through in kind and cash consideration. The seller and the total purchase price disclosed for reasons of confidentiality until the closing.
Acquisition of KYTX will give an injection of both reserves and cash flow, as well as a machine shop, which is well suited for the existing fields. However, it is not primarily the existing cash flow in KYTX as justification for the acquisition, but mainly the potential in the undeveloped sources and the assessment of future natural gas prices. Since negotiations began, the price of gas has risen by 50% and we believe the future rising gas prices. When the new export terminals for LNG (liquefied natural gas), completed in 2015, the assessment is that gas prices stabilize at higher levels than in recent years . An evaluation of the economics of drilling in the planned wells will occur and a development plan will be finalized . Development risk in this type of sources is limited and is mainly due to falling price of natural gas. Each new source is expected to open with a flush production which is 20-30 times higher than the long-term stable production level. The development of all planned sources could increase the field’s production manifold. Drilling cost per well is estimated at 100 to 120,000 USD. Further possible drilling sites are available on the leased land, as well as opportunities to acquire additional land. Benchmarks bank is in favor of the acquisition and offered to finance the acquisition and future development activities. The Bank believes much stronger gas prices from 2015 onwards. The development of onshore shale gas in the U.S. is probably the biggest threat to today’s oil prices. With this asset in our generation portfolio, the company is well diversified if oil and gas prices converge. There is a huge potential in gas production in Kentucky.
Commodity Quest has agreed to acquire minority shareholders’ shares in the subsidiary Benchmark Oil & Gas. Acquisition refers to 23.6% of the outstanding shares of Benchmark Oil & Gas and involves Commodity Quest’s ownership will increase to 100%. The purchase price is intended to take over 2,573,000 newly issued Commodity Quest assuming shareholder approval.
Investors have chosen to utilize additional 790,000 warrants of series 2013:1 and signed 790,000 new shares in Commodity Quest AB (publ). The Board decided on 21 March 2013, if a private placement of 3,000,000 shares and 3,000,000 warrants. The warrants expire on 30 September 2014, and gives the right to subscribe for one new share for 3.40 SEK. This leaves only 1,350,000 unexercised warrants issued.
The share capital of Commodity Quest is after the registration of the shares for the exercise of warrants to about 58,598,135, divided among 17,234,745 shares.
Commodity Quest has decided to start preparations for a listing on the OMX First North, and suggest renaming to Dome Energy.
Following the streamlining Commodity Quest undergone the past two years, from being an investment in the energy sector into a pure oil companies, it seems appropriate to change the name. The proposal Dome Energy comes from the company’s two main assets that are oil “saltdomer”, a structure formation that the company successfully identified and developed. The name suggestion Dome Energy is already registered in the USA as a company and domain names.