MW Pt 215 Oct 2021 20:09
That is immensely frustrating but means that it would be wrong to write off West Newton at this stage, as the share price of each company appears to have done. If West Newton starts to flow – and we might know some time from next spring, maybe later, the shares will look very cheap indeed.
That is a highly speculative suggestion, but one which is supported by specific prospects outside West Newton in each company.
Go back to my report ‘It’s a Gas, Gas, Gas’ on September 22 and ponder whether a piddling £15m market value for the whole of Reabold really makes sense, other than in terms of the currently despairing sentiment the market feels about the business. That dealt with Reabold’s 49.99% of Victory, a simple low-risk offshore UK gas development shared with unquoted Corallian.
We are due a final draft development plan for Victory towards the end of the year. Corallian will either use it as a prominent plank in a flotation document, or sell it. Reabold is certainly minded to sell all or some of it once the value is more clearly defined in the development plan. In June 25, it was reported that the gas at Victory could be worth between £85m and £146m taking the gas price at 42.5p a therm or at 50p a therm.
We all know now about the shortage of gas and the soaring price. That high price might not last forever, but Victory production is no too far away. Prices have been 170p a therm recently, and the Victory prospect comes as a nice, easy, gift-wrapped prospect for someone. They might not want to pay 170p a therm, and there will be costs, but 110p to 120p might not look too far away.
Don’t let us be greedy. If the gas could be worth £146m at 50p, assume a price of 100p and maybe Reabold’s 49.99% could comfortably be worth all of that £146m.
What does that mean for Reabold, shares at 0.175p valuing the whole quoted company at £15m? Shrug West Newton aside, forget the other assets, and Reabold looks way undervalued on Victory alone.
Move along to Union Jack, and ponder what is happening at Wressle, a discovery not too far from West Newton but with much more oil industry friendly geology. Go back to September 23 and my ‘Up and Down’ report. That dealt with the probability that Wressle could produce at 1,000 barrels a day, not the original suggestion of 500 bpd. And UJO has 40% of that. Against a background of rising oil prices, that does not look too shabby, West Newton or not.
In the next couple of weeks we could hear how plans to upgrade production at Wressle, which has been throttled back sharply, are progressing. Don’t lose patience with Union Jack just yet. There could be several useful steps forward quite soon.
I have a holding in Reabold Resources.
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