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U.S. Oil & Gas plc was formed to exploit the potential for substantial oil and gas finds in one of North America's most prolific oil producing regions, using the most advanced technology available.
U.S. Oil & Gas plc’s (Ticker: USOP) core activities are in the USA, with exploration activity in Nevada where the company holds a large lease acreage and is fully funded to drill three wells.
US Oil & Gas Plc: Funded to drill its 187 mln barrel project in Nevada
The latest update from U.S. Oil & Gas (PLUS:USOP) may split opinion among investors, but what’s clear is that the group is now ready to push ahead with its ambitions drilling plans in Nevada.
Crucially it has sufficient cash to cover the 2011 drill programme, via a combination of debt and equity.
It is set to raise US$3.35 million, issuing 5.8 million shares at 36 pence each to institutional investors. It has also signed heads of terms to put in place a secured convertible loan note facility of up to US$5.1 million.
On the face of it the 36 pence issue price looks like a very deep discount - the share topped 110 pence on Friday - but in reality the picture is skewed by a sharp spike in the share price over the past week. Just five trading days earlier the Plus-listed shares were valued at 40 pence.
Speaking with Proactive Investors chief executive Brian McDonnell highlighted that it was difficult pinning down a placing price against the backdrop of such a sharp rally.
“The share price has doubled in the last week,” McDonnell said. “It would’ve been considered shoddy practice if we had changed the price based on just the past couple of days."
McDonnell adds: “As we were working on the funding I was always thinking about an average price over the past thirty days, and I think (at 36p) we got a good balance on that.”
For those new to the U.S. Oil & Gas story it is important to point out that the funding issue has been in lingering in the background for a while now. But back in October the reinterpretation of 2D seismic work opened McDonnell’s eyes to the potential scale of his project in Nye County, Nevada.
Before then McDonnell’s team had estimated already ambitious 25 million barrels oil-in-place, and the results sent him back to the drawing board.
“When we went on to analyse the probable oil reserves in place we found that we had 187 million barrels of original oil-in-place, which we confirmed today. That caused me to re-check everything.”
Subsequently the Plus-listed firm entered a closed period. McDonnell called in his geologists to formulate a plan of action, given that they had potentially found so much oil-in-place.
Ending a three-month news hiatus today, USOP unveiled a preliminary estimate of oil-in-place, based on a report from Akrawi et al, which confirmed the 187 million barrels figure.
It put maximum recoverable possible reserves at 113 million barrels and set the first target, Eblana Phase 1, at 47 million barrels of probable recoverable reserves.
We also talked to McDonnell about the new additions to USOP’s share holder register, the upcoming drilling plans and a possible step-up to the AIM market. All of which will feature in an in-depth Proactive Investors article tomorrow.
The shares have been volatile in the wake of today’s announcement as investors weigh-up the news - something that's clear from the 30-plus percent spread on the tightly held stock. The shares opened on the Plus Market at 71 pence a share, it has traded between 62.5 and 85 pence today alone.
By the end of Wednesday’s trading USOP closed the session practically unchanged at 72.5 pence a share, which values the group at around £23 million.
