Energy Co. Looks at Spinning Off Hydrogen From Oil & Gas Interests

Jericho Energy Ventures Inc. (JEV:TSX.V; JROOF:OTC; JLM:FRA) announced it is exploring the possibility of spinning off its hydrogen platform from its oil and gas concerns.

The objective of the proposed spin-off is "to create two independent, streamlined, pure-play companies focused on becoming leaders in their respective markets," the company said in a release. "Each of the businesses would have a clear focus, an appropriate capital structure, a distinct and compelling investment thesis, and focused investments across its portfolio to deliver superior results."

Originally Jericho Oil Corp., the company changed its name in 2021 after acquiring Hydrogen Technologies' assets to pivot towards the energy transition. Since then, the company has been able to use cash from its oil and gas holdings to advance its hydrogen platform.

The change came after several years ago after Chief Executive Officer Brian Williamson attended an investor conference and realized that "nobody wanted to talk to small oil and gas companies."

In 2019, Williamson and founder Allen Wilson decided "we either needed to transform Jericho into something different, or we needed to take it private because the public (market) was not investing in small-cap oil and gas" at the time.

Jericho's roster of major backers among its shareholders includes Edward Breen, executive chairman and CEO of DuPont; Belzberg & Co., led by Strauss Zelnick, chairman and CEO of video game giant Take-Two Interactive; McKenna & Associates, led by Andrew J. McKenna; the Graves family, a multi-generational U.S energy asset owner and operator; and Frank Drendel, founder and chairman emeritus of CommScope.

Technical Analyst Clive Maund of CliveMaund.com has written for Streetwise Reports that hydrogen "is a fuel of the future" and that Jericho is "moving with the times."

"Jericho's decision to pursue the proposed spinoff and separate listing of its hydrogen platform reflects its strategic commitment to meet the evolving demands of the energy market, all while striving to optimize shareholder returns," the company said.

"This initiative intends to create two agile, specialized companies, enabling them to pursue their unique strategic objectives and position themselves advantageously for sustained growth, profitability, and heightened investor appeal."

The company said if the spinoff is completed to create a separate listing of the hydrogen business, the shares of Jericho Energy Ventures, representing its oil and gas business, would be expected to remain on the TSX Venture Exchange under JEV. However, the company also stressed, "there are no guarantees regarding the terms, timing or completion of this process."

"We believe existing JEV shareholders stand to benefit from the growth prospects of owning both pure-play H2 and Oil and Gas enterprises, with each focused on maximizing value and becoming a leader within its sector," Williamson said.

Technical Analyst Clive Maund of CliveMaund.com has written for Streetwise Reports that hydrogen "is a fuel of the future" and that Jericho is "moving with the times."

The Catalyst: No Greenhouse Gases, Other Pollutants

Subsidiary Hydrogen Technologies' Dynamic Combustion Chamber™ (DCC) boiler burns hydrogen and oxygen in a vacuum chamber to create high-temperature water and steam with no greenhouse gases or other pollutants.

The only by-product is water, which is recycled. It's meant to replace existing boilers that burn coal, natural gas, diesel, or fuel oil.

Last year, two of JEV's associated hydrogen hubs, the Midwest Alliance for Clean Hydrogen (MachH2) and the Pacific Northwest Regional Hydrogen Hub (PNWH2), were selected for up to US$1 billion each from the U.S. Department of Energy's Regional Clean Hydrogen Hubs (H2Hubs) program.

Jericho also announced in October that it had signed a joint venture and fabrication agreement (MOU) with Kansas-based, 125-year-old Superior Boiler, a global leader in producing boilers and equipment for industrial and commercial applications, to manufacture the DCC™ boiler.

Analysts Nicholas Cortellucci and Ben Pirie of Atrium Research maintained Atrium's Buy rating on the stock with a CA$0.50 per share target price.

"Hydrogen Technologies (100% owned) has developed a cutting-edge zero-emission hydrogen steam boiler system which is positioned to disrupt one of the largest carbon-emitting industries in the world, steam boilers," analysts Nicholas Cortellucci and Ben Pirie of Atrium Research wrote in a November research note.

The analysts maintained Atrium's Buy rating on the stock with a CA$0.50 per share target price.

Another hydrogen portfolio company, Supercritical Solutions Ltd., completed a green hydrogen demonstrator in Northeast England, JEV announced in December.  Supercritical Solutions is also backed by Anglo-American and Chris Sacca's Lower-Carbon Capital.

Jericho said the event, which was a "significant milestone," was part of the WhiskHy project, a partnership between Supercritical and Beam Suntory, a global leader in premium spirits, and the Manufacturing Technology Center.

The world will need more hydrogen technology and projects to meet a net-zero emissions scenario by 2050, according to the International Energy Agency.

It is a "uniquely versatile energy carrier," according to a report by the Hydrogen Council. "It can be produced using different energy inputs and different production technologies. It can also be converted to different forms and distributed through different routes — from compressed gas hydrogen in pipelines through liquid hydrogen on ships, trains or trucks, to synthesized fuel routes."

Jericho Not Alone in New Direction

The company is not alone in pivoting toward clean energy from fossil fuel interests, Deloitte said in a recent report on the outlook for the oil and gas industry.

"The oil and gas (O&G) industry earned record profits in 2022, providing ample cash flow to fund their strategies in 2023," Deloitte noted. "And while O&G companies recognize geopolitical and macroeconomic uncertainty in the year ahead, they've also been given a clear mandate to secure supply in the short term while transitioning to cleaner energy in the long term."

The oil and gas industry entered this year with a healthy balance sheet, the report said, which could help companies "overcome the energy underinvestment of recent years and help enable an accelerated energy transition."

Ownership and Share Structure

Around 35% of Jericho's shares are held by management, insiders, and insider institutional investors, the company said. They include CEO Brian Williamson, who owns 1.25% or about 3.1 million shares; founder Allen Wilson, who owns 0.79% or about 1.97 million shares; and board member Nicholas Baxter, who owns 0.46%, or about 1.14 million shares, according to Reuters' latest research.

Around 10% of shares are held by non-insider institutions, and approximately 55% are in retail, the company said.

On March 6, 2023, JEV completed an insider-led private placement financing, above the current share price, for gross proceeds of CA$2.23 million.

JEV's market cap is CA$47.97 million, and it trades in a 52-week range of CA$0.33 and CA$0.16. It has 259.28 million shares outstanding, approx.. 179 million floating.

Important Disclosures:

1. Jericho Energy Ventures Inc. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000. 
2. In addition, Jericho Energy Ventures Inc. has a consulting relationship with an affiliate of Streetwise Reports, and pays a monthly consulting fee between US$8,000 and US$20,000.
3. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Jericho Energy Ventures Inc.
4. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
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