Joel Dumaresq the CEO of Molori Energy sits down with Maurice Jackson of Proven and Probable with an in-depth company update on a number of promising developments that may significantly increase the value proposition for shareholders. Mr. Dumaresq, begins the interview with a thorough review of the past 12 months, in particular the staggering 10 fold production increase from 40 to 400 barrels of oil and gas production and just as impressive achieving a 6 fold increase in Reserves from $5 to $31 million! Mr. Dumaresq provides a comprehensive review on what has the potential to be a game changer in the Red Cave formation. Furthermore, Joel highlights the virtues of Molori’s low-cost expenditures of drilling and spudding that Molori Energy is conducting that are unlocking massive potential for shareholders. Also, for Accredited Investors, Molori Energy may conduct 1 final financing opportunity in the 1st Qtr. of 2018.
Welcome to Proven & Probable where we focus on Metals, Mining and More. I’m your host, Maurice Jackson.
Today we will discuss a company that presents a very unique value proposition in oil and gas.
I’m speaking of Molori Energy:
Trading on the TSX-V: MOL and on the OTCQB: MOLOF
Joining us for a conversation is Joel Dumaresq the CEO of Molori Energy
Before we begin allow me to convey that we are proud shareholders of Molori Energy.
Mr. Dumaresq, welcome to the show sir.
Thank you Maurice. It’s a real pleasure to be back and to once again address your audience. I also want to take this opportunity to thank you for the confidence you’ve placed with us by way of your investment in Molori.
Maurice: Well it s worth the investment, we have full confidence in you and your team.
Joel for first time listeners who is Molori Energy?
Maurice: Joel, I would like to hihglight Molori’s successes in 2017. From your perspective what would they be – and why?
Joel: Let’s wind the tape back a year and look where we were at in the 4th quarter of 2016. At that time, we’d reported that in our workover business we had approximately 40 barrels a day of gross oil and gas production, along with just over $5M in reserve value.
Over the course of the first three quarters of this year, we then reported an increase in production from 40 barrels to over 400 barrels, and an increase in reserves from $5M to almost $31M.
In addition, we identified what we think is a company maker in itself…and one of the most compelling development plays onshore in the US today – our Red Cave play.
Once we had completed an exhaustive study of the Red Cave, we went out and over the course of last summer, secured over 11,000 acres with access to the Red Cave, and containing almost 1,000 potential drill locations.
In August we ran a test well which initially flowed at around 25 barrels of oil equivalent a day, and
last, but by no means least, just last week we spud a well into the Red Cave which will be our first test on our newly acquired acreage and which we believe will demonstrate our ability to begin converting many of those 1,000 drill locations to producing wells.
So Maurice, we’ve had a busy 2017 and we’re expecting an even busier 2018.
Maurice: Over the last couple months Molori appears to have gone through a metamorphosis as it relates to the Red Cave Opportunity and the scale of Molori’s plan. Can you comment on this observation…?
Joel: That’s true. Our initial business plan was comparatively modest. We sought to acquire an interest in some formerly productive oil and gas leases and then carry out ‘recompletions or workovers’ to re-establish oil production on those leases.
We were successful in this regard, having recompleted over 120 wells during the past 18 months, with the typical well producing about 2 or maybe 3 barrels a day of production.
However, contrast that Maurice with our Red Cave development opportunity. With the Red Cave, we plan to drill these wells for a very modest amount of money – about $250K per well. The beauty of this is that the Red Cave is a very shallow formation and therefore the costs are low when compared with say the Permian Basin where one well can cost $5M or more.
What we love about the Red Cave play is that with such low cost, and with the production we’ve seen from our neighbours at Adams Affiliates, we can recycle capital very quickly. These wells payback that $250K investment in 6 – 12 months. That’s a highly desirable rate when compared again with the Permian where it often takes 2-3 years to payback the capital cost of a well.
If there’s a lower cost, faster return, higher ROR (rate of return) play right now onshore in the US, we haven’t seen it, and that’s why we’ve jumped into this opportunity with both feet!
Maurice: Joel, you mentioned Adams Affiliates, Molori’s neighbour in the Panhandle and in particular what Adams is doing with their production from the Red Cave – can you tell us more on Molori’s plan to ‘’replicate’’ what you see your neighbour doing?
Joel: Certainly. Full credit goes to Adams – they first recognized this play and set about building their production – in just over a year – from less than 50 barrels a day, to almost 1200 barrels a day presently.
Adams, being a private company, kept quiet about what they were doing until one of our oil hands happened to be visiting one of our leases adjoining Adams and saw what they were up to.
What caught our attention first was the fact that Adams had 3 or 4 drills working just to the south of our lease. In this area of the Texas Panhandle, the drills have been sitting idle since the 2015 correction in oil prices, so seeing this many drills at work perked our interest.
However, what really caught our attention was the large containers sitting next to the drill rigs. These containers of course contained sand which Adams were using for very large fracs of the Red Cave. You see Maurice, explorationists tried to produce from the Red Cave back in the 1980’s but the formation was complex and tight and the could not get much production, so the oil remained inplace..untapped.
What Adams figured out, and what is the real secret sauce behind their success and what we hope will soon be Molori’s success, is that by employing the type of large-scale fracs that are common in the Permian – 250,000 or 300,000 lbs – that you can get the Red Cave to produce..in fact produce very well.
So you are dead right Maurice, our plan is to duplicate what Adams has been doing on the surrounding Red Cave acreage we’ve been able to assemble.
Maurice: Why should your Investors care?
Look, we’ve just begun to expose this opportunity to investors and to our shareholders. If you think of this along the lines of a 26 mile marathon, we are only in mile 2, so it’s still a great time for investors to get positioned into Molori in order to participate in this Red Cave play. The entire market capitalization of Molori is presently only about $12M which is below the value of our existing reserves. Heck, what that means is that investors are getting the Red Cave play effectively for free. That strikes me as a pretty compelling value proposition.
Maurice: Why should new investors buy into MOL today?
Joel: Maurice, I’ll give you 3 good reasons to buy today.
Number 1 – This is a comparatively ‘low risk’ development play. Adams, who I’ll remind your listeners have acreage either adjoining or surrounding our acreage, have drilled almost 50 wells in the past year. What was their success ratio – 100%. Yes, that means they drilled 50 wells and had 50 discoveries. I’m not guaranteeing that we will have a 100% success rate, but what I think that does show you is that this is NOT a greenfield exploration play but rather a development play.
Reason #2 – As I mentioned earlier, our Red Cave play doesn’t require the massive amounts of capital that are required for development in the Permian or other high potential exploration plays in the southern states. What I’m trying to impress upon your listeners Maurice, is that we purchased and can now develop our Red Cave opportunity with modest amounts of capital which is great for our shareholders as they don’t suffer the kind of dilution that’s typical for expensive oil and gas plays.
And Reason #3 – with our Thompson 23-1 well now underway, we believe we are on the cusp of demonstrating we can consistently tap into and economically produce from the Red Cave.
Upon realize the significance of the Red Cave, we set about doing an extensive and exhaustive study of the formation and of available acreage with access to the formation. Once the study was complete, we then set out and successfully secured over 11,000 acres of prospective land with 1,000 or more potential drill locations. Finally, we spud this well which we strongly believe ties the entire opportunity together as we plan to demonstrate that we can turn much of that 11,000 acres into wells producing from the Red Cave.
Once we validate the acreage, we are confident the markets will begin to assign the type of value to Molori that attractive development plays typically warrant.
Maurice: Discuss Molori’s plans for 2018 as it relates to this 8 well program previously announced.
Joel: Excellent question Maurice. We anticipate completing the Thompson 23-1 well by the end of this month and we will immediately report the results.
What we’ve already committed to as part of our securing the 11,000 acres is that we will move forward in 2018 with initially an 8 well program to determine where we should concentrate our development efforts. Our team in Borger, Texas is right now assessing where to drill these 8 appraisal wells and we expect to have a very active first and second quarter of 2018 as we appraise our acreage followed by infill drilling to build our production and reserve values.
Maurice: How will Molori fund this program?
We are fortunate in that we have some share purchase warrants outstanding as part of prior rounds of investment which we hope to draw upon for additional capital. As a matter of fact, my CFO and I recently exercised all our personal warrants – an investment of almost $200,000 – as an indication of our commitment and belief in this opportunity.
Beyond that, we also anticipate a return to the capital markets in the first quarter of 2018, which we believe could be our last equity raise as we are confident that other less dilutive sources of capital will be available to us once we demonstrate our ability to consistently build upon our reserves.
Maurice: Same question as I asked earlier – what should the Molori audience focus on for 2018 and why?
Joel: Maurice, I’d suggest they focus upon three key elements – our success ratio – on a well-by-well basis – as we accelerate our drilling program into 2018; the incredibly low capital cost required in this Red Cave play; and most importantly, continued additions to our acreage portfolio as we position ourselves to dominate this play.
Maurice: Joel, what keeps you up at night that I forgot to ask?
Joel: Maurice, the last two weeks it’s been the head cold I’ve been fighting, but I don’t think that’s what you were getting at. Really, there isn’t anything related to our business that keeps me awake at night. There are however a couple things beyond my control, the most important being the global price of oil. That I can’t control, however from the time we entered the Panhandle, it’s worked out pretty nicely with the price of WTI moving from under $30 per barrel to almost $60 a barrel today….so as my father always used to tell me…”better lucky than good”….but best to be lucky and good..and that’s what we hope we are.
Maurice: Joel for someone listening that wants to get more information please share the website and contact details.
Joel: Maurice, I’d strongly recommend they reach out to our communications director Judy-Ann Pottinger who they can reach at 604-617-5290 or email [email protected]
And last but not least please visit our website www.provenandprobable.com, where we interview the most respected names in the natural resources space, you may reach at [email protected]
Joel Dumaresq of Molori Energy thank you for joining us today on Proven and Probable.
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