RE: Will we ever get back to 2p30 Apr 2020 11:36
Welshtoptrader wrote: Will we ever get back to 2p. That is around my breakeven. Only sensible reasoned replies pls. I'm more than happy to hear both sides of the argument (that's what BB's are meant for) but pls no guff. Anyway, hope everyone is well, stay safe, all the best, Welsh.
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Welsh, to get to 2p needs something like £200m market cap, or $250m. At $25 Brent this would need a bit over 3,000 b/d production. At an average $55 Brent price this will need around 1,000 b/p production. Don’t look for much constructive comment, as few negative posters on this board present any form of investment analysis. I don’t normally post often here, find free time is better spent on say Zero Hedge, but these are unusual times.
Revenue after costs at Brent average price $25, subtracting costs averaging $11.50 per barrel from 365 days average production levels in barrels net to UKOG:
300b/d $1,478,250 net annual income after costs
600 $2,956,500
900 $4,434,750
1200 $5,913,000
2000 $9,855,000
3500 $17,246,250
Putting a value of zero to all other UKOG assets except HH wells currently drilled, and a price to earnings multiple of x5 for a growing junior oiler, somewhere between 900 and 1200 b/d provides a £20m market cap. Using a P/E ratio of 17 would have the current £20m market value covered by less than 400b/d output. All assuming 10 billion share issued.
At an average price over 365 days of Brent at $55 the numbers change to:
300b/d $3,668,250 net annual income after costs
600 $7,336,500
900 $11,004,750
1200 $14,673,000
2000 $24,455,000
3500 $42,796,250
If you applied a P/E of x5 then the current market cap is covered somewhere between 300 and 600 b/d with zero value for anything other UKOG assets. Using a P/E ratio of 17 would have the current £20m market value covered by less than 300b/d output.
Seadoc, Pingu, Backman, ect. all will claim none of these numbers are correct. Monday’s RNS stated costs per barrel will go down to $11.50 soon, funds raised are being spent to cut out rental costs for example of over $4 per barrel. This does in fact include payroll costs. Much argument over that, but assuming normal accounting definitions it does. USD 11.50 costs per barrel does not include capital costs such as interest and other expenses from new spuds. However new drilling should lead to higher production. The other assumptions in my calculations are UKOG production and Brent prices, which is why I show a range of outcomes.
A P/E ratio of 17 is certainly possible in a normal crude oil market. From Forbes for USA oilers; “As of Q4 2019, the average P/E ratio of the oil and gas drilling sector is 16.98. The industry average includes the metrics of large-, mid- and small-cap companies.” UKOG on a growth surge would overshoot a 17 P/E to the upside in all likelyhood, giving you your 2p share price sooner.
Like this as a multi year play on higher crude prices, higher eventual production
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