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The farmout is subject to approval by the shareholders of the operator of the field, Horse Hill Developments Limited ("HHDL"), including Alba. UKOG announced in December 2023 the extension of those terms to 30 June 2024. As at the date of this report, the shareholders have not approved the farmout.
From Alba's RNS of this morning:
Carrying value of investment in Horse Hill Developments Limited - £2,600,000
The Company's investment in Horse Hill Developments Limited (18.1%, HHDL itself holding 65% of HH) is carried at fair value, as, in the judgement of the Directors, it has been possible to estimate a reliable fair value for the investment. For further details of the valuation see Note 12.
The Directors believe that the intrinsic value of the oil field has not been diminished during the year and this is mirrored by the majority owner maintaining the asset valuation in their balance sheet from 30 September 2022 to 30 September 2023. As the majority owner has access to more information for valuation purposes than the Group, management relies on their published information to support the Group's assumptions.
So, Alba values its own 11.765% holding in HH at £2.6m (v UKOG's holding of 85.635%), ie 2.6x UKOG's current market cap.
UKOG still has (a bit less than) £0.42m of convertibles to reimburse to RiverFort/YA and will require further funding behind that, but that still looks like a very high discount is being applied by the market to UKOG's share valuation.
So, Alba values its own 11.765% holding in HH at £2.6m v UKOG's holding of 85.635%.
UKOG's holding is valued at £2.6m x 85.635/11.765 = £18.9m.
That is, both Alba and UKOG consider HH to contain considerable potential which remains unexploited.
Ocelot please stop posting regurgitated rubbish that means nothing to shareholders, the facts are reflected in the SP and the continual decline in the SP over the years. You have been taken for a ride! So stop trying to mislead others into investing in this turd…
Ocelot, your argument is circular and proves nothing.
Alba: "Management relies on the valuations of the majority owner of the project as they have access to fuller information"
So UKOG values HH, Alba values HH based on UKOG's valuation, you then work out what HH is worth to UKOG based on Alba's valuation which is based on UKOG's HH valuation.
Trouble is nobody believes UKOG's valuation, hence the low SP.
Concerning the calculation: yes, of course, but it does provide UKOG's valuation of HH.
Concerning your assertion that nobody believes UKOG's valuation (apart from Alba):
don't agree, believe the market is focusing its attention on UKOG's funding requirements and excluding from consideration the valuation of its assets portfolio.
"it does provide UKOG's valuation of HH"
They are just reading UKOG's Annual Report "The Directors have determined that the potential value of the Horse Hill development to be £19.3 million, which takes into account drilling of four additional wells in the field, and supports the value of intangible assets of Horse Hill."
It's the same widely optimistic valuation and nothing new.
I was looking for the valuation elsewhere in the report, so missed that missed and thank you.
From note 12 of Alba's report:
The majority owner and operator of HHDL, UK Oil & Gas plc (UKOG) recently announced its results for year ended 30 September 2023 maintaining its carrying values for the assets relating to the Horse Hill oil field and the HH1 well, based on net present value calculated utilizing an internally generated depletion curve that was independently reviewed. Costs were based on current costs less any anticipated savings. A long-term average Brent oil price of US$78/bbl was used being the Brent curve until 2031 and then kept flat at $75/bbl. A discount rate of 2.79% was based on a Capital Asset Pricing Model analysis being the weighted average costs of capital of Horse Hill Developments, the holding company of the producing well HH-1. There is inherent uncertainty in any oil field valuation due to the uncertainty of future oil price movements.
Management relies on the valuations of the majority owner of the project as they have access to fuller information and therefore have maintained the current valuation of the investment in HHDL, in line with UKOG.
On what basis are you able to value HH differently from Alba which relies upon UKOG in its published accounts?
Let's look at the history of UKOG's HH-1 valuation:
2022 "HH-1 should be impaired by £2.9 million"
2021 "HH-1 should be impaired by £1.46 million"
2020 "HH-1 should be impaired by £9.35 million"
HH-2 spouted water not oil
Turkey was dry
You have to admit UKOG's historical valuation record isn't great is it? The market can see straight through UKOG's "intangible assets"
Donkey Hill is CLEARY more a liability than an asset, they cannot fool folk anymore, game's pretty much up !!
Deltavegatheta,
HH-1 isn't HH.
As you show in your post of yesterday 20:51, the valuation of HH-1 has been progressively and severely impaired.
It means that the £19.3m valuation of HH essentially relates to the net present value calculation of other wells than HH-1 (and HH-2).
Ocelot
“The definition of insanity is doing the same thing over and over again and expecting different results.”
We look forward to hearing of the Operator's plans for enhancing productivity and delivering on the inherent, and to date largely untapped, value of the Horse Hill Oil Field. (Alba's George Frangeskides in their final results RNS of 19/05/22)
Ocelot…When are you going to realise? That UKOG is a con ! And run by conmen ! Just feathering their own nest, and have absolutely no interest in shareholder value…
From PPP's interim results RNS of 28/12/23:
About Horse Hill Oil Field ...
" Following its discovery in 2014, Horse Hill was successfully production tested in the Upper Portland sandstone and underlying Kimmeridge limestone section from 2016 through to the start of long-term continuous Portland production in 2020. UKOG advise that, as of mid-March 2023, continuing oil production from HH-1 totalled an aggregate of over 185,000 barrels of 35 - 41 API sweet crude. Full planning and environmental consents are in place for four additional infill production wells.
A 2018 Xodus CPR for UKOG estimated a gross mid case P50 Portland oil in place ("OIP") of 30 million barrels, with a corresponding mid-case 2C recoverable Contingent Resource of 1.5 million barrels. The estimated mid case 5% recovery factor being stated as in accord with other analogous fields in the Weald Basin. It should be noted that the recovery factor being stated as in accord with other analogous fields in the Weald Basin. It should be noted that the total HH-1 Portland production to date potentially leaves around 1.36 million barrels of the estimated mid-case recoverable Portland resource available to infill drilling and remaining HH-1 production.
In addition to the 132,000 barrels of 35-36 API Portland continuous production as at mid-March 2023, approximately 53,000 barrels of 41 API sweet crude were produced from multiple zones within the Kimmeridge limestones during production testing, before being shut in to allow for longer term Portland production. In 2015 a Schlumberger report calculated an estimated mean OIP of 8.262 billion barrels lying within the entire Kimmeridge section underlying the Licences.
Note: OIP should not be construed as either recoverable Contingent resources or Reserves. The Kimmeridge therefore remains a potentially viable secondary production target at Horse Hill. "
The Operator’s plan was later revealed to be framing HH3 out to PPP who unfortunately, just like UKOG, are broke and any can’t raise the required funds to do anything.