RE: Happy Monday19 Apr 2021 11:31
UKOG have limited ways to raise more cash and the recent comment in the final results suggests that further placing's are the way UKOG intends to finance growth in the near term at least.
RBL; reserve based lending was the hope. Before lenders; like the banks will conventionally loan they would want to inspect an up to date CPR . Is there a sufficiently valuable asset to possibly secure against, to loan cash ,.... at a cost, of course.
However , the latest annual report has this passage;
"Consequently, as CP's generally require around a minimum of one year's stable production history to adequately capture and predict the longer term decline performance of a well (Horndean's performance, as above, demonstrates the importance of a year-long decline period), it was decided that the best practice was to assess reserves only when a more robust and fully representative decline curve analysis could be undertaken. The Company will thus wait until the next reporting period to calculate the field's reserves following the first full year of stable production."
Since UKOG have not yet achieved a stable production; it appears there is a very long wait until a new report is commissioned.
Buried deep in the results is this significant impairment review;
"The Directors have carried out an impairment review as at 30 September 2020. The Directors determined that the net present value of the HH-1 well was £4.78 million and therefore determined that HH-1 should be impaired by £9.35 million. The net present value utilised an internally generated depletion curve that was independently reviewed. Costs we based on current costs less any anticipated savings"
'HH-1 should be impaired by £9.35 million. The net present value utilised an internally generated depletion curve that was independently reviewed'
That depletion curve must have looked ugly
The question that follows would be just how big is that HH asset in the ground?
This passage suggests there MAY not be a very big one;
"For guidance purposes only, the Company's qualified persons ("QP") consider that the 1C value of 0.6 mmbbl carried for Horse Hill in Table 3, below, provides a reasonably representative view of HH-1's likely technical recoverable Portland reserves at the end of 2020. "
600,000 barrels 'likely technical recoverable' Not a lot .
Turkey is , as Sanderson himself conceded; "a roll of the dice" .
UKOG's current revenue stream is wholly inadequate to cover the ambitious development plans which include a second Turkish well this year.
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