Cluff +IBg-could lose+IBk North Sea licenses if hunt for partners goes on

+ADw-p+AD4-Cluff Natural Resources (CLNR) has been warned it could lose two North Sea licenses if it continues to struggle to find a partner for them.+ADw-/p+AD4
+ADw-p+AD4-Financial advisors Allenby Capital have produced a report for the firm, saying the stock is +IBw-very much a play on securing large-scale financing+IB0 for the work.+ADw-/p+AD4
+ADw-p+AD4-The two southern North Sea licenses in question +IBM P2248 and P2252 +IBM are estimated to hold around 2.4trillion cubic feet of gas.+ADw-/p+AD4
+ADw-p+AD4-CLNR has struggled to find a partner to help finance a drilling campaign, and the Oil and Gas Authority (OGA) last month waived the firm+IBk-s obligation to farm-out.+ADw-/p+AD4
+ADw-p+AD4-Allenby said that project financing remains +IBw-the greatest risk+IB0 to the firm.+ADw-/p+AD4
+ADw-p+AD4-A drill or drop decision is expected in September, by which point CLNR could lose the licenses according to Allenby.+ADw-/p+AD4
+ADw-p+AD4-If a partner cannot be found, financing would need to take place in order to raise cash for appraisal of CLNR+IBk-s ten recently awarded blocks through the OGA+IBk-s 30+ADw-sup+AD4-th+ADw-/sup+AD4 licensing round, which would +IBw-dilute existing shareholders+IB0.+ADw-/p+AD4
+ADw-p+AD4-In April CLNR generated +AKM-750,000 through share placing ahead of its application to the OGA, and is +IBw-fully funded+IB0 until the middle of the fourth quarter of 2018.+ADw-/p+AD4
+ADw-p+AD4-However Allenby expects the funding requirement to be +AKM-2million for both 2018 and 2019.+ADw-/p+AD4
+ADw-p+AD4-The advisors say that +IBM in order to pay for the two licenses at +AKM-5-7million and +AKM-12million each +IBM-CLNR would need to give a 50+ACU stake to a partner, citing the model of Hurricane Energy+IBk-s deal with investors Kerogen Capital.+ADw-/p+AD4
+ADw-p+AD4-Success on that front +IBw-could be a prelude to drilling in 2019+IB0.+ADw-/p+AD4
+ADw-p+AD4-Allenby estimates that with a farm-in partner found, drilling would take a minimum of six months to get underway, potentially in Q2 or Q3 of next year.+ADw-/p+AD4
+ADw-p+AD4-First production may then be in 2023, assuming further appraisal would be needed on the resource.+ADw-/p+AD4
+ADw-p+AD4-The 10 full and partial blocks awarded in the OGA licensing round would require +IBw-a lengthy period of appraisal+IB0 to determine their potential.+ADw-/p+AD4
+ADw-p+AD4-Report author Peter Dupont said: +IBw-At this stage we believe that by far the greatest risk facing CLNR is project financing.+ADw-/p+AD4
+ADw-p+AD4gHA-Failure to secure financing by end September 2018 could result in the loss of licenses P2248 and P2252 based on the OGA+IBk-s drill or drop condition on this date.+ADw-/p+AD4
+ADw-p+AD4gHA-In the event of a loss of the legacy licenses CLNR would then face having to raise finance in late 2018 for appraisal work on the 30+ADw-sup+AD4-th+ADw-/sup+AD4 Round licensing against a potentially challenging backdrop.+ADw-/p+AD4
+ADw-p+AD4gHA-Between now and September we see the stock as very much a play on securing large scale financing for its SNS drilling programme.+ADw-/p+AD4
+ADw-p+AD4gHA-Success on this front would be a prelude to drilling in 2019.+IB0APA-/p+AD4
+ADw-p+AD4-Despite farm out opportunities being +IBw-few and far between+IB0, CLNR founder Algy Cluff has previously said the firm will leave +ADw-a href+AD0AIg- stone unturned+IB0APA-/a+AD4 to find exploration partners.+ADw-/p+AD4
+ADw-p+AD4-The Allenby report adds that CLNR has doubled its resource base following the successful licensing round last month.+ADw-/p+AD4

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