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Sorry for the repeat post. Thick fingers, and maybe cold feet! GP

Hi Mirasol. As you say, the licences were awarded a long time ago. Both the WN and Bisc licences were awarded (I think) in the 13th Onshore Round in Feb '08 but Humber and UJO didn't get in to them until quite recently (WN in December '18, and Bisc in March '18, although UJO already had a 12% interest in Bisc). So perhaps the "due diligence" was done at some time during 2018. I don't know if this now makes much difference, but Humber seem to have got themselves into financial problems over Biscathorpe, (as we learnt from Egdon yesterday) but at present they seem to be in good standing at West Newton. Of course, this may only be temporary and might only last until Rathlin start spending again. The things I'd really like to know more about in a default situation are - Does the default partner lose its licence interest immediately, or are they given time to pay up? And, if they do lose their interest, do they get everything back that they have paid so far? This seems a bit unlikely. Or do the other licence partners just have to pay the relevant costs going forward? If so, it's possibly a cheap way to increase your interest if you like the prospects, and can afford to do so. Just looking at the basic arithmetic, and assuming it would be done proportionately to the current interests held by Rathlin at 66.67% and UJO at 16.665%, without Humber the new interests might be: Rathlin at 80% and UJO at 20% if my arithmetic isn't completely rusty. An extra 3.335% for UJO, once the A2 well is fully paid for (including the EWT), might not be too expensive going forward - but there are at least two more wells to drill etc, etc. Have you any further thoughts on this unlikely scenario? That's assuming UJO's placing finally gets put to bed!

Hi Mirasol. As you say, the licences were awarded a long time ago. Both the WN and Bisc licences were awarded (I think) in the 13th Onshore Round in Feb '08 but Humber and UJO didn't get in to them until quite recently (WN in December '18, and Bisc in March '18, although UJO already had a 12% interest in Bisc). So perhaps the "due diligence" was done at some time during 2018. I don't know if this now makes much difference, but Humber seem to have got themselves into financial problems over Biscathorpe, (as we learnt from Egdon yesterday) but at present they seem to be in good standing at West Newton. Of course, this may only be temporary and might only last until Rathlin start spending again. The things I'd really like to know more about in a default situation are - Does the default partner lose its licence interest immediately, or are they given time to pay up? And, if they do lose their interest, do they get everything back that they have paid so far? This seems a bit unlikely. Or do the other licence partners just have to pay the relevant costs going forward? If so, it's possibly a cheap way to increase your interest if you like the prospects, and can afford to do so. Just looking at the basic arithmetic, and assuming it would be done proportionately to the current interests held by Rathlin at 66.67% and UJO at 16.665%, without Humber the new interests might be: Rathlin at 80% and UJO at 20% if my arithmetic isn't completely rusty. An extra 3.335% for UJO, once the A2 well is fully paid for (including the EWT), might not be too expensive going forward - but there are at least two more wells to drill etc, etc. Have you any further thoughts on this unlikely scenario? That's assuming UJO's placing finally gets put to bed!

I'm sure the OGA (Oil & Gas Authority) as well as the licence operators (Egdon and Rathlin) and their various partners will have done their own financial "due diligence" exercise on Humber Oil since it was a recently incorporated private company getting involved in the oil & gas industry which was apparently new to Humber, and several licence assignments or farm outs were done with them. Maybe they did all their financial research and it looked OK when the Bisc and WN deals were being done. Something has obviously gone badly wrong since then, and there are all sorts of possibilities - a falling out over something important, or cash flow / liquidity problems or even investment problems elsewhere , particularly for a private company like Humber. For myself, I wouldn't make any excuses for Rathlin's, Egdon's or UJO's apparent lack of oversight. It will be interesting to get to the bottom of this - if we ever do.

Shareaction: You make a good point. However, I wonder if UJO have had to stump up already for their pro rata share of the Humber default. It clearly happened quite a while ago.

Fairview: I think an interesting pattern emerges if you look at the chronology of UJO's RNSs concerning Humber Oil.
10 June: Frazer Lang resigns from UJO's board. At that time the directors would probably have been insiders with respect to ongoing West Newton operations.
27 June: GP Jersey, an associate of the Lang Family / Humber Oil, reduces its UJO shareholding from 15% to 5.6%
28 June: Over-subscribed UJO Placing
11 July: GP Jersey reduces its UJO holding to less than 3%
15 July: Biscathorpe Up-date issued by Egdon and UJO
19 Nov: Egdon's 2018-19 annual results published. These show that at 31 July Humber were already in default over the Biscathorpe costs.
To my mind this suggests that the relationship had soured quite badly by early June, if not well before that. It must have been obvious within the Biscathorpe partnership that Humber weren't paying their way on a project that UJO introduced them to. I would guess that Frazer Lang needed to sell down their UJO shareholding but couldn't do so while he was on their board. I don't think Humber's default has been resolved yet or we would have seen a mention of it in the "Subsequent Events" section of Egdon's RNS today.

Something of possible significance Egdon's Accounts RNS this morning:
"Note 4. Trade Receivables: During the year, one of the Group's joint venture partners on PEDL253 (Humber Oil and Gas Limited), defaulted on a balance due to Egdon. The payments were due under the Joint Operating Agreement (JOA) and the Farm-out Agreements. The outstanding balance at the date of default was £0.78 million. Egdon (as Operator and on behalf of the remaining joint venture partners) have enforced their rights under the JOA default provisions and commenced proceedings to recover the sums owed. Under the terms of the JOA, the defaulting party can be removed from the licence and that party's share of the asset redistributed amongst the remaining joint venture parties. Humber remain liable for the outstanding debt but in the interim the remaining joint venture parties have assumed responsibility for the payment of invoices. Egdon's pro-rata share of the outstanding Humber JOA default amounts to £327,200".
If Humber owe £0.78 million on their Biscathorpe licence, their 20% interest in it suggests that the items on which they have defaulted must have cost about £3.9 million, If that's the case, then Humber probably owe for the whole of the Bisc-2 well costs plus a few other items. Does this indicate potential funding problems within the WN consortium, or am I concerned about something that's not relevant to us?

Sorry - I missed something earlier in Egdon's accounts.
"Note 4. Trade Receivables: During the year, one of the Group's joint venture partners on PEDL253 (Humber Oil and Gas Limited), defaulted on a balance due to Egdon. The payments were due under the Joint Operating Agreement (JOA) and the Farm-out Agreements. The outstanding balance at the date of default was £0.78 million. Egdon (as Operator and on behalf of the remaining joint venture partners) have enforced their rights under the JOA default provisions and commenced proceedings to recover the sums owed. Under the terms of the JOA, the defaulting party can be removed from the licence and that party's share of the asset redistributed amongst the remaining joint venture parties. Humber remain liable for the outstanding debt but in the interim the remaining joint venture parties have assumed responsibility for the payment of invoices. Egdon's pro-rata share of the outstanding Humber JOA default amounts to £327,200".
If Humber owe £0.78million on just one licence, their 20% interest suggests that the items on which they have defaulted must have cost a whopping £3.9 million! If that's the case, then Humber must have defaulted on the whole of the Bisc-2 well costs plus a few other items. Can this be right? Looking on the bright side, it means that UJO may be able pick up an extra 5.5% of Biscathorpe. Any thoughts?

An detail from Egdon's RNS today says: "Elsewhere in PEDL253, Humber Oil and Gas Limited has failed to remedy a default in relation to payments due under the Joint Operating Agreement ("JOA") and the farm-out agreements. The remaining joint venture partners have enforced their rights under the JOA default provisions and separately have commenced proceedings to recover the sums owed". As PEDL253 is the Biscathorpe licence you would have thought Humber would be supporting the project since the well was drilled. It therefore seems possible that Humber are a bit strapped for cash. Does this have implications for West Newton too?

Is UJO struggling to raise £5 million? Perhaps, but I doubt it. It's AIM listed, so they will almost certainly get the cash at some price or another. But Humber O&G will have to keep up with the new work programme. Will they be able to raise a similar amount for their 16.665% share of the accelerated work programme? The Lang family (who own Humber) probably have fairly deep pockets, but do they have £5 million readily available? If not, I reckon Humber's share of WN will soon be on the market, especially if you take into account the recent positive oil / gas in place news. Maybe RBD, along with UJO, will try to buy Humber out. That's if they are not already talking to them. On the RBD / LSE bulletin board there was a question whether Humber was "cashed up and ready to rock with WN" . It also mentioned that this hasn't been discussed enough. I'm not sure whether oil and gas projects can move at the pace of the worst funded participant, but I would think not. If companies like Humber - but not UJO, I hope - can't keep up with the programme, will they be in danger of losing their interest? Can anyone enlighten me about this please? Humber have recently filed their 2018 accounts and they don't look exactly brilliant to me. If you are interested have a look at Companies House website:
https://beta.companieshouse.gov.uk/company/11117055/filing-history

Union Jack may be struggling to raise £5 million at the moment, or not perhaps, but it's AIM listed. But how are Humber O&G going to raise a similar share of the cost of the forthcoming work programme at West Newton? Unless the Lang family (who own Humber) have very deep pockets, and they may well do so, I reckon that Humber's share of WN will soon be on the market after all the recent positive news. Maybe RBD, along with UJO, will try to buy Humber out, if they are not already talking to them??

I agree isdeer. I wouldn't say that Bramhill is anything like Lenigas. I think he is basically decent but was probably legged over yesterday, and then had to make the after hours RNS because of various leaks about the forthcoming work programme. I wonder where they came from - perhaps some stockbroker, or from someone like Boiler Man Dan maybe?
We should also bear in mind that this is the time of year when the licence operator decides on a new work programme and budget for next year. The proposal is then discussed and voted on by their partners at various technical meetings. DB was almost certainly telling the truth a while ago when he said he had enough cash in the bank for the current (2019) programme. I suspect the 2020 programme has come in quite a lot more expensive than anticipated, hence the proposed placing. I reckon it won't be sorted out for a few more days. What will the placing price be, I wonder? The SP could be chaotic on Monday morning, and perhaps for a while after that, but it will probably settle down after the placing details are announced. I don't think it will be announced first thing on Monday, though.

Why does the UJO board think it's essential to have a £5 million placing right now? Presumably because they can see what's coming along soon, thanks to Reabold's £16 million investment in Rathlin. If there is to be a large UJO placing, then it's obviously be best to get it over as quickly as possible. Perhaps they should suspend the shares until it's done. By my reckoning, raising £5 million at anything close to the current 0.20 SP, if they can do it at this price, would mean a further 2.5 billion shares in issue. That's quite a lot on top of the 12.1 billion shares already in issue. I hope DB will prevent Chris Oil / Williams participating in the fundraising, but it's not always possible. I assume the new shares will be placed with various institutions, brokers and the like, and CO will have his own contacts there. But it would be best if DB can shut him out of this one. Let's hope the Langs / Humber Oil aren't involved either, though they must have their own needs for cash for WN, if they are not to be squeezed out of it.

SP Angel is using a 24% recovery factor for both the oil and the gas, which seems a bit odd. I reckon 24% for oil (in a Zechstein reservoir, such as the Kirkham Abbey here) is reasonable, and it might even be a bit generous, but you should expect to get a 80% recovery factor for the gas. I see they are using a $14.70 per boe value which is probably about right for undeveloped oil but it's generous for gas. Maybe it all balances out in the end, but I think it would have been wise (?more transparent) to have used different values for the oil and the gas. Way back in mid October I "guesstimated" 179 million barrels of in place for the Kirkham Abbey oil, based on the original CPR. If you use SP Angel's 5.8 Bcf per MM boe, the new gas in place comes to 36.5 million boe. Add to that the 146.4 million barrels of oil and you get 182.9 million boe, which is fairly close (IMHO).

Uggy 100: Sorry, but no one here is talking about recoverable oil reserves yet. The recoverable oil will be only a portion (usually 20% to 40%) of the oil in place.

Also, I think BMD's figure was 140 million barrels, not 1.4 billion barrels

Hello Uggy 100
My theoretical 179 million barrels of oil in place (as mentioned below) is exactly the same as 179 million STOIIP (Stock Tank Oil Initially In Place). The way I did my original sums back in October included any / all the gas within the same Kirkham Abbey reservoir converted into"oil equivalent" at 6,000 cubic feet of gas to one barrel of oil. So, to be accurate, I should really have suggested a total of 179 million boe, or barrels of oil equivalent. I hope that makes sense!

My guess? Back in mid October I guesstimated 179 million barrels in place. This was based on the old CPR number for gas in the Kirkham Abbey "Shoal" turned into the same reservoir volume of oil. Connaught's CPR also mentioned a further 54 Bcf of prospective gas resources in the Kirkham Abbey "Slope". This might be what they were looking for in WN-2. If you add this to the 189 Bcf you get 243 Bcf. Doing the same gas to oil conversion calculation you would get you to about 230 million barrels in place. This would presumably include the 20 metre gas column converted into barrels of oil equivalent. Well … we can only wait and see.

I reckon a meaningful RNS is getting pretty close. When it appears, will it confirm BMD's leaked volumetric information - or was that only a rumour or wishful thinking? I'm hoping that BMD will be shown to be fairly near the mark. If the RNS contains some revised oil and gas volumes, I assume we'll only get new "In-Place" numbers, and not a full CPR which gives the possibly recoverable reserves. I say this because they probably don't yet have any really useful flow rates that would help with estimating potential recovery factors . Still, even that would be a real help with making a valuation of what WN is worth to the participants, and to us!. Will the new numbers bear any relationship to what 's been talked about on this BB, I wonder? I've already put a bit of my cash into UJO shares since I hope the RNS will come out on Monday, and that it will be positive, but there's no guarantee, obviously.

Fracking off? You might think the government's decision to suspend fracking wouldn't affect UJO very much as we have only one licence which has significant shale gas potential. I think it's the Burton on the Wolds licence, where no drilling is planned in the near future. Still, that may not be what happens on Monday morning. Sentiment is a funny old thing, and I expect the market will punish any onshore oil and gas company with exposure to shale gas, but by very varying amounts. So we might get swiped by association. An old friend in the oil business once said "When a ***** house burns down, the pretty run out with the ugly"! I would hope it's obvious that I'm not saying they (or we) are a bunch of *****s, but you can probably see what he meant. I reckon we should try to resist getting panicked on Monday, and wait for some good news which won't, I hope, be too long in coming. Until then, I'll probably keep quiet on this board. Thank god for that I hear you say!

Regarding re-starting the EWT, I think Rathlin are still waiting for Regulatory Consent. The OGA (Oil & Gas Authority) are usually reasonably quick as they are staffed by oil and gas types. The EA (Environment Agency) is another matter. Getting their consent for quite simple things can take up to 3 months. Mind you, it would have been helpful if one of the WN partners had told us this a long time ago. Perhaps they don't want to be seen putting the blame on anybody as they will almost certainly need the EA's help / consents in the future. My feeling is that we've only seen a short, initial flow test so far, whatever Rathlin might care to call it. The proper EWT hasn't ever really started IMHO. As some smoke was seen during the first flow period, I would guess there is some black oil there, rather than condensate. I think that completely different test equipment was then required and the EA are taking their leisurely time to approve its use. We'll just have to wait and see, I guess.