SP Angel . Morning View . Union Jack Oil; United Oil & Gas; Highlands Natural Resources and more...



  • In Brief:
    • Union Jack Oil*** (LON:UJO) (0.11p) – $62.7mm (0.76p) – Transaction and Structure for Shareholder Value
    • United Oil & Gas* (LON:UOG) (5p) – Option Lapse Disappointing, but Not Terminal
    • Highlands Natural Resources (LON:HNR LN) (18p) – Time to Bring it All Together
    • Mayan Energy (LON:MYN)  (0.75p) – Update Positive, But How Positive?
    • Pantheon Resources (LON:PANR) (20p) – Next Stage of Appraisal Needs Outlining
    • TomCo Energy (LON:TOM) (6p) – What’s the Plan?
    • Victoria Oil & Gas (LON:VOG)  (29p) – Start the Clock

In Brief


  • Union Jack Oil*** (LON:UJO) (0.11p) – $62.7mm (0.76p) – Transaction and Structure for Shareholder Value: New today that the Company is acquiring a further 12.5% for ~$1.8mm and it’s sure of the existing NPI is a coup for the Company. Today’s news also underlines the fact that management’s focus remains the delivering of value to shareholders. By making the consideration liable on first oil the wily management team at UJO has structured a transaction that not only limits exposure to development risk but also allows for the use of alternative financing to fund it, such as a working capital line, potentially eliminating the need for equity. As a result of this transaction, but before the details of the NPI are known, our valuation rises to $62.7mm (0.76p), which is net of 2.5% NPI, although we estimate that the NPI to UJO will be at least half this, potentially less.
  • United Oil & Gas* ((LON:UOG) (5p)– Option Lapse Disappointing, but Not Terminal: Today’s news that the Colter option (to take an additional 10%) has lapsed is disappointing, but it doesn’t mean that the Company can’t access a further interest in the licence. We look forward to revisiting the Company’s asset base over the summer to undertake a granular bottom-up assessment of the portfolio’s valuation, especially considering the recent fundraising and active well programme for 2018/19.
  • Highlands Natural Resources (LON:HNR LN) (18p) – Time to Bring it All Together: Hot on the heels of its discovery last week of the rarest of gases, nitrogen, the Company has updated the market with regards to its other assets in its Denver shale play. The problem is now becoming one of “so what?” while we laud the Company for its drive towards transparency, there is a need to address the fact that there is little in the way of information in these announcements that go to the heart of the all-important value generation. While we do not doubt that there is value being generated in the portfolio, it would be useful to quantify it.
  • Mayan Energy (LON:MYN)  (0.75p) – Update Positive, But How Positive?: In a burst of positive news we see that the Company has disclosed that its recent well (Morris-01), with 3bcf of recoverable Reserves is commercial if developed using a “gas to grid” strategy. What would be useful is an idea of the potential range of recoverable reserves and, of course, the attendant economics. If it is possible to get this right, maybe they will correct the horribillis that is the arrangement that is in place for Deloro, which to our mind still sullies this management.
  • Pantheon Resources (LON:PANR) (20p) – Next Stage of Appraisal Needs Outlining: Today’s news, while positive, serves to reinforce the often “sawtooth” progress an appraisal programme can have. In this instance, the downward side of the “tooth” has been provided by the preferential production of water from differing horizons to the one fracked due to “over fracking.” The upward side of the “tooth” should be provided by the resolution of the results of the study of the data; this is how early-stage appraisal programmes often unfold on newly discovered accumulations and basins. The next steps will now be shaped and influenced by this new data point and a revised programme implemented. While further testing of the revised hypothesis will be required before the results can be deemed to be sufficiently confident, this is what an appraisal project looks like. What’s required now is a clear understanding from management about the status of the appraisal project and what the next stages of the programme will look like, and at what stage they can confidently declare commerciality, opposed to the piecemeal “hit and hope” strategy of selling test production to date. 
  • TomCo Energy (LON:TOM) (6p)– What’s the Plan?: Today’s announcement is interesting, but isn’t informative, as it gives little away as to what the programme will do, what it is aimed at achieving and what the range of results could tell us. In exploration parlance, this programme is still at the early stage appraisal stage and will require (in our estimates) 3 – 5 years of testing before enough confidence and data will be collected to enable a full-scale development plan to proceed.
  • Victoria Oil & Gas LON:VOG)  (29p) – Start the Clock: Today’s announcement is fairly anodyne, save for one point, which is that there is currently ~10 years left of meaningful production. If ever a disclosure underlined the need for the Company to migrate away from the upstream business, that was it. The Company is in a strong position, and with now a long-term target set, it can now start to negotiate with existing licence holders and assets that contain gas, with confidence.

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