Member Info for StarBright

Per my post yesterday, the EBITDA multiple methodology indicated an SP of 4.1p.

Good work guys. I built a quick spreadsheet to calculate the NPV of the production schedule as modelled.

At a 7% discount rate, the production has an NPV of £260.1m giving an SP of 4.60p

I think that 7% is too low, and propose 10% as a more realistic rate due to the risks involved.

At a 10% discount rate, the production has an NPV of £224.9m giving an SP of 3.97p

As these figures are multiples of the current SP, this valuation is broadly supportive of the investment case.

Penguins - I don't think that further tinkering with the production schedule (tapering of tanker trips etc) adds great value at this point. Neither will the eventual CPR provide any useful input on macro factors - oil prices, exchange rates etc. Beyond these there are so many implicit assumptions in any case.

Valuation models like this one - and the EBITDA multiple methodology that I prefer - are useful only as a rough guide. They are informative as to orders of magnitude only. In this instance the main conclusion should be that the various posters on this board talking about 75p, £1 parties etc are way way outside the boundaries of what can be supported by even optimistic assumptions.

TLDR: HH production as envisaged by the scoping document supports a share price between 4p and 5p.

I think it was an opportunistic sell into the short-lived RNS spike, probably by one of the minnows who took shares in the placing.

If I were feeling really cynical I’d wonder out loud why the RNS was only released after the placing shares were admitted...

None of this matters to LTH’s, who should see it as noise. If Weald oil is recoverable in commercial quantities, UKOG shareholders will be rewarded for the risk they have taken in providing equity capital.

It is hard to identify the "trolls" / "shorters" / "derampers" etc with which argus1 (and others) seem so obsessed. Ok, we have the likes of Cockernhoe, OrsonCart and Ifonly, but surely no-one takes them seriously..!?

The buyside HFT Algo was switched on momentarily to execute an iceberg order in a dark liquidity pool so as to facilitate the closing of MM’s naked short positions at mates rates.

To finish off answering toughiv’s question:

At 3,500bopd, HH might be worth £390m. UKOG owns about half, so £195m and has some other cash and licence assets (let’s say) £35m. That’s £230m or 4.1p. Implicit assumption is that no further equity capital has to be raised to fund production setup.

I’ll own the £15m (although it was based on 360 days of production annually), and happily contradict Vonk who has an obvious axe to grind...

Simple EBITDA calcs assuming (BIG assumption...) stable & enduring flows:

900 (bopd) x 300 (no Sundays we have learned) x ($85-$25) / 1.3 (GBPUSD) = £12.5m
Industry EBITDA multiple range* is from 3.9x to 13x, so £50m to £160m, average is 8.4x so say £100m

At 1100bopd that would be £122m.

That’s a reasonable valuation for the HH project. I think there are too many unknowns for a more sophisticated methodology at this point, although the next CPR should fill some gaps.

To get to what it means in Mcap terms you’ll have to adjust for UKOG’s % (just under 50%) and add in whatever you would like to attribute to the company’s remaining cash and other assets.

* http://www.imap.com/Reports/IMAP_Sector_Report_Oil_Gas_October%202017.pdf

First Equity are Alba’s brokers...

I think that’s nonsense jptop.

The MM’s neither have nor need control in order to operate profitably. They are flow businesses, making their money from the spread in two way trade.

I guess they are also useful as bogeymen when you don’t have a scooby and need someone to blame...

Are you sure of that MaxHSpringer?

That's £129m realised over a 20 year period toughiv. It'll be a lot less in NPV terms.

I agree with your point on the Kim layer(s).

allthatguff is 100% correct. What matters here is what is built into the mcap already. The “facts on the ground” have had a lot of running to do to catch up with a share price that has sailed high on anticipation for many months. That isn't in itself a negative - and it certainly doesn't mean that there'll be a chance to buy in at a lower level - but holders should be clear that there is a lot priced in already.

Penguins - the table to which they refer indicates that production will run Mon-Fri plus a half-day on Saturday. I make that 52*5.5 or 286 days annually. The table gives us an idea of what they expect in depletion.

16 tankers/day for the first 4 months = 16x214x286/3 or 326k barrels
12 per day for the following 24 months = 12x214x286x2 or 1,468k barrels
8 per day for the following 48 months = 8x214x286x4 or 1,959k barrels
4 per day for the following 60 months = 4x214x286x5 or 1,224 barrels
2 per day for the final 104 months = 2x214x286x8.67 or 1,061k barrels

That's 6m barrels or (1,050bopd averaged over the 20 years) give or take, of which 63% is expected to be recovered in the first four years of operation.

It's good news, and further underpins the concept of Weal production on a commercial basis. It isn't what I would call "material new news" as it is broadly consistent with previous information. This is why we won't see a sustained re-rate as a result of the RNS today.

However, it is a clear positive - further confirmation that the company is continuing to make good progress with its plans.

Penguins - the company could put out an RNS saying they'd found an old biro and few 2p coins at the bottom of HH, and we'd still see a transient spike such is the febrile atmosphere around this share.

UKOG is an unusual share for AIM because of the level of attention it attracts, and the engagement that this creates. I can’t think of other (unrelated) instances where people have been camped out watching and tweeting news. We see this for heavily traded companies like Tesla (where drones are used to survey the parking lots where production is held etc) but it’s very unusual for a micro-cap oiler. Perhaps as a result we see a pattern of disappointing rises on good releases and sharp falls on poor releases, which tells us that there is a significant level of news/price anticipation here. Extra care is required when assessing what is and isn’t in the price when information and discussion is so available. If you’ve read something here, it isn’t a secret!

This share will only re-rate when there is material new news. Where recoverable oil is confirmed in meaningful volume, earnings will follow and shareholders will be rewarded. We have several bites of the cherry where an upside surprise is a possibility. Let’s hope one (or more) of them comes off. I continue to believe that the upside potential justifies holding through the noise...

Good work Apollokeith..!

Crocqman - Bloomberg shows 5.57bn shares in issue, so yes they've been admitted.

I disagree. I think we'll see a TR1 from Solo telling us that they are below 3% in the next week or two. At this point we'll know they have sold 67m shares.

Vernon - respectfully, your posts frequently reveal that you don't understand the triangle of shares in issue, market cap and share price. It really would help you to do some reading on this topic. http://lmgtfy.com/?q=shares+in+issue+market+cap+share+price

Solo took 234m shares in the placing, which gave them about 4.2%.

I do not know if a TR1 is required for shares acquired via a placing. It may be that it isn't, as the holding has been disclosed through the placing announcements. If this is the case, then we'll only see a TR1 if/when Solo's holding falls to 3%.

It would appear that not all of the 328m placing shares admitted last week are being held tightly.