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UKOG: THE UK OIL INDUSTRY CHANGER WITH BAG FULLS TO GIVE.
Hi everyone,
Today I will be talking about UK Oil and Gas Plc (LSE:UKOG)
A lot of people will have heard of UKOG. After all, its press coverage in the UK as a result of the Horse Hill Kimmeridge clay news recently has scared and excited a lot of potential investors and long time holders, but not many people have a full understanding of this company and its prospects. Today I intend to make any investor who cares to read this article aware of the current condition of UKOG and where I see it going in the next 6-12 months.
So lets start off with the prospect that has enticed and scared so many investors.
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Horse Hill: UKOG own 20.358% and are not the operator.
The Kimmeridge hybrid formation is a good place to start, it is made up of naturally fractured carbonate and mudstone interbedded hybrid reservoir sequences . So what does that mean you ask?
Well naturally fractured reservoirs are made when rocks formed billions of years ago are pushed up and violently fractured by earthquakes and other tectonic forces. The result is a porous network in which oil runs. A point I would like to make is that the oil is not in the rocks and as such does not require fracking to acquire the oil. This is very important to know as fracking does not only go against the mission statement of UKOG but also costs significantly more than the conventional drilling methods that will be used by the Horse Hill development team. Now this is a key point as so many personal investors have been influenced by financial tipsters (you know who you are) who have very little knowledge of the oil industry or whom have on numerous occasions insinuated that HH will never be flow tested due to its need to be fracked…. this is not true.
HH IS A CONVENTIONAL PLAY AND WILL NOT REQUIRE FRACKING.
Next up is the Horse Hill Upper Portland conventional play which was recently upgraded to having a low estimate of 14.3 million barrels and as having a high estimate of 30.4 million barrels. I expect (based on other Upper Portland plays) that 300 bopd could theoreticaly be produced form this prospect.
So, HH is a conventional play with huge levels of oil.
Now, the Kimmeridge play has been reviewed extensively by Nutech but who are Nutech.
I have done extensive research into Nutech and find all their work of highly accurate quality, this is my opinion based on looking over the information available online and although Nutech might have got this all wrong I find it highly unlikely. The technology that Nutech have at their disposal and the knowledge they have surpasses that of most of the market.
The press have bashed HH-1 declaring it a none starter and even implying that Dave and the HH team are making claims on a asset that will most likely need fracked. They have been wrong time and time again!
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Isle Of White UKOG own 77.5% and are the operator.
IOW is a great opportunity for UKOG to grow.
The drill ready M prospect is the main company making opportunity that IOW P1916 provides. Between 37.4 million and 239.2 million barrels of oil could be found in the ready M prospect and it is expected that this will be of high quality and easily extracted.
The other exciting part of the IOW prospect is that it is onshore and allows for offshore oil reserves to be obtained by an onshore well.
Further updates on this asset could provide upward share price momentum throughout the next 6-12 months.
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Now no company makes it onto the SIBseries if they are not financially safe, that means money in the bank and revenue to keep cash flowing.
UKOG has a $10million financial debt facility (of which they have already drawn down $1million) though YA Global Master SPV Ltd (“YAGM”)
UKOG also have a revenue stream via their interest in Angus Energy Limited.
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Now i’m not going into all the areas that UKOG have and invested interest but I will go into one last area.
Maxwells wood: UKOG own 100% of this prospect and of course are therefore operators.
The Maxwells wood prospect has already proven itself as a producing prospect with an average production of 100bopd but the interesting thing about Maxwells wood is that it is potentially an extension of the Horndean oil accumulation.
The Horndean field run by IGAS had a peek production of 600bopd in 2007. If this could e replicated at the Maxwells wood prospect then this could add a healthy revenue stream to UKOG.
Maxwells Wood is part of the Weald Basin and as such should also gain attention from any work done at HH.
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To summarise:
UKOG is a fully funded oil producing company with a real vision to become a key UK oil industry player.
It has no need for placement of shares or fund raising until after the flow testing of HH and IOW.
It has assets that are producing and also has assets that are yet to be flow tested which have huge potential.
Today we seen the share price of UKOG rise over 15% and yet the company is still highly undervalued in my opinion.
News on the remaining three HH Kimmeridge zones that Nutech are assessing will be released “Imminently” as stated in the last update RNS.
Based on all this information and the effect that good news has had in the past on UKOGs share price, I give a 6-12 month share price target of 7pps with further upside coming from the potential flow rates that Horse Hill and IOW might achieve.
I hope you all enjoyed this blog and as always:
All in my opinion and not to be taken as fact nor advice.
Always seek financial advice before investing in any company.
Find me at akwinvestmenttalk.co.uk
