Member Info for StarBright

[Probably] "bed and ISA" trades executed by a platform (HL, Fid etc) for individual PI's transferring their holdings into the ISA tax wrapper.

The endless talk here of mm's games, tree-shakes etc every time the price drops 0.05p is largely unfounded rubbish that can be safely disregarded.

However, I think what we saw late last week might be fairly described in this manner.

The interests of those looking for a successful outcome for the companies involved in the Weald Oil project are best served by simply holding. Don't worry if your average in-price isn't close to the bottom tick. None of us are prescient enough to "trade our stacks" against the spread and the market so as to achieve this. If commercialisation on the scale contemplated in the scoping document can be delivered, holders will be well rewarded for the capital they have risked, and for their patience.

Rodders - per my earlier post if you're going to use a P/E ratio for a valuation, your earnings number will need to be after ALL costs, including depreciation and corporation taxes. I believe that in aggregate these will be significantly higher than $20/barrel, not least because a marginal CT rate of 40% will apply.

At $65/barrel and $20/barrel of production-related OPEX, taxes will add somewhere around $17/barrel. Applying a 20x p/e ratio to the post-tax earnings indicates a valuation of around £130m

I agree with your point that the other wells at HH (and potentially further sites) can have a major positive impact on this.

We should also acknowledge high sensitivity to the price of oil. This is an inevitable reality for equity owners of oil companies! At the recent peak of $85/barrel, with no other variables changed, a comparable valuation would be £190m.

Rodders - if you're going to use a P/E ratio for a valuation, your earnings number will need to be after ALL costs, including depreciation and corporation taxes. I believe that these will be significantly higher than $20/barrel, not least because a marginal CT rate of 40% will apply.

At $65/barrel and $20/barrel of production-related OPEX, taxes will take somewhere around $17/barrel. Applying a 20x p/e ratio indicates a valuation of around £130m

I agree with your point that the other wells at HH (and potentially further sites) can have a major positive impact on this.

We should also acknowledge high sensitivity to the price of oil. This is an inevitable reality for equity owners of oil companies! At the recent peak of $85/barrel, with no other variables changed, a comparable valuation would be £190m.

The idea that a company has a specific obligation to report a “complete disposal of an asset” has no basis, despite appearing frequently on this ‘board. I agree that no conclusions can be drawn.

Rodders - looks like your analysis on time scales etc was pretty accurate. I know that you have put a significant effort into reading and dissecting what the company has said on this. Good work.

No, Vernony. It isn’t possible.

What do you mean when you describe Angus as “higher”..?

Arcam2 - patient posters with professional expertise (either oil industry or investment) and thick skins are in short supply. I hope you will keep posting.

I’ve noticed in the past that there are well informed posters here from the haulage industry. Is there anyone who has any idea how much one of UKOG’s tanker round trips might cost? I assume ultimately that they will have some sort of long term contract - hopefully with 16 tankers/day as envisaged in the scoping report..!

I am trying only to get a rough sense of the proportion of operating costs accounted for by transportation, so requesting nothing more than an informed estimate. Thank you in advance.

Perhaps.He is a blunt instrument not a finely honed tool though. And whilst he is clearly prepared to sail closer to the wind than most, he faces regulatory constraints as well.

At the end of the day there is very little scope for rigging the outcome of the CPR. When we will see this is very hard to guess.

100% agreed WotW.

barnetpeter - you are right to observe that the economics of ANGS (like all oilers) is heavily leveraged to the price of oil. Brent crude trades below $70 today having touched $86 on 1 October.

On the central scenario (PE 20x) in the 1000bopd model discussed elsewhere, that is the difference between 25.6p and 34.3p. [Or between 40.7p and 54.7p if you choose not to believe in Corporation Tax ;>]

The equity market can be slow to react to commodity price changes, but once it does it is usual to see all components of the relevant complex re-marked sharply. The rise late last week defied the underlying macro story. The fall now may well be a simple case of catchup.

To hold equity in an oiler is to accept the underlying commodity exposure. That said, it is the outlook for oil prices that is relevant not the spot price. From what I can see (WTI only not Brent Crude) the longer dated options are not off by as much.

So true Boyzee.

I have little time for any of the posters who regularly try to shut down discussion. It is a discussion board - get over yourselves.

Penguins - here is (I think) the relevant definition, from SPE-PRMS:

"2.1.2 Determination of Commerciality
Discovered recoverable volumes (Contingent Resources) may be considered commercially producible, and thus Reserves, if the entity claiming commerciality has demonstrated firm intention to proceed with development and such intention is based upon all of the following criteria:
• Evidence to support a reasonable timetable for development.
• A reasonable assessment of the future economics of such development projects meeting
defined investment and operating criteria:
• A reasonable expectation that there will be a market for all or at least the expected sales
quantities of production required to justify development.
• Evidence that the necessary production and transportation facilities are available or can be
made available:
• Evidence that legal, contractual, environmental and other social and economic concerns will
allow for the actual implementation of the recovery project being evaluated.

To be included in the Reserves class, a project must be sufficiently defined to establish its commercial viability. There must be a reasonable expectation that all required internal and external approvals will be forthcoming, and there is evidence of firm intention to proceed with development within a reasonable time frame. A reasonable time frame for the initiation of development depends on the specific circumstances and varies according to the scope of the project. While 5 years is recommended as a benchmark, a longer time frame could be applied where, for example, development of economic projects are deferred at the option of the producer for, among other things, market-related reasons, or to meet contractual or strategic objectives. In all cases, the justification for classification as Reserves should be clearly documented.

To be included in the Reserves class, there must be a high confidence in the commercial producibility of the reservoir as supported by actual production or formation tests. In certain cases, Reserves may be assigned on the basis of well logs and/or core analysis that indicate that the subject reservoir is hydrocarbon-bearing and is analogous to reservoirs in the same area that are producing or have demonstrated the ability to produce on formation tests."

I'm sure that HHDL and UKOG are working hard to ensure that the reserves criteria are met.

Rodders74 - I think you have a point. Having said that, I think our basic problem is too many people NOT THINKING far enough ahead... ;>

CaptainStanley - the MM’s are less omnipotent than is popularly supposed here on LSE’s boards. Generally they are better thought of as price-finders than as price-setters. They are flow businesses, and maximise their returns by finding the price points at which the most trades will happen. Volume is ultimately more rewarding for them than volatility, although they are very very good at understanding the relationships between those two.

No reason wizard125. A combination of debt and equity finance would be great.

Crocqman - you are right. The company has always been very careful to qualify its forward looking statements on funding. As you point out, they say they are “..fully funded through to the end of 2019 for current projects..” for example. This is nothing more than good management in a thinly capitalised company like UKOG. They are carefully allowing themselves space within which to raise funds if (for example) they decide to accelerate the development of production resources. As I have said many times previously, AIM exists so companies can raise funds. If they didn’t need to raise funds, they would be privately held not publicly quoted. Fund raising is a positive sign when the funds are needed to develop profitable ventures. My hope is for a big placing in 2019 to fund the capex required to commercialise UKOG’s Weald licences. This wouldn’t have to result in material dilution for existing investors if the investment case is well supported by testing results, CPR etc.

100% agreed. Most here seem to be invested for the long term gains that will be generated if the Weald concept is proven up. A few traders, but generally easy to spot and discount.

In the meantime, the SP will fluctuate, and there will be times when it is below our average in-prices. None of us are prescient enough to buy our entire positions on the absolute bottom tick. And few will genuinely “trade their stack” to materially lower averages - it’s just too hard against the spread and the market.

If you believe that the long term prospects for ANGS (& UKOG if you like, many hold both) have changed materially since you invested, to the extent that their expected value (ie. potential valuation x % chance of success) is below the current price, then you should sell up and move on. But be clear about what it is that has changed, don’t let your confidence be undermined by short term fluctuations.

If you believe that the expected value is higher than the current price then all you need to do is hold.

What we see on this thread is a textbook example of cognitive dissonance. New information (essentially that corporation tax will be payable at a marginal rate of 40%) has been introduced. Because it reduces the valuations that have become generally accepted over time, it isn’t welcomed. Posters are responding in a predictably defensive manner - by disputing that the tax will be payable and/or by attempting to undermine the credibility of the person with the new information. If the new information had increased the valuations, posters would no doubt have responded differently...

With many inexperienced investors on this board, it is important is that the valuations we discuss are at least grounded in reality. The reality is that the profits of Weald oil companies will be taxed at a marginal rate of 40%. As I have pointed out repeatedly, we all hope that production can far exceed 1000bopd. If it does, then potential valuation ranges rise proportionally.