Columbus Energy Resources – Gets a bit of nitro from Schroders

News out this morning from CERP’s announcing an institutional placing agreed with Schroders for £3m at 5p a share. An open offer has also been launched to ensure all shareholders can partake in some form on a 1 for 31 basis (although you may get more than your quota via excess applications).

I don’t normally get excited by placings which come at a 17% discount to closing price. But getting a large respected holder like Schroders on board is no small feat for a small cap. It’s testament to the management team and the chairman in particular that they have managed to secure these funds.

It wasn’t that long ago that management were discussing the prospect of being cash flow positive. This was being driven by boosting small field production of which there are around 160 wells which can be ‘boosted’. Thus far, the company has increased production from some wells by 10 fold. Yes we are talking small stuff from the outset but taking a 6 barrel a day well and turning it into 60 barrel a day producer is massive for a company with such low barrel costs (roughly $5pb, although additional opex and G&A need to be considered). If CERP can do this across their licence with 160 wells, just imagine the production increases and cash flow potential. And that’s just one licence. The company has deep prospects as well as other resource potential in other licences.

Prior to this placing deal, it may have taken the company several months before being able to accelerate the production and ops program. Positive cash flows would have enabled a slow development of the wells. With £4m+ in the sky rocket (pocket) CERP is now super charged to enhance production with greater speed and potentially drill a deep well which could deliver sizable increases in mmboe resource.

Columbus Energy is certainly reborn. The future looks bright indeed.

Current price 5.8p.

CERP.L previously given the ‘heads up’ on thesharehub 3 weeks ago at 3.9p a share. See previous post here.