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Horse Hill – why are its shares so hard to value?

By Tom Winnifrith, The Sheriff of AIM | Monday 25 July 2016


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


Horse Hill was incorporated on 10 December 2013.  Angus Energy was the founding shareholder of Horse Hill and after formation and being issued 300 shares exchange for the issue of licenses in the underlying oil fields ended up with 400 shares out of total of 1,000 shares. David Lenigas was appointed a director on 8 December 2014 and resigned as a director on 13 July 2015 and was a key promoter for some of the listed entities that now a large proportion of Horse Hill entity.

If you plow through the accounts of the various entities all the new shareholders (i.e. other than Angus Energy Limited) paid £6,000 per share in the period from 19 December 2013 to 19 June 2014, valuing the entire Horse Hill Company at £6 million.  Set out below is the ownership shown as at 10 December 2014, 10 December 2015 in the Annual Returns filed at Companies House and in the final column we show the current position based on two further publically disclosed transactions.    

Horse Hill shareholdings

Horse Hill Developments Limited

     

Post

   

10-Dec

10-Dec

Regency and

Holder

 

2014

2015

Flowermay deals

   

Number

Number

Number

Angus Energy Ltd

 

400

170

120

Doriemus PLC

 

100

100

100

Stellar Resources PLC

100

100

100

Solo Oil plc

 

100

100

100

UKOG plc

 

200

300

360

Alba Minerals Resources plc

50

150

150

Regency Mines plc

50

0

50

Evocutis PLC

 

0

20

20

Flowermay Ltd

 

0

60

0

Total

 

                                                         1,000 

           1,000 

                 1,000 

As one can see there have been some significant changes to share ownership since the 2014 Annual Return.There were no changes to Doriemus, Stellar Resources or Solo Oil holdings of 100 shares or 10% each. There were however a subsequent 8 transactions between certain of the parties listed above.

Angus Energy accounts contain details of two actual sales and a conditional transaction with Alba (which did in fact complete) for the disposal of 230 shares. Interestingly Angus was happy to disclose Alba as the potential purchaser for the conditional sale but why was it so shy about stating the name of the purchaser/(s) of the other two blocks of shares?

Published details for Horse Hill share transactions.

In the table below, I have extracted the various details from published information and recorded them in transaction date order.  I have colored red those deals where the purchaser and vendor are publically disclosed plus the 6 March 2015 transaction purchase and sale as these seems to match precisely.  A few observations are noted below: 

  • Danadav appear to have been very fortuitous in its timing of its purchases and more than trebled and quadrupled its purchase price in just over 3 months.  UKOG announced details of further well analysis on 18 March 2015 the day before Danadav sold its stake to Evocutis. Who owns Danadav?

  • Alba Minerals seem to have got a relative bargain on their deal from Regency Mines.  The deal was announced on 12 March 2015 as a conditional binding agreement and completed on 8 April 2015   Why were Regency Mines so desperate to sell Horse Hill shares only to buy back in the same stake some 10 months later and why were directors satisfied this was a sensible transaction? In the Regency Minerals 2015 Annual the Chairman’s statement explained their rationale.

The investment in and subsequent sale for £300,000 of the interest in Horse Hill gave rise to an £83,900 loss, included under exploration expenses. The underlying picture is clearer when one takes into account that as a result of the co-investment in Horse Hill with Alba Mineral Resources plc (“Alba”), the Alba price rose and Regency was able during the period to realize a profit on sale of investment of £131,756 from selling a holding previously carried at £48,821, and that Regency was also able to raise £447,700 before expenses in September 2014 at a price per share approximately double that achieved four months earlier and before investing in Horse Hill.

  • How did Regency Mines apparently get such a bargain on its purchase from Angus Energy of 26 February 2016?  

  • Similarly Flowerday appear to have been motivated to sell following the UKOG Horse Hill flow test RNS announcement of 19 July 2016 and again has trebled its money. Who owns the mysterious Flowerday?

 

Transfers 2014 to 2015

Buyer and Vendor

Number

Percentage

Consideration

100%

Annual Return

   

paid

value

16-Dec-14

Unknown from Angus Energy

100

10

            500,000 

       5,000,000 

6-Mar-15

Unknown from Angus Energy

80

8

            580,000 

       7,250,000 

6-Mar-15

UKOG from unknown

80

8

            580,000 

       7,250,000 

12-Mar-15

UKOG from Danadav Investments

20

2

            352,000 

    17,600,000 

19-Mar-15

Evocutis from Danadav Investments

20

2

            425,000 

    21,250,000 

8-Apr-15

Alba from Regency Mines

50

5

            300,000 

       6,000,000 

24-Sep-15

Angus Energy(a) to Alba

50

5

            917,222 

    18,344,440 

23-Oct-15

Alba from Angus Energy

50

5

            917,222 

    18,344,440 

           

Transfers post 2015

       

Annual Return

       

26-Feb-16

Regency Mines from Angus Energy

50

5

            400,000 

       8,000,000 

22-Jul-16

UKOG from Flowerday

60

6

         1,000,000 

    16,666,667 

 

 

Notes

a) Alba conditional sale adjusted to final consideration per Alba audited accounts

b) In terms of unmatched transactions it appears that Angus sold 100 shares to unspecified parties.

c) UKOG has brought 20 shares from Danadav and 60 shares from Flowerday and Evocutis also brought 20 shares from Danadav. Making a total of 100 shares.


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