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This is all so bloody familiar but here we go again with another trading update from Sefton Resources (LSE:SER), the joke company that is suing me for libel. I will offer it an opportunity to broaden that case below since I have unearthed another howler of a statement this morning in which, I accuse Sefton and its plutocrat chairman Jim Ellerton once again of deliberately misleading investors. But first the trading statement.
Dr Ali says that his report on steamflooding in California is making good progress. Specifically that: “ work on the history match stage of the thermal stimulation report is now coming to an end. Dr Ali has advised that he is about to start the cyclical steam matches and various steamflood scenarios which he plans to work on simultaneously”. This would be the report that in the now infamous interims of September 2012 was promised for delivery by the year end. And that which on 6th April was promised for delivery by the end of May. That is April and May 2011.
In terms of output we are told that 6 wells in Kansas produced 300 barrels of oil in February. Golly gosh. That works out at about 1.8 barrels per well per day. But Sefton does promise that it will increase that number. Golly gosh again. What are the costs of extracting, transporting and selling such vast quantities of oil? Er..we have not been told. You will remember that Sefton paid an average of just over $4,000 per well and will spend $10,000-15,000 bring each of these old abandoned wells back onstream. So if we (generously assume given the low volumes and fixed costs) a net take of $25 a barrel and capex of $15,000 payback for the upfront capital costs might just be achieved within 15 months. The trouble with old wells like these is that production profiles tend to go down not up. All I am saying is that those folk who thought Kansas was a game changer will be disappointed.
And so it is back to California where output in February came in at 118 bopd, up from 111 bopd in January. Bully for you Sefton. But before we all go and award the Nobel business prize to chairman Jim Ellerton I remind you that December output was 133 bopd. Output goes up and down.
And as background: On September 11th 2012 Sefton announced first calendar half results. In the six months to June 30th output averaged 120 bopd. And at that time Sefton stated explicitly in an RNS:
Workovers and cyclic steaming continue to deliver production growth
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. Production rates at these levels provide evidence in support of the effectiveness of the recent drilling, ongoing workovers and cyclic steam flood programmes
TEG is in the process of implementing plans to boost production for the remainder of 2012 and addressing the production constraints that have recently and are still impacting production, by drawing on its experience in successfully dealing with a number of production challenges since it began to redevelop the Tapia oilfield, including mechanical (facilities improvements, well control), natural (fires, flooding), regulatory (permitting) and other challenges.
OK. Sounds great. In light of that statement issued on 11th September I draw your attention to monthly output levels recorded since H1 ( when output was 120 bopd).
July 116
August 96
September 103
October 112
November 114
December 133
January 111
February 118
You will note:
a) H2 output was lower than H1
b) Output in 2013 to date is lower than H1
c) Output on September 11 2012 when the company talked of how “Workovers and cyclic steaming continue to deliver production growth” had in fact fallen sharply since H1 ( i.e. it was down not up).
d) At no point at all has the company come within a country mile of delivering output anywhere near 170-200 bopd from California since September 2012.
You might therefore conclude that the RNS of 11th September was deliberately misleading. That is what I wrote and am now being sued for libel for doing so.
But Sefton appears always keen to spend shareholders dwindling cash reserves with uber expensive City lawyers Pinsent Masons and so I offer it another chance to do so. After all the mother of my daughter Olivia is a partner at Pinsent Masons and school fees are terribly expensive…
Here goes. I would like to accuse Jim Ellerton and Sefton of making yet another deliberately misleading statement. Please feel free to add a new libel case on this one Jim. I know that your Pinsent Masons ( who incidentally also earn a fee from Sefton as its company secretary) are keen readers of my work and if you want to sue me for libel for this accusation go ahead. Make my day. I shall see you in Court again.
I would like you to study the output numbers for the months of July through to October very closely. And now I refer you to a presentation made by Jim on 9th October 2012 and to his slides which you can see HERE
Please turn to slide 3
Now look at bullet point 7
“Current oil production 150 bopd”
Gee whizz. In light of the data published by the company since October 9th that number is just wrong. And yet Jim included it in his presentation and stuck the slide up on the interweb thingy for all to see. And less than two months later the company issued shares to raise funds to keep the show on the road.
Having spoken to TWO other folks who attended that presentation, none of us can remember Ellerton qualifying that bullet point in any way. Nor is the presentation on the interweb qualified in any way. And so punters who ponied up for the December 7 equity issue, may have done so on the basis of a presentation that stated that output was 150 bopd when it is clear that it was nothing like that. Is that market abuse? I do not know but the FSA will this morning be asked to add this matter into the investigation of Sefton and its other statements.
Go ahead Pinsent Masons & Sefton. I shall be at 91-95 Clerkenwell Road, EC1R 5BX all day if you wish to serve some more papers on me. If you want to grab a bite to eat while serving papers I shall be delighted to serve you all a cracking Real Man Pizza lunch but given the state of Sefton’s balance sheet, as far as Jim is concerned I will require him to pay in cash. I am sure that you understand. For the avoidance of doubt I am stating:
“The presentation made by Jim Ellerton on 9th October was deliberately misleading with regard to production – in light of the company’s equity issue shortly afterwards this clearly begs the question of whether Sefton and Ellerton have committed market abuse”
See you in court, bitchez.
Tom Winnifrith writes for 10 US and UK websites. He pulls no punches. You can get links to all his free work on his personal blog at www.TomWinnifrith.com and you can follow him on twitter@tomwinnifrith
10 nil to Winnifrith
And Winnifrith knocks it for six yet again.
Any shareholder who bought between July 11 and Sept 25 would have done so on the basis that SER said output was 170 bopd and rising when it KNEW output was falling fast and was 100 bopd. They should be suing SER for compensation..
t