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AIM listed joke company of the year 2001-2013, Sefton Resources (LSE:SER) has this morning released an independent valuation of its Kansas reserves which can only be described as laughable. It is back to its old pal Dr Onat for this corker. It defies belief that anyone should fall for this baloney but here goes.
Sefton states:
“The report estimates the net present value (discounted at 10%) of cash flows from Sefton’s oil and gas proved reserves and unproved resources in Leavenworth County, Kansas at this time at US$25.99 million (£17 million). This represents a ten-fold increase compared to the value of US$2.57 million which was reported as at the end of 2011.
The report demonstrates that Sefton has been successful in moving resources up into the proved reserves category, whilst dramatically expanding the resource capability in Leavenworth County, Kansas.
Oil production in Kansas in March 2013 increased to approximately 400 barrels a month, compared with the approximately 300 barrels of oil produced in February 2013.
Following the acceleration of the acreage leasing program in Leavenworth County, the Company now has assembled 14 separate project areas all with oil and gas potential.”
Ends.
Now an independent report from a Sefton expert is always interesting. You will remember that the report on Sefton’s California assets says that they have a NPV of $273 million but yet in 12 years of operation $18 million has been pumped in and only $5 million come out. That is to say they have generated NEGATIVE free cashflows and there is no sign of that ending. Yet Independent reports say they are worth $273 million. Whatever.
Ultimately a company’s shares will reflect not what independent reports state the NPV is but the NPV itself and that requires free cashflow to be a positive number.
And so back to Leavenworth, the assets Jim first floated in 1989 with Powerhouse Resources ( which went tits up) and which then went to Monument ( which went tits up) and finally to Sefton for $215,000. And now they are suddenly worth $25 million. Cor blimey, Jim Ellerton you are the Bill Gates of the oil world.
And so how does Dr Onat arrive at his conclusion? What has been the drilling undertaken in Kansas which has allowed him to upgrade the resource thus? Do tell Jim.
We see that output in Kansas is now running at 400 barrels a month. That would be 13 barrels a day. Now just how many old and abandoned wells has Sefton re-entered at a cost of $15-25,000 a pop to reach that mammoth total? 13 barrels a day will be chucking off (perhaps) $600 cashflow per day and then once one knocks off the additional PLC costs to run this operation that will be er…norra lot.
And since it costs a good amount PER WELL to restart production the payback on Kansas is sure to be pretty similar to that in California. It is bleeding cash too!
Ask yourself why Sefton does not tell you how many Kansas wells are on-stream to produce those 13 bopd? Odd that innit. This is the missing fact. It is the dog that barked. Come on Jim: “How many frigging wells have you re-entered at a cost of $25,000 a pop ( or five business class return flights from London to Hawaii) to drive output up to 13 bopd?” Simple question. What is your answer? Why will you not release this information?
There is about as much chance of Sefton letting us know the answer to that as of it saying how many flights to and from Hawaii (where its chairman lives in a multi-million dollar mansion) it has paid for.
Sefton Resources is still running out of money fast and will be out of cash by June. The omission in its latest statement are a shocker and leave investors unable to gain a fair reading of its trading position in terms of cash generation ( or rather lack of it). But who cares? It seems as if the authorities do not and Nomad Allenby will clearly allow Sefton to issue whatever it wants. This is part of yet another attempt by Sefton to ramp the stock to gullible investors to get away yet another fund raise to keep this pitiful show on the road.
Target price 0.01p.
Tom Winnifrith is being sued by Sefton Resources for libel for daring to ask questions such as why its last Nomad quit, for pointing out that past statements on production were misleading and for daring to ask questions such as “how many wells are needed to get output to 13 bopd?” and “how many flights to Hawaii has Sefton paid for?” Tom will not stop asking those questions, whatever Sefton and its uber expensive City lawyers Pinsent Masons throw at him.
You can follow tom on twitter @tomwinnifrith & you can show your support for free speech and investigative journalism by purchasing a Justice 4 the Sefton 2 T-shirt, hoodie or mug here.
Tom is aware that Pinsent Masons are big fans of his videos – especially THIS ONE
YOU CAN NOW READ A FULL ARCHIVE OF TOM WINNIFRITH’S SEFTON EXPOSES HERE
Not an ‘independent’ report. Onat and Ellerton have been doing business with each others companies for years.