Member Info for Penguins

Legalease,

For the reason why I said HH might not flow - see my earlier post:- 'elsewhere results echoing what was expected at HH by HHDL prior to testing.'

Otherwise the declaration of commerciality by the company has yet to be confirmed by a CPR, I agree it sold be commercial at very low levels of production and the flow rates targeted, if achieved, will presumably support SS's valuations.

Keeping to realistic expectations and awareness of risk is not being negative - posters seeing them as such suggests likely outcomes are more negative than they think.

Wizard,

The premis I work on is that you can't have reserves based on a recovery without connection to the OIP you want to recover from.

On your basis do you take Brockham as a data point - and where do draw the zero recovery line, I wonder what Xodus might think?

Of course the decision to not test Brockham made by experts is disputed by non experts - but let's asume the experts got that righr

Legalease,

My you have been busy.

But you are making up a complete fantasy of 'reserves' and ignoring even the sparse basic information released by the company.

Presumably when SS gave out his estimates of about 30% recoverable of the 30mmbbls OIP he was well aware that the 3 Portland producers were going to be horizontal. The plan also had 2 injectors. If 45% was high end, and SS used 30% then the low end is not 30% if you want to start predicting low and high recoveries.

With only 2 horizontals, albeit with more connected oil, and one injector recoveries at the high end in both wells is unlikely and if one well has no pressure support then even 30% may be stretching it for that well. Another unknown is the accuracy of the maps and how the Collendean Farm fault terrace, where one of the Portland producers will be placed, will perform.

The IOW and Loxley, the remaining Portland targets, are dependant on successful appraisal of new maps (with no new seismic acquisition) and hope in the case of Arreton that previous testing was messed up.

The Kimmeridge has become a wait and see with UKOG releasing little useful information during the current test (or any test really) and elsewhere results echoing what was expected at HH by HHDL prior to testing.

Is HH unique, flow rates of the Portland are much better than might be expected with no water production and Xodus in the previous CPR did not come to any conclusion as to why.

There are a lot more questions than answers and rambling on about ifs and maybes with ever higher valuations when SS has already given a reasonable steer on value is meaningless.

Redhead,

I have my view as to what this sentence in the RNS means:-

'The convertible loan detailed below also ensures full funding for UKOG's increased share of future production facilities costs and other near-term surface, subsurface and regulatory costs necessary to bring the field into long-term production.'

........and my view is it doesn't include drilling anything beyond HH-2. Hopefully production from HH-2z and HH-1 will quickly generate funds for further drilling but in general statements by UKOG have been either vague regarding what the funds are for, or for much the same things as previous fund raising.

Wizard,

The Kimmeridge CPR won't cover other sites although UKOG might extrapolate across the licence/s. They are delaying the CPR until PP for the development at HH is approved, with no other sites even approved for appraisal what could be realistically CPR'd except in the very vaguest of terms.

The question isn't funding for HH-2/2z but HH-1z which seems to all but disappeared in dispatches.

The acquisition RNS mentions facilities for production but nothing about HH-1z. Wizard asked poster Sanderson earlier about the rig remaining on site after drilling HH-2 and I would say based on the last couple of informative RNS no.

Ignoring any worries about cash to pay for nearly 86% of further wells and the develpment there's hesitation about the Kimmeridge and asuming that hesitancy continues drilling HH-3 (the second Portland horizontal) before testing HH-2 would not be sensible - whilst many on here take for granted that HH-2 wil be a certain success I suspect UKOG would like to see actual results, not estimates before drilling a second Portland well. The OGA would also be included on a decision and almost certainly the FDP would be required before drilling HH-3. Note that the Portland FDP is being prioritised. As it would require no new civils perhaps HH-1z might end up in the Portland to expedite production.

Thorpedo,

Completion of the financing and completion of the SPA not important to the market so won't be announced promptly?

Fair chance.........; I don't think......; could........; could........... - so you are also just speculating.

I have a different opinion based on an expectation these events will be RNS'd promptly and the financing and SPA will be as RNS'd separated '.....upon draw down, which is expected to be triggered towards the completion date of the acquisition.'

We will see.

Russell,

I'll repeat part of a previous post of mine, with edits:-
Looking at the 07/08/19 RNS the sequence of events should be:-

'1) Draw down loan of £5.5mm ('......upon draw down, which is expected to be triggered towards the completion date of the acquisition.').....quite soon, then soon after..........2) SPA is concluded. SS in interview on 7/8/19 said about 2 weeks, then as long as HHDL keep to the schedule.......3) Rig will arrive. ('As a consequence of this transaction, drilling of the much-anticipated HH-2/2z Portland horizontal well will follow very shortly after completion of the SPA.

So no need to fret about the rig arrival until after the SPA is concluded, which ought to be next week latest'....which could be a day or two after the financing is triggered, which is needed to pay Tellurian (as thorpedo pointed out).

Some think that the completion of the SPA and rig arrival will be same day, I don't but it may be possible, though there may be paperwork requiring completion before the rig can be hired without Tellurian's involvement (indemnities, guarantees of funding?)

Rig arrival this weekend - unlikely even if the financing is drawn down today, and 1 & 2 will be RNS'd.

Thorpedo,

Apologies, I thought you would understand what an orderly market provision was, rather than a lock-in (where you can't sell the shares). I don't see any mention of a lock-in in the 07/08/19 RNS. A lock-in is significantly different from an orderly market provision so not something they might have forgotton tto mention, as an orderly market provision is not a prohibition on selling shares and it's the only restriction on selling the shares mentioned in the RNS. If you believe it completely prevents the sale of shares that is your interpretation of a term that is contrary to its normal usage.

'Tellurian's dealing in UKOG consideration shares is to be subject to a 6-month orderly market provision'

If Tellurian were not allowed to sell their shares for any length of time words like lock in it would have been used - any chance you could identify where in the RNS it's stated that Tellurian cannot sell their shares from day one as long as it conforms to whatever orderly market provision they have agreed to.

The RNS (13/06/16) announcing the PEDL 234 (BB & Loxley) purchase included this:-'The issue of UKOG ordinary shares to both CEPL and Magellan is subject to a 6-month lock-in undertaking for both companies.'

Thorpedo,
You posted:-

'Tellurian can't sell for six months, I would have thought that someone who reads the RNSs as much as you would know that.'

But I did read the RNS, thoroughly, and it only states:-

'Tellurian's dealing in UKOG consideration shares is to be subject to a 6-month orderly market provision.'

This does not prevent tham from selling, it just means that Tellurian probably have a restriction on the % of shares traded in a day that can be theirs.

If you are going to post something contrary to a post at least check and then copy and paste the relevant information, or refer to where it is - in this case where in the RNS does it state they can't sell?

Looking at the RNS the sequence of events will be:-

1) Draw down loan of £5.5mm ('......upon draw down, which is expected to be triggered towards the completion date of the acquisition.').....quite soon, then soon after..........2) SPA is concluded. SS in interview on 7/8/19 said about 2 weeks, then as long as HHDL keep to the schedule.......3) Rig will arrive. ('As a consequence of this transaction, drilling of the much-anticipated HH-2/2z Portland horizontal well will follow very shortly after completion of the SPA.

So no need to fret about the rig arrival until after the SPA is concluded.

It will be interesting to see if YA / Riverfort start converting and whether there are any signs Tellurian (who Rodders has said are getting short of readies) start selling in an orderly fashion their £3mm worth of shares.

Rodders on twitter:-

'I think pingu has a little ban, or has given up for the time being. Run out of fake news and lies to spread. He/she does the bird a disservice.'

No fake news and for you no such luck. Just sitting by a pool reading and looking in now and then.

Ohmetoe,

I suppose during the whole time the SP has been dropping I've been saying what you regard as negative things, and obviously the enthusiasts have been saying how great every RNS is and how wrong I am.

Of course the drop isn't anything to do with how the market sees this share, MM's the mythical shorters and anything else is blamed.

.....and I'm the one writing dross?

I just post how I see it, and rarely post anything about the current SP, or what it will be in the future, though I will use figures from UKOG and SS when I see a valuation based on a misunderstanding.

If you don't like what I post filter me.

Wizard,

Please read this definition of connected oil. It's from a UKOG RNS glossary RNS 18/10/18 :-

'a volume of OIP that is demonstrated by collected pressure and flow data to be directly accessed and drained by a well during production. Only part (or a fraction) of the volume, known as the recoverable volume, will normally be recovered to surface during oil production. The percentage of the recoverable volume compared to the total connected OIP is known as the recovery factor'

Perhaps you will realise why I said you were misleading with this statement, 07/08/19, 01:08 :-

'Recoverable Portland oil connected at 30% was stated as 7-11 million barrel with a NAV of £150-180 million has now been upgraded to 11-14 million this will have a NAV of £165 -252 million if there are no further upgrades which gives UKOG £82.5-126 million with there 50%+ share not the £69 million figure that you use to misrepresent the facts!'

You seem to be repeating (the same dross?) that the 11-14mmbbls is recoverable oil when UKOG say it's connected oil, a fraction of which wil be recovered to surface - 2 producers now, not 3 and SS said 30% recovery with 2 injectors, will it be 30% with only one?

Wizard,

Your 16:54 post is pure speculation 'I think',' maybe HH-3'. So I don't think it's me that is speculating, just using the information at hand - yes a CPR will update but don't you think it might be an idea to try and predict what might happen based on what's actually in RNS and SS has actually said, not hope.

Zoom,

As the $20 per barrel production cost is for the development phase I don't need to take anything up with SS. If you think that it only costs $20 a barrel produced during testing how cheap do you think all that kit and advice etc. needed during testing is.

Also what were they doing that cost nearly £4mm during October to March when the main thing happening was the HH-1 testing - and I've only taken half of that amount.

Zoom,

currently the per barrel cost of producing the oil is not $20. We don't know what the cost of testing is but probably a large part of the £3.975mm spent on exploration & evaluation assets in the 6 months 31 September 2018 to 31 March 2019 . Even if it is only about half of that then that's £2,000,000 to produce about 35,000bbls of oil is about £57 per barrel.

UKOG also spent about £1.56million in the same 6 months just for it and it's subsidiaries to exist = £8500 per day / 220 = £38 per barrel - assuming an 86% share of that oil = about £45 per barrel.

As for share of the cost/revenue - UKOG during the ewt recently had a just over 77% share (their shareholding in HHDL which was responsible for 100% of the costs and got 77% of the oil - though retained 100% of the oil revenue).

This will rise to just under 86% once the deal goes through for the costs (and income) from the HH-2/2z and HH-1z wells, although theoretically they could benefit from the free carry for the continued ewt of the Kimmeridge even once the deal goes through until HH-1 testing finishes paying only 77% if costs exceed revenues, which they almost certainly will unless the increased pumping (not the shares) reported follows through to an increase in Kimmeridge production.

Also can you explain the strange theory that because the pound / dollar exchange rate is low that when the Brent price per barrel is $58 UKOG get $68. Crude is valued in dollars - UKOG will get $58 worth about £48.

Mirasol,

SS has suggested a valuation based on NPV of between £15 and £20 per barrel. Paying £12mm suggests 35% is about 0.667mmbbls. or a total of about 2mmbbls 2P reserves. Of course you shouldn't pay what an asset is worth as you need to make a return on the investment, and of course there are no 2P reserves (nit picking again eh) but using 30% recovery and contacted oil for 2 wells (22 to 28mmbbls) gives 7.5mmbbls of (say) contingent resources just for the Portland - so 100% profit on £12mm and 50% risk on the 7.5mmbbls - £12mm looks a good price as long as the Portland performs as expected, and of course the Kimmeridge comes good.

S

Well done.

But this is probably the sort of stuff you believe:-

Rodders on twitter:-
#UKOG so Pingu now saying the Portland CPR does not exist. What a complete p******k. You've lost the plot d*ckwad.

I think he is probably referring to my statement that HH Portland has zero reserves.

Well I di read the CPR and strangely enough my memory of it was correct when I checked just now - no reserves (which is what Rodders said oil companies were valued on).

There are Contingent Resources, a whopping 1.5mmbbls gross 2C resources, but no reserves - a very important difference - as Rodders says oil companies are valued on reserves (and they are mostly - so at least he got that right).

Perhaps more research, less invective Rodders.

Freemoney.

I actually like oil companies, even UKOG, but something I was told many years ago was 'don't use you own money to drill for oil, use other peoples.'

and SS is a perfect example - he hasn't even paid for his option shares at 0.4p which would have added (a little) to UKOG's coffers.

I assume you perceive my earlier post to be negative - why - it's more or less just a listing of cash that UKOG has raised since October 2017 and their stated purpose at the time.

You also posted 'So I see the loan agreement as a backstop and they will only draw down what they need if anything at all.'

Really - UKOG's finances will improve so much in the next couple of weeks - 'The Company will receive the full £5.5 million Loan in cash from the Investors upon draw down, which is expected to be triggered towards the completion date of the acquisition'.

Wizard,

Just out of interest I went back to a spreadsheet I kept at the time and actually UKOG only drew down the first £7.5mm of that loan overall they issued just over 467.6 million shares.

The average conversion price was 1.6p.

It was during a period of bad news about the BB testing but between the start of drawdown on 20 November 2017 and the last one on 25 June 2018 the conversion price paid went from 4.1p to 0.95p.

The loan was converted in 9 tranches of £500,000, 9 tranches of £250,000 and one of £750,000.

Interestingly the purpose of the loans was:- 'to carry out its stated forward drilling and testing programme over the coming 12 months. This programme includes the completion of the BB-1z flow tests, the forthcoming production testing and appraisal drilling programme at Horse Hill and the drilling and testing of the Holmwood exploration prospect'.

3 wells and all the testing of HH-1?

They raised a further £5.5mm @0.9p on 15th June for:-
Funding its portion of the Horse Hill-2 appraisal well.....
Prepare and submit regulatory applications to convert Horse Hill into production....
Lease two well sites, prepare and submit regulatory applications for two new exploration wells in PEDL234....
Lease well site, prepare and submit regulatory applications necessary to drill and appraise the Arreton oil discovery Funding UKOG's share of the planned Portland and Kimmeridge Holmwood exploration well

Since then a further £5mm was raise 2 July 2018 :- Together with the funds raised in June, these funds will allow UKOG to embark on its projects' current 18-month work programme.

Then another £2mm 4 July 2018:- This placing is intended for opportunistic investment to help deliver the Company's stated goal of consolidating and expanding its asset base in the Weald Basin - what happened to that - £425,00 Gunsynd (HHDL equity), £90,450 to Solo (Arreton) - all other transactions were using shares since July 2018.

So £1.5 million should have been left (of the £2mm), but raised a further £3.5mm for acquisitions on 27 March.

So another financing of £5mm (+ maybe more later) to help pay for stuff that a substantial part of the £18mm raised since November 2017 was for - UKOGs equity in HH has risen over the period (from 33% of HHDL to 77.9% but that's a lot of money raised repeatedly for much the same things. This doesn't include the £5.5mm for acquisitions where prior to the Tellurian deal only just over £500,000 was spent on acquisitions - which conveniently could have funded the cash element of the deal.

Apologies to other posters but these tweeters don't seem to be able to read.

tweet:-
'Pingo asked is buying 35% of Horsehill a good opportunity to spend the £3.5 million raised ?'

Err no I didn't - I just said it didn't seem to be what they said it was for :-(though is buying more of HH really 'to assess and acquire new opportunities in the UK onshore and elsewhere').

It was pretty obvious they would have to use it for ongoing operations unless they raised some more cash - and the raising of an extra £4mm over and above the amount needed to pay Tellurian shows that £3.5mm would have been spent unless more funds were raised.

Rodders

you will have seen that I have posted repeatedly that the carry would end with the current ewt and Tellurian would have to pay their way for for HH-2/z & HH-1z. eg: 6 August: 'Assuming Tellurian remain in the licence as a full paying partner for the 2 appraisal wells and the development they will pay their share of costs and receive their share of the oil (35%).'

But you tweeted:- '#Ukog and pingu, where in the Magellan agreement does it state that the carry extends to HH2 and HH1z? I think it'll be limited to HH1 drill and EWT. Certainly does not cover HH3 TO HH6 plus injector(s).'

As to your other, and future 'challenges' - grow up, expecting me to respond to you when you tweet the stuff you do, and then delete it.

Just this time though - your YoY decline of 10% for HH nowhere near matches the decline shown by tanker movements and gas production in the planning application , so there's a lot less production front end than your decline would predict (eg tankers down 25% in the first 4 months, 16 down to 12) - as for the internal formula for valuing Alba's non payment of a cash call - who knows why it leads to only a 0.1% drop in HH equity, not because UKOG as owner of HHDL has a valuation of £261mm for HH - it certainly can't be what UKOG has in it's books as Total Exploration & evaluation assets are £24,584,000 and Oil & Gas properties £1,442,000.

Eyes on the prize - you're right everything is still 'pending a CPR'. So you (and Rodders - '69% more reserves that are in the ground. Thats how oil and gas companies are valued...' - but Rodders there are no reserves yet for HH so is the value £0?) can make up any numbers you like -and so can I - the only proviso I would add is use figures within the ranges the company has released, as I do.

Should be

'.........because the costs of just running UKOG and subsidiaries......' not .....HHDL and subsidiaries......

Free money,

I'll assume you heard right.

But effectively it's not up to the company whether they repay the financing in cash or shares:- 'The Loan attracts 0% interest and may, at the sole discretion of the Investors, be converted into new ordinary shares in the Company.'

So the day after UKOG taking the loan YA & Riverfort could begin selling £3mm of shares and 3 months later start selling £2.5mm of shares - yes there is provision subject to additional payments (The Company retains the right to prepay any outstanding amount so long as the 5 day VWAP prior to prepayment is less than the Fixed Conversion Price and subject to a 10 percent prepayment premium ) but it's unlikely that UKOG will have generated sufficient funds to trigger it...………...……….because the costs of just running HHDL and subsidiaries was £1.559mm over the 6 months Oct 1st to March 31st, or £8,500 per day. Expenditures on exploration & evaluation of assets during the same period was £3,975mm or over £21,000 per day (I've ignored other costs detailed in the cash statement) or about 3 tankers a day, 7 days a week. During drilling a lot more for a positive cash flow.

The warning signs were there for a fund raising, they have used the £3.5mm raised to pay part of the acquisition (though is buying more of HH really 'to assess and acquire new opportunities in the UK onshore and elsewhere'), need another £1.5mm to pay the £5mm cash consideration payable to Tellurian on completion - but have raised on extra £4mm to fund what a lot of posters claimed they already had funds for.

There is no 'lock-in' to the shares being issued to Tellurian - just an orderly market provision for 6 months but no details (maximum sale of a percentage of daily volume?).

Argus

The pont is that Tellurian needed to exit before the drilling of new wells, why else exit now. If the carry continued they could wait for the results of those wells.