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UK Oil & Gas - you cannot say that Broadford Bridge is commercial - but the share price discounts success: placing ahoy?

By Tom Winnifrith, The Sheriff of AIM | Thursday 7 September 2017


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.


The word on the street is that - having raised £6.5 million (gross) at just 0.8p back in May -  UK Oil & Gas (UKOG) has been so startled by the spectacular - and largely unwarranted - re-rate of its shares that it is lining up another, much larger, placing alberit at a material discount to the current share price. The shares raced ahead again yesterday as private investors again fundamentally misunderstood an RNS.

The company gave a series of updates on Broadford Bridge which the morons took to mean that it is commercial or that there are signs that it may be. that is not what the RNS means. In plain English a leading oil analyst summarises thus:

Basically they have completed the side-track and are allowing it to clean up and flow the drilling mud back to the well bore.

It is too early to say whether it is commercial, but this will give no information on the shale prospectivity as these formations haven’t been tested, only the conventional zones within the shale series.

You need to imagine it being a series of sponge layers, some layers are shakes (unproductive without fracking), some are conventional reservoirs (limestone, sandstone, etc.) that don’t necessarily need to be fracked. The unconventional shale horizons have still not been tested.

Oil has been found at Broadford Bridge but the find would have to be massive to justify a market cap of £320 million. I explained just how massive in the weekend podcast HERE. But at this stage we do not even know whether the find is commercial!

It is not just the analyst and me saying that but also the planning officers at West Sussex County Council who have recommended that UK Oil & Gas be allowed to continue work for another year after September 15. The planning meeting to review this is on 12 September and you can read the officers report in full HERE For what it is worth I reckon the decision is almost a formality. But here is what the planning officer writes:

The remaining works would involve Phases 3 and 4, namely up 14 weeks of testing (Phase 3) followed by either restoration of the site (Phase 4a) or ‘retention’ of the site (Phase 4b), while a further planning application is prepared for production (see Appendix 4 – Restoration Plan and Appendix 5 – Retention Plan).

4.6 Testing and evaluation involves cleaning the well before carrying out flow tests and ‘shut-ins’ (i.e. sealing the well to carry out pressure testing) to understand the pressure and temperature characteristics of the geology and hydrocarbon resource. The applicant has noted that although the original application indicated that testing for oil and gas may be required, it is now anticipated that only oil testing will be needed.

4.7 Fluid and gas would be pumped into a separator where oil and water would be diverted into separate tanks, and gas would be diverted to a flare. The ultimate aim of the process is to understand whether the hydrocarbons can be economically exploited. The testing/evaluation process takes up to 14 weeks, and so is expected to be complete by November 2017.

4.8 If the tests show that there is not a viable hydrocarbon resource, the well would be ‘abandoned’ by plugging the borehole and the site restored (Phase 4a of the original application). This involves cutting the steel tubing inside the well approximately five metres below the surface, and capping the borehole with a steel plate before and decommissioning of the rig, a process which would take approximately three days. All structures including welfare and support buildings, the rig, storage tanks, the well cellar and ditch lining would be removed, and any remaining drilling mud, cuttings and waste would be removed from the site. The land would be returned to its former use, using the native soils from the stored sub and top soil bunds. The site surface would be re-formed using the stored soils and allowed to regenerate naturally.

Ends.

In other words at this point no-one knows whether Broadford Bridge is commercial and if so what amouints of oil can be produced. But - as I explained HERE - the current market cap discounts a field throwing off £100 million free cashflow or more a year. There is just not a cat in hell's chance of that happening.

But pro tem the morons bid up the stock and you can see the complete lack of understanding and sheer stupidity of those recklessly punting on the shares from the tweet I received yesterday which a host of other morons were quick to like. Seriously, you would not want any UKOG shareholders in your pub quiz team.


For the record I sold the pizza place ( at a profit, an experience this twit is unlikely to experience) two years ago, I am not short. I accept that a man who makes his living as a sparky in Sparkbrook has far greater media contacts than I do so I am sure that the BBC is onto me. Not!

But if the BBC wish to report on me perhaps they might start with my work on that BBC documentary two years ago which caught UK Oil & Gas boss Steve Sanderson lying on camera as he denied making claims ab the size of Horse Hill which sadly he had also recorded on camera. Maybe the BBC would like to allege that I am short and I could get my license fee back in spades in a libel court. Please there is a God....

As to the no posts... how do you keep an idiot in suspense? I told the tweeter I'd be posting today.


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