Member Info for StarBright

I'm not sure what you are asking me. The tweet has nothing to do with me - I'm not on twitter.

If you are asking me where there is confusion in SS's comments on the potential NPV of Horse Hill, here are two quotes from the Sharetalk interview:

http://embeds.audioboom.com/posts/7092829-stephen-sanderson-chief-executive-uk-oil-gas-plc-lon-ukog/embed/v4?eid=AQAAAHoa9FtdOmwA

[07:08] "...So when you look at the Portland we've got about 30m barrels of oil in place. The well tests show that we will need about three wells, each recovering about 30% of the contacted oil that they see and that's about 10m per well, so if you look at three wells that's about 10-12m barrels of oil that we can get out of the ground. So times 15-18 that's 150m to 200m quids worth of value in the Portland alone."

vs

[08:41] "...we can replicate Horse Hill in many sites across the area. Each of those sites has got the same sort of value - you know, potentially 100m quid if we keep at $70 oil..."

Is SS is telling us that his current NPV estimate for HH is £150-£200m for the Portland alone, or £100m for the whole site? Whilst we'd all prefer the 07:08 version, the 08:41 version is additionally consistent with the last NPV estimate for HH (attributed to Cenkos) provided in an earlier presentation.

For value-focussed investors such as myself - yes, I am a long term holder of several million shares here - that is not a trivial difference. When CEO's speak it is not unreasonable to expect them to be clear and consistent, especially within the space of a few minutes.

Questioning inconsistencies doesn't make me (or anyone else) a de-ramper/troll/swampy. Fools suggesting otherwise should grow up.

Here's rule 6 for anyone who wants to read the actual code text.

RULE 6. ACQUISITIONS RESULTING IN AN OBLIGATION TO OFFER A MINIMUM LEVEL OF CONSIDERATION
6.1 ACQUISITIONS BEFORE A FIRM OFFER ANNOUNCEMENT
Except with the consent of the Panel in cases falling under (a) or (b), when an offeror or any person acting in concert with it has acquired an interest in shares in the offeree company:
(a) within the three month period prior to the commencement of the offer period; or
(b) during the period, if any, between the commencement of the offer period and an announcement made by the offeror in accordance with Rule 2.7; or
(c) prior to the three month period referred to in (a), if in the view of the Panel there are circumstances which render such a course necessary in order to give effect to General Principle 1,
the offer to the holders of shares of the same class shall not be on less favourable terms.

If an acquisition of an interest in shares in the offeree company has given rise to an obligation under Rule 11, compliance with that Rule will normally be regarded as satisfying any obligation under this Rule in respect of that acquisition.

In the case of paragraph (b), an immediate announcement may be required in accordance with the Note on Rule 7.1.
6.2 ACQUISITIONS AFTER A FIRM OFFER ANNOUNCEMENT
(a) If, after an announcement made in accordance with Rule 2.7 and before the offer closes for acceptance, an offeror or any person acting in concert with it acquires any interest in shares at above the offer price (being the then current value of the offer), it shall increase its offer to not less than the highest price paid for the interest in shares so acquired.
(b) Immediately after the acquisition, the offeror must announce that a revised offer will be made in accordance with this Rule (see also Rule 32). Whenever practicable, the announcement should also state the nature of the interest, the number of shares concerned and the price paid.
(c) Acquisitions of interests in shares in the offeree company may also give rise to an obligation under Rule 11. Where an obligation is incurred under Rule 11 by reason of any such acquisition, compliance with that Rule will normally be regarded as satisfying any obligation under this Rule in respect of that acquisition.

Ironic - the minimum consideration rule(s) don't mean that an offer must be at the highest market price in the last year. Rather that the offer price can't be below the price paid for any shares bought by the bidder in the open market during various time periods (see below). The rules are intended to ensure that all shareholders benefit from the same terms.

Highest price means "highest price paid by the bidder" not "highest market price" during the relevant period.

Generally, the offer price must be at least the highest price paid by the bidder or any concert party for the target's shares during:
- The three months prior to the offer period; or
- Any period between the start of the offer period and the announcement of a firm intention to make an offer.
- For mandatory bids, the consideration must be at least the highest price paid by the bidder or any concert party during the 12 months prior to the announcement of the offer.
-If after a mandatory bid has been made (but before it closes for acceptance), the bidder or any concert party acquires a further interest in target shares above the offer price, the bidder must increase the consideration under the offer.

I don't see any lack of clarity there. Summarised, it says: "KL4 will be tested after the KL3 pressure build-up has been completed. We look forward to KL3 & KL4 commingled test production."

Does it matter whether or not we've been told the KL3 pressure build-up has been completed? Who has been fooled into what?

Sageman - you missed the most important rule: don’t buy open-ended property funds. The liquidity mismatch between the underlying assets and the daily pricing / dealing requirement led directly to the high-profile suspensions after the Brexit vote. You dont want to be trapped in a suspended fund with no idea when dealing will resume.

So the 150 days of testing referenced in the RNS is within the 210 days of Phase 1 in the approval..?

It makes obvious sense to use every single day whilst the oil can be flowed and sold.

Interesting. Thank you.

When does (or did?) the 220 days start from? And how does it relate to the 150 days we've been discussing since the "Production Flow Test Operations Commence" RNS of June 27th?

Wizard/Penguins - you are both right. Sanderson contradicts himself within just a few sentences.

I’m going to repeat my post from earlier.

“The hard truth is that the confusion comes from SS and Vonk. Neither are consistent and clear when they talk about:

production - net to UKOG/ANGS or gross from their respective projects....?
revenues - gross income minus OPEX or just income?
NPV's - no discount rate mentioned, no definition of scope (project NPV vs single well NPV vs layer NPV..?)
profit/earnings - never clear whether they mean pre- or post- tax, and there is HUGE difference between the two

I used to think that Vonk was the worst; that he would dissemble gratuitously to suit his narrative. He once gave ridiculous guidance for Mcap per 100barrels of production that was quickly accepted as gospel by certain ANGS watchers. But SS is possibly worse. His lack of precision undermines his credibility. I suspect the truth is that neither is really in comfortable territory when talking about numbers. Vonk is a smooth-talking relationship banker, and SS is an oil man. Both would likely be ripped to pieces if questioned on their numbers by a skilled portfolio manager. I think that the most reliable numbers we see are those that are prepared for formal purposes, including in this instance the scoping report. There there is simply less scope for obfuscation and error than there is in blow-job interviews with the likes of ShareTalk. Tread very very carefully when you listen to these...”

The only concrete conclusion is that none of us can rely on specific assertions made in that interview as it is riddled with errors. It would perhaps be better if all of us who post on valuation agree that quoting it selectively (we’ve all done it, whether by accident or design) is pointless.

I will see if I can get a friend to ask a couple of carefully targeted questions via the company’s broker. They might ignore a question from a PI, but perhaps not from the person I have in mind. As the questions will only be seeking clarification of comments already in the public domain, there should be no MAR considerations to hide behind. I will see what I can do...

I assume that intense arguments are an ever-present experience for Scully, like the smell of fresh paint for our Queen...

Ok - I found it. He says:

"...rates for both the Portland and Kimmeridge horizontal wells of 750-1000bopd (which could be conservative), that generates gross sales revenue of £20m/year. [-] And we're looking at drilling multiple wells, for the Portland 3 horizontals and for the Kimmeridge, upto six."

How does that fit with his later comments on value...?

£20m per year of gross revenue is $25.6m. At $70/barrel that's consistent with 1000bopd.

If production expenses are $20, taxes will take another $20 (40% of 50) leaving field earnings per barrel at $30 (£23). For 1000bopd over 365 days that's £8.4m pa. That could be consistent with an NPV of £100m. It is nowhere near high enough to support the £195-£260m interpretation...

As pointed out earlier in the thread SS's lack of clarity regarding scope, and his inconsistent use of language make it very very hard to understand what he says. Frustrating.

In the interview I linked above, the £20m we have discussed is clearly an NPV, not a revenue figure (annual or one-off). I haven't managed to track down wherever it is you are seeing £20m for revenue. Can you point me in the right direction?

Good point on Portland vs Kim NPVs. I can't offer a better/alternative explanation to yours.

********************************************************************************

Giles Hargreave is the chairman of Hargreave Hale (a stockbroker), and the fund manager of the Marlborough Nano Cap fund. He's a good investor, widely respected with a long term track record. I have met him (shared a platform with him at an investor event) and I rate him - and I am really really difficult to please...

Looks like 9m were bought more recently, perhaps via (even if circuitously - it happens) one of the placings.

https://www.morningstar.com/stocks/xlon/ukog/quote.html

Marlborough Nano Cap owns 31m UKOG shares as at 31/10

Marlborough and Miton both have small ANGS holdings. Hargreave Hale too - although it is less clear in what capacity.

Let's hope so!

The only II's with Weald investments that I can find are Marlborough and Miton, both through their small/micro-cap funds. I am watching closely for others...

Thank you Penguins. I agree that talking in NPV terms is a good way for SS to (indirectly) incorporate depletion. Also with your observation on the relevance of NPV in a transaction.

SS says that £15-£18 of NPV(10?) per extracted barrel is the same for both the Kim and Portland layers.

If one Portland well represents £50m-£67m in NPV terms and one Kimmeridge well represents £15m-£18m, the implication is that a Kim well is only expected to produce 1m barrels compared to 3.3m from a Portland well. This is exactly what he says in the last line of para 3 (of my partial transcription).

6 such Kim wells on a pad would have an NPV of £90m - £108m.

3 Kim wells + 3 Portland wells at HH would have an NPV of £195m - £260m

Are we getting closer to numbers that fit what we have been told, and upon which we can agree?

With perseverance - and determination to ignore the chaff - it is still just about possible for sensible/constructive exchanges to take place here. There are some knowledgeable posters hiding in corners of the village.

Possibly. The per dollar value of P2 reserves for an onshore project might be materially higher though.

I agree that it is too much of a stretch to suggest that the current Mcap is underpinned by Portland alone.

I would assume he doesn't know anything other than what is in the public domain. He's obviously a serious investor with capital to commit. It would seem that he's satisfied with the risk/reward ratio on offer from buying FLYB at prices up to 24p.

Rodders - I don't think his choice of language signifies anything, other than it is perhaps an effort to focus attention on the longer term. It's quite normal for CEO's to talk in terms of NPV, although some are better at it (ie more precise with their words!) than others...

I am pretty confident that he is talking about the project as a whole when he mentions flow numbers, OIP etc. This is what we see in all the RNS's for example, not to mention the scoping report etc. It would be unusual to adjust every number to represent UKOG's owned interest - especially as we've seen this change several times during recent months. My assumption is that you have to value the HH project and then apply UKOG's interest (presently 47%?) to that number.

Are any of those aircraft financed...?

wizard - thank you for taking the time to respond, and for doing so with grace. I have listened carefully to the interview(s) this morning once again.

http://embeds.audioboom.com/posts/7092829-stephen-sanderson-chief-executive-uk-oil-gas-plc-lon-ukog/embed/v4?eid=AQAAAHoa9FtdOmwA

After clarifying that by NPV he means the current discounted value of future production (this is the normal definition of NPV, and I will guess that he means NPV10 as used in CPR's etc) he goes on to say:

[06:53] "When we calculate that [NPV] at $70/barrel, we get some very healthy numbers. We basically see £15-£18 per barrel in the ground that we can get out of value. So when you look at the Portland we've got about 30m barrels of oil in place. the well tests show that we will need about three wells, each recovering about 30% of the contacted oil that they see and that's about 10m per well, so if you look at three wells that's about 10-12m barrels of oil that we can get out of the ground. So times 15-18 that's 150m to 200m quids worth of value in the Portland alone. [diverts to talking about Wytch Farm]

And then there's the Kimmeridge [-] where the NPV per barrel is about the same as the Portland. So for each Kimmeridge well you're looking at 15 to 20m quids worth of value for each well, and we're thinking of putting multiple wells on each pad.

I think that Horse Hill is just one pad and I think the data to date shows again that our concept of this continuous oil deposit being laterally extensive across the Weald means that we can replicate Horse Hill in many sites across that area. So each of those sites has got the same sort of value - you know, potentially 100m quid if we keep at $70 oil and we get 1 million barrels per well."

This then lays bare the reason that we have been unable to agree what SS is saying.

In para 1, he says £150m-£200m of value in the Portland alone, from three wells.

In para 2 he says £15m - £20m of value for each Kimmeridge well. Elsewhere he talks of 3 Kimmeridge wells, so let's interpret this as £45m-£60m. I cannot explain why he suggests such a different value for the Kim wells to the Portland.

Adding up what he says gives us a total NPV of £195m to £260m for HH.

But..... he then goes on to say quite clearly that the HH site will have a value of "potentially £100m" and that HH can be replicated at many sites across the Weald. This £100m is roughly consistent with what is outlined in the scoping report, and by the Cenkos DCF figure that UKOG has quoted in various presentations.

So - is SS telling us (para's 1&2) that a successfully delivered Horse Hill project is worth £195m to £260m? Or is he telling us (para 3) that it is worth £100m?

I would very much welcome further constructive discussion/contributions on this topic.