Friday, 12 July 2013

Silvermere Energy

What happened to Silvermere Energy?

I must say that I have no axe to grind with any investor,adviser or board member.
I myself invest my own hard earned cash into the market and accept that high risk does what it says on the tin, thankfully i have been around long enough to know when things are looking grim. 

To the retail who are lagging behind let this be a lesson.

Today I had a chat with various associated parties with Silvermere and these are my findings.

Silvermere Energy had a loan note with mineral financial - Mafl announced that it had written the debt down to a 88% loss.

Mafl announced they have a strategy in place to try and recover what value it can for its shareholders.

Dominion announced that it would auction off the asset if silvermere could not stump up the cash to fulfil their financial commitment.

So now we have a default on loan note and also not the cash to fulfil financial commitment to dominion.

So in a few months where did it go wrong?

As previously reported, the flow-test conducted on 15 October 2012 showed flow rates of 155 bopd plus 700,000 scfpd of associated gas, and no water. With the well clean-up still on-going, the optimum commercial flow rates have still to be determined but encouraging operating pressures recorded in the well suggest that commercial production could match or exceed the levels obtained in the flow test

Where is the Oil and Gas?

The company claim that some gas was sold but the rest was used to pressure the network in order to get the oil ashore however due to unforeseen circumstances a technical issue had the oil stuck in the pipeline.

Silvermere seemed to be going well until the extensive clean up dragged on and on and on...         (time to be cautious in my experience)

Silvermere seemed to have put all its eggs in one basket however the company remained optimistic until Q2 2013 at which point Mafl is now trying to recover their loan, Dominion looking for silvermere to fulfil their financial commitments.... '' Use the £5m equity facility i here you say? '' 

Andy Morrison said this on 3rd December - "The SEDA facility is an enabling action that will help to ensure that we have access to future development funding that will put the Company in a stronger position to take advantage of organic and inorganic growth 

Recap Here:

8th January 2013With production re-established, the clean-up of the I-1 well will continue and an indication of likely sustainable commercial flow rates is expected to be available after a few weeks of continuous production.

All is looking rosy in the garden of silvermere energy right?

11th January 2013"We are grateful for the support from our existing and new shareholders which enables us to continue to build our interests in the Mustang Island field. With the I-1 well now in production and with these new funds in place, the Company is positioned ready for further development".

4th FebuaryFollowing the previously announced re-opening of the third party transmission line on 07 January 2013, total production and sales of gas recorded during the month were 8,680,000 standard cubic feet (scf). Total production of oil was 1,780 barrels. It is expected that the oil charge of the pipeline will be completed within the next month so that sales and production numbers for oil will begin to converge.

5th March - Total production and sales of gas recorded during the month were 11,477,000 standard cubic feet (scf), an increase of 32% month to month and total production of oil was 1,845 barrels, an increase of 4% month to month (1,912,068 scf and 308 barrels, respectively, net to Silvermere). The well was flowing for 73% of the time in February, representing a significant improvement on the previous month.

15th April Total production and sales of gas recorded during the month were 883,000 standard cubic feet (scf), and total production of oil was 127 barrels.

Up until the previous update on 5 March 2013 the well continued to experience restricted flow rates due to obstructions in the well-bore. Pipeline operating pressure from platform to shore was reduced in an attempt to improve pressure differentials and flow conditions, but this did not resolve the matter. It was therefore agreed by the partners that a simple work-over should be conducted in order to investigate and remedy the blockages that have extended the clean-up period longer than had been expected.

OKAY A SIMPLE WORK OVER - This would have been around a $100,000 with Slme responsible for around $20,000 costs. All along the foot notes on each Rns stated we are pleased to be, We are encouraged, We are grateful, We are pleased to note etc etc etc....

Then this come the following day 16th April 2013

On 11 January 2013, the Company announced a subscription to raise £371,000. An existing shareholder who subscribed for £80,000 worth of shares has subsequently failed to honour his irrevocable commitment to pay for them despite repeated verbal and written assurances to both the Company and its advisers that such funds were being or had been remitted directly or indirectly to the Company. That subscriber's 1,200,001 subscription shares in the capital of the Company have, however, already been admitted to trading on AIM. Silvermere has accordingly now instructed its lawyers to pursue the defaulting subscriber for the amount owed.

The unpaid subscription commitment has a material effect on the Company's available cash resources such that in the absence of a refinancing it is dependent upon the support of it s directors and creditors. The Company also has an unsecured convertible loan (the "Loan") of £750,000, repayment of which is due by the Company on 1 July 2013. It is now in default of significant outstanding financial commitments on its I-1 Well which could prejudice the Company's interest in the Well, in respect of which it has received a notice of default.

What the hell has happened the company appeared to me selling gas and transferring oil down the pipeline to shore, This pipeline is not like the road to perdition however ended up that way.
When asked the company suggest '' The oil is stuck in the pipe. Now the fiances are in the shit and all the great work of diversifying and securing the financial future whilst going into commercial production was hog wash as the fall from grace become a quick one.

9th May 2013 -  The Company announced on 16 April 2013 that in the absence of a refinancing it was dependent on the support of its directors and creditors. In recent weeks the Board has pursued a number of different funding proposals but the Company has not been able to procure the necessary funding it requires. As such, given the uncertainty around the Company's short term working capital position, the Board has requested that trading in the Company's Ordinary Shares is suspended while it considers the next steps
18th June 2013 - Further to the announcement made on 16 April 2013 with respect to the Company being in default of significant outstanding financial commitments on its I-1 Well, Silvermere announces that it has received a demand notice from Dominion Production Company LLC, the operator of the I-1 Well, for full payment of amounts outstanding to them totalling $229,445.29 on or before 15 July 2013. The demand notice states that if these payment terms are not met then Silvermere's interest in the 818-L Field will be sold by way of a public auction to the highest bidder on 6 August 2013.
The Company remains in discussions with various parties with respect to refinancing the Company and a further announcement will be made as soon as practicable.

Now lets review the initial start of the post, Mineral financial (was Athol) have written down their loan note, coupon and outstanding balance to £40,000 from £600,000 which is a clear indicator that they don't see how the company can continue in its current format or pay its outstanding balance.
Whilst Private Investors are looking to find some resolve by contacting the relevant PR,Coms,Broker,Nomad and Company the universal story is we are still discussing. 
'' Personally I would say that the game is up, However wait in anticipation ''
Why not use the financing facility? Well this facility is a package which is often used on Aim and is based loosely around pre-arranged funding shipped into the market... Clearly the Seda didn't see enough liquidity or the company has another reason why this so called deal ''which enables us to continue to build our interests in the Mustang Island field. With the I-1 well now in production and with these new funds in place, the Company is positioned ready for further development". 
Something wasn't so cut and dry now was it as the asset is up for auction on the 6th, Mafl have wrote down the debt and the company don't seem to have a strategy out of the current position under the current regime.
I have personally asked Andy would he offer some explanation when and if the dreaded event should take place! Stay tuned.......
I don't expect Andy to be involved in the future and I don't expect investors can believe how quickly this has gone from 30p to 1.75p when its actual value now appears to be 5-10% of its current net worth if you take Malf figure of 88% loss on outstanding debt. 
High risk- retailers remember this is high risk speculative stock and this could come to a stock like you should the story not hold up in a troubled arena....

I anticipate broker/nomad and corporate advisers were all paid in full although can't confirm yet. I also quote Lse poster pablo2 here:

Scott Mathieson of Sanlam told me negotiations are still ongoing. It is obviously in all parties' interests for these to come to a useful conclusion. These discussions involve Silvermere with Dominion, MAFL and Other parties. He doesn't see the passing of Dominion's deadline of 15th July as terminal and again stated that as soon as the company has anything definite to announce, it will. -------------------------------------------------- So, it's really 'as you were' and keep everything crossed. July 15th does not mean it's all over.
I beg to differ old boy but hope the company finds some resolve, I now rate the company at 0.0001p

Word in the ear '' Mathieson wouldn't say anything other than that ''

Regards Doc

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(These are but opinions derived from my own experiences and thoughts and do not adopted as statement of fact)

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