Member Info for ocelot

Penguins,

UKOG's partner in Turkey is AME, the operator of E Sadak.

You say yourself "Turkey is more difficult to dig out information".

Is it possible SS has access to more information than yourself?

Ninetails,

Have more confidence in SS than you, don't hold him responsible for BB and HH-2z not producing the hoped-for flows, but do recognise you as a long-term investor in UKOG and that we are both looking for a long overdue recovery in the share price.

"... to get the step-change in value growth UKOG seeks, we need projects that are each worth 100s of millions in net present value, not 10s ... that's where South-East Turkey comes in. (SS in his recent video presentation).

Think he WAS frustrated but isn't now, hence the necessary documentation being vetted by the lawyers.

Does Angus have a Plan B in case the SFB loan financing does not close as anticipated? Asked on 27 January 2021

We started looking for debt finance or leasing solutions in March 2020 – not the most auspicious time – and whilst equity markets picked up in the summer, debt folk tend to be much more circumspect. We don’t like to count chickens before they have hatched but we would say that the environment for debt finance of development opportunities is vastly better now than it was even in September 2020. Funds and individuals can sit on their hands for so long before they start losing feeling in them. What we can say is that, of the great number of counterparties we spoke to, two potential industry partners, and four experienced debt investors have crawled over the field (and Angus) and none have had any problem with the technical or financial proposition other than the relatively small size of the deal and their readiness to do anything last year.

Note, therefore, the absence of a Plan B.

Further to a recent favourable meeting with the Turkish licence regulator, GDMPA, we understand that the AME/UKOG application has now been passed to the Turkish government for approval. At this stage, whilst indications are positive, we await formal notification as to which licence or licences, if any, are awarded to AME/UKOG. Notification is expected within 60 days - results and terms will be released in due course. (RNS of 10/12/20)

The 60th day is tomorrow, 08/02, so may hear some news quite soon.

Oil set a fresh one-year high in New York with continued producer supply curbs helping spur strength everywhere from physical markets to the futures curve.

Futures gained 1.1% in New York on Friday to the highest since late January 2020, while Brent crude remained just under $60 a barrel in London. The number of vessels sailing toward China jumped to a six-month high on Friday, suggesting the world’s largest importer may be piling back into the oil market. Meanwhile, crude stockpiles tied to oil futures in China fell to the lowest since June 2020, according to data analytics company OilX, the latest sign of ebbing inventories... (from a Bloomberg article updated late on Friday)

Agree with your assessment of SS, Ozzy.

It's what happens with a company at this stage of development where all attention is focused on one particular drill for protracted periods of time.

If they can build up a portfolio of drills in Turkey, even if no one drill proves to be spectacular, they will become less vulnerable to future plans going wrong.

In his recent video presentation, SS spoke of seeking a "step-change in value growth" and projects with net present values in the 100s of millions instead of the 10s of millions.

Think it is reasonable to conclude that the aim of Turkey is not to produce a modest bopd figure even if, given UKOG's current circumstances, every 100 bopd counts.

Ninetails,

All that you say about the past helps to explain why the share is where it is at present.

Yes, there are a lot of unhappy shareholders.

But, for those of us who are, at least, in part, contrarians, that signals an opportunity.

And yes, a lot of shares have been issued. Consequently, there is no financial debt, the only significant liability being £550k due to PW Well Test Ltd for the 3rd instalment in more than 5 months' time.

Forgot to say:

Point taken about the government's take, Penguins, but my figures were just ball-park ones, to give an order of magnitude for 100 bopd for UKOG's share.

Ozzy,

Think all possibility of any future success for UKOG is absent from the current share price.

Think, therefore, that the share price undervalues UKOG, which has a range of potentially exciting projects to develop (they will need financing, of course, but have the impression their likely financing needs are within UKOG's capacity over time).

Penguins,

My figure of 100 bopd for UKOG's share wasn't a guesstimate, it was simply a guide to make multiplication easy: if a reader wants to insert, say, 200 bopd for UKOG's share, all they have to do is double the figure (I am not making any guesstimate).

PS: thanks to the 78% increase in the operating margin since July ($59.5 - $15 = $ 44.5 v $40 - $15 = $25), the same operating profit will now be achieved with 25/44.5 of the anticipated bopd at that time, so, for example, 100 bopd in July is now equivalent to 56.2 bopd.

Penguins,

The hope is that Turkey will become self-funding so, yes, cash is likely to be re-employed in Turkey, at least initially.

Cash generation in Turkey and the corresponding operating profits should help to change UKOG's stock market profile and facilitate access to cash for its UK operations.

It's an obvious point but shouldn't be forgotten:

once first drill and seismic costs are met, the front end capital costs of subsequent drills will fall away sharply, because they will be split 50:50 with AME.

The share price rose sharply ahead of the 1st Loxley committee meeting and fell back sharply afterwards.

But it is very clear Loxley was rejected on specious grounds at the re-run of the meeting and that UKOG will win their appeal.

Fail to see why Loxley has been completely eliminated from the share price. There remains a degree of uncertainty (although not much), so a small discount would appear reasonable but not a discount of 100%.

If any future oil production was expected to be economically robust at the $40/bbl oil prices of the original RNS of 23/07/20, it should be even more robust at the current price for Brent of about $59.50.

Expected operating costs were forecast to be around $15/bbl at the time of the RNS, to give an operating profit of $25/bbl.

That operating profit has now increased by 78% to $44.50/bbl.

Back in July, the potential operating profit was $25 per barrel.

At today's $44.50, it has increased by 78%.

Any future oil production is therefore expected to be economically robust at current $40/bbl oil prices as front end capital costs per barrel are relatively low and expected operating costs, derived from those at AME's nearby East Sadak field, are forecast to be comparable with UKOG's Horse Hill field operating costs at around $15/bbl. An equivalent production stream in Turkey will therefore pay back far quicker than in the UK. (RNS of 23/07/20)

Brent at $59.50 less operating costs of $15 = operating profit of $44.50 or, at 1.37, £32.50.

So 100 bopd for UKOG's share = annual operating profit of (£32.50 x 100 x 365) about £1.2m.