MOLORI ENERGY INC COM NPV (OTCMKTS:MOLOF)
One of the world’s greatest sayings is “follow the money”. This is particularly true of businesses as their vision of the future dictates how and when they allocate their resources. Businesses like the highest reward for the lowest risk so it is logical that they spend where they can get the best returns. In today’s oil market, the topic that continues to dominate is the new technology available to North America drillers and friendlier industry regulations – both of which are highly prized assets by the oil and gas sector. This combination is producing an environment where profits are now being generated from assets that were once believed to be depleted or too costly to operate. Mothballed, or previously operationally expensive, assets are now being brought back to life. Oilfields that were once considered too costly, or too difficult, to extract are now getting a second look. A great example of this is the Red Cave formation in the Texas panhandle. Not only are established players returning, but at least one firm we have highlighted in these pages before has an interesting play currently in process.
Red Cave History
The Red Cave formation has an interesting history. Most drillers believe that “Red Beds” do not produce both oil and gas, however Red Cave does. The formation has produced over 70 billion cubic feet of natural gas since drilling there began back in 1919. In 1960, the Red Cave formation received a separate field designation from the Texas Railroad Commission. Drillers have been active here ever since and are to this day, as you can see in the satellite image from Google.
For a while many believed that the Red Cave formation was either depleted or too costly to drill at a profit. That now appears to be “old thinking”. Reports show that money is returning to the Red Cave formation. Long time player Masterson West LLC, through their affiliate Adams Affiliates Inc., has 8,000 net acres. Masterson is now joining forces with Tulsa, OK-based Empire Petroleum Corp. to attack the sands play. The newly formed entity is named Masterson West II and it will be well capitalized. Empire will be contributing 40 million of its common shares and $9-$18 million for a stake that could range from 25-50%. Masterson West LLC will be contributing the leaseholds. Masterson West believes they have identified 380 locations to develop on wells spaced five to ten acres apart, with 200 proved undeveloped drilling locations. They estimate each well will cost them $250,000 and they are planning on drilling forty wells for the next few years.
Molori Energy Inc (OTCMKTS:MOLOF) Offers Pure Play
So we know that serious money is coming back to the Red Cave formation. How to take advantage? MOLORI ENERGY INC COM NPV (OTCMKTS:MOLOF) owns outright, or has optioned, over 4,000 acres with exposure to the Red Cave formation. Their largest lease is named “Mother Goose” while another lease is named “Thompson”. Joel Dumaresq, Molori’s CEO, is expecting two wells to be completed on the Mother Goose and Thompson leases by the end of this month. Molori’s bankers, Casimir Capital, have sourced over $100 million in investments for oil and gas producers with an asset profile similar to Molori Energy. At the last shareholder conference call, Casimir claimed that most of the wells drilled in this area produce around 50 barrels per day with a payback period of six months to a year. A review of the Texas Railroad Commission records seems to indicate that its likely Casimir could be referencing the Red Cave wells owned by Adams Affiliates, Inc. This could explain the massive investment that Empire Petroleum is willing to make.
If technology and a new regulatory environment will return the Red Cave formation to its old glory days, then it could be wise to forgo investment in some of the larger players and instead consider the Red Cave pure play that is offered by MOLORI ENERGY INC COM NPV (OTCMKTS:MOLOF).
I have no positions in any of the stocks mentioned, and have no plans to initiate any positions within the next 72 hours. All information, including any data, is provided without any guarantees of accuracy.
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About the author: Marc has a degree in economics and a MSc. in Finance. Over his 20-year career, Marc has worked for global investment firms in Europe and the United States as an analyst, fund manager, and consultant.