In Brief
• Union Jack Oil*** (LON:UJO– 0.11p) – $57.3mm (0.69p) – A Supportive Council & The “F” Word:Due to the fact that the Company released yesterday’s news that North Lincolnshire Council had extended their approvals for Biscathorpe and North Kelsey after First Oil was issued and there is news today of an acreage acquisition from Celtique Energy we are covering both:
o A Supportive Council: News that North Lincolnshire Council had extended their approvals for the Biscathorpe and North Kelsey is positive in two respects, namely: (i) is indicative of a supportive planning authority, unlike that at Wressle; and (ii) it clearly underlines the urgency with which the Company is pursuing the value potential within its portfolio.
o The “F” Word: With the acquisition of an interest in PEDL201 (16.25%) and PEDL181 (12.50%) for £7,500 each from Celtique Energy, the Company has taken a sizeable option on the fracking potential of the Bowland Shale. Ahead of a review of the underlying technical valuation, we can support the observable “worth” that has been provided by market transactions.
While the news on Biscathorpe and North Kelsey do not add to our valuation, but they do add to our confidence that these assets will be developed if the wells are successful, the acquisition of Celtique Energy’s interests for £15,000 is, to our mind, instantly value accretive. To this end, and before we undertake a more thorough technical valuation, we are comfortable to add $6.2mm (0.08p) to the risk valuation and $11.4mm (0.27p) to the unrisked valuation. On this basis and adjusting for shares in issue, our Valuation rises $57.3mm (0.69p).
• Colter & Wick Countdown: Today’s news, from multiple sources, discloses that the private operator, Corallian Energy, has executed a letter of intent with the rig contractor Ensco to secure a rig for drilling the Colter discovery (near offshore Dorset) & Wick prospect (near offshore Moray Firth). While timing has yet to be confirmed, we are now more confident that the discovery will be appraised before the end of 2018. Based on our high-level preliminary analysis, the gross values are:
Asset E&P Stage 2C/P50 Value Comment
Colter Appraisal 34mm bbl $260mm Development through existinginfrastructure at Wytch Farm.
Wick Exploration 70mm bbl $439mm Development through on shore infrastructure.
The following SPA companies have an interest in Colter & Wick:
Company Ticker Price Interest in
Colter Wick
Baron Oil*** LON:BOIL 0.50p 5% 15%
United Oil & Gas* LON:UOG 4.65p 10% -
• Mayan Energy (LON:MYN – 0.76p) – Why?: It is very rare that a company with an interest in and asset that has 3.5mm bbl of recoverable oil relinquishes that interest, for whatever reason. Consequently, we find ourselves asking “why?” We feel confident that were due to insufficient cash resources on behalf of the farminee, that the Company would have disclosed this to the market as it is material. We are now concerned that the farminee, being the party putting its fiscal resources at risk, no longer sees an adequate risk/reward balance to justify the investment. In the absence of any meaningful disclosure from the Company, we are left to feel once again that its lack of technical expertise is exposing it to excessive risk. It is time that the management team started to share, in a meaningful way, the technical support for their investment decisions, because as it stands currently the “in again, out again” approach is undermining already low confidence in this management team’s ability to generate value for shareholders.