It has been a busy week at Renaissance Oil Corp (OTCMKTS:RNSFF) and one filled with jubilation for their shareholders. The company’s shares have risen from their previous price of $.17 at which period their shares were barely trading at a price of $.23 where over 500,000 were traded.
This price action can be seen in the chart below:
This near 40% spiked our interest in the company, leading us to evaluate it with a view to finding out whether this price run is merely short-term or one which will hold over time.
History of Renaissance
However, let us first have a brief overview of the company for the sake of first-time readers.
Renaissance Oil Corp is a Canadian based exploration stage company that engages in developing shale and mature fields portfolio for the development in Mexico. The company is focused on the acquisition, exploration, and development of oil and gas properties. It was founded by Craig Steinke and Ian Telfer.
Renaissance: The Current State
In late November last year, the company announced that it had initiated a multiple well drilling program on the Amatian block in Veracruz, Mexico working with its parent company Lukoil Renaissance. The company takes pride in owning certain blocks in Chiapas Mexico comprising 39% oil and 61% natural gas. It is on a journey to becoming a major Mexican energy producer.
Shale oil deposits is a sedimentary rock that is the geological kitchen transforming kerogen and organic deposits into oil and gas with heat and pressure. This is what has made the United States of America become a global force in the energy market due to the fact that producers have figured out how to economically recover oil and gas from these huge resources. In Mexico, shale oil has never been commercially extracted from the ground. It is a well-documented fact that deposits exist in this country though this is not publicized.
This vast resource in Mexico has not had the proper technology and capital applied to it to be made commercial and Renaissance wants to pull a first in this area. Renaissance is trading its guns on becoming the largest pure public player in the Mexican oil basin tapping into areas that have the same geology as other world’s large players in this field. There is a considerable degree of optimism of world-class reserves being hidden underground in Mexico. When Mexico scrapped its oil monopoly the big boys, Pemex, came calling. Renaissance followed suit and acquired the choicest three pieces of property up for auction in December 2015.
The partnership that followed was that Lukoil the Russian oil giant approached Renaissance to develop a world-class hydrocarbon resource in Mexico. With the partnership officially penned down in February 2017. Renaissance by so sealing the deal bought 25% stake in Lukoil’s contract to develop the large Amatatitlan block in Veracruz Mexico with an option of up to 62% stake moving forward.
The agreement, therefore, gives Renaissance access to a proven property (over 175,000 of light oil produced) with a huge undeveloped resource and the financial might to expedite development ahead of everyone else. Renaissance is on the road to hitting a jackpot by reaping big from this untapped resource.
It is believed that Amatian holds 6.2 billion barrels of oil in place of shales. This is after extensive evaluation of rock samples and test wells in the area.
Early this year in the month of February to be precise, Renaissance Oil Corporation announced a C $1 million brokered private placement fully committed an option to increase offering size to C$11.5 million. To achieve progress on this front, the company was working in conjunction with Haywood securities as the lead agent. A total of over C $10,000,000 had been raised with the option of raising an additional C $6,000,000. The units will consist of one share of the company and one common share purchase warrant. The holder of the warrant will acquire the right to buy one common share of the company at a purchase price of C$0.50 for a period of 36 months from the date of issue.
The proceeds of this financing arrangements will boost the company’s efforts to secure oil and gas rights in Mexico, fund capital expenditures and for general corporate purposes. The offer period closes on March 2, 2018. Key among these is the completion of documentation and receipt of regulatory approval, including acceptance of TSX Venture exchange.
The basin where the company is currently doing exploration work has been left virgin for years and is located in the Northern part of the Gulf basin of Veracruz and some areas of the neighboring states of Tamaulipas and Puebla in Mexico. TampiCo Misantla remains a huge basin in terms of the oil it has produced to date and it’s potential. It remains a multi-zone with different producing horizons many of which are underexplored.
Renaissance first fully secured an exclusive right to acquire a 50 percent stake of Perforadora’s half-stake in the neighboring block measuring 61,300-acre Pitepee integrated and exploration and production contract to explore and produce oil and gas near Poza Rica in Veracruz.
The contract awaits necessary approvals by the constitutional amendments of the Mexican Energy Reform to become a contract of exploration and production. If the approval were to go through as expected, Renaissance would have the exclusive right to acquire up to 50 % of Perfomadora’s interest in the Pitepee block at fair market value. The Pitepee block is adjacent to the 60,000-acre Amatatitlan block. Renaissance plans to develop a portfolio of high quality diversified shale and mature fields in Mexico where it comes a distant second place in the ranking of oil and gas production.
During a recent Renaissance services event organized at Muscat securities market, the investors and analysts meeting provided a forum for top executives of the company to give an update of the company’s performance and answer queries from key stakeholders. The event took place on the 30th day of January 2018.
Renaissance senior management gave a blow by blow account of the company’s performance over the past three years along with projections into the future within the global space. The senior management team was quick to point out the financial bottlenecks experienced by the company in the wake of a decline in crude oil prices worldwide. The upward trend in crude prices gives the company a fair degree of optimism of a bright future and a healthy balance sheet which translates to improved returns to shareholders. The group has two core business units, Topaz and Renaissance.
Topaz is engaged in providing logistic support through offshore support vessels to the oil and gas sector primarily located in the Caspian Sea and MENA region. Renaissance offers facilities management solutions for businesses across many locations in the country. It has a strategically important contract with Total in Azerbaijan. It’s US $350 million project in Kazakhstan is progressing on well and is within the company budget.
On the Renaissance business front, it emerged from the meeting that the performance of the company’s core business facilities and managemental services is good. The occupancy in the flagship Renaissance Villages in the oilfields remains stable the company is optimistic that the rewards from major projects would start trickling in the second half of 2018.
The recent increase in crude oil prices on a global scale has been a huge pointer of better things to come for Renaissance group in the year 2018 and beyond. The company in mid-November last year announced the completion of a third work over program which saw the completion of a lower zone in the Chicontepec formation in a previously non-producing well. Gross production from the three workovers has stabilized at approximately 110 bbls/d of 38 API light oil. This translates to an estate C$650,000 or under C$6,000 per producing barrel.
Renaissance and its partner company Lukoil are efficiently re-establishing production on Amatian through light and heavy workovers and are ready to commence drilling the shallower Chicontepec and deeper Upper Jurassic Shales.
Renaissance boasts of people who revolutionized the USA shale production and has the requisite technology to do so in a space where there is no big player to compete with. All roads will soon lead to Renaissance as a genuine tested pioneer in the Shale industry and the leading independent onshore producer in Mexico.
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Disclosure: We have no position in RNSFF and have not been compensated for this article.