About five months back I noted a small shell completing its RTO to become Halio Energy (HOL.V). Not a lot of news was available on the project, where it was headed or what it planned to do, but I did manage to extract that an all-star oil and gas man was at the helm.
Joe Casabona is an old school energy guy, a director of the $2 billion PDC Energy (NASDAQ:PDCE), a former long time Executive VP of the private, humongous, and loaded with wealthy elites Energy Corporation of America.
Casabona had retired, but kept an oar in the water with a company called Halio Capital, the website of which stated they would be investing in stateside energy. He’d quietly rolled in on a tired old shell, and changed the name to Halio Energy. And then… silence.
The stock traded lightly during the quiet times, and I sent out a few more notes with anything I could learn in the meantime, but execs weren’t talking and news releases weren’t plentiful. And so I loaded up and waited…
This week, the silence was finally punctuated with a newser that didn’t catch the attention of many, but made my day for two reasons. 1) The market cap of Halio is just $1.4 million, so any positive activity should see the price spike, and 2) I was literally considering selling my stake this week, because it seemed like nothing was going on.
“Halio Energy Inc. (“Halio” or the “Company”) (TSXV – HOL) is pleased to announce the signing of a Farm-out Agreement to drill several high-priority oil and gas prospects in Oregon’s Western Idaho Basin (“the Project”), conditional on the Company obtaining financing on terms and conditions satisfactory to the Company. The area covered by the agreement is approximately 57,000 acres, where 10 initial prospects have been identified.”
Now we’re talking. So let’s take a look out at the Western Idaho Basin’s past and see what we see.
Back in 2010, Bridge Resources did a bunch of drilling in the WIB, and found some serious value, with a best case contingent resources on their property of $125.6 million. They eventually changed their name to Idaho Natural Resources Corporation (IDN.V), and their market cap high point (before oil slumped) was $130m of net worth. Ultimately INRC fell in on itself when it couldn’t arrange the cash it needed to exploit the resource. Casabona shouldn’t have the same troubles.
What I know of the property is this:
- There’s a pipeline right at the front door (the 2/3 capacity Williams Northwest Pipeline), allowing the company to produce quickly and transport its resource without a huge up front cost
- Should the company choose to transport by rail instead, there’s a railway line going directly to a Salt Lake City refinery just as close
- Bridge Resources documentation when they drilled the area in 2010 said, “These are very small fracs to clean-up highly porous conventional sand reservoirs”
- Follow-up drilling in 2013 through 2015 was similarly successful
- The area reportedly shows good gas quality without acid gasses to filter out
- Commercial development in the area began in 2015, so there’s already infrastructure and government enthusiasm for the area
- Halio has purchased 348 miles of 2D seismic data and has another 225 miles as proprietary. There’s 3D seismic data for the area to be had if they choose to pursue that
So, okay, oil and gas aren’t in their halcyon hey-days right now, but you’ve got to look at this company’s $1.4 million market cap as being sadly underbought with this play now part of their roster.
Back to the news release:
“Halio can earn a 50% interest in the Project by funding the drilling of three conventional wells. Estimated drilling and completion costs for each well is $1 million USD. The wells will be drilled to a maximum depth of 6,000 feet. Subsequent to the drilling of the three initial wells, Halio will become the operator of the Project. Halio will also have the option to increase its working interest in the leases through direct purchase.”
So $3 million earns half the property and advances it to near production. Halio raised $1.5 million before it even looked at the WIB, so it’s already halfway there, and trading at cash value.
Let’s look even deeper: Operation Manager Ed Davies has previous experience with Shell, Conoco, Energy Corporation of America (where he worked with Casabona), and… Bridge Resources, which had drilled in the basin previously. Technical Manager Tom Stewart also has experience with Conoco and ECA… and Bridge.
So here we are with a low market cap company with billion-dollar execs that has just whispered only what it had to in relation to its new deal, and kept very bloody quiet for months now as it geared up to this.
The kicker? There are, according to the data I see online, only 1.95 million shares outstanding. Not 195 million. Not 19.5 million. 1.95 million
(See note in the comments section: Apparently Morningstar info on this ticker is out of date and 22m shares exist)
You think these guys have some room to move on this one? At the time of writing, Halio is at $0.70. It’s $10k of buying from the $0.80 mark.
What will happen when the word gets out?
Well the word is out. Halio Energy on your watchlists.
— Chris Parry
FULL DISCLOSURE: I own a bunch and will be buying more on dips.