Member Info for StarBright

argus1 - your statement isn’t correct as it it fails to recognise that the value of any assets acquired is important.

It is only accurate to say that it’s not dilution if the shares aren’t issued at a discount.

3.5bn

The idea that the former HHDL stakeholders may have a good opportunity to offload the UKOG shares they received as consideration seems entirely credible to me.

I suspect the “minnows” sold because they didn’t have the cash to meet their funding obligations to HHDL. Selling their stakes released them from the cash calls.

It is hilarious but a little sad that there are evidently posters here who have only just understood that UKOG has effectively paid for the stakes through a placing, issuing new shares for the vast majority of the consideration. This information was hidden in plain sight in the original RNS’s - I really don’t think they could have been any clearer.

Just a little bit too rampy perhaps..?

mick2 - the spread betting firms are also flow businesses, with their economics driven by the volume of transactions not by price movements in the underlying instruments. Where a spread betting firm has an imbalance on the long side, it can hedge its position by buying the underlying securities. Remember that the price paid by spread betting clients will be marginally higher (the spread!) than the underlying offer price, so the firms can hedge whilst retaining profitability. In reality they tend not to do this on a trade by trade basis, as their net positions form a diversified portfolio against which they can and do conduct hedging operations at an aggregated level.

The idea that they can "noble the market by placing naked sells" is a piece of internet fantasy, as is the idea that they will look to suppress an individual SP in the morning and "remove their sells" (surely a meaningless phrase..) later in the day. It's just nonsense! If they place a sell order they will have to have the shares available to deliver for settlement. If they don't own them they can't borrow them (see earlier post) so they will have to buy in the market thus driving the price back up in any case... They will also have breached market regulations by taking the naked short as they are subject to the same rules as other market participants (including on disclosure) - there are no exceptions for spread betting firms.

I hope this is clear and helpful.

willow - you’ve got yourself in a bit of a muddle. There’s no evidence (the FCA daily disclosure ‘sheet) to suggest there are any material short positions in UKOG. There’s no evidence (TR1’s etc) to suggest that there are any material Institutional Investors in UKOG. These two statements are linked because short positions generally require stock lending by Institutional Investors - you have to “borrow” the shares for a fee before selling them (to open the short position). You buy shares back (to close the short) in the open market to give them back to the original lender when they are due. You profit if the price has fallen in the meantime as it costs you less to buy the shares back than you received from the sale.

To be clear: if an individual (or a fund) could borrow UKOG shares from an Institutional Investor, sell them at a price toward the top of the recent range say 2.5p and then buy them back at the low end of the recent range say 2p then they would realise a financial gain.

But there are no II’s with worthwhile amounts of shares to lend, and in any case UKOG is too small and too volatile to be considered for lending. As there are no borrowable shares, there’s no way to open a traditional short position.

There are two known exceptions:

One is spread betting. If you have an account with IG Index (or similar) you can open a short spread bet. IG offset this against the long spread bet positions their other clients have taken. This reduces the spread bet firms long exposure to the price, it doesn’t require them to trade in the underlying market so doesn’t impact the share price. The amounts involved are typically small in any case for a variety of reasons.

The other technical exception is for the market makers who are permitted to hold short positions at times. Their obligation to accept trades requires at normal size effectively requires this to be the case. They don’t typically take material or long term short or long positions as this is risky and capital intensive; they are (despite what you might read on here) more interested in maintaining transaction flow than they are in punting on the price of shares as they earn their living from collecting the spread between buyers and sellers.

The endless discussion here about burning shorters etc is just imaginary drivel from posters unaware of the perimeters of their knowledge. As such it can safely be ignored.

The absence of shorting activity is a negative for investors interested in UKOG in any case, as it impedes the process of price discovery and promotes the existence of the short term sentiment driven spikes that are a feature of UKOG’s share price history. It’s clear from reading this board that there are many inexperienced PI’s who’ve been caught out and “spiked” buying at the wrong time. If the share was easier to short it would be harder for our resident rampers to fuel short terms spikes with their excitable postings about 1500 ft columns of Rolexes etc!

Brocal53 only joined recently DaveWin. It's perhaps unreasonable to expect him to have read his way through everything posted here in recent months, or to accuse him of having an agenda.

The arrival of new names / posters on this board is a positive sign. The SP won't move until new good news attracts fresh investors and their capital.

And to use the reply button rather than starting another thread....?

Do we know if the planning application mentioned in the 10th September RNS has been submitted yet?

"A planning application for long term production is planned to be submitted to Surrey County Council shortly, prior to the completion of the forthcoming Kimmeridge EWT programme."

'HHDL's internal declaration of Portland commerciality is therefore expected shortly following receipt of Xodus' final connected oil volume analysis.'

This statement is slightly ambiguous as to whether the report is expected shortly, or whether the declaration will be made shortly after the report is received.

I think the latter. The report isn’t necessarily expected shortly, but the declaration will be made shortly after the report arrives.

Those suggesting the company is “late” may be victims of poor sentence construction (the piano for the lady with the wooden legs...) not just their own impatience.

I guess the trite answer to why they sold and UKOG bought is that a price that satisfied both parties was found.

UKOG will correctly have insisted on payment in shares, because they can just issue to cover the requirement. For the company this is like printing money. The recipient is free to sell the shares in the open market unless the S&P agreement contains clauses restricting this - which I would expect to have seen referenced in the RNS.

Payment in cash would have drained £6.6m from the company's precious cash pile. In fact, only £425k was paid in cash, with the remaining £6.175m to be [thank you JayKay1] covered by issuing shares. I think this was sensible structuring.

Shareholder permission evidently wasn't required - as with other recent placings.

Thank you Penguins, Ibug and JohnnyB.Goode - that's the detail I was after.

If the (potentially) recoverable oil lies in the KL3 and KL4 layers and these are between 166 and 208ft thick, then I am uncomfortable with the description "1500 ft oil column".

Whether this originated from David Lenigas (who I suspect has the knowledge to know better) or not, perhaps it shouldn't be repeated here any more in the absence of supporting evidence.

Thank you. That page also says:

"...the HH-1 well penetrated a very thick 1500ft section of world-class, thermally mature, oil saturated source rocks in the Kimmeridge section. The source rock shales encase up to six Kimmeridge Limestones reservoir units."

Which description is accurate?

(a) "1500 ft oil column"
(b) "100m of potential oil pay"

Let’s set aside the hyperbole of the Shard, the Empire State Building and the Rock of Gibraltar.

Is “1500 ft oil column” an accurate (or supportable) description of the Kimmeridge oil play?

I have been looking closely at the diagrams on pages 7 & 8 of this UKOG presentation: https://bit.ly/2OxMmlD

It appears to show the Kimmeridge layers extending from -615m to -1,127m. KL#4 is located at -840m, and KL#3 at -900m. Could one of the board's resident oil experts please confirm that I have understood this properly? What are the vertical heights of KL#4 and KL#3?

Thank you in advance.

The graphic on page 14 of the UKOG presentation deck is particularly interesting.

Where on the graphic is the “...1500 foot column of oil...” we have been hearing so much about?

A question for all of you who know much more about CPR's than me...

According to Gaffney, Cline and Associates, a CPR will contain:

"...an overview of the licences held by the company, with expiry dates and obligations (e.g. exploration wells, or minimum expenditure) and a list of assets associated with each of the licences. A geological overview is usually included, which should be written in such a way as to be accessible to readers with basic geological understanding. Where production has taken place from one or more of the assets, produced petroleum volumes and associated operating expenditures should be provided for at least the previous three years.

A key part of the CPR is concerned with the statement of the Reserves and Resources associated with each of the licences, with a brief description of how and by whom these were estimated. All classes of Resources are generally reported, i.e.

- Reserves (Proved, Probable and Possible): those quantities of petroleum that are anticipated to be commercially recoverable by application of development projects to known accumulations from a given date forward under defined conditions;

- Contingent Resources (Low (1C), Best (2C) and High (3C) estimates): those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations, but the applied project(s) are not yet considered mature enough for commercial development due to one or more contingencies; and

- Prospective Resources (Low, Best and High estimates together with an estimate of the “Geological Chance of Success”): those quantities of petroleum that are estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects.

A second key part of the CPR is a “valuation of Reserves”, which is required for AIM but optional for the Main Board. In fact, what is presented in the CPR is not a “market valuation”, but an “economic evaluation of Net Present Value”. Market valuation of the listing entity is performed by the Sponsor or NOMAD in setting the share price. The economic evaluation in the CPR usually takes the form of an estimate of the post-tax Net Present Value (NPV), at a 10% discount rate, of the forward cash-flow of the projects associated with production of the Reserves, under certain economic assumptions, which must be clearly stated. Sensitivities to key economic assumptions, such as oil and gas prices, project costs, discount rates, etc., are usually also presented."

Which are the key areas in which upside surprises (eg new news) are possible? News the company either didn't have, or couldn't release at the time of the RNS?

Elegance - the 10 year figure wasn't used in connection with valuation. The 1.4bn barrels figure came from FlatBottomBroke's post at 00:04 in which he suggested that a recoverable figure of 1.4bn could mean a share price of 60p or even 75p. My 08:04 post pointed out than even over 10 years this could mean 2600 tanker movements per day. It's not how I would value the company.

As my post went on to say, I think EBITDA multiple will be the most appropriate valuation methodology for UKOG given the particular challenges presented by the geographic location of the oil. The market will attribute value to production, or very-near-production assets with a high degree of certainty around cashflows. This will happen incrementally, as the legal and logistical hurdles around each potential site are unlocked.

As JayKay1 says, the time value of money is critical. EBITDA multiples incorporate this through the choice of multiple used. If interest rates rise, Ev/EBITDA multiples will decrease as future cashflows have lower present values.

I hope this makes sense.

It's a fun debate, but the reality is that I don't know anything about large scale pipelines other than what I've read this morning and posted up here. I've read enough to form a view that this would be a complex and costly undertaking, but am open to education and opposing views from posters with relevant expertise.

There are rather a lot of hurdles to clear before it becomes a practical problem in any case!