The responsibility for this blog posting lies under contract with me and me alone and so in asking Sefton Resources PLC (LSE:SER), its chairman Jim Ellerton and its IR man Michael Green to explain why they have not told lies via RNS statement, I invite them to sue me personally if they feel I am being unfair. I shall see you in court and it will be my pleasure. Should Sefton and the two gentlemen mentioned above not take legal action investors can draw their own conclusions.
So Jim, Michael and Sefton PLC explain why you have not lied to investors?
The most recent RNS by Sefton on this matter was, in my view, an outright lie. On 11th September it stated:
“Although oil production for the first half of 2012 at 21,755 barrels or an average of 120 barrels of oil per day (bopd) was higher than in the comparable period (19,968 barrels or an average of 110 bopd in 1H, 2011), there were several factors that served to restrict oil production. Encouragingly, since this period ended we have seen production in excess of our targeted level of 200 bopd and average in the vicinity of 170 bopd over a limited period”
By 11th September the Sefton board must have been aware of what output was in July and August – something we also now know from official data from the State of California: viz 116 barrels per day in July and just under 97 barrels per day in August. I suppose that it is possible to construct a scenario where some days production is greater than 200 bopd and for limited periods it averages over 170 bopd and still over a month averages 97 bopd. But that implies that for decent periods production is actually pretty close to bugger all bopd. Perhaps the company might care to publish via an RNS its daily output statements for July and August to show how what it actually said was not deliberately misleading.
If Sefton, Ellerton and Green which to sue me on the grounds that they did not lie about production but merely misled investors that is fine, I cannot see that I will be paying out much in damages. I look forward greatly to our day in Court. If we ca make it the High Court we can walk back to The Real Man Pizza Company for a meal afterwards. Sefton can pay ( in cash not shares).
But in order to adopt a belt and braces approach, I invite my pals to explain why this is not a slam dunk lie. On 23rd November 2011 Sefton announced via an RNS:
Drilling of four new wells began at Tapia Canyon on Wednesday 16 November and is expected take approximately five weeks to complete. Oil production in early 2012 is expected to rise by up to 75% to an estimated 240 barrels of oil per day, once the new wells are on stream.
Needless to say, as with every RNS from Sefton, it promised the delivery of Dr Ali’s report on steamflood economics by the “end of the year” – i.e. within 37 days. We are still waiting. I remind you that we first heard about Dr Ali and his work on a report that assessed the economics of a company changing programme back in October 2010 when Jim announced via RNS:
Additionally, Sefton recently retained Dr. Farouq Ali, an expert in steamflood design, and president of Edmonton, Alberta-based HOR-Heavy Oil Recovery Technologies Ltd. He has worked on over 200 oilfields throughout the world and is a well-respected expert on thermal recovery of oil. TEG is very pleased to be working with someone of Dr. Farouq Ali’s caliber in the technical review for possible implementation of a steamflood at Tapia oilfield as well as the evaluation of the primary oil recovery and the cyclic steam pilot thus far.
By 19th November Sefton 2010 announced that Ali had already served up an in initial report which was promising and that:
“Dr. Ali continues to evaluate the project and has indicated that he expects to provide additional geologic and engineering data specific to the Tapia reservoir. “
Jolly good. Two weeks later that was yet another placing, raising £861,000. As I detailed in an earlier piece in almost every subsequent RNS Sefton has claimed that Ali’s final report would be posted within a given timeframe or very soon. It has still not been published. Can Sefton provide written statements from Dr Ali showing that he intended to deliver his report in the timeframe indicated in each RNS ( there have been many) or are Sefton’s statements on the publication dates just another lie? Come on Ellerton and Green show us Ali’s emails that back up your claims – I cannot wait.
But back to those wells and the Autumn of 2011. Having ramped the shares to raise £1 million at 2.1p on 8th December 2011 on the back of this drilling news, promise of production and the imminent release of Dr Ali’s report, the company ‘fessed up on 21st December, having drilled 3 of the wells, that: “The last well, Hartje #20, will be drilled once the relevant documentation has been approved by the Los Angeles County Planning office, which is now expected in the New Year.“ You see, when issuing the RNS on 23rd November, Sefton did not actually have the necessary permissions to drill this well at all. It thus did not have a hope in hell of drilling all 4 wells in 5 weeks.
Sefton, on that basis can you explain why the RNS of 23rd November was not a lie? But heck, at least you got yet another placing away on the back of it. In fact there have been 10 “issue of Equity” announcements from Sefton since October 2009. Impressive.
As for the 240 barrels a day? Sheer fantasy. The biggest monthly output number for this 25 year old field in 2012 was for May ( 134 bopd). Looking back over production data going back to 1977 the greatest ever monthly output was February 2009 ( 222 bopd). So where do these guys get their numbers from? It seems like sheer fantasy on their part.
Jim, Michael (I hope you do not mind me calling you by your first names) and Sefton please explain why you have not lied to investors. If you wish to sue me you can contact me on email@example.com and serve papers to me at 91-95 Clerkenwell Road, London EC1R 5BX. I am around all day. You have four choices.
1. Sue me. I shall see you in court.
2. Admit that you cannot explain why on a number of occasions you have issued an RNS containing lies, and then go discuss the matter with whoever is appropriate.
3. Deny that your RNS statements contained lies but admit publically that they were misleading and go discuss with whoever is appropriate
4. Do and say nothing in which case your Nomad, Fox Davies, should – if it is to maintain its very high standing – consider its position carefully.
Over to you.
Love and big hugs
PS. I slept on this piece overnight and wondered about Sefton’s first half production numbers. Surely there was no point in lying about those? Not even Sefton, Jim and Michael would have felt the need to do that. Er….I checked.
Just for the record, according to the State of California first half output was not 21,755 barrels but 21,739 barrels of oil. That works out not at 120 barrels per day but at 119.45 barrels (which would be rounded down to 119 bopd). The differences are not great but none the less, what is stated appears to be a lie. A totally pointless lie but a lie none the less. Gents perhaps you might also explain why that is not the case?
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