AXP Energy Faces Cash Flow Pressure as Colorado Production Declines and Focus Shifts to Oklahoma
AXP Energy has drilled its inaugural vertical well in Oklahoma following a significant lease acquisition and raised A$2.7 million to fund exploration, while production in Colorado declined due to operational challenges.
- First vertical well drilled in Oklahoma with hydraulic fracture stimulation completed
- A$2.7 million raised in two-tranche placement to support development
- Colorado production down 16% for oil and 15% for gas due to weather and equipment issues
- Strategic shift to focus on Oklahoma operations amid Colorado regulatory delays
- Operating cash outflow of $840,178 with cash reserves at $238,735 at quarter-end
Strategic Expansion into Oklahoma
AXP Energy Limited has marked a significant milestone this quarter by drilling its first vertical well in Oklahoma, following the acquisition of 1,400 acres of oil and gas leases in Noble and Kay Counties. The Charlie #1 well reached a total depth of 4,725 feet, with hydraulic fracture stimulation recently completed and the company now awaiting flowback and evaluation results. This move positions AXP in a proven geological region with multiple payzones and proximity to established infrastructure, including the Phillips 66 Oil Refinery at Ponca City.
Capital Raising to Fuel Growth
To support its exploration and development activities, AXP successfully raised A$2.7 million in a two-tranche placement during the quarter. The first tranche of approximately A$1.67 million was received in August, followed by a second tranche of just over A$1 million in October after shareholder approval. These funds are critical as the company plans to drill additional wells in Oklahoma and scale its operations in the coming months.
Challenges in Colorado Operations
Meanwhile, production in Colorado experienced a notable decline, with oil output down 16% and gas production down 15% compared to the previous quarter. The downturn was attributed to extreme hot weather conditions and equipment shutdowns, which also impacted the company's Gas to Power operations and payments under its joint venture with Blackhart Technologies Inc. Regulatory delays in Colorado have further influenced AXP's decision to pivot its focus toward Oklahoma.
Financial Performance and Outlook
Financially, the company reported a 31% drop in revenue from continuing operations to $132,061 for the quarter. Operating cash flow was negative at $840,178, reflecting ongoing development, production, and corporate expenses. Cash and cash equivalents stood at $238,735 at quarter-end, down from $424,752 previously. However, subsequent to the quarter, AXP received additional proceeds from share issues, tax refunds, bond deposit refunds, and oil receipts, which are expected to bolster liquidity going forward.
Safety and Environmental Stewardship
On the operational front, the company reported no recordable injuries or environmental concerns during the quarter, underscoring its commitment to safe and responsible resource development.
Looking Ahead
With the Oklahoma well now stimulated and further drilling planned, AXP Energy is poised to capitalize on its new acreage and infrastructure advantages. The strategic shift away from Colorado, driven by operational and regulatory hurdles, signals a recalibration of the company’s growth trajectory. Investors will be watching closely for flowback results and production ramp-up from Oklahoma to assess the potential for reversing recent production declines and improving financial performance.
Bottom Line?
AXP Energy’s pivot to Oklahoma and fresh capital injection set the stage for a pivotal growth phase, but operational and financial challenges remain to be navigated.
Questions in the middle?
- When will the flowback results from the Oklahoma Charlie #1 well be available, and what production rates can be expected?
- How will ongoing regulatory delays in Colorado affect AXP’s long-term operational strategy and asset portfolio?
- What are the company’s plans to manage cash flow given the recent operating outflows and relatively low cash reserves?
