By Dr. Michael Green
News this morning from MetalNRG was really upbeat, focusing on the big advances that have been made recently at its 50%-owned BritNRG subsidiary which is being polished up to be listed on the London Stock Exchange in 2022. This latest announcement provided an update not only on production and revenues but also news on the development of the current asset base, key activities on the current assets and new ventures.
On production and revenues, investors learned that BritNRG is currently producing an average of 3,500 bbls/month, which is way more than double the level seen in Q1 2021. July saw BritNRG sell 3,780 bbls at an average price of US$73.88 per barre,l equating to US$280,000 of gross revenue. This performance is continuing, with the company being able to report that similar levels of sales have been achieved in August, with monthly oil sales projected to be in excess of 4,000 bbls.
This uplift in oil production is all down to the effects of operational improvements carried out in H1 2021. BritNRG’s operating partners have agreed cost recovery of 100% of production, which will provide BritNRG with obvious cashflow advantages. At current oil price forecasts, it looks likely that the Whisby site could produce in excess of US$2.5 million a year. The end result is that BritNRG is now profitable.
Looking at the development of the current asset base, following a presentation of the outlined development plans by BritNRG to the Oil and Gas Authority, the abandonment notice on EXL-141 Newton on Trent has been postponed until June 2023. This will allow time to submit a detailed development plan for formal approval. In addition, the abandonment notice for EXL-294 Reepham has been postponed until Q3 2022 which will give BritNRG the breathing space to develop a more detailed abandonment plan and also explore viable redevelopment options to the base case site abandonment and licence relinquishment.
As for key activities on current assets and new ventures, improvements at the Whisby Site are ongoing, including the testing and overhaul of all wellheads and other key activities in liaison with the regulatory authorities. Meanwhile, at Reepham, BritNRG is making progress on a feasibility study to repurpose the suspended well that was watered out in 2005 and to redevelop the brownfield site. This will potentially benefit from an existing planning application, recently approved for development, for a nearby 50-hectare green energy hub due for construction in 2022-2023.
At the time, comments from the directors were really positive with Pierpaolo Rocco, MNRG Executive Director and CEO of BritNRG, suggesting that “Our journey has just begun, and we are happy to continue to report solid progress on important fronts. We are taking the necessary time to develop our medium-term strategy, the benefits of which we intend to share with MetalNRG investors in Q4 2021, whilst we progress key activities related to the plan for BritNRG to be listed on the London Stock Exchange in 2022.” Whilst Rolf Gerritsen, CEO MetalNRG Plc, was quick to add that “the encouraging news from BritNRG is confirmation of our strategy to invest in near term cash-generative projects and particularly of our decision to invest in BritNRG, we look forward to reporting on our ongoing progress”.
This latest announcement reads well in our view. BritNRG looks well set to become the blueprint for a series of possible IPOs in gold, green energy and uranium Special Purpose Vehicles (SPVs). MetalNRG is the old NEX-listed ZimNRG which in 2016 was rebranded and adopted a new investing policy with greater focus on projects within the natural resources and/or energy sectors. By 2018, the company had identified a route to secure shareholder value by helping project owners with access to new investment, applying commercial management and mastermind the listing of these SPVs.
This succession of IPOs is expected to kick off in 2022 with BritNRG. These IPOs will allow MetalNRG to begin crystallizing the value that has been created in these well-crafted SPVs, providing the funds to be recycled into further investments. The company will be retaining an economic interest to support corporate overheads and pay dividends. Brit NRG is already profitable from its oil interests in the Midlands Basin and having now become an operator, will look to make additional acquisitions to significantly grow production to its 1,000 bopd listing target.
MetalNRG offers investors exposure to both energy and precious metals, with a growing tally of impressive assets that are either close to or already have producing revenue. Fundamentally, this is a private equity format to generate revenue over both the short and longer term. In the search to initially deliver short term value, all these interests are being packaged as SPVs.
This looks key, as each SPV is being established with a dedicated management team to grow the business both organically and by acquisitions to increase revenue and create companies that can stand on their own two feet. MetalNRG will be working with them on the financing to make sure things happen. The corporate strategy is to spin off these SPVs as separately quoted vehicles and for this to make commercial sense, a £10 million market cap is likely to be the minimum target.
In all there are four SPVs in the making. The combination of a mounting share of EBITDA from investee companies, dividends and partially crystallising value through a series of spinoffs look as it could stop MetalNRG having to coming to market to raise funds. Already we can see that the profits being made could soon be sufficient to cover overheads and the payment of dividends. As the SPVs are spun off, the company will be able to recycle money from one project to another.
Investors might be concerned that the impressive growth we are outlining has to be funded. But we note there is £3.8 million which could come into the company’s kitty from warrants being exercised. That requires a share price clearly north of 1p, but we do not think that will be a long time coming given the rapidly improving fundamentals and the current derisory share price of 0.525p. It can be seen that a big newsflow is developing here rapidly. At the moment we are working on a full initiation of coverage note which is expected to be released shortly.
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