Molecular Energies 'disappointed' with Paraguay well suspension

1st Mar 2024 14:45

(Sharecast News) - Molecular Energies said in an update on Friday that the Tapir x-1 exploration well in Paraguay had been temporarily suspended due to challenging drilling conditions, failing to reach the target zone.

The AIM-traded firm said the decision to suspend operations was under review by all involved parties, weighing the risk-reward ratio associated with the well.

Further details would be disclosed in accordance with confidentiality and regulatory constraints, the board said.

It noted that the venture was considered frontier exploration, with an estimated 17% chance of success.

Molecular also reported positive cash receipts from President Petroleum, its former subsidiary, which was making progress in paying down the $13m debt owed to Molecular.

About $1.28m had been repaid within the last four months, with expectations of ongoing cash inflows.

Significant advancements were also reported regarding GHC, with an upcoming separate announcement anticipated early next week.

GHC received EIS advance assurance from HMRC - a significant milestone under the UK government's EIS scheme.

That, the board said, would pave the way for potential investments in GHC to qualify as 'qualifying holdings' for a venture capital trust.

Molecular said it had also embarked on studies with global engineering consultancy Aecom to assess the feasibility of venturing into the sustainable aviation fuel (SAF) sector.

The studies were progressing, with Molecular leveraging its expertise, management capabilities and knowledge of supportive multilateral funders and institutions.

SAF was described by the company as a promising opportunity, given the increasing demand from airlines globally.

Production entailed a complex process and substantial investment, however, with updates to be provided as developments unfolded.

Finally, Molecular acknowledged the progress of Atome, adding that it remained confident that its investment in Atome would yield significant shareholder value in the future.

"The result of the Tapir x-1 well, whilst disappointing, is not surprising given it is frontier exploration," said chair Peter Levine.

"Sometimes it is the better decision in tough drilling conditions to make a bold resolution to suspend rather than continuing in escalating cumulative down hole issues, especially taking into account the risk-reward ratio."

Levine said the progress being made in GreenHouse was promising, as was the continued cash flow coming from the previously-disposed Argentine business.

"This bodes well for the future and complete collection of the $13m intercompany debt."

At 1410 GMT, shares in Molecular Energies were down 22.63% at 21.2p.

Reporting by Josh White for Sharecast.com.