Member Info for Penguins

Tollesbury,

Good afternoon.

Yes, but part of that is to stop having to do it, yet years have passed and despite promises of Caribbean holidays and self funding or at least RBL SS seems to have decided to build the empire and then find out if the plan (or perhaps play) will work, or worse realised it wasn't working but carried on regardless. £60mm is an awful lot spent with only 3 wells costing about £3mm each to drill to show for it, one producing an imprecise 'more than' 300 bopd.

UKOG is a company addicted to spending other peoples money. Here's a list of the money raised through placings , CLN and purchases with shares:-

Dec 2013 £1mm
May 2014 £0.7mm
July 2014 £2mm
Oct 2014 £2mm
Oct 2014 £1mm (of 10mm)
June 2015 £6mm
April 2016 £0.8mm (shares to Angus)
May 2016 £4mm
June 2016 £2.25mm (of shares to Magellan and Celtique)
July 2016 £0.85 (of shares to Flowermay)
May 2017 £6.5mm
Nov 2017 £10mm (CLN only 5mm used)
June 2018 £5.5mm
July 2018 £5mm
July 2018 £2mm
Aug 2018 £1.5mm (of shares to Gunsynd)
Dec 2018 £0.25 (of shares to Solo)
Feb 2019 £2.1mm (of shares to Doriemus)
Mar 2019 £3.5mm
Apr 2019 £0.4mm (of shares to Europa & UJO)
Aug 2019 £5.5mm (CLN only £3.75mm used)
Aug 2019 £3mm (of shares to Tellurian)
Dec 2019 £1mm (of shares to Tellurian)
Mar 2020 £1mm (of shares to Tellurian)
Apr 2020 £1.275mm
Jun 2020 £4.2mm
Jul 2020 £0.275mm (of shares to PW)

That's about £60mm of which most is spent, maybe £2mm left as nearly £2mm had to be paid to YA and £0.275mm paid to PW out of the recent placing. There's still £1.1mm owed to PW, a commitment to pay £5mm to AME for a well and seismic in Q4 2020, workovers at HH to both wells and a desire to progress Loxley assuming permission is granted in September and of course IOW not to mention the costs of running SS's empire vs 300 bopd.Even if Resan (Turkey) is successful any revenue is likely to be retained to pay for further wells so given UKOGs addiction to fund raising rather than sorting out what it already has to enable self funding (or even a CPR to get RBL) there is every prospect of at least £5mm required in the next few months, and if Loxley is advanced to drilling another £4 to £5mm early next year.

I see the trading experts who did manage to hold off buying until 0.16p ish are gloating that they managed to off load on to mugs buying at 0.24p (not realising the pump had run out of steam and the dump was in progress) who perhaps believed the BS about 0.3/ 0.4p.

For what is now a small company with little cash and most of that obtained through placings and CLN they have got a lot of ideas they hope will come off, having spent over £60mm (ocelot's figure was £59mm before the last placing) they've masterminded that down to a company with a mcap of around £20mm.

and as I replied yesterday.........

Trollhunter,

If only the revenue streams were guaranteed as much as the need for placings or CLN to pay for the up front costs required to either prove or disprove there will be a revenue stream. In exploration and appraisal it costs the same to drill a successful well as a failure. The announcement makes no specific comments about Resan except the area and that the licence is NW of the Eruh discovery - which despite being an analogue and in production since about 2014 from (now) six wells from the Resan target reservoir neither UKOG or AME seem to have mentioned anything but initial flow rates. Maybe the Eruh Field is producing 6000bopd, maybe 600 - whatever it is could help the market understand how good (or bad) this deal might be as a 2 for 1 farm-in seems quite high especially as UKOG don't have the cash to pay for the deal.

So what is the likelihood of success for Loxley, Arreton and Resan? From memory Xodus gave Arreton a 65% chance of commercial success and were pretty negative about Loxley - according to UKOG Resan is similar to Loxley and Arreton. They also stated: 'Resan oil shows and electric log data are at a comparable level of supporting evidence for the presence of moveable oil as the Company's Arreton discovery data.' - which incidentally didn't flow when it was DST'd in the 80's.

Ocelot,

Cash generation for who?

Without any information will it just be enough to drill the further wells over the next few years so retained 'on the licence' for the operator to pass to their drilling department to pay for the next well (assuming success)?

So need to generate $6mm just to pay UKOG's share of 4 future wells + operators other recharges - so 150,000 bbls at (say) $40 profit per barrel (assuming a rise in OP) - so total production needs to be 300,000bbls. Knowing what the Eruh wells have produced over time would be extremely helpful as at least some 'hard' guidance.

Trollhunter,

If only the revenue streams were guaranteed as much as the need for placings or CLN to pay for the up front costs required to either prove or disprove there will be a revenue stream. In exploration and appraisal it costs the same to drill a successful well as a failure. The announcement makes no specific comments about Resan except the area and that the licence is NW of the Eruh discovery - which despite being an analogue and in production since about 2014 from (now) six wells from the Resan target reservoir neither UKOG or AME seem to have mentioned anything but initial flow rates. Maybe the Eruh Field is producing 6000bopd, maybe 600 - whatever it is could help the market understand how good (or bad) this deal might be as a 2 for 1 farm-in seems quite high especially as UKOG don't have the cash to pay for the deal.

So what is the likelihood of success for Loxley, Arreton and Resan? From memory Xodus gave Arreton a 65% chance of commercial success and were pretty negative about Loxley - according to UKOG Resan is similar to Loxley and Arreton. They also stated: 'Resan oil shows and electric log data are at a comparable level of supporting evidence for the presence of moveable oil as the Company's Arreton discovery data.' - which incidentally didn't flow when it was DST'd in the 80's.

Ocelot,

'Turkey may be a gamble, but isn't that in the nature of oil exploration?'

Exploration - yes, but are the Kimmeridge and Portland at HH exploration - yet they would rather throw the dice and drill a well in Turkey in a play that they probably know little about. I posted before that was the attraction of the IOW that it wasn't in the Weald - I think this further proves the point, and it isn't just planning difficulties as UKOG has permission at HH for 4 more production wells, a sidetrack from HH-1 and an injector, said to be needed to sustain Portland production. Maybe about time UKOG came clean about what it currently thinks the KImmeridge and Portland are capable at HH so the reason for the Turkish adventure is clearer.

Wizard

Have you forgotten - I have repeatedly (since July 2019) replied to your refusal to believe that UKOG would make such a statement and mean it.

Helpfully ibug has cut and pasted the relevant paragraph today, by the way I do think they are referring only to the Kimmeridge as I have stated all along.

But actions speak louder than even those words plus the lack of any definitive statement about it being 'commercial' after months of testing - it took three months for the Portland from start of testing (though never backed up by independant review) - suggests something isn't right.

The published flow rates appear to be only part of the story with lengthy shut ins followed by initial and short burst flow rates and, for both levels, reluctance to get a CPR done.

We don't know what UKOG currently expect the Kimmeridge in HH-1 to produce at, nor what decline is likely after months of albeit interrupted testing.

As for commercially viable you may have missed the point.

Even 50bopd is probably commercially viable if the well is completed and the cost sunk - but you wouldn't drill another well if that was considered a representative rate. 140bopd was considered robustly (?) commercial for the Portland but even for the Portland SS has only given financial estimates in an interview based on horizontal success with injectors - so even now, in production, no financial forecasts (or even an accurate current rate) have been RNS'd.

For the Kimmeridge UKOG might be hesitant about doing a more complex recompletion in HH-as there could be a risk of damage, losing tools or worse, losing the well.

Until UKOG give a frank assessment of the Kimmeridge all we have to go on are actions rather than words, and not much better for the Portland.

Ash,

thanks for clarifying that the rules / law prevent anything but the decision taken at the meeting being an outcome (I'm assuming that's the basis for your answer). I wondered what the restrictions might be - could there be a case for extraordinary circumstances, being the first remote meeting - I'm guessing not. It will, as you say, be interesting what they cobble together as a reason for rejection.

Here's my list of outcomes which is ordered from (in my opinion) most likely to least:

The decision is put aside and the application considered at the next planning committee (unfortunately they still might reject it being stubborn fools)
The decision is upheld (to save face) and UKOG appeal
The decision is delegated to the professionals
The decision is changed to passed on review of the video

There are probably rules or even law that could prevent some of the expected outcomes happening but unless UKOG give up they will, sooner or later, get planning permission, let's hope it will be worth it.

I can understand not wanting to mess around with HH-1 and drill a Kimmeridge sidetrack but UKOG already has permission to drill a sidetrack and 4 more production wells at HH so what is stopping them doing a Kimmeridge test at HH and investigating methods that would work at HH rather than Loxley?

The set up costs would be limited to installing a concrete pad and cellar rather than a whole site and timing would not be dependant on planning permission - alternatively if HH-2z is a write off why not sidetrack out of that, an even cheaper option.

Obviously it wouldn't have the romance and fund raising opportunity that appraising the Godley Bridge Portland discovery - but nor would it have the risk of complete failure.

But successful Kimmeridge production in the Weald now seems more of a hope than the national importance it once commanded. Even the quote from the August RNS with a rate of 200 to 260bopd which is described as stable suggests something isn't right.

For a long time I have highlighted the lack of transparency in UKOGs RNS and use of short term initial rates and averages, we now have imprecision to add to the list with what must be a known flow rate for the Portland from HH-1 described as 'more than' 300bopd. The classic UKOG statement was during the 2016 testing when a short term rate was described as 'over 900bopd' - it was actually in later RNS 901 bopd.

Commerciality is another variable feast. Once an exploration (or appraisal) well is drilled almost any rate from that well will be commercial going forward, but to justify production wells (or even further appraisal wells) requires a more robust commercial analysis, is a further Kimmeridge test only commercially justifiable elsewhere where expectations are not limited by months of test data and can be tagged on to a Portland test at Loxley rather than a stand alone appraisal well at HH or even BB.

Invester

The UK needs UKOG? I hope the future isn't that bleak.

The Kimmeridge is not being produced at the moment. It was shut in mid January and production changed to Portland - as detailed in the 28 January RNS.

Comingling was mentioned with regard to Kimmeridge production from KL3 and KL4. Production from Portland and Kimmeridge in HH-1 will, if they get round to it, be utilising dual completion which means separate flow to surface from each reservoir.

You must also understand why he used the word 'potential'.

What I find odd is that AME, despite having an analogous field discovered in 2014 which is on trend with six producing wells (but the production from these is ?), did no work on it recently, just paying Xodus to farm it out

Obviously Resan didn't pass the financial 'test' (from AME web site):- 'We will continue to high-grade our portfolio and consider divestitures and joint ventures where the underlying values are not reflected in our financials.'

From the RNS 'There was no attributable profit or loss in relation to the licence interest in the last year as it incurred no exploration expenditure.'

Doesn't mean it's dead in the water but suggests a greater risk than is apparent from what has been released.

Surely SS must buy some shares now (all news in the public domain) or the gung ho statements in the RNS are going to sound a bit hollow - it might even help the SP.

Ocelot,

More likely he realised the game was up regarding HH-2z and the SP would completely collapse with that news plus more conversions and UKOG needed more cash soon. Did the CLN have a no more CLNs except from YA clause - and YA weren't keen.

I suspect the next placing (or CLN) will coincide with the announcement of plans to start drilling in Turkey and a mega ramp by posters going on about 3 months to payback elsewhere and giant fields elsewhere.

So far the only information we have is from a Xodus report done on for AME (ie the sales pitch). Of course UKOG (and AME) see more upside not recognised by Xodus.

I wonder if we will get more relevant information from UKOG before the drill is announced. Flow rates, reserves or comtingent resources, chance of success - the important stuff that allows you to understand the risk vs reward,

Tymers,

your predictions have been dire about the SP (though you obviously don't believe them yourself) but I realise you have no idea about E&P so your claim 'write down all ukog licence areas as we know none I repeat none are abandoned dusted all imo will flow oil' needs to compared to reality.

HH licence area:- supposed to have identified further sites. Currently has permission to drill another horizontal at HH and when they get their finger out finalise the planning for another 4 production and one injector well at HH. Haven't progressed any work on the Kimmeridge, Portland has issues.

PEDL 234 (Broadford Bridge and Loxley):- relinquished the licence immediately to the south. Extended permission to keep the site for 2 years from March, but no permission to drill. Loxley is the third appraisal of the Portland Gas discovery by Godley Bridge-1 - or as UKOG put it the structure is defined by 3 wells ' We estimate the resource, whose extent is determined by 3 legacy wells' (ie 2 appraisal wells that missed it - so they know where it isn't). Xodus were critical of the mapping (even with 3 wells defining it) and wouldn't even calculate OIP.

PEDL 134 The A24 prospect was formerly known as Holmwood - UKOG (operator) looking at O&G potential in the licence which surrounds Brockham - another failed test of the Kimmeridge. This HH 'lookalike' - maybe no longer the most promising thing to say about a prospect.

PEDL 331 Arreton-3 will be a redrill of Arreton-2 where the Portland failed to flow on test - UKOG believe there was a failure in the testing, not the reservoir.

Horndean - still producing - 15bopd? net to UKOG

Avington - shut in

Resan: very little in the presentation to base a view on though it's pretty obvious the licence is at the periphery of the play and a long way from the big fields. The nearby similar sized fields seem to have reserves in the 20 to 30mmbbls range (though no way of knowing what that's based on) so net to UKOG similar to the previously claimed volumes in the Portland at HH - yet to be confirmed.

As for ' let our leader SS work his magic ' - would that be a disappearing trick of over £60mm so far - how much more?

Tymers,

to start with the P50 is 253mmbbls and recoveries were quoted at 10 to 20% - but we don't know how good Xodus think this estimate is.

and what sort of flow rates are expected, connected oil per well, water production, injection, decline rates - these all impact the commerciality - very little in the presentation to base a view on though it's pretty obvious the licence is at the periphery of the play and a long way from the big fields. The nearby similar sized fields seem to have reserves in the 20 to 30mmbbls range (though no way of knowing what that's based on) so similar previously claimed net to UKOG in the Portland at HH.

If you want to quote maximums (P10 - sort of 10% chance) maybe you should ask what the P90 was?

btw 400million what? if you mean $ then that's remarkable for the sort of flow rates AME are used to.

Did you use that bust calculator you use to calculate your average and free float?

Sounds just like the promise of the Kimmeridge in the Weald in 2015 - ohhhh, hold on maybe not!

Funny how absolutely no mention of AME production in that article though their web site does have a few figures that may or may not be current - should be a perfect fit for UKOG then.

It got me thinking (again) about the deal, timings and cash.

UKOG now have a wait while the farm in is ratified (in the no delays, no bureaucracy Turkish system) before shelling out the $1.5mm for the seismic which then could be acquired October / November - looks interesting terrain for seismic acquisition and January is very cold. Maybe UKOG will concentrate on HHDL while waiting and get the reperforation of HH-1 underway and, perhaps, HHDL will be expected to stand alone if HH-1 can continue to produce the 'more than' 300bopd.

While HHDL might have income for the foreseeable future it will be needed to fund workovers etc on HH-1 and 2z so it's unlikely UKOG will trigger debt repayment for some time (though they may be charging HHDL equipment rental of $1000 or so a day plus some overheads?) so what's left of the cash raised recently will have to keep everything 'UKOG', eg Loxley, IOW, A24(?) and now Turkey, funded. Luckily(?) for the moment everything else is on hold and the timing of building the drill sites, when planning is forthcoming, is at UKOGs discretion to some extent (IOW not summer for instance).

With about 800k left at end March and about £3mm raised after paying off YA and PW what UKOG has left now could be £3mm assuming UKOG running costs now of about £250k a month (consultants reviewing farm-ins don't come cheap) and planning costs, and even cut salaries etc mount up, so hopefully no placings etc for a while, though another few months running costs plus paying for the seismic may bring the cash down below £1mm which seems to be a trigger for fund raising where, unless there's a massive turnaround at HH, one will be needed for the $3mm for the well in Turkey.

Hopefully all the HH bad news is now out (assumed anyway) and in the SP, and UKOG isn't hiding anything like the likelihood of success at Resan - which was sidestepped.

all of course IMO.

Basil,

No, HH-1, not the field:-

'We should not forget that outside of the Wytch Farm Field, HH-1 is currently the UK onshore's most productive well.'

Which means there are some wells at Wytch Farm that produce more. But it's probably more an illustration how poor UK onshore reservoirs are rather than how great HH-1 is.

It's also probably more than any single producer that Aladdin ME have - though they are even more secretive than UKOG - but then they are a private company.

Ohmetoe.

Probably not.

It's difficult to find up to date information but Aladdin ME seems to have daily net production of somewhere between 400 and 600bopd - from 6 licences. Although these licenses are spread across SE Turkey it perhaps shows the level of their ambition as it's hardly a strong showing for a company operating for 60 years there - mostly low productivity wells. You have to wonder if the Resan Exploration Licence is expected to be no better if they did nothing last year waiting for the licence to be farmed-out?

Eruh Licence – no information on flow rates

Zeynel-Nemrut Lease The total monthly oil production is around 3.000 bbls/month. AME holds %25 WI in the concession. AME net 25bopd.

Arpatepe Production Lease Daily net oil production is approximately 335 bbls/day from 6 production wells (AME 20%) It's possible that net oil means oil net of water so possible AME share is only about 70bopd

Karakilise Licence Current daily net oil production is ~20 bbls/day from only Karakilise-1 Well (AME 50%)

Petek-1 well was put on production in 11 February 2014 and is producing from Cretaceous reservoir in the Mardin Group carbonates with 35.9° API gravity as 100 bbl/day. AME holds %50

ALTINAKAR-BASAKLI PRODUCTION LEASE – according to GYP production was about 21,000bbls in 2014

From GYP website:
Altinakar Field Although initial production rate was increased to 60 bbls/d for a week, a quick decline occurred, and an original rate of 15 bbls/d was resumed afterwards. Currently, daily oil production rate is 12 bbls and the total production from the well is 14,080 bbls.
Basakli Field Having installed a pump on July 11, 2014, the well produced daily 115 bbls crude oil with 25% water cut. Since June 2015, daily oil production of the well is 60 bbls and the total production is 27,500 bbls.

So excluding Eruh approx net production to AME was about 600bopd but possibly only 400bopd being a private company information is sparse and old.

'We reduce initial investments invested in high-risk exploration.....'

'AME asset base includes large positions in several long-running pieces that generate little to no cash flow. We will continue to high-grade our portfolio and consider divestitures and joint ventures where the underlying values are not reflected in our financials.'

Nothing like getting a new entrant into a play who thinks they can do better than the old hands......

Tymers,

I think UKOG have inferred far greater numbers than that for the Weald - and not just mmbbls what happened to those billions of barrels figures?

I think the word might be OIP not reserves, a mistake a lot of posters make, and adding together two P10 OIP to get to 600mmbbls - classic.

Well Aladdin have managed what UKOG failed to do at HH, find not only a partner willing to pay, even when they had all the data, but one prepared to pay 100% for 50% interest. An entry fee of over $2mm.

Who cares about projected flow rates, possible reserves when you can trot out OIP and guesses for recovery rates, and of course the obligatory initial flow rates from a fractured reservoir - always a reliable indicator of future performance.

A classic UKOG RNS.

I'm sure everyone has looked at Aladdins other licences and production, the little that is stated anyway. The other licences seem to have wells producing in the tens up to a hundred barrels a day, though they give no figures for the nearest licences to Resan, the Eruh production licences

Their rig inventory appears to be 2.

Seismic data first, presumably to 'confirm' the mapping that the OIP figures are calculated, followed by $3mm for the first well. Not quite sure how that and any progress developing HH is going to be paid for, well I suppose we do.