Something strange has happened to the UK Oil & Gas (LSE: UKOG) share price – it’s risen, and it’s kind of stayed up. Admittedly we’re still looking very much at penny share levels, but at 1.043p as I write, the price is up 30% since a low on 7 August.
Over the past 12 months the UKOG share price has slumped by 46% (even after the latest gain), and we’re looking at a 90% loss since 2017’s peak. Could things really be different this time?
Outpourings
UKOG is turning up its rate of communications, and we’ve seen as many RNS releases from the company in the past month as in the previous five. It started with the announcement, on 11 September, that UKOG had expanded its holding in the Horse Hill oil field to a controlling 85.6%, from its previous 50.6% stake.
Updates regarding drilling at Horse Hill have been rather mired in detailed technical progress. Frankly, I don’t really care about the specific time of day an activity commenced, exactly which diameter casing has just been cemented into place, to precisely what depth, and so on.
We’re still getting regular flow test updates, with the test production from the Horse Hill-1 test well apparently reaching 41,800 barrels by 9 October. That’s total, by the way, which really tells us nothing whatsoever about any prospective daily production rate or the potential size of any reserves. These updates are really just saying “Oil is still trickling out of that hole we drilled.”
More new shares
UKOG is also still handing out new shares as if they find them on trees. Recently it’s been to convert some of its debt owed to YA II PN Ltd. In three new tranches, the company has issued 114.6m new shares in exchange for a reduction in its loan from £5.5m to £4.35m. Oh, and options for over 121.5m new shares were awarded to directors and employees on 27 September. And the firm’s newly formed Employee Benefit Trust is subscribing to 201m new shares.
It’s easy to lose track of all these millions of new shares being issued, but despite this extra dilution, the UKOG share price is so far remaining relatively buoyant – though it did reach a higher point of 1.374p on 10 September, a level from which it has retrenched a little.
I’ve scrutinised the past month’s worth of company updates, and I’m seeing nothing that inspires optimism. To me it all just seems like noise added to the news of all the new share issues. Meanwhile, there’s one substantial question that remains unanswered, and towards which I’m seeing no real progress. That question is – what commercial reserves are actually down there?
A real milestone
A key milestone for most oil explorers is getting good analysis done, leading to a Competent Person’s Report. Such a report would provide an independent technical report on UKOG’s hydrocarbon assets, split into three categories: reserves currently anticipated to be commercially recoverable, contingent resources that are not yet ready for commercial development, and prospective resources that could be potentially recoverable from new discoveries.
UKOG has shown little enthusiasm for procuring such a report. But until I see one, I’ll continue to rate UKOG’s prospects as a pipe dream. I’m still giving it a wide berth.