The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
Good afternoon garymbrock
You humorously wrote;
"...eventually if the south east corner of the country doesn’t crack off and drop off into the English Channel cos he’s cris crossed so many blinking drills that it is now barely connected to the rest of the U.K. land mass .... that one or two will be successful. "
Trouble is; just how valuable are possible discoveries in The Weald?
Sanderson did a bit of a 'tens of millions' hatchet job on his own asset base with this presentation;
https://www.youtube.com/watch?v=rEu4M3nCkWI
Who would want to invest in the Weald after he , not only dissed the value of the potential prizes and the reserves ; he also emphasized how costly it was to drill in The Weald.
I agree ;Turkey is key now. However; in the above presentation Sanderson refers to nearby East Sadak and its fast route to monetization. . What he did not say was that MULTIPLE wells there only produce, in total , a few hundred barrels. Apparently; each well averages circa 50 barrels a well .
Would five wells on Resan producing 125 barrels in TOTAL (UKOG's possible 50% share) really be transformational; especially when you factor in the millions invested?
I think Sanderson is pretty desperate now and that ANY oil show from Resan will be bigged up to high heaven and WILL be described as a discovery. A very careful read of the results RNS will be required; I learnt that lesson from the BB "discovery" RNS. The bad 'sub-commercial' news was buried in the huge text.
Who knows; Sanderson may get really lucky with his "roll of the dice" and the Resan volumes could be much better.
spin the wheel; roll the dice; fingers crossed......and never mind if you lose; Sanderson has other great plans...think geothermal . Ummmm
Ibug's link goes to the 12th may AGM meeting; at least for today.
The AGM is worth listening to carefully again.
I found Sanderson's comments on a HH CPR rather interesting; from about 11.35.
To summarise his comments on a CPR; UKOG have no plans for a CPR until after a third well on the field. UKOG have made their own assessment that resulted in the revisions in the annual report.
Sanderson said "a CPR here adds very little value"
These remarks combined are very significant because, in the distant past, Sanderson has held out the prospect of reserve based lending to avoid fund raisings involving dilutions.
We know that the annual report seriously impaired HH value. The Portland technical recoverable was estimated by UKOG themselves as just 600,000 barrels. The Kimmeridge 1C to UKOG was shown as 300,000 barrels.
One can understand now, imo, that Sanderson has recognised that he would struggle to raise much against such small volumes.
I conclude that a CPR is a very distant prospect now and that leaves UKOG with on going financing continuing to be by more share issues.
Sanderson stated that if Resan failed their are other blocks they have hopes of and they have other UK projects still.
I think that its not unreasonable to assume there will be more significant fund raises in the future.
UKOK clearly indicated this with this line;
"Should an open offer be successful on a cost benefit basis the Company will make available to the Shareholders an opportunity to participate in all future fundraisings either: (i) by way of an open offer on a pre-emptive basis; or (ii) through a mechanism that allows shareholders participate in fundraising on a more general basis." "
UKOG's fund raising model remains equity issues for the foreseeable future; more WILL follow.
OofyProsser
You wrote; " Mr. Sanderson has committed the company to the Turkey well.."
Yes; but without ALL the capital required which I find amazing and reckless. I presume AME did the DD and were FULL aware of UKOG's finances. If they were; it suggests to me that they really had no other choices if they wanted a free gamble on Resan.
The drill has to go ahead now or else ......
There's just that 'what if' voting issue on Monday to consider...surely the votes will pass?
Good morning OofyProsser
You wrote; "They've shoved it all on 36 and the wheel is spinning."
The drill is not spinning. Sanderson has apparently NOT got the cash at hand to get the rig on site yet.
He just assumed, and must have reassured AME; that UKOG were good for the cash; raising further capital would be a walk in the park.
Unfortunately , Sanderson has been left a little embarrassed . It appears too, that even MORE cash is required for all his ambitions than was originally thought.
He is standing at a roulette table which has a minimum stake , and he has not got all the necessary to play. He's frantically trying to raise the funds to stake on "36" and get the drill spinning.
Monday's votes are critical.
Can not see any equipment being moved on here;
https://twitter.com/UKOGlistedonAIM
Good morning ocelot
From TW's article on S h a re Prophet s , it appears Rodders and Co need 10% not 5% to call the meeting;
hTTps://www.share prophets.com/views/56078/uk-oil-gas-now-458-of-the-equity-pledged-to-oust-lyin-steve-sanderson
Have put a space in the web address as LSE tends to auto delete links to Sp's. Close the gap for a working address.
I do not think they are going to get 10%. T
The really interesting questions do surround the GM votes.
I remember how the BB disaster was headlined as a "Discovery"
29th march 2018 RNS
"Broadford Bridge-1/1z Oil Discovery and PEDL234 Licence Update"
https://uk.advfn.com/stock-market/london/uk-oil-gas-UKOG/share-news/UK-Oil-Gas-Investments-PLC-Update-Broadford-Br/77062016
Long and technical. Took some looking to find the phrase "sub-commercial"
What I have learnt over the years is the longer and more turgid the RNS; the more likely there's buried bad news.
Good afternoon OofyProsser
You wrote;
"If it succeeds, investors will make a lot of money.."
What would 'success' look like ? To Sanderson at BB he was initially quite happy to parade a video of a jug of oil being poured. In the long , and very expensive run. it turned out to be 'sub-commercial'.
I am sure there will be plenty of spinning of the drill result. Maybe a few traders will make money .
The only thing impossible to spin would be a complete duster which is probably unlikely.
As others have pointed out; E Sadak may give clues as to what 'success' may look like.
Its all been made very clear by UKOG themselves; again in bold type;
"In order to deliver the Company’s stated strategy and growth objectives, it will require
further funds in the near future for, amongst other things, its funding obligations under
the agreed work programme for the Resan Licence and any of the new Licence
applications should they be awarded to the Company and its partner."
If UKOG can not pony up....do you think AME will complete the drill WITHOUT payment, up front? Would you accept an iou from SS?
Nothing from UKOG here to indicate ANY movement of equipment to the site;
https://twitter.com/UKOGlistedonAIM
The directors are listening NOW only because they have been forced to.
From the annual results;
"It is the prime responsibility of the Board to ensure the Group remains a going concern. At 30 September 2020 the Company had cash and cash equivalents of GBP1,634,000 and borrowings of GBP3,084,000. These borrowings are due by the Company's subsidiary, Horse Hill Developments Ltd, to its shareholders, There is no repayment schedule associated with this loan and repayment is determined by the directors of Horse Hill Developments Ltd. The intent is to repay this loan from the free cash flow generated from the HH-1 well or any other further developments on the license areas of Horse Hill Developments Ltd. The Company has minimal contractual expenditure commitments and the Board considers that in conjunction with equity financing, the present funds are sufficient to maintain the working capital of the Company for a period of at least 12 months from the date of signing the Annual Report and Financial Statements. For these reasons the Directors adopt the going concern basis in the preparation of the Financial Statements."
"in conjunction with equity financing"
Sanderson just assumed that he could forever print money; and UKOG could be always be a going concern supported by 'equity financing'
The share holder activism and the voting down of resolution 6 left UKOG with financial commitments they made to AME they could not honour. More funds are required to complete the well so we move to the new GM resolutions.
When has UKOG previously felt it necessary to issue such a worded working capital warning just before a fund raise vote?
The votes MUST pass.
Good evening ocelot
"A bit melodramatic, cyan2.." You may question my language; BUT, its what UKOG warned in BOLD type that is a serious warning;
"Please note that if the Resolutions fail, the Company’s ability to raise further working capital may be impacted. "
https://www.ukogplc.com/ul/UKOG%20GM%20Notice%20210521.pdf
Without working capital UKOG grinds to a halt and their going concern status is under threat, imo.
Good evening LSE337
you wrote;
" there has always been something going on UKOG that only the BOD would know about, so maybe they have been in a Closed Period preventing them buying shares. We don't know .."
Actually we do know categorically about one occasion.
This RNS clearly states there was an open period in 2018 when Sanderson wanted to trade;
hTTps://uk.advfn.com/stock-market/london/uk-oil-gas-UKOG/share-news/UK-Oil-Gas-Investments-PLC-Exercise-Grant-Ame/77182010
"..current open period.."
Sanderson wanted to exercise options in 2018 and sell straight away but was persuaded/blocked by other directors.
This is an extract of a post I wrote on ADVFN at the time on the blocked exercise of options;
"Why was it blocked?
"to ensure the continued alignment of the interests of shareholders and the option holders and considering the liquidity of the Company's shares it would be beneficial to extend these options"
LIQUIDITY would be affected IF THE SHARES WERE GOING TO BE SOLD straight away.
You have to ask the question; why would a director be keen to sell NOW?
If the director thought that the SP was going North to 3p ; say after HH EWT;
he would want to HOLD his 0.4p shares NOT SELL them for 1.5p NOW.
That RNS is a red flag imo"
One has to use simple logic to understand the directors motivation to start buying a limited amount of stock in July.
If it was because they thought RESAN was going to be an outstanding success; they would have announced their scheme soon after the market was informed in October 2020.
There has been no reason why a DDSPP could not have been set up years ago; like 2018.
So why now; what has changed their mind? Obviously they are running scared of the new shareholder activism . They also desperately need to encourage possible participants in yet another fund raise as the company will soon run out of working capital; the situation is serious.
Good morning Ocelot.
Not familiar with all the ins and outs of the ANGS deal. I think they have a CPR. However the funding was structured the funders must have cause to judge the loan safe.
RBL gets mentioned because Sanderson a VERY long time ago held out the prospect of reserve based lending to avoid dilution based funding .
Cynderland wrote;
"So why couldn't UKOG get a finance deal? Do you think they tried and were refused? Where is the updated CPR for HH, is the data that bad .."
Reserve based lending requires a CPR. A year of stable production is required before a CPR can be completed.
Unfortunately HH production is not stable and I think they need the injector working and then the clock can start.
Trouble is ;UKOG's own in-house competent person assessed The Portland's technical recoverable at only 600,000 barrels.
How much would anyone want to lend against such a poor volume?
You can see why SS went looking elsewhere for a larger potential asset; just a pity he had not sored all the finance before commuting to Turkey.
Now UKOG are in a financial pickle; nearly out of working capital and seeking to finance by yet another huge dilution.
Good morning ocelot.
You wrote; " In Iraqi Kurdistan, on some of its wells, Genel was achieving full payback of its investment in 3 months, ie it had fully recovered its investment in 3 months."
Genel is a proper volume producer whichI hold. I don't think anyone recently posting here expects Resan to approach the flows Genl has had;
This is what an outstanding well result looks like and that's why payback can be quick when you find a field so productive and large;
hTTps://uk.advfn.com/stock-market/london/genel-energy-GENL/share-news/Genel-Energy-PLC-Update-on-Tawke-PSC/76264689
"A total of 11 zones in a 1.2 kilometre horizontal section of Cretaceous and Jurassic reservoir in the Peshkabir-3 well were individually tested and flowed successfully, of which ten were oil zones and one a gas zone. The oil zones tested an average of 5,340 bopd per zone on a 64/64" choke, with the highest individual test rate of 7,200 bopd. A multi-zone combined production test totalled 12,500 bopd on a 128/64" choke from five zones."
TH"2 This line is ridiculous ;
"Maybe 3p in the short term and then push on to whatever the Turkish production numbers justify."
That would mean UKOG's market cap would be circa £400 million. That's more than during the "billions of barrels' madness in 2017"
The Turkish target here is POSSIBLY 30 -40 million barrels.
Good morning TH"
You wrote "See chart for 2017. Same rise developing here but the potential now is so much greater..."
Hang on a minute; in 2017 Sanderson was dangling the Weald 'gusher' potential at "Billions of barrels " That did excite but we now know that was crazy talk.
The Turkish dream now a trickle in comparison; the potential is NOT much greater; its far far less.
Good evening Ocelot
Interesting commentary on the global oil market of particular interest to volume producers. Unfortunately UKOG are not producing in significant quantities.
The great hope is RESAN. What are your expectations?
I note an excellent post from Ibug with data on production from nearby Dogu Sadak.
I chose the highest ever monthly production from at least 8 wells; maybe more ;27,428 barrels a month ; circa 914 barrels per day; that's an average of circa 114 barrels a day per well.
Unfortunately the production decline appears very dramatic as a year late all the wells produced 420 barrels a day or an average of circa 53 barrels a day each well.
If Resan produced at similar rates with UKOG having a 50% share ; UKOG's production share would look to range between circa 27 barrels and 57 barrels a well. Hardly big earners.
I think UKOG will find some oil , BUT the volumes MIGHT disappoint if they are like other AME assets.
Time will tell
Here is a view on the Arbitration
https://isds.bilaterals.org/?oil-gas-is-italy-doing-it-wrong
Extract;
"Risk analysis
Given this picture, it is worth running a risk analysis for both sides. From Italy’s perspective, there is the tangible risk of facing not just one, but multiple arbitrations; the possible defeat in the ongoing Rockhopper case (even though, arguably, the risk of being ordered to pay the 275 million euros is remote, as that sum could be reduced substantially); and the ensuing risk of setting an unfavorable precedent to be relied upon by the next belligerent oil & gas company.
From the disgruntled oil & gas companies’ standpoint, there is the risk of losing time and money pending their arbitrations (which can go on from three to five years); the risk of having the tribunal drastically reducing the compensation they aspire to get; the risk of Italy non complying with the pecuniary obligations set in the award, thus causing further delays; and the ensuing risk of being compelled to choose between trying to enforce the award or selling it for less than what it was originally worth."
Good morning Godders99
You wrote; " If this is such a great idea why are at 9 pence?"
Here is a very basic, abbreviated, description of the issues assuming any reader has no knowledge at all of the story to date.
RKH has a large interest in SEALION which is a very large conventional fully appraised oil field , ready to develop and to the North of the Falkland Islands. Its in a moderate depth water; in fact the technical challenges and the weather data are very similar to the North Sea.That is the good news.
The bad news is ; it was farmed out to Premier Oil (PMO)who, for a number of reasons, were put under debt pressure and never recovered their independent strength to actually commence development.
RKH financial position is weak and it is reliant, in the near future, on receiving a significant arbitration award from a dispute with the Italian government who blocked development of an offshore oil field.
A decision is expected on the case this July . RKH are claiming 275 million Euros in compensation for costs incurred and lost profits.
The HOPE is that RKH have a winning case . The size of any possible award is very much in question; some think any award will be halved because RKH knowingly bought into the blighted asset.
This case is critical to RKH's finances. Without an award RKH will be close to running out of funds by YE 2022. Without a cash injection its clear to me that RKH would have to equity fund raise in autumn 2022.
Its important to note that RKH has a tiny income from a couple of declining assets which have large decommissioning liabilities which will become an issue. They are toxic assets.RKH has nothing to sell of value other than an interest in SEALION.
SEALION is not an asset that has a ready market . Its fate depends on the decisions made by Harbour Energy HBR who took over the struggling PMO.
Harbour are hard nosed and heavily indebted with a focus on the North Sea where they hope to exploit PMO's enormous historic tax losses. The Harbour management have been lukewarm and non committal regarding SEALION stating SEALION has to compete with other opportunities they see. They are to review SL.
That is tricky for SL as its a buyers market and with a breakeven on the proposed $1.8 billion USD development declared to be $42 (RKH final results); that is not cheap.
Its possible that harbour could abandon SL as too big and expensive. It is , imo, exceedingly unlikely that another cash rich player would replace HBR.
My hope is that the Falklands Island Government (FIG) will review their taxation of oil production to encourage SL development. One area of taxation that might be reduced is their $9 per barrel royalty.PMO tried to get the FIG to move on the royalty in 2017 but they refused.
There are a number of of scenarios here with the worst case, imo, being complete wipeout of RKH shareholders funds.
The most positive case is Rockhopper receiving a very substantial cash injection AND Harbour commit
The directors could have created a DDSPP years ago.
If the directors really believed RESAN was going to be fantastic; they would have announced plans for a DDSPP at the time of the first announcement. Could have really lifted the price.
The only reason they announced it now is because they are running scared of the new shareholder activism and the share price is on the floor. They needed to do something to help save their jobs and encourage support for a new round of fundraising.
Confidence in management is very low and UKOG's financial position is dire.
danpoe353 wrote;
"I think with the Directors now buying.."
But they are not buying..NOW.
"Upon commitment to the DDSPP, which is expected to occur in the open period following the publication of UKOG's interim results, due on or before June 30th, 2021, the director will purchase shares from the market on the first Friday of each month for a period of 12 months. Consequently, the first DDSPP purchase is expected to occur on Friday July 2nd, 2021 and the final purchase on Friday June 3rd, 2022."
Sanderson & co are going to be buying well AFTER the June 7th resolutions and all that follows.......
Will the votes pass?.
Will UKOG be able to find homes for billions more shares in time, or will UKOG's financial resources be so depleted as to cause Turkish operations to be suspended?
Where will the share price be by the time Sanderson & co buy in early July?
Will it be a better time to buy or worse....ummmmm
And remember this; There WILL be more funds required down the road; UKOG spelt it out;
"....the Company will make available to the Shareholders an opportunity to participate in all future fundraisings.."