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HNR highlights quick move to revenue for its new CBD business

"The progress made by Zoetic since we established this operation less than two months ago has been excellent,” said Robert Price.

CBD
CBD is opening up new revenue streams for Highlands

Highlands Natural Resources PLC (LON:HNR) shares saw positive territory as it highlighted a quick move to revenue in its new cannabidiol (CBD) business in the United States.

The company - which had been focusing on oil and gas assets in Colorado and shale well technologies - in March got into the CBD business via the new Zoetic Organics subsidiary.

Within weeks of launching the venture the company secured its first retail distribution and sales agreement, to supply products via Schrader Oil’s chain of eighteen convenience and gas stores.

READ: HNR’s new cannabidiol business lands first retail sales agreement

At the same time, it is also selling direct to customers via the internet and it is also developing a seed distribution business.

"The progress made by Zoetic since we established this operation less than two months ago has been excellent,” said Robert Price, Highlands executive chairman.

“From a standing start, we have three revenue lines underway within the Zoetic business and I look forward to providing further updates as our retail sales develop. 

“This is a fast-moving industry but the combination of our facilities and innovative management team has enabled us to take a flexible approach which I am confident will deliver good returns to our shareholders in the years to come.”

Zoetic is presently planting outdoors, with the team aiming to cover two eight-acre fields, and Highlands today told investors that the new plan is expected to improve the revenue potential compared to the prior approach.

The company anticipates a planting deadline of 30 June, though it expects to complete the programme before then.

The group is also building out a 33,000 square feet of greenhouse, growing plants for CBD production.

Capacity is expected to reach 10,000 plants per season, and, along with the primary CBD products those plants will yield more than 500 seeds.

Highlands noted that the indoor growing cycle is a little longer than outdoors, but, it still expects to achieve at least three production seasons per year.

The broader gas business provides synergy, as it is supplying gas to produce a nitrogen-hydrogen based fertilized that’s being used across the Zoetic operation.

In today’s statement, the company highlighted that demand for high quality seeds is very strong amid a fast growing hemp and CBD industry, though it guided investors that the timing of revenues from the seed business are skewed to the last quarter of the financial year.

Revenue generating hydrocarbon business

Looking to the gas business, Price added: “In the meantime, our East Denver project is being operated to the highest standards and providing regular revenue to Highlands."

Highlights told investors that its eight part-owned production wells at the East Denver project yielded around 2,700 barrels of oil per day and 4mln cubic feet of gas per day.

Five of the eight new wells are currently operating on a limited choke, restricting output with a view to maintaining pressure and extending well life.

The company owns a 7.5% interest in the wells, and, it said that the asset is generating monthly revenue above the company’s fixed operating costs.

Taking account of expected revenues across the whole group, Highlands said it retains the view that it will generate sufficient cash flow to cover all overheads for the current year.

Quick facts: Zoetic International PLC

Price: 7.1 GBX

LSE:ZOE
Market: LSE
Market Cap: £10.59 m
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