UKOG issues 637m new shares to fund cuts in the cost of oil production

191026 HH Well site DoD

Horse Hill well site. 26 October 2019. Photo: DrillOrDrop

The company behind oil production at Horse Hill in Surrey has raised £1.275m in a share placing to pay for cost cuts.

Following record falls in the oil price, UK Oil & Gas plc (UKOG) said in a statement this morning it was negotiating contracts at reduced rates for key equipment and services at Horse Hill.

It was also seeking to buy, rather than lease, surface facilities, such as stock tanks, flow lines, choke manifolds and oil and gas separators. It was looking to install a gas-to-wire generator to power the site and to automate functions to reduce staff costs.

The statement said there was “a general downsizing of all operational elements not essential for continued safe oil production”. Directors’ payments had been cut from 20-50%.

The cuts had reduced the operational costs of Horse Hill oil production by $7 a barrel (bbl) to $12/bbl, UKOG said.

The asset level operational cost, which includes tanker export, sales and marketing, was now $17/bbl, it said, making Horse Hill production profitable at current Brent oil prices.

UKOG said the cost cuts and other payments at Horse Hill would be paid for by £1.275m, raised through the issue of 637,500,000 new ordinary shares at a price of 0.2 pence per share.

The issue increases the total number of UKOG shares to almost 8.5 billion.

DrillOrDrop reported last week that UKOG had issued 1.7 billion new shares in eight months. The new total is an increase of 40% on the level in mid-August 2019.

UKOG said average daily flow rates at Horse Hill were “over 300 barrels of dry oil per day”. It was planning “a series of interventions aimed at significantly increasing field production”.

The company said these included adding commingled Kimmeridge oil flow. But it said the plans had been halted until necessary procedures could be redesigned to remove the risk of Covid-19 infection to site staff.

At the time of writing, the UKOG share price was down 26.15% at 0.24 pence.


14 replies »

  1. So they are borrowing roughly the same as Steve Sanderson was paid (including bonus) a few weeks previously? No wonder one investor called him “Snake oil Sanderson “ today. I wonder which end of the 20% -50% cut
    he will be taking or if he will be refunding part of that bonus ?

  2. Oh dear Jono. Seems you and your buddies trying to dampen down UKOG is being ignored. (Never have so few tried such obvious drivel and been ignored by so many!)

    At time of posting:

    555 MILLION shares bought today.

    How many sold?

    Oh yes,

    71 MILLION.

    All a bit too obvious so the silent majority seem to have sussed it and just carried on investing.

    Maybe if same “investors” were really concerned about SS pay they would call an EGM to discuss? Nah, don’t think so. Trying it on the UKOG chat as well, doesn’t seem to have fooled too many there either. Seems somewhat counter intuitive to suggest those greedy capitalist investors looking to make a quick buck should be too focused upon someone else’s pay! But that is what you get when you attempt to lay your own prejudices upon others. It can expose where they have come from.

    Now if you want to take a look at the pay rate for someone who manages to burn through $BILLIONS EVERY YEAR of other peoples money and has yet to return a profit, let alone a dividend, after many years of trying, then Mr. Musk is your man! Okay though. Just call them GREENBACKS!!$$$$$$$!!!!

  3. So much for lots of new well paid jobs created locally when the frackers come to town!
    Cuadrilla sold that dream and certain local businesspeople promoted it for their own reasons.
    AFC Fylde Chairman David Haythornthwaite for one who still promotes Cuadrilla through his club’s Community Scheme for young people and the underprivileged. So cynical!
    He told me to my face that gambling the health, wealth and happiness of the residents of the Fylde on Cameron’s ‘dash for shale gas’ was a risk worth taking!
    [Edited by moderator]

    • Peter K R

      The issue of local jobs is a thorny one.

      Typically an industry such as the onshore oil and gas industry used existing staff to do the initial drilling work ( and all associated work such as well design etc etc.)

      Local industry can be used for the civil work and support but if I remember, at Preston Road local companies were pressurised to refuse Cuadrilla work, so a bit of an own goal there.

      High paid jobs then move into the area over time as it expands and local people are trained as required.

      So ( for example ) Marriott Drilling are not going to open up a centre in the Fylde in order to drill individual wells. Not are the drilling haulage companies likely to move to the area for the odd well and a pile of angst.

      So the lack of jobs ( and the promise was predicated on the industry developing ) is of no surprise.

      However, the Fylde and surrounding areas are already benefiting from high paid jobs in the oil and gas industry. A fair few work in the North Sea and Morecambe Bay.

      • Local jobs?

        Well, there are a few already. Such as the lorry drivers who have been trucking the oil down to Hamble. The pilot and crew who work on the ship to transfer the oil to Fawley Refinery and then those working in Fawley Refinery. All pretty well paid. And if the oil volume increases, so will such local jobs. Then there is the aviation fuel that the Refinery produces and pipes to most of the airports in the south of the UK, and is then utilised at those airports. All dealt with by highly trained and paid individuals.

        And, then there are the environmental people who monitor that the refinery actually is continuing to improve water quality in the Solent so the salmon can run through happily.

        Looks pretty decent compared to all those “local” jobs to build a solar farm, with labour imported from Poland, and materials from China!

        And yes, that is the REALITY in many situations in the UK.

  4. No frackers have come to Horse Hill, Peter.

    Shame, but once again the reality escapes you.

    However, the investors continue to invest in UKOG. So, the connection between chat forums and what actually happens is pretty remote. Whether the investors are correct in those decisions, time will tell, not a few who enjoy the opportunity to try and manipulate the dialogue (poorly and obviously) for their own ends.

    [Edited by moderator]

  5. Oh really!

    So, now twitter!

    Such an accurate source of information.

    Interesting? Not to me Dorkinian, or to the many who bought over 500 million shares yesterday. So far today, more buys than sales as well.

    However, I shall need to take more notice of Donald’s posts on Twitter if they are that “interesting”.

    The majority of investors, or just the majority of people, would recognise that being happy bunnies regarding the current status of just about any company in the world is stretching credibility a bit far. They could also look specifically at comments regarding UKOG and find many are not investors and recognise that for what it is. It is not that sophisticated, and pretty obvious, but as yesterday showed, not really having any more result than a few with their own agendas to whinge to each other and pretend they represent something significant when they do not.

    A familiar use of Twitter and other “social” media.

  6. Well said, Martyn. Such good sense as always. Usual drivel from the antis.

    But wait. Is this not the same Martyn Collyer who celebrated the acquisition by Occidental Petroleum of Anadarko in September 2019 ? Was it not his learned opinion that the purchase price of $ 38biliion was proof that Wall Street had faith in the Oil and Gas Industry ? Was he not untroubled by the new debt burden of $ 55billion held by Occidental ?

    At the time I advised him of the destruction of shareholder value by those engaged in Fracking but was told that I was being patronising. Well what has happened ? Occidental now valued at $ 11 billion with its share price in tatters. Is that not a dismal verdict from Wall Street or have I missed something ? Shares down by 66% since its takeover.

    Turning to UKOG – a company with shares that not a single one of its Directors has bought for six years – how do things stand ? Again, serious destruction of share holder value. Long term debt of £ 14 million and a collapse in share price of 80% in the year.

    It is true that it has managed to raise some Equity in recent days ( £ 1.2 million) but set against the Long term debt that does not make for a glittering gearing ratio. And don’t lets get too carried away by the dealing in shares. Once issued, trades are of little importance to the company itself – and these trades are minnows .

    By all means continue to be a cheer leader for Fracking, Martyn, but you should at least accept the volatility of the entire Oil and Gas Industry. Those engaged in it call themselves “players” which is exactly what they are. They “play ” in a world where oil prices per barrel can go from $ 100 to below zero in the twinkle of an eye. Those of us concerned about the Natural Environment are not convinced that the system of Corporate Finance which underpins the extraction is dependable enough for the responsibility of residual liability.

  7. Well, pt, I think you have your history a little out of synch, but no problem.

    No, I had no particular view on who should consolidate in USA. Perhaps you confuse me with Mr. Buffett?? Consolidation was obviously needed, and will continue. Probably, it will accelerate.

    If you wish to look at share value, then we had Jack the Lad promoting Tesla at $900/share-which then crashed, and has recovered somewhat since. Same will happen with oil/gas. How are Shell and BP doing? Oh yes, up again today. If you believe share value is a game to be played during the influence of Covid-19, as if that is just an aside, I find that-at the best-disingenuous.

    I am the first to accept the volatility in oil and gas-which is why it is a nonsense for some to think that they can excite others that oil exploration is so stable that everything is guaranteed, and then when it proves to be volatile they cry out that no one expected it!
    So, problems CURRENTLY in the Straits of Hormuz. Conveniently ignored when Brent Crude prices being so “knowledgeably” discussed, but may resurface as the major global influence much quicker than some would believe. Hope not, but it has a habit of doing so.

    Of course, pt, you can make your own pension arrangements. But, don’t expect those who have found the extraction is dependable enough for the responsibility of residual liability over DECADES, will be easily convinced. And, of course, there is always Norway which you should avoid with that suggestion altogether, plus much of the Middle East. And, before you go off on your own residual liability angle, do not think there is no residual liability for alternatives, because there clearly is. How many £ billions has it recently taken to try and make up for “cash for ash”, let alone the associated consequences for most of those who live in N.Ireland?

    As far as UKOG are concerned, they will either thrive, or not, depending on their ability to produce enough oil to cover their costs and more. That is unknown currently, but no different to other start ups. Oil price in the short term is not a great issue to them as they are restricted in attempting to increase that output due to Covid-19. Is that not what they are trying to facilitate through this funding?
    Gearing? Really? I think you are confusing this company, which is in a start up type of situation, with some other types of business.

    And, UKOG are nothing to do with fracking.

    On fracking I have always made it clear that I would like to see fracking have a thorough test in UK before any decision is made. Others may decide that for me. That’s fine. Others may feel they can misrepresent fracking to achieve that. That, to me, is not fine.
    I think the same stance has been taken by some regarding the Swansea Lagoon, except they go a bit further and want taxpayers to pick up the bill. I could support both, but not happy about the tax payer money for Swansea or the need to completely trash local democracy in St. Keverne.

    • MARTIN ,

      FIRST let me say how it warms my heart knowing that after all this time, your still thinking about your old buddy JACKTHELAD…. YES MARTIN, I’m still here if ever you need a guiding light to help you understand whats really happening on planet earth .

      I would also like to thank you for the endless amount of laughter and light entertainment you have provided me with, as I’ve quietly, over the last few months taken a back seat on the DOD forum members webpage . We all need some laughter and entertainment in these darkened times and your , distorted fantasy posts backed up with the usual SWEET NOTHING, have been pricless.

      I still see your suffering with that nasty little TESLA fetish ….

      Ok Ladies and Gentlemen, first let me ask you to go and look at the TESLA share price today. Then please click MAX on the share price time. NOTE the share price trend …..

      NOW take a look at the share price of a few of the companies that MARTIN has so fanatically tried to promote, Igas, Angus Energy, UKOG, AJ Lucas as they are today. Then also click on the MAX share price time .. TAKE NOTE as to how far down the toilet they’ve gone . Individual ( SINGLE ) sheets of toilet paper now have a greater value than the ( SINGLE ) share price of some of these companies, now there’s a thought

      MARTIN , I know how you hate the all electric car industry because you see it as a threat , but shall we talk about the real big players in the car industry like VW, Honda, Renault,Nissan ,BMW, Ford , Rolls Royce who now producing fully electric vehicles, or are currently in the process of, or intending to ……. OR are you MARTIN, still wanting to pretend they dont exist so that you can continue on with your TESLA fetish ??????

  8. Oh, hello little green Jack!

    I thought you Jacks/jacks of many colours were still running from those disgruntled share holders who bought Tesla at $900! I can see why you took a back seat until they recovered a bit, but our memories last more than a few weeks Jack! Share price trend? Oh yes, Jack ramps at $900 and it then crashes to $400!

    Think you will find very few companies are producing any cars at the moment, Jack. I remember I warned about that whilst you were ramping Tesla. Mr. Musk desperate to get production going again, but I suspect he will have to twiddle his thumbs for a while and call people fascists when reminded he was instructed by the authorities to do as he was told until he is told different.

    You do NOT know I hate electric cars Jack. I have had TWO hybrids, I have told you that. I simply found them unconvincing, as I posted to pt only yesterday. So, according to UK purchasing stats. do most who are purchasing, with SUVs far more popular than electric or hybrid. I remember asking you about your own experience with electrics/hybrids Jack. There didn’t seem to be any! Maybe gain some experience and share that?

    And, by the way, I have not promoted the purchase of any shares of those companies you mention. I have, however, pointed out that the volatility in their share prices has provided many opportunities to make a profit, whilst you seem to think that share value at the start of a year and at the end, or peak price against current price are the only indicators of whether purchasers of shares in those companies have made a profit or not. Strange, the same happened with Tesla, but that is different!?
    Perhaps take a look at the numbers traded on a daily basis some time Jack. It may give you a clue. But, looking at the UKOG share price over the last couple of days and the number of shares bought at that price, you will be nowhere to be seen if/when those share prices rise by the 20-30% they have in the past, and 500million are sold with that sort of gain. You will then just take a back seat.

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