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New World Oil & Gas chief on the front foot as he aims to build a mid-cap oil producer

Landing US$25mln of new funding (and with it a new cornerstone investor in Niel Petroleum) and gaining access to a debt facility of the same order, has put one of the junior market’s most followed oil firms very much on the front foot.
New World Oil & Gas chief on the front foot as he aims to build a mid-cap oil producer

The news of the summer for followers of the growth company sector was the Lazarus-like resurrection of New World Oil & Gas (LON:NEW), headed by the irrepressible Bill Kelleher.

Landing US$25mln of new funding (and with it a new cornerstone investor in Niel Petroleum) and gaining access to a debt facility of the same order, has put one of the junior market’s most followed oil firms very much on the front foot.

It’s a transformational sum and one that allows it to fund a strategy that could – if executed properly - comfortably catapult New World into the realms of the mid-caps.

But Kelleher is not only thinking along those lines; he is also focused on building a sustainable company based on solid fundamentals.

One that is and derived from the exploration, exploitation, acquisitions and, ultimately, the production of oil and gas, he says.

The plan is to add production to its highly prospective exploration acreage in Belize, Central America, and onshore Denmark.

But New World won’t be acquiring producing assets just for the sake of it.

No, the plan is buy right and then add value.

“The best and easiest way to do this is by reclassifying probable reserves into the proven category, proven undeveloped reserves into proven developed producing reserves and closing existing production performance gaps,” reveals Kelleher.

”The latter achieved by advancing a number of technical steps in proper order which will be designed to maximize the dollar increase in value per dollar invested.”

The group will focusing on the French speaking African region, North Africa, the Middle East and other areas where value can be acquired sensibly with strong value upside potential.

The company will also use some of the industry contacts of Niel, which are global.

For the principals of New World’s new 75% shareholder are veterans of the oil and gas industry, and they have an impressive track record of developing projects that deliver stellar returns.

Kelleher, though, is keen to keep his cards close to his chest on the assets he wants to acquire.

However, he does at least reveal his targets are onshore: “Don’t expect us to drill in 10,000 feet of water.

“We are not going to participate in any tenders. We are negotiating deals where we can bring our experience to the table along with our cash and the debt facility to add value. We are very close to advancing on a few very promising projects.”

It has been exploration rather than production for which New World has been noted to date, and it came so, so close to delivering a commercial discovery on its Blue Creek licence in Belize.

Three wells (all delivered on time and to budget) found three elements of a productive hydrocarbon system: source, migration and seal. What it didn’t identify (or benefit from) was a trapping element.

In this world you get nothing for being close. However, there are a couple of positives to be drawn from the adventure.

The first is the group now has full control of Blue Creek and has identified five drill-ready targets.

It is also two years ahead on its drill commitments, which gives it the breathing space to decide what it wants to do next.

That said, there is some interest in the project, and the data gleaned from it that has interested others operating in Belize. The way forward may be some sort of joint-venture, Kelleher reveals.

“We are evaluating what they have and vice versa and at some point other interested companies will come back to us,” he adds.

“There are a number of companies operating in Belize now that are attempting to benefit from what we know about Belize now.

“We are pretty much well ahead of the curve on what we know about the sub-surface of Belize.”

There is also interest in Denmark, where it has a stake in the Danica-Jutland licences alongside the state-owned North Sea fund.

 “We are in serious discussion with a major oil company seriously considering to farm in with us. We are very close to making a deal happen,” Kelleher reveals.

The strategy of defraying risk and the cost of exploration by partnership and bringing in production is a sensible one, and it brings us back to Kelleher’s word of the day: ‘sustainability’.

“So this means creating a business that can support itself from cash flow, and not just overheads and operating expenses, but also by capturing the upside from cash generated and by use of an available sensibly priced debt facility,” says Kelleher.

“The message is we are going to be more sustainable and soon you will see our company grow into the mid cap level and above.

 “At the same time we will continue to pursue our exploration ambitions.”

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New World Oil & Gas Timeline

September 15 2015

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