The writer of this piece, Jim Bentein, is a personal friend for many years here in Mexico. Jim, also writes for the Daily Oil Bulletin, out of Calgary, Canada. In full disclosure, I own a position in Renaissance Oil via their stock warrants trading on the TSX Venture as ROE.WT.A . I am not a financial advisor and interested investors should seek the advice of their advisors before buying the common shares and/or stock warrants of Renaissance Oil.
ROE – common shares Closing Price on October 13, 2017 – C$0.235
ROE.WT.A – stock warrants Closing Price on October 13, 2017 – C$0.105
BY JIM BENTEIN
Lake Chapala, Mexico
Vancouver-based junior Renaissance Oil Corp., which has become one of the most active participants in Mexico’s recently privatized oil and gas market, has announced that one of the world’s richest men has become an investor in the company and will be a strategic advisor.
Renaissance, in a press release issued on Thursday, announced that Monaco-based Eskandar Maleki has been granted shares and warrants of the fledgling Mexican-focused producer.
Maleki, originally from Iran, has a net worth of several hundred millions of dollars and is considered one of the world’s top art collectors.
Renaissance announced that it has agreed to issue almost 17.4 million shares of the company to Maleki, at a price of 0.1725 per unit, for gross proceeds to the company of $3 million Cdn. Each unit comprises one common share of the TSX Venture Exchange-listed company, as well as one common share warrant. Each of the warrants are exercisable to allow for the purchase of an additional common share of Renaissance at a price of C$0.50 for three years. In addition, the company announced that an associate of Maleki’s will be purchasing a further 869,565 of the units for C$150,000.
In connection with the investment, subject to regulatory and shareholder approvals, including acceptance of the TSX Venture Exchange, the company has agreed to provide “performance-based compensation” to Maleki, in the form of common shares, at a value created by Renaissance, “as a result of securing oil and gas opportunities in Mexico”.
Maleki has a strong record of building successful oil and gas companies. Most notably, he was an early strategic investor, board member and, at one time, the largest shareholder in London Stock Exchange-listed Tullow Oil PLC. During his tenure with Tullow, it grew from a junior with a market capitalization of about U.S.$30 million to U.S.$20 billion, with 85 exploration and production licences across 17 countries.
Kevin Smith, Calgary-based vice president of business development with Renaissance, told Daily Oil Bulletin Maleki approached the company earlier this year.
“He took a keen interest in our company and approached us,” he said. “He thought he could help our business in Mexico.”
Craig Steinke, chief executive with Renaissance, also commented on the involvement of Maleki in the company.
“We are extremely pleased to have Eskandar as a strategic partner and look forward to accelerating our growth in Mexico, with the objective of creating significant value for our shareholders,” he said in the press release.
The company said it expects the investment to be completed by October. 16.
The junior said proceeds from the investment will be used to acquire additional oil and gas rights in Mexico and for general corporate purposes.
All of the securities issued under the transaction will be subject to a hold period of four months and one day from issuance, in accordance with Canadian securities laws.
The Maleki share purchase represents about 7.61 percent of the issued and outstanding common shares of Renaissance on a non-diluted basis (about 14.14 percent on a partially-diluted basis).
Smith said the addition of Maleki as a strategic investor has already caused a spike in shares of the company, which had been trading at about 16 cents each and have since risen to about 25-26 cents.
He said Maleki’s involvement in the company should help it accelerate its presence in Mexico.
“He will help us with deal flow and funding opportunities,” he said.
Renaissance last year became the first private sector oil and gas company to produce oil and gas in Mexico, after the almost 80-year monopoly of state-owned Petroleos Mexicans (Pemex) ended.
The company, which earlier this year released results based on production from smaller oil and gas blocks in the southern state of Chiapas, where it holds three fields, said it is moving ahead with drilling plans in its highly prospective Amatitlán block, part of the Chicontepec formation, which holds billions of barrels of oil reserves. It won the rights to develop that block earlier this year.
Renaissance, which announced this past February it had partnered with Lukoil, the giant Russian oil and gas company, to acquire a 25 percent interest in a contract to develop the 230 sq. km. Amatitlán block, near Poza Rica, Veracruz, said its drilling plans are now on track.
Renaissance said it is focused on developing the Upper Jurassic shale and shallower Tertiary formations present in the Amatitlán block, which the company said it believes holds “significant resource potential”.
Smith said the company has ambitious plans for its nearby Amatitlán block, located in the Tampico-Misantla Basin, which has been compared to the booming Permian Basin in Texas.
Steinke, in a press release this past summer, said the company has made “significant progress in preparation for its initial drilling program” in that area.
“Renaissance, through Lumex Operacion … has contracted Weatherford de Mexico S. de C.V., a subsidiary of Weatherford International … for a committed drilling program in the Amatitlán block,” Steinke said in the release. “The first six wells, targeting the shallow Chicontepec formation, is expected to spud in early Q4, 2017, pending government permitting…The company is aggressively working to obtain the permit to spud a deeper unconventional well …”
In the release, Renaissance said it plans to drill an initial vertical well to evaluate the Upper Jurassic shale formation in the fourth quarter. It said it would follow that with a horizontal well and complete the well with hydraulic fracturing.
“Based on proprietary geochemical evaluation, Renaissance believes the Upper Jurassic section throughout the Amatitlán block is a high potential reservoir. If the first well is successful, the 60,000 acre block has the potential for an aggressive unconventional development program. Renaissance has taken the lead role in operations and holds options to increase its interest in Amatitlán to 62.5% of current partner’s interest, upon successful development of the property,” Steinke said in the release.
The Amatitlán block holds an estimated 4 billion bbls of conventional oil reserves and 6 billion bbls of unconventional oil reserves.
The company, which began production from its Chiapas blocks; Mundo Nuevo, Topen and Malva, last spring, is now producing 1,500 boe/d there.
Smith said Renaissance is now concentrating on field workovers of existing wells in its Amatitlán block.
He said the company plans to drill nine wells there, starting in November through to the latter part of December.
“We’ll have a steady flow of drilling results, starting in the first quarter of 2018,” he said.