Member Info for StarBright

I guess that is possible. But perhaps he's one of the "...institutional and other investors..." buying shares at 9p in the placing already..?

I have always been prepared to take a bit of heat for articulating my thoughts, but this is getting silly. Would one of you like to copy and paste below whatever it is I have said that is negative towards ANGS?

And - hot off the press - here is the 2018 version of the IMAP study, which I (alone if necessary!) will read with interest...

https://www.imap.de/media/uploads/oil_%26_gas_report_2018_final_24_feb_sin.pdf

itsallaboutme - we are not so far apart, just debating assumptions. I welcome your input on this.

The material differences are:

1. You have OPEX at $14, I am using $25. Perhaps we'll get more info on this from a CPR or similar before too long.

2. You would like to use a different EBITDA multiple. If you can find a better comparative dataset, I will happily update mine from the 8.4x indicated in the IMAP study. IMAP do suggest an average EBITDA multiple of 9.3x for transactions, based apparently on a dataset of 389 transactions >$25m globally. At the moment this remains the best I can find. It was a q4 2017 document, I am hopeful that they will release a 2018 version soon.

I do know that there was a big sentiment spike last year. Also in UKOG. The attendant publicity is what initially prompted me to look more closely at the Weald story. As a value investor, I am trying to look through the transient possibilities to assess what ANGS and UKOG might be worth when they are producing the free cashflow necessary to pay dividends etc. This is what institutional buy & hold investors will look for in the long run. I too would like to be a holder for 5 or more years.

Do you - or anyone else here (Alan2017?) have good information on Premier's sale of its Wytch Farm interest? That might offer some insight, although I understand that WF is in its later life. I will have a dig anyway.

youngba - my post 10:00was directed to Alan2017 not you...

45 posts from 13 posters suggests a certain level of interest... If you're not interested any longer, that's fine - don't post. But there is no need for you to look to shut down a discussion.

The UKOG v ANGS thing is childish, with those engaging in it diminishing themselves. Especially those with professional standing who are capable of more constructive contributions. I am a long term holder of both companies, and hope that both will be successful, as I have said many times here and elsewhere.

Alan2017 - it’s a discussion board. I am interested to discuss valuation. Other threads and topics are available..!

But valuation is the link between your (and others) technical input on bore diameters etc and the many posts from those plucking SP’s out of the air. I think that the comments on the subject from Mr Vonk have been accepted with too little question by many posters here. They are re-posted with tremendous frequency. Broadening debate on this - even if that means questioning some of the nose-bleed numbers bandied about - surely benefits those interested in understanding the potential of their investments in the Weald Oil companies including ANGS.

Yes - I have a nose bleed too when I read some of the figures quoted here! I guess that is what has prompted me to generate some more debate on the topic. 50p (“four bags” from here in LSE parlance) would be a fantastic outcome, and appears possible to me when I read posts from the oilers on here.

Alan2017 - even simple models, like those under discussion here, have value. They are the (often missing) link between discussions on production, and discussions on valuation. They help us set expectations, and understand how different outcomes on the ground might influence the share price. Boards like this are surely at their best when they facilitate exchanges between those with professional expertise from oil and finance...

PE ratios are notoriously difficult in a sector like Oil & Gas. Perhaps principally because of material differences in accounting and tax methodologies globally. For this reason, it is more usual to use EV/EBITDA as a starting point. I think this will be especially true for the Weald Companies, where professional investors will likely focus on cash generation - for which EBITDA is an acceptable shorthand proxy.

imac - £25m for 100bopd is simply too high. I know it (sort of) comes from Mr Vonk, but he has shares to sell as well as oil to find and extract. CEO's valuation views on their own companies should always be taken with a pinch of salt...

Industry comparatives suggest an Mcap range of £8m-£12m for 100bopd with $25 OPEX. £10m-£15m with $15. There is debate about which figure should be used, see earlier in the thread.

With 404m shares in issue and 100bopd, that's an SP of 2-3p (at $25 OPEX) or 3-4p (at $15)

At 13p, the current SP embeds an implicit assumption of 300-400bopd of long term steady state production. This is a number that can clearly be revised upwards if testing goes well. Let's hope that it does.

To extend what was discussed earlier, 1000bopd net to ANGS might support an SP between 28p (on my assumptions) and 38p (using itsallaboutme's assumptions). The SP may - as always - exceed all of these numbers for a short period if we see a sentiment driven spike!

To add to the other posts on this. The price "gapped" through your stop loss, which was then executed at the first available opportunity. I'm afraid this is something we all have to learn by (painful) experience. You've not been ripped off in any way.

gkb - I guess my illustration works if it is for 1000bopd to ANGS..! I agree with your caveats on depletion and reserves (both of which I mentioned) and PoO (which I didn't). Interestingly on that one I read that BP is now using $65 for PoO in its project assessment work.

Can I point out again how careful I was to say that 1000bopd was used only for illustration, and embeds no view from me on whether or not it is the right figure? My background is M&A followed by investment management; I prefer to leave the production estimates to those with relevant professional experience!

Alan2017 - I was responding to itsallaboutme saying: "...you were just focussed on UKOG as you are a major poster over there and not a holder or long term poster here. So why exactly are you here? hmmm"

That was entirely unnecessary. I am a holder here, and I welcome constructive discussion on the posts I make. There is no need to question my intent. You only have to look back to Monday morning to see me posting on this board early and clearly to say that the placing was "no big deal as dilution impact is just 1.7%" if you would like evidence for that...

Yes - we can all agree that the SP's of the various companies involved in what I call the "Weald Project" can rise substantially if the commercial case is proven up.

itsallaboutme:

- I dont think we yet have enough information to populate a P/E valuation. I would expect the outcome to be broadly similar.
- I was careful to say that the 1000bopd was just an illustration and could be scaled as you wish to cover higher or lower production, from Brockham or elsewhere. I didn’t strangely forget anything in the way you suggest. In fact I went back and stated explicitly that I wasn’t expressing a view on whether 1000bopd was either likely or represented success.
- EV/EBITDA is correctly estimated using net profit/barrel. I went with $75-$25, with the $25 representing OPEX so not including other corporate (eg SG&A etc) costs. I based this on the statement from Mr Vonk that you copied. It’s not immediately apparent to me why OPEX for Brockham should differ from that for HH, so I think my interpretation is reasonable. But if the figure for OPEX should be $15 then your revision using $60 if fine with me.

If you have a better data set of valuation comparatives, please feel free to share it. I suggest that it is “statistically silly” to push what is so clearly presented as an indicative valuation by changing days from 360 to 365, and exchange rates by two points as you have.

I’m not trying to muddy anything. I provided an illustrative valuation in response to a question from what appears to be an inexperienced investor, referencing my sources as I went. I am a long term investor in ANGS as well as UKOG and ALBA. I am positive on all three, and don’t indulge in silly games. There really is no need for you to attack me as you have.

Sorry - should have said that I am not implying 1000bopd as either likely or successful! It’s just a round number for an illustration. If you think success at Brockham could deliver 3000bopd of long-term steady-state flows, then you can multiply by 3.

Ask the professional oilers on here for an idea of what successful for Brockham might look like in production terms.

I can work through an illustration based on 1000bopd:

1000(bopd) x 360(days) x $50(profit/barrel) x 0.75(USDGBP) = £13.5m of EBITDA
Peer group EV/EBITDA multiple range is from 6.0x to 9.1x, average 8.4x
Estimated valuation therefore £113m, within a range of £81m to £123m

However, this embeds quite a few assumptions! Most notably that the 1000bopd is a long-term steady-state flow rate, ie no depletion. In reality this is perhaps unlikely. UKOG’s HH scoping report document appears to indicate expected depletion of -50% after 3 years, -80% after 8 years. I am hoping for more information on this when we next get CPR’s or similar after testing is completed, perhaps along with more detail on estimated production costs.

In the meantime, the EV/EBITDA valuation is a reasonable way of assessing what is possible in valuation terms. But it is only an estimate, and should be viewed primarily as a guide to orders of magnitude.

TLDR: 1000bopd of steady production will support a valuation of £80m-£120m.

I agree, Legalease.

Here’s something better than a single comparator, an industry-wide study by a credible firm: https://www.imap.nl/media/uploads/publications/IMAP_Sector_Report_Oil_Gas_October%202017.pdf

What it tells you is that the average EV/EBITDA multiple for oil & gas exploration and production companies is 8.4x. When you see calculations here referencing bopd x days x profit per barrel etc, these are simplified EBITDA calculations. So 8.4 is an appropriate multiple to use. It is normal when valuing companies to use peer comparatives in this way.

PE ratios are different as they use E as in earnings. Earnings are calculated after Interest, Taxes, Depreciation and Amortisation. P/E ratios of 15-25x are possible for oil companies.

Mr Vonk confuses the two by multiplying an EBITDA figure by a P/E multiple. This is wrong - as I suspect he knows - but he has shares to sell as well as oil to find and produce...!

Seriously argus1, I’m sure that trolls hate the endless “ticked up” posts, but I suspect normal people interested in discussing UKOG don’t appreciate them very much either; they are a bit pointless when we’ve essentially traded in a range since the end of June. That means they are valued only by rampers, who are just as troll-like as the de-rampers... My sensors are triggered by those transparently seeking to use this board to influence sentiment rather than to discuss. You only have to spend a little time here to realise that cynical rampers (not you argus1!) have hurt inexperienced investors in the past, and will do so again when an opportunity presents itself. The same could probably be said of the de-rampers, hence my disdain for both types of troll.

Yes - most professional investors would laugh out loud at the majority of posts on this board. Especially those from the level II obsessives constantly pointing out every upward tick. However, if the Weald oil concept is proven up by the testing underway between UKOG and ANGS, then the early providers of capital to those companies will be rewarded for the risks they have taken. Many of the happy punters here have had no idea of these risks, but all holders will benefit if everything goes well. Let’s hope that is the case!