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Brookside Energy Ltd

Brookside Energy executes active acreage revaluation strategy in prolific US basin

Snapshot

The company is focused on a buy-low, sell-high land and leasing model in the SCOOP and STACK plays of Oklahoma’s Anadarko Basin.

Drilling rig

Quick facts: Brookside Energy Ltd

Price: $0.01

Market: ASX
Market Cap: $10.99 m
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  • South Central Oklahoma Oil Province (SCOOP) and Sooner Trend, Anadarko Basin, Canadian & Kingfisher Counties (STACK) are Oklahoma’s most productive oil and natural gas plays

  • They cover 50,000 square miles, where 129 drilling rigs produce 600,000 barrels of oil equivalent a day for US$3 billion of annual drilling and completion capital expenditure

  • Brookside hopes to grow its acreage by 3,600-acres to 6,000-acres by the December 2019 quarter

  • The company leases prospective ground for drilling, proves up reserves, then books proved undeveloped wells for drilling to enjoy accretive growth

What does Brookside Energy do?

Brookside Energy Ltd (ASX:BRK) is an oil & gas explorer focused on acquiring and upgrading prospective ground in the US state of Oklahoma. The company is backed by developer and equity portfolio manager Mark Casey through his Casey Capital investment outfit.

The energy company acquires undeveloped or undrilled acreage through a US$4 million leasing facility, then drills it through a US$3.5 million drilling joint venture or other drilling funding source.

The Casey-funded outfit is executing a buy-low, sell-high strategy to lease undeveloped acreage then pursue revaluation and appreciation through the funded drilling to establish high-quality proved undeveloped reserves.

Subiaco, WA-based Brookside is hoping to increase its acreage by 3,600-acres to 6,000-acres by the December 2019 quarter as it executes the company’s acreage revaluation business model.

Brookside is led by David Prentice, an energy and resources industry management professional with more than 15 years experience heading up companies and boards.

Prentice has an MBA and more than 27 years industry experience, having obtained degrees from the University of Western Australia and Deakin University.

The corporate leader has led Brookside as managing director since July 2015 while also serving as a non-executive director for a variety of energy and resource companies.

Prentice has served as chairman of Lustrum Minerals Limited (ASX:LRM) for the past two years and is a non-executive director of Brookside manager-partner Black Mesa Production LLC and Comet Resources Ltd (ASX:CRL).

He was MD of Red Fork Energy Limited (ASX:RFE) for the decade to 2015 and was previously chief executive officer of DLA Phillips Fox for three years.

What does Brookside Energy own?

By early July 2019, Brookside had taken its Sycamore & Woodford in the South Half (SWISH) and SCOOP land to about 2,700 acres.

The company’s key focus is its SWISH Area of Interest (SWISH AOI) in the SCOOP play, with SWISH AOI acreage now about 2,000 acres.

Brookside's SWISH AOI holdings include core operated development units and drilling spacing units (DSUs).

The company reported on July 5, 2019, its manager and partner, private Oklahoma company Black Mesa was “continuing to build on (its 2,700-acre) position with trading and high-grading activity, as we now direct our attention to establishing operations in a number of core operated DSUs.”

Australian-listed Brookside’s approach is to lease all or a portion of undeveloped acreage in a drilling unit of, say, 1,280-acres, then minimise dilution through using a drilling joint venture or drilling company to completely fund the costs of an initial or parent well.

The drilling can include a horizontal well bore about 10,000 feet below surface.

Once the company and its partners produce reserves from their efforts, Brookside can “book” all the reserves attributed to any proved undeveloped wells in the unit.

The approach allows for acreage revaluation and ensures Brookside can then “sell high” to other operators.

Activity within the SWISH AOI is ramping up generally, with top-tier operators Encana Corp (NYSE:ECA) and Continental Resources, Inc. (NYSE:CLR) both being active.

Brookside has an interest in a number of non-operated DSUs, with five at various stages from drilling to awaiting completion or full production.

The company previously executed its accretive strategy in its SWISH AOI, using $2.5 million of proceeds from acreage sales to reinvest in a leasing campaign for the area.

Brookside estimated it took an average of 29 months to achieve a payout on non-operated STACK Play wells.

The company currently has about 3.45MMboe of reserves attributable to about 20% of its acreage position for a combined net present value (NPV10) of US$12.5 million at a 10% discount.

Forecasted future net revenues are US$37.75 million.

Brookside’s reserve results translate to a US$30,000 an acre valuation, proving the broad value of its acreage revaluation business model.

Inflection points

  • Acquisition of additional STACK and SCOOP acreage in Oklahoma’s Anadarko Basin during 2019

  • Upgrade to reserves at new and existing acreages

  • Further execution of accretive strategy

Brookside executing “active” acreage revaluation strategy, says MD David Prentice

“Our team on the ground in Oklahoma is continuing to execute our strategy through an active trading and high-grading program that will see us accumulate a series of core DSU’s in what is now a very active and highly sought after part of the SCOOP Play in Oklahoma,” Brookside Energy managing director David Prentice said.

“This is an exciting opportunity for Brookside, and a clear demonstration of our ability to successfully replicate and scale-up the land and leasing model we have piloted in the STACK (Sooner Trend Andarko Canadian and Kingfisher) Play.

“We have already grown our SWISH AOI position to five times that of our STACK position, where late last year we booked our maiden reserves of oil and gas with an NPV of US$12.5 million or approximately US$30,000 per acre.”

 

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