Mosman Oil & Gas earlier this month unveiled a new report by industry consultant Sproule which laid out a ‘technically credible’ project at Sagebrush, in Colorado, with a gross value pitched between $40million and $80million.
For context, that’s more than 10-times what the AIM share price reckons the company’s worth.
Unsurprisingly, Mosman called it ‘a very significant milestone’.
Beyond the estimates, however, the report marked something much more significant albeit it was a little bit subtle too.
Mosman is a nano-cap player in the sector, and, whilst it’s had its enthusiastic followers, its efforts have generally lacked the scale of many of its would-be sector peers on AIM.
Yet, here was Mosman releasing, pre-test, a detailed independent assessment of its Sagebrush project penned by a well regarded international consultancy.
Frankly, it laid down a marker. It signalled a different methodology, arguably one that’s expected of larger, more established, better resourced operations.
In a way it underlined that Mosman’s team is running a more traditional industry playbook.
For a company with a market cap of around £6million, with around £1.4million in the bank (A$2.26 million) and a tepid track-record, it seemed like an important but not obvious departure.
That said, Mosman has been going through a transformation.
Sure, aren’t we all
Now, on AIM in 2025, finding a small cap firm mid transformation is frankly shooting fish in a barrel.
As the junior bourse is showing signs of revival after a few years of choked capital and dwindled trading liquidity, and as the market’s survivors emerge into the light, it isn’t hard to find the pivots, revamps, restructures or reboots amongst each day’s news flow.
But there are a few factors that market this story as different, interesting and one to watch.
But, we’ll come back to this shortly. First, let’s rewind very slightly.
The Vecta distraction
Mosman kicked off its reboot when it switched its attention to helium, from previously a mixed bag of Australian exploration assets, and small scale oil production in North America.
It wasn’t alone in this thinking. The move came as a number of other small-caps turned to helium – a valuable gas that’s essential for industry, but not a combusting hydrocarbon.
Whilst not a unique endeavour, Mosman’s move to helium quickly caught the attention of investors as it opened this new strategy with a joint venture in five planned wells located in eastern Colorado, referred to at the time as the Vecta project.
It ended in disappointment, after well results failed to match the expectations.
Vecta, in retrospect, was the wrong project at the right time.
Nevertheless, somewhat in the background, Mosman was putting together a quite different proposition.
Howard Mclaughlin, at the time Mosman’s head of US operations, identified the Sagebrush and Coyote Wash projects in Western Colorado, in the ‘four corners’ region.
More substantiated
‘When you compare Eastern Colorado from Western Colorado, the area we were looking at in the West is more traditional, drilling deeper, using 3D seismic, and lots of well control data,’ explained Mclaughlin, who today is Mosman’s chief executive.
‘From a geologist’s point of view, you can really get into it, roll up your sleeves and work up plays.’
‘The prospects that Vector put together in East Colorado were generally based on surface geology. That is a proven methodology as long as the surface is somewhat similar to the subsurface.
‘As it turned out after we drilled the first couple of wells, there was a, a complete disengagement between what was happening in the subsurface and what was happening on the surface.’
‘So, we could see that coming after we drilled the second well. We decided, if the third well is a bust then we were done there.’
‘But we did generate some interest in the market, and we did meet a lot of very important people in the helium business.’
The Sagebrush and Coyote Wash projects (the latter is much larger and currently less proven) are much more fundamental and a lot more attractive, according to Mclaughlin.
A closer look at Sagebrush
Maybe the most attractive part of Sagebrush is that it already has a deep well drilled.
Another significant matter is that there’s the possibility that it can tap both helium gas, and oil, from parallel operations. It’s a factor that could materially boost project development options, though more data will be needed first.
The presence of an existing well, drilled in 1993, allows a company of Mosman’s financial means to get a foothold.
Not having to drill from scratch is saving Mosman something in the region of $3million to £4 million, according to Mclaughlin.
And, to put that another way, the saving would equate to more than half of Mosman’s current market value.
‘That immediately captured my attention,’ Mclaughlin said.
‘It means we have a real advancement in project timing. We’re not starting at grassroots exploration. The well already had a gas analysis that already tested commercial helium. It’s got high reservoir pressure, so, pretty much everything we needed.’
‘This is a real project with real value and a lot of upside.’
Mosman is guiding that it will conduct the well testing hopefully before the end of 2025.
Among the next steps before that will be the final sign off from the Bureau of Indian Affairs, to greenlight the programme.
A successful test at Sagebrush will unlock a development project. After that, Mosman will move on to look at the options for gas processing and route to market.
There’ll also be the not-so-small matter of Coyote Wash.
‘Sagebrush is more of a proof of concept. Coyote Wash is the meat and potatoes, that’s really where the significant value is going to lie.
‘For all intents and purposes, the geology is not that much different than Sagebrush because they are quite close together, so our expectation is we will have four, five or six times as much helium in rock as Sagebrush.’
At this point, it probably goes without saying that success at both Sagebrush and Coyote Wash will render the company practically unrecognisable from its recent incarnation.
Time will tell whether the company can complete its reinvention. But, what you can always guarantee, with Mosman the story will never be dull.
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