Member Info for Penguins

Ocelot,

You should make it clear you made this up:-

'The directors' review determined a fair value founded upon a third-party market-based valuation which they commissioned.'

and what you have made up would have been in the RNS, or even 'a review carried out for the company' not what was written:-

'a review carried out by the company'

If that's what they meant.

One further point it wouldn't be the 'directors determination', it would be the findings of the valuation

Where's that valuation though?

'Following a review carried out by the Company in connection with the preparation of these accounts, the Directors have determined that the fair value of the Company's investment in HHDL should be revised down to a figure of £4,000,000 (2019: £5,430,000)'

Following a review by the company....the directors have determined.....

A review by the company, not a third party.

and reading through again this isn't exactly a glowing endorsement of the Kimmeridge well plan:-

'so there is certainly merit in testing the Kimmeridge's producibility from a new vertical well.'

Did they forget to include ....'as long as we're not paying for it.'

So the directors got together and valued their bit of Horse Hill at £4mm. No justification given, though a nice round number, obviously a detailed determination.

I would be more interested in a third party valuation with details of how the valuation was arrived at, which they have commissioned, but unfortunately don't appear to have the results of in time to publish them.

I see they raised concerns about the Portland horizontal, didn't see any mention previously though from them, though the refusal to fund further work was maybe an indication. Will they now stump up their share of costs as they have such a positive view of the future (while reducing their valuation), or is the third party 'market based' valuation going to be part of a sale attempt rather than trying to flog it based just on the directors opinion?

I hope UKOG read that RNS and consider whether they have made as much disclosure about the so called negative aspects of the projects they are involved in as the positive ('negative' as this has been where they end up so accurate and thus not negative).

Putting a 'don't believe a word said or published outside of an RNS' disclaimer is not a get out, and choosing not to publish certain information may be skewing the market.

Yes it enables posters to regurgitate reams of cut'n'paste of 'positives' but it certainly doesn't reflect the range of possible outcomes.

Will the 'verbal' 100s of millions of value (Turkish Lira?) made by SS hold up to scrutiny, previous positive statements outside RNS have failed to materialise?

Perhaps publishing the full Xodus reports on Loxley, and Resan / Basur rather than what could have been heavily caveated estimates of volumes in the reports?

More information needed about E Sadak, the producing lookalike, rather than reserves and an initial flow rate? Perhaps a statement about how much like E Sadak it might, or might not, be - there are wells already, with 'inconclusive' tests of the Mardin.

What about a map of Basur so investors can see iif the structure is well defined or complex.

Historically (last year)
Tardy in mentioning the ultimate failure of HH-2z water ingress work, and not mentioning HH-1 water production until it had been in the public domain.

Claims everything is as expected at HH - including the sudden high water cut - but no mention as to the suddenness or scale before it happened (25% water cut, 3 months after starting production).

Longer ago:
BB: constant stalling of issuing bad news, instantaneous pictures of 'oily' core and little bottles of oil on twitter, announcing a 'production' completion.

No wonder certain posters can't wait for 'news' of Basur-3 - bad news only happens eventually.

Yes AIM is risky but with the company deciding what's appropriate to tell it's owners it becomes even riskier and enables ridiculous predictions of future value with zero justification - mainly because that's what the company does.

Unfortunately with only pi invested and most of those dependant on the selective information disclosed by UKOG the sort of action at Hurricane is unlikely.

No doubt I'll be accused of being a swampy, xr, deramper, truth twister etc. rather than anyone detailing how good UKOG are at releasing balanced information about the projects they are currently involved in.

I'm not sure that even long term 2000bopd net to UKOG would justify a valuation of quarter of a billion, but assuming that's correct.

2000bopd net to UKOG requires over 4,500bopd gross production in Turkey with only 50% equity and 12.5% royalty oil.

The geological and producing lookalike E Sadak has never achieved anything like that production even with multiple wells, last September it was less than a tenth of that (and declining), though E Sadak-13 (13!) was being drilled - I'm surprised that UKOG haven't given out any information on the results of the most modern drilling on Resan / Basur's twin, maybe AME won't let them, or will it be a big reveal when drilling begins?

But if Basur-3 is tested and significant initial flows of Basur-3 are published and the SP rockets - remember the HH experience of initial flows, then initial ewt flows, then calculated flows, then initial production flows then silence and then waiting 3 months for the OGA to publish production figures.

TH2,

Not sure anyone doesn't expect a P&D at some stage leading up to the drill, but what you are posting is a long term price prediction without any justification at all.

Maybe in a few more months people will be saying I wish I'd sold when the SP was high - probably quite a few here at the moment thinking that about previous spikes.

Ocelot,

But might it indicate his view of risk.

Cyan,

not everything is out in the open. SS will be aware of an awful lot of information on the play that has not been passed on to the market. They haven't shown a subsurface map with the well target, details of the many wells drilled on the Resan / Basur surface expression, details of the analogue (lookalike) field, including very recent wells.

Any rise must be based on hope as there is insufficient information released by UKOG to assess the chance of commercial success, nor the likely level of that success.

Ocelot,

Your post was about the professionalism of UKOG and AME and chance of success (= risk).

You're now posting about the cost being reasonable. There is no way of knowing if the cost is reasonable without knowing what the expectation of flows is and chance of success and thus the risked NPV.

With supposedly projects worth 100s of millions the chance of success must be pretty low otherwise why would AME farm it out for 'only' $2.5mm?

SP rises on rig arrival, spud, oil shows and initial flows will be what most are gambling on, not the eventual outcome of production and decline, things UKOG have failed to give any indication of, even with a lookalike producing field in geological and production terms nearby and operated by AME.

But to return to your original post I would be surprised if anyone was investing on the 'professionalism' of UKOG, that boat sailed a while ago.

'but, in UKOG and AME, we are dealing with experienced and professional teams who have sought to put the chances of success on their side.'

Certainly AME have have reduced their risk to zero, even perhaps making a profit regardless of outcome. Not sure what UKOG have done apart from say yes to drilling a well on Resan/Basur and acquiring some seismic, paying 100% of the cash for both, and thus taking all the risk.

Must proof read better:

Not:-
'But now 5 years after months of ewt, knowing the Portland was fractured following the 2016 testing'

But:-
'But now after months of ewt, 5 years after knowing the Portland was fractured following the 2016 testing,'

Ocelot,

I'm not sure of the purpose of that cut'n'paste.

It highlights the duplicity of UKOG with respect to investors.

'plenty of promise but with the expected problems too'

I'm not sure that over the years that UKOG has mentioned 'problems' with the reservoirs at HH. Just bullish statements about oil flows and resources that are never revised to acknowledge the 'problems' they seemingly encounter unexpectedly - which, although they don't deign to give specifics of these problems, I'd assume were water ingress from fractures as well as rapidly declining flow rates - both problems very likely to be encountered with fractured reservoirs.

Surely it would be a positive step if they were to give some information about these problems, the impact on previous statements about resources and flow rates, what's expected from the injector (including possible problems rather than only the positives), so that not only financially will they have 'cleared the decks' but also operationally, vs the current situation which is avoiding mentioning what the water cut is - or even flow rates, leaving it to the 3 month delayed OGA data release.

Maybe if they had read this board and read the posts over the years that have highlighted the possible 'problems' (you know the ones from 'swampies', shorters, nimby's) they wouldn't have been so unexpected?

But now 5 years after months of ewt, knowing the Portland was fractured following the 2016 testing, and dilling a failed horizontal production well, predictions of production rates that have never been revised it's a bit rich to now be saying 'The team is determined to find technical solutions to make it the economic success story we want it to be'.

or is it just BS to repeat to the gullible.

Let's hope that there's no unexpected problems with Basur, though it would be great to know what's expected apart from cheap drilling, easy permissions and arm waving resources

Interesting,

But what leads to the inference of 'Here comes the Turkish delight!!!'

32 trades in total, 15 very low value ones within one second of each other - which happens almost every day though sometimes a lot more or less.

Average trade 296,075(.5) shares,
Average value £685.0065
Highest value £5603.89 - 2,501,738 - recorded as a sell, and probably is.
Lowest £1 - 416 shares - 2 buys recorded at that price - though for these mini trades I don't think the buy / sell is accurate.

and?

Wizard,

My glass isn't empty. Just pointing out that there's a hole in the bottom of your glass half full posts.

You don't have to not own shares to tell it how it is, although those that claim that everything UKOG say will not only happen - but will be better than they say - are ignoring the current outcome of almost everything UKOG has said and done.

I hope tthe SP goes up, but trying to encourage buying by claims that the Kimmeridge is worth £16.5Billion in the HH licences alone, and claiming the £4.8mm NPV (which is a valuation based on current value of oil expected to be produced) doesn't take into account the 'much higher production value for the oil that can be produced', and then quoting excessive payments made for equity, now written off, is not proof of undervaluing

The focus has moved to Turkey. UKOG have failed to give any specifics about the expected outcome at Basur / Resan except for vague hopes of transformative value.

Yet the company who promoted the project and have operated the adjacent field with 88% interest doesn't seem to be oozing cash from that field and has only proceeded with UKOGelse paying the full upfront cost.

This seems to be a UKOG theme, potential appraisals that have been around a long time and no one else wants. All have been licenced, some several times, since the initial well discovery of an oil show, or had a brief presumably uncommercial test, all have had wells drilled since.

Is UKOG hoping for guaranteed oil (or gas) shows, maybe even a good test, so great for trading (see SP chart for 2017 BB, and 2018 HH) and keeping the plates spinning but 1000s of bopd production - the long term transformative carrot that some believe in - not so sure.

Last sentence should be:-

The Kimmeridge is presumably worse as Portland production was chosen over Kimmeridge production.

Wizard,

I think you need to understand that £4.8mm is the value UKOG put on the oil that can be produced at HH using a the normal methodology for valuation of reserves based on production..

This has meant that the goodwill of over £17mm that was previously carried as a result of paying Tellurian and others for the HH licences has been removed from intangible assets. Just £4.8mm remains as a tangible asset based on an internal Competant Person's valuation rather than a full CPR.

Simply put UKOG has paid over the years far more for HH than it is worth and has finally had to acknowledge it.

We don't know if the £4.8mm valuation took into account any anticipated effect of water injection, but otherwise any further Portland well's commerciality must be high risk given the low NPV of the Portland production from HH-1 going forward and probability of further water problems.

Any value of the Kimmeridge, given the failure to execute any plan associated with it since not deepening HH-2 to log it and the obvious failures elsewhere, would also have a high risk associated with it.

To prove HH is worth more requires further expenditure. Will further drilling cost less than the risked NPV of the production anticipated if it was based on HH-1 production?

The Kimmeridge is presumably worse as Portland production was chosen over Portland production.

Cripes news of......the Kimmeridge, the previous transformational play (just not in the right direction) that has failed to flow significant quantities (not rates) in every test in the Weald since UKOG's 'discovery' (though everyone knew it was there but expected it to be uncommercial) except at Horse Hill - where lengthy testing has lead then to; 1) not extend HH-2 to enable logging, 2) not drill a sidetrack from HH-1, and 3) not dual complete HH-1 - and 4) the need to further appraise the Kimmeridge with another well, probably by deepening HH-3 whenever that will be drilled.

and then there's

Optimism is OK, but relying on TH's take on progress for accurate analysis.......

'Best get the news out soon, not many trading days left to hit my 20p target by end of year :-)
At least we'll be significantly north of here by Christmas on HH-2z flow news... maybe have to wait for the new year for the market to trade up to my 20p now. GLA'

Ocelot,

But not the first modern well testing the Mardin reservoir nearby. It would be usual for a company to give information about analogue fields nearby to support their case , especially when this is their first venture in Turkey and described as transformational.

But UKOG don't mention production from the very recent wells on E Sadak - the field described by UKOG as 'the closest producing look alike field to Basur-Resan'.

Then investors might more easily have an idea what to expect based on a field nearby producing from about 8 wells from the same reservoir target as Basur-3 - UKOG also describe it as 'Basur-Resan is a geological lookalike to AME's proven producing E. Sadak field, 20 km south west, and sits within the continuation of the same geological fold and thrust feature.'

But complete silence from UKOG about the production from the field which is operated by AME, with the most recent well on E Sadak planned to be drilled earlier this year.

Interesting though, anybody else think it's odd that the conductor pipe still looks crooked in the first picture and straight when the concrete has mostly dried, seems unlikely the cellar is complete, and is the conductor pipe really concreted in? They also seem to have put a pile of earth in the 'mud pit'.

But good progress.

Ocelot,

The shares prospects ultimately will depend on success in Turkey, not today's SP which can change up and down based on nothing.

The Sp went up over 10 times yet ended up 100th of that. Doubling does not prevent it ending up a 20th.

The SP after the PR 'puff', P&Ds, oil shows, short term tests will eventually depend on success which is not guaranteed, and even success is unlikely in reality to be 100s of millions of 'value' even if $70 times reserves suggests it.

Ocelot,

The current price has everything to do with 'then' not now. If past objectives had been met the starting point SP would not have been under 0.15p, and the venture in Turkey not needed with 2000bopd at the end of 2019.

When you look at a company don't you compare what they have previously predicted and how they have presented those goals against outcomes to assess whether current expectations are likely to be achieved?

If a company continues to use the same language and selective information does that really indicate change.

There's an interesting statistic (probably what Ozzy would describe as twisted facts).

Production data for E Sadak for the year following E Sadak-11S being put on stream (August 2019 to July 2020) was 226,594bbls, or an average of 619bopd and that's from 8 production wells.

Just in case you think I'm being selective this includes the highest production month in the available data.

Great(ish) if you' ve already drilled 12 wells (plus at least one sidetrack) on a field - at $70 that would have been revenue of 70*226594 = $16,000,000, and maybe 'profit' of about £9mm - or just over £1.1mm per production well, or for 50% £550,000. Unfortunately $70 wasn't the average price.

With UKOG quoting reserves of E Sadak as 28mmbbls. At an average 619 bopd it would take over 120years to get thatmuch oil out - in September 2020 the average E Sadak field production was just under 421bopd.

OIP and reserves are not the only metric to value a company. The NPV going forward UKOG carry for HH-1 (less than £5mm) clearly shows the impact of low production vs a reserve of 600,000bbls (at $70 =£30mm revenue), if the well cost had to be offset against that figure the NPV would have been negative.

'Oil price is likely to be over $70 for Turkey summer production too :-)'

Maybe, and I'm sure those producing in Turkey will be pleased, the question is will there be Basur-3 production this Summer? No drilling is a slam dunk, even an appraisal well has risk. The subsurface structure appears to be complex in this fold belt, though UKOG haven't shown any structure maps, with even the 2019 E Sadak-12 (which UKOG describe as 'the closest producing look alike field to Basur-Resan') being P&A'd dry, and #11 requiring a sidetrack.

.....and yes you have to go looking for this type of information beyond what UKOG choose to mention:- cheap drilling, easy permissions, fast track production, initial flow rates, OIP (mostly in fields a long way away and / or in a different reservoir) multiplied by rule of thumb recoveries.