By Tom Winnifrith, The Sheriff of AIM | Monday 18 April 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.
There are two statements from UK Oil & Gas (UKOG) today. One is a hard financial transaction which demonstrates clearly that UK Oil & Gas shares are horrendously overvalued and the other is the most ludicrous attaempt at share ramping in the history of AIM. Defenders of Steve Sanderson, UKOG's CEO, say that he is trying to distance himself from the Aussie share ramper David Lenigas. Frankly even Dave would have struggled to sign off on today's ramping. It is cringe-making and it is noticeable that although it relates to a Horse Hill study, no other Horse Shite company has dared publish these ridiculous claims.
UKOG reports on a study by Ernst & Young which states:
It should be noted that the Report is solely in relation to the potential extraction of oil from the two main Kimmeridge Limestones over the entire Weald Basin and is not an assessment of the Company's own 11 individual licence interests in the Weald. Kimmeridge Limestone Oil - Economic Impact Highlights:
· Future peak oil production could provide approximately 4% to 27% of 2014 UK daily oil demand over the life of the project
· The Gross Value Added to the UK economy could range from £7.1 billion to £52.6 billion
· Generation of between approximately 1,000 to 5,600 jobs in the UK, averaged over the project's lifetime
· Lifetime tax revenues of between £2.1 billion to £18.1 billion
The report explocitly does not use the flow rates from the first well but none the less uses Leni-maths to extrapolate over the whole of South East England. A senior figure at one of the other Horse Hill plays said that as a result "it was not worth the paper it was written on." The numbers are enormous but there is no basis in fact for them at all. UK Oil & Gas is engaged in shameless ramping.
Why? Because having just sepent another £1 million today it is almost out of cash. It has a lot of exploration at Horse Shite, the Isle of Wight and elsewhere to fund and as such our sources tell us that it is trying to raise as much as £8-10 million in a share placing.
The problem is that UK Oil & Gas shares are demonstrably monstrously overvalued after another deal announced today. UKOG has bought 12% of Horse Hill Developments ( which owns If 12% of Horse Hill) from Angus Energy for £1.8 million. That gives an impied value to UK Oil & Gas's entire stake in HHDL ( 42%) of £6.3 million. The company, that is UK Oil & Gas, now has net cash of bugger all and is burning cash yet at 2.15p ( down a tad today) it is valued at £44 million.
There is no way on earth that its other UK assets are worth £38 million. They are at best worth £5 million. These things are all relative and relaticvely speaking Horse Shite is the jewel in the crown. On my generous valuation of the non HH assets UK Oil & Gas is - by the metrics of its own deal - 75% overvalued.
Angus Energy is run by the chap who set up HHDL, Jonathan Tidswell. He knows the asset beter than anyone and he was prepared to sell 12% of HHDL for just £1.8 million. That rather suggests that he doesnt think that this field will add £52 .6 billion to the UK economy, enough to fund our armed forces for 15 months.
The metrics of the deal announced today by UK Oil & Gas show how grossly overvalued its shares are. The most shameless attempt at share ramping in the history of AIM shows that UK Oil & Gas accepts that overvaluation and feels it must try anything to get a placing away. The E&Y release brings shame on all concerned.
Ahead of the bailout placing with this stock now stinking not only of Lenigas but of desparation, the shares are a sell.
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Bearfacts
Will the FCA step in here and show some protection to investors?
This Bear is roaring at them.
All the best….
wildrides
This debarcle just gets better and better . Can we please have a comment from Andrew Bell ? Oh go on please ! and will he still accept his invite to the Villa ( with pool )( perhaps) . Olive oil is better than snake oil I suppose . Especially pressed in the old fashion way between the legs of bronze tanned virgins .
wildrides
UKOG ,88 Energy and Metal tiger should do a merger . Plenty of synergies be twix them and strategic fit as well ( for very little ) . You could sack two boards and just keep one wanking committee for writing RNS and overall strategy ( spunking direction ) By all accounts the market cap would be through the glass ceiling for rabid turds . Never mind the bollocks , just think of the liquidity .
Bob
Bearfacts, surely even you can’t be that naive?