MOLORI ENERGY INC COM NPV (OTCMKTS:MOLOF)
Last March and April, MOLORI ENERGY INC COM NPV (OTCMKTS:MOLOF) was the darling of investors who were looking for hidden gems in the independent oil and gas company sector. MOLOF rocketed about 500%, from $0.09 to more than $0.40 per share. In May, lacking any news, shares receded into the $0.20 – $0.30 range. However, now there are rumblings coming out of the company that suggest those who exited their MOLOF position may have done so too early. Additionally, a recent shareholder conference call offered a glimpse into what could be a major blockbuster deal for the independent oil and gas company.
MOLORI ENERGY INC COM NPV (OTCMKTS:MOLOF) is based in Vancouver, British Columbia but its operational cash flow comes from the oilfields of Texas. One thing Molori Energy has going for them is a close relationship with a Texas-based company named Ponderosa Energy, LLC. Molori holds a 25% interest in certain Ponderosa-owned oil wells in the Texas panhandle. In exchange for that 25% interest Molori Energy paid Ponderosa $500,000 plus an additional $1 million as a capital infusion.
Improved Performance Reported
Since the deal, Molori says they have been able to grow reserves from under $5 million to over $30 million. A year ago they were producing 40 barrels per day and today they are producing 400 barrels a day. To add to the good news, they have been re-working wells with excellent results. Referencing about 100 of their wells, Molori states that operating expenses had been $20-$25 per barrel and they have been able to get that figure down to $10 per barrel. The end result is that they now believe they are pulling in over $200,000 in gross revenues monthly.
While those results would make any CEO proud, what really excites Joel Dumaresq is Molori’s opportunities in the Red Cave area. MOLORI ENERGY INC COM NPV (OTCMKTS:MOLOF) either owns outright or has optioned over 4,000 acres with exposure to the Red Cave zone. Red Cave is not a new play to oil field hands – it has been around for a while. However, it has not been fully exploited and that is what attracts the Molori team. Their largest lease is named “Mother Goose” and sits on the Red Cave opportunity along with other leases named “Thompson”.
Dumaresq 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.
This play really ramps up when the math starts getting computed. MOLORI ENERGY INC COM NPV (OTCMKTS:MOLOF) They are planning at spacing the 7,000 Red Cave play out in five acre lots. If one assumes that just 400 wells will actually produce at 50 barrels per day, you still have a production of over 20,000 barrels per day. That’s quite a bit of cashflow by anyone’s standards.
They Said What?!
Molori leadership, in the conference call, then said something that caught a lot of people by surprise. They said:
“Then we have this Red Cave which we think of as PUD development, it is very very low risk, we are going to develop it. Then there is the blue sky opportunity that we have not discussed yet. Joel knows about this and that is we have commissioned the study at the University of Texas to do a water flood for a very large area. And that study might take 6-8 months to complete but a tertiary recovery of this area has not been completed on this scale by Murray Grigg, his is a big component of it and he has been funding it out of his own pocket today but that is going to be for our account. I will just throw this out there, it is a very big project , it is not something that either Molori or Ponderosa can handle on it’s own. It is a two billion barrel project, so it is something.”
Not only do they consider the Red Cave opportunity as “low risk”, they also have another opportunity that they believe may yield 2 BILLION barrels? The math isn’t easy but consider where MOLOF shares are today with their current assets and running 400 barrels of daily production.
Some investors may sneer, but a lot of experts remember when doubters were snearing at the 2008 announcement that there were 2 billion barrels of recoverable oil in North Dakota’s Bakken formation. That discovery was producing over 450,000 barrels per day by 2010. How is that math looking now?
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.