Page 6 - Sun Resources 2014 Annual Report

CHAIRMAN’S LETTER
SUN RESOURCES ANNUAL REPORT 2014 4
Dear Shareholder,
As this is my first year as your Chairman, let me start by
thanking Dr Wolf Martinick for his stewardship of Sun in
the initial years of Sun’s journey through the Woodbine
of East Texas. I accepted a position on the Board as the
nominee for Hancock Prospecting Pty Ltd in September
2013 and I replaced Wolf as Chairman at the Annual
General Meeting of Sun in November 2013. I have enjoyed
his wise counsel as a Non-Executive Director since he
stepped down as Chairman.
The Board and management of Sun have spent the period
from 1 July 2013 to 30 June 2014 continuing to drill and
lease to maintain our material land position while unlocking
the value we see in the various levels of the Woodbine play
in East Texas. Unfortunately, to date, while each horizontal
well we have drilled has encountered oil in the target zone,
we have struggled to deliver a strong commercial success
that would re-rate the share price and allow us to book
reserves to the balance sheet. This remains our strategic
goal and we hope, the forthcoming Jack Howe #1H lateral
will deliver that commercial success.
East Texas continues to be a focus area for US
Independent oil companies, with EOG Resources Inc.,
Contango, Hawkwood Energy and others actively drilling
around our lease areas, particularly the Normangee
Oil Project. In fact, there are a number of commercial
oil wells adjacent to our Jack Howe well which are, in
part de-risking the play for us. While the Upper and
Middle Woodbine ‘tight sands’ have delivered mixed
results in terms of initial oil flow rates, our neighbours
are having much better and consistent success in the
Lower Woodbine around the Jack Howe location. We are
confident the management team in Texas can duplicate
those results at Jack Howe.
During the reporting period, Sun completed two capital
raisings; the first was an equity placement to Hancock
Prospecting ($13.5 million) and the second was a capital
raising managed by Bell Potter in Melbourne ($6.3 million).
These funds were to cover the cost of three critical wells
in our 2013/2014 drilling campaign: F. Thompson #1H,
Davis #1 and Jack Howe #1H. The funds were also to
be used to build and maintain the strategic ‘land bank’
which the Board considers as a critical benchmark for
success. Funds were deployed to cover Sun’s costs of the
F. Thompson lateral and the Davis and Jack Howe vertical
pilot wells, as well as securing additional net mineral acres.
It was clear to the Board that at the end of the reporting
period, further capital would be required to attain that
commercial well outcome we seek. So, the current capital
raising process is looking to secure a further $10 million
($4 million via an equity placement and $6 million via a
renounceable rights issue). This process is designed to
add institutional investors to the register as well as giving
existing shareholders an opportunity to participate at the
same entry price as the new shareholders. With these
funds, we are set to test the Lower Woodbine in the
Normangee Oil Project with a 5,500 feet lateral at the
Jack Howe #1H location. Some of the money will also be
used to secure further leases on trend with Jack Howe
and prepare for the Badger #1H well with our new partner
and operator, Ursa Resources II Inc. This is due to spud
in November 2014 and test the western-most area of the
Eaglebine play where the Austin Chalk rests on the Eagle
Ford Shale, within the oil fairway.
ASX market-leading land lease
position in emerging Lower
Woodbine tight oil play