Reabold Resource bounces on California hydrocarbon discovery (RBD)

By James Moore


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Reabold Resources (LSE:RBD) bounced 7pc to 0.9p this morning after announcing a commercial hydrocarbon discovery at one of its new leases in California. The firm reported that Integrity Management Solutions, contract operator of its US investments, made the finding at the VG-3 well on the West Brentwood licence area.

VG-3 is based in a location near a previously-producing well on the West Brentwood field, where logging equipment indicated the presence of good sands and significant oil and gas shows. Reabold said the well was safely drilled to the planned target depth of 4,600ft and encountered around 60ft of pay, in line with its pre-drilling targets. Surface cutting samples were taken, confirming the presence of hydrocarbons, and Integrity will now begin installing production casing and completing the well as a producer.

West Brentwood is one of the California-based leases partially acquired by Reabold in June when it bought 100pc of Gaelic Resources’ share capital in exchange for £3.1m worth of its shares, equal to a 12.9pc stake. Reabold has the right to earn-in to 50pc of Gaelic’s leases by drilling up to five wells by the end of 2019. The five-well programme earns an estimated NPV of $235m net against a cost of around $7m.

Reabold is now working with Integrity to assess whether there is potential to add a second well at West Brentwood to add further value following VG-3’s success. A second well would be drilled at 50pc paying interest and 50pc equity interest to Reabold.

Elsewhere in today’s update, Reabold wrote that Integrity has begun finalising permitting for the next well in its California programme, which will be drilled on the Monrow Swell field. Like VG-3, this will test a target up-dip of a previously-producing field.

Stephen Williams, co-CEO of Reabold, said: ‘We are delighted that the first well in the current six-well programme has been such a success.  Reabold California is progressing as well as we could have hoped, with the workover programme already in production and now the first activity with the drill bit leading to a commercial discovery. We look forward to the drilling of additional wells in California and hope to deliver more good news for investors throughout the year and beyond.

Sachin Oza, fellow co-CEO, added: ‘Reabold’s strategy of funding near-term drilling into de-risked, pre-cash-flow assets has proven successful at West Brentwood. We look forward to the remaining five wells in the 2018 Reabold drilling campaign, and to further execution of our strategy into additional high impact projects.’

Reabold’s Californian interest sit alongside its stakes in UK-based Corallion Energy and Romania-focused Danube Petroleum, both of whom are on the cusp of drilling key assets. When we spoke to Williams and Oza at the beginning of June, Williams foreshadowed the recent busy period of newsflow, saying:

‘We have been able to go out and start building up to our next investment opportunity- this takes a little bit of time to get right. That means news flow is absent while we are getting those next set of investments ready to go. We have been in a sort of passive situation where we have been watching the share price moving without being able to do anything about it. We can’t talk about investments when they have not completed.

‘We expect to have a bigger portfolio than we do today by the time Corallion or Danube announce their first drill. At this point, we will have regular newsflow from our underlying projects, solving the situation we have had in the last few months where there hasn’t been that regularity of information. Reabold’s unique approach has already piqued the interest of many institutional investors, and we are entering a period of potentially transformational activity.’

Author: Daniel Flynn

Disclosure: The author does not own shares in the company mentioned in this article


In this article:

Reabold Resources

Author: James Moore

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.