Has anyone here heard anything from the company regarding how it's going to raise the money required for TSB-3?
The $5 million covertible debt financing announced on November 30, 2011 won't be enough to cover the cost projections outlined in the Dec. 6 Jennings Capital Report on Mira:
https://www.jenningscapital.com/reports/MRP20111206LoweringTarget.pdf
Excerpt
> Financing becomes the key issue. Mira would like
build the facilities required to commence production.
recommendation.
Formation Damage Limits Production from TSB-1
Yesterday, Mira provided updates on its production testing on the TSB-1 well.
Testing of the lower interval of the U7 sand has been completed and the well is
being suspended. The key disclosures were:
• Production rates ranged from 77 - 512 Bbl/d (280 Bbl/d average) at
various choke sizes. Four days were required to clean up before
conducting the tests over three days.
• No formation water was produced and the gas oil ratio (“GOR”) ranged
from 850 to 950 ft
3
/Bbl.
• The testing to date (including a short duration pressure build up)
suggests that the U7 was damaged during the original drilling. The well
kicked immediately below the U7, and Shell had to increase the mud
weight and use other materials to regain full control, affecting all zones
exposed including the U7 and U4. The Company estimates that it would
require ten additional days to calculate definitive skin and permeability.
• Reservoir modelling suggests that a pump could increase the rate to
1,500 Bbl/d. Furthermore, if the U4 were to be completed and put on
production comingled with the U7, the total well output could be as high
as 2,500 Bbl/d.
• The new logs indicate 146 ft of net pay in the U7, much higher than the
48 ft used in the last resource assessment. As such, we anticipate
significant upside to the 8.7 MMBbl of contingent resources in the next
resource assessment due in early 2012. Moreover, the U8, U9, and
U9.5 zones remain untested and still offer significant additional potential.
We substantially agree with Mira’s assessment of the well and, in particular, the
U7 results. We do not have sufficient data to verify or challenge the production
rates modelled, but they do not seem implausible. If the well is severely
damaged, (say for instance, a skin factor of 10 or 20), removal or remediation of
the damage could increase the rates by 100% - 250%, if all other factors
remained constant. That remediation could be done via a number of methods
including frac’ing or acid stimulation.
This is not a riskless proposition, however – it is still possible that the
disappointing rates could at least in part be a function more of lower permeability
rather than skin damage. Ideally, the Company would like to perform the
additional testing, but equipment and funding constraints prevent that at this time.
The lack of funds is Mira’s greatest challenge. We do not believe that the
potential of the Tom Shot Bank field has been impaired – indeed, the new logs
suggest that the contingent resources could be much larger than the 8.7 MMBbl
(gross) assigned by Netherland Sewell in 2010. Testing and validating those
resources will require drilling TSB-3 (at a cost of $25 million) and tying the Tom
Shot Bank field into Stubb Creek for production (another $28 million). Both of
these will be at 100% cost to Mira under the terms of its farm-in agreements.
This is a worst case of sorts. It may be possible for the Company to raise a
lesser amount to finish testing and completion of TSB-1 and tie-in the field before
TSB-3 is drilled (Once production starts, all partners must pay their share of
capital costs, so Mira would only have to pay 48% of the cost of TSB-3). The
problem with that is that it will be difficult to raise money for production facilities
for a well which has not yet been proven commercial. It could also drill TSB-3,
and, if successful, the remaining capital could be raised at a better price. If
TSB-3 is unsuccessful, however, the Company would then again be stuck.
So, Mira is faced with the choice of raising the additional funds at the cost of
massive dilution to its current shareholders, or farming out to a third party who
can fund these operations.
In the first case, we expect the Company would have to raise $50 million to drill
TSB-3 and subsequently tie in the field to Stubb Creek. We have used a share
price of
.10, a 17% discount to yesterday’s closing price
1
. Other major
changes from our last report include:
• TSB-1 will be partially remediated and produce 2,000 Bbl/d (we continue
to believe that TSB-3 will produce 3,500 Bbl/d as modern drilling
techniques will avoid similar damage).
• Production start-up has been postponed to Q1 2013.
• Our chances of success for the TSB contingent resources have been
reduced to 60% from 80% in recognition of the results to date.