Shares in UK Oil & Gas have suffered considerably during 2018 due to a series of announcements which has seen the companies market cap fall from £120m+ down to a mere £50m having hit high’s of 11p+ Or almost 400m in Sept 17’. The company was once regarded as the darling of aim as one of the most traded junior companies in 2017, however the trial and tribulations faced by investors hasn’t gone unnoticed as the news from broadford bridge in late February followed a common theme of those operational announcements subsequently received to date. The indigestion of the highly awaited updates simply has not met the expectations of the market, furthermore the company does not appear to have helped matters with the shares trading like a runaway train as commentators and stock market influencers trumpeted Billion dollar valuations based on nothing more than what appeared to be blind faith.
Test results delivered by the company showed flows of 10-72 barrels of fluid per day over 96 hours with the influx of oil rising marginally from the more recent reports. The stark reality of the testing data simply demonstrates that not only were the flows poor but indeed tested over a very short time horizon, one of the industry golden rules to making the best of a bad job is to dramatically shorten the testing period. On the 29th March 2018 the company announced it’s BB-1z had struggled mechanically in addition to the window closing for it’s planning approval preventing any outstanding issues being rectified. The company today announced it’s end of year results sept 2017 which showed the company had £1.7m in cash or cash equivalents. Whilst the company remain convinced its geological footprint is Kosher it’s blatantly obvious that funding commitments and concerns (noted in this piece) should not be ignored. We also note the bullish composition of the report on its improved proven and probable resource.
At this point we often see commentators followed by mainstream news sticking the boot in, however it is our opinion that the worst could be out of the way. Indeed the death spiral financing associated with bad news has divorced investor value and whilst their is no certainty the share price won’t soften further we acknowledge historical price performances which has seen 3 major shifts of multiples in excess of up-to x 10 uplift.
If UK Oil & Gas can manage to steer the business into shallower water and away from any more choppiness by assertaining further technical insight or indeed bringing In an influential partner then one could argue the shares at a penny offer significant value. Contrary to this if Sanderson and Co. do not find an end to the misery then the financing will continue to inflict death (spiral) by a thousand cuts. One stand out difference for UK Oil & Gas against it’s peers is their ability to trade dramatically high volumes which intern offers a solution to all of the potential negatives on the assumption the board has an alternative stimulant. 90% IG Investors appear to have been wrong setting the trend for retail punters who are already at 85% loss from the high’s, on a brighter note the oil sentiment helps us rationalise our thoughts by giving the benefit of the doubt.