Molecular Energies upbeat on its strategic shift

Molecular Energies updated the market on its ongoing activities on Wednesday, reporting significant developments in its Paraguay drilling project and a strategic pivot towards sustainable aviation fuel (SAF).

The AIM-traded firm said the final phase of on-site commissioning for the drilling rig in Paraguay was currently underway.

It said it had been informed by the drilling company that the repaired blowout preventer (BOP) - a critical safety component of the drilling rig - had successfully passed its operational tests in Brazil.

The company said it now aimed to start drilling the Tapir x1 well in November, with the potential to unlock a complex of prospects estimated to contain over 260 million barrels of unrisked resources.

While Molecular acknowledged the exploration risks, with a chance of success estimated at 17%, it said the substantial potential reward made the exploration well an enticing opportunity.

Molecular Energies meanwhile anticipated a positive cash flow boost in 2024 from the recent sale of its Argentine hydrocarbon assets.

Regardless of the outcome of the Paraguay exploration programme, it said it was planning to shift its focus towards originating and developing large-scale alternative energy projects with attractive long-term returns.

That shift would see Molecular evolving into an alternative energy investment and trading entity, with a focus on investing in businesses where its core management possessed significant expertise and experience.

Notably, it said the successful AIM listing of Atome Energy - a Molecular-incubated business with a 20.5% investment - served as a model for creating shareholder value based on the company’s position in Paraguay.

That strategy extended to Green House Capital Group, in which Molecular Energy holds a substantial interest.

Green House is dedicated to developing and operating alternative energy businesses with near-term income generation projects and the potential for separate funding in the future.

Looking at sustainable aviation fuel (SAF), Molecular said it was actively pursuing opportunities in the area, particularly those involving green hydrogen.

The recent signing of the ReFuelEU Aviation directive by the European Union, mandating increased use of SAF from green hydrogen by planes departing from EU airports starting in 2025, presented a significant business opportunity, the board noted.

Molecular said it was collaborating with Aecom - an international engineering consultancy - on an early-stage feasibility plan while discussions with feedstock, technology, and offtake partners were underway.

If the project proved technically and economically viable, the company said it would partner with an industry or strategic financial entity for project funding, leveraging its strategic position and capabilities.

“The company has a pipeline of potentially large scale and lucrative new energy projects that, subject to finance, can develop at pace,” said chairman Peter Levine.

“Our competitive advantage lies in our management, experience, contacts and geographic footprint.

“This secret sauce places Molecular in a unique position for a company of its market size, allowing us to punch well above our weight.

“For the immediate future, we have an exploration oil well to drill in Paraguay and Green House Capital to progress.”

At 0822 BST, shares in Molecular Energies were down 4.86% at 88p.

Reporting by Josh White for Sharecast.com.