It has been an interesting few weeks!
Most recently, Jerome Powell once again announced an additional 75 basis point hike (0.75%) to combat inflation. Despite stating future rate hikes were not off the table, it appears July 2022’s increase was largely “baked in” to the market.
Conversely, while raising rates usually result in downward pressure on overall markets, Thursday and Friday of the last trading week saw considerable gains. We found this historical disparity interesting particularly due to the media’s insistence on “pinning” down Mr. Powell to defining the current market condition question which has been on many an investor and economists’ mind:
“Are we in/headed into a recession?”
Despite the parameters (definitions) one may use to make such an assessment, Mr. Powell asserted that the U.S economy has in fact NOT entered a recession. Near instantaneously after his announcement, Spot prices of Gold, Silver and Oil along with commodities and conglomerates alike showed reasonable if not significant gains despite mediocre earnings.
To some extent, it appears as though Mr. Powell’s words of “reassurance” have instilled a modicum of confidence in the otherwise dismal market that has been 2022.
Though we always suggest patience and caution when attempting to “time markets,” last week provided considerable gains for many of our plays. We are cautiously optimistic that the second half of 2022 will be more bullish than the former – most notably with our new oil play in the stable, Marksmen Energy inc.
Enjoy our feature!
We have been reaching out to the CEO’s of our various investments to stay up-to date on their respective progress and initiatives. As always, due to legal reasons, CEO’s may be “tight lipped” regarding various questions, however provide a general sentiment for their projects going forward.
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Feature
Marksmen Energy inc. (TSX-V MAH)
We were fortunate enough to schedule a meeting with Marksmen Energy’s President and CEO: Archibald J. Nesbitt last month. As a result, we invested heavily in the stock with a current average of $0.07 CAD.
Mr. Nesbitt is no stranger to corporate management and operations with over 30 years of experience in both Oil & Gas and mineral exploration companies. In addition, Mr. Nesbitt has been a member of the Law society of Alberta since 1978. As a whole, management possesses over 140 years of combined business experience with significant ties to the Oil & Gas industry.
Currently, five individuals comprise approximately 50% ownership of the stock. These individuals as discussed with Mr. Nesbitt, are well-heeled and in no rush to sell their stake in the company. These shareholders are invested in building out Marksmen Energy to become a formidable player in the Oil & Gas industry.
In addition – Management and the top-tier Geo team both have options and several shares in this company. As previously mentioned, we always look for management and insiders to “have skin in the game” thereby increasing accountability while incentivizing growth.
Marksmen Energy’s headquarters are out of Calgary, Alberta Canada with operations in Ohio, USA. In speaking with Mr. Nesbitt, we found this international approach brilliant for multiple reasons, including:
- Historically, Ohio has been a prolific state for private Oil & Gas with approximately 8,000 families in the state owning and/or operating oil reserves for generations; (Please see this article for information on the “Ohio Oil Rush.”)
- As a result, Marksmen Energy currently has the ability to pick and choose their participation in approximately 70 wells in the state included several joint ventures with other companies.
Ohio is home to several 42 API light, “Sweet Crude” (Green oil) reserves;
- Sweet Crude is highly valued (over “Sour Crude”) due to its lower processing costs and wider applications (eg. aviation fuel).
- As a result, many Oil Companies are willing to pay WTI prices for Sweet Crude on site!;
- In addition, trucking and shipping are often included in the purchase price of the oil resulting in Incredibly high Netbacks for Marksmen Energy!
- Multiple “wildcat drills” have hit oil without any geological work In Ohio Indicating substantial oil reserves throughout the state;
- Marksmen Energy’s Leases are from private land owners virtually eliminating government involvement in the process!
- As a rule of thumb, many families have struck deals with companies like MAH for approx. 12% of the net earnings resulting in 88% net revenue interest for the company!
- As a result, MAH is slated to pay approx. $0.40 cents USD per barrel to the Federal government. In comparison, Taxes per barrel in Alberta Canada could reach as high as 50%!
- As a rule of thumb, many families have struck deals with companies like MAH for approx. 12% of the net earnings resulting in 88% net revenue interest for the company!
On October 3rd 2019, Marksmen Energy announced a Private Placement in part to fund the following (Part of the Joint venture with PEP Drilling LLC (“PEP”)):
- Planning and engineering of the previously announced 40 well re-completion program targeting the Clinton Sandstone formation in Portage County, Ohio;
- $410,000 allocated for the first three re-complete wells planned to begin in Q4 of 2019, and;
- $94,000 allocated as working capital to support continued light oil exploration activities in Ohio.
With drilling operations based in Ohio, USA, Marksmen Energy Plans to:
- Become cashflow positive by the end of Q4 2022;
- Be “significantly” cashflow positive by 2023;
- Drill 70-100 wells in the next few years;
- Prioritize well longevity and efficiency – focusing on wells/reserves with a 20 year lifespan;
- Become an industry leader in the Trenton-Black River, Clinton Sandstone and Cambrian Knox formations in both Grade 42 API light oil (“Sweet Crude”) and Natural Gas;
- Maintain the highest Oil Operating Netbacks in the industry;
- Employ the use of 3D Seismic and their vast corporate drilling experience in to identify and develop drill locations for new vertical wells in historically prolific areas throughout Ohio, USA;
- Follow up on currently held rights to drill additional oil wells in addition to the two wells discovered in 2016 at their Cambrian Knox program (please see above October 3rd 2019 News release);
- these wells are currently active producing “Sweet Crude;”
- Additional permits were approved as of late June 2022.
As of July 15th 2022, MAH issued a press release providing an update in part to the October 3rd 2019 placement regarding the Clinton Sandstone formation. Highlights included:
- Three wells currently scheduled for recompletion;
- Up to 40 wells could be scheduled for recompletion under this agreement;
- The cost to recomplete each well is anticipated to cost $185,000 USD and will be funded via current treasury holdings;
- MAH is currently reviewing additional opportunities as proposed by PEP:
- Potential construction of wells in the “Rose Run” formation; near existing wells which currently produce approx. 145,000 barrels of oil equivalent (“BOE”) and natural gas.
- Up to 40 wells could be scheduled for recompletion under this agreement;
Please see above news release for additional project developments and upcoming opportunities.
With all of the above at play and upside potential that remains, we are not looking to sell Marksmen Energy for a “quick flip.” With a promising average of $0.07 CAD and company developments on the horizon in conjunction with numerous future opportunities, we would like to see gains of 2.5-3x from our current position.
Marksmen Energy closed trading on the Venture exchange last Friday, July 29th 2022 at $0.11 CAD.
As always, seek professional financial advice and conduct your own due diligence prior to making any investment decisions,
Paradigm Market Research inc.
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