“Substantial losses” at Horse Hill

The operator of the Horse Hill oil site in Surrey made “substantial losses”, its latest accounts have revealed.

UKOG’s Horse Hill site in Surrey, 29 April 2020. Photo: Used with the owner’s consent

Horse Hill Developments Limited (HHDL) lost £1,155,205 in the year to September 2019. This compared with £512,667 in the nine months to September 2018.

The company relies on funding from its shareholders, including the parent company, UK Oil & Gas plc (UKOG).

The accounts said UKOG intended to provide funding based on HHDL and its shareholders agreeing a budget for the next 12 months.

The company could also reduce costs it necessary, the accounts said:

“The cost structure of the company comprises a high proportion of discretionary spend and therefore in the event that cash flows become constrained, costs can be quickly reduced to enable the company to operate within its available funding.”

 The accounts also revealed that HHDL had sought an extension to the permission to test its second well, HH-2z. The extension would “ensure that sufficient data is available to enable the correct decisions to be made”, the company said.

Water problems in the HH-2z have delayed plans for long-term production. UKOG has said it is considering options including stimulation, sidetracking and converting it to a water re-injection well.

Key figures

Turnover: £0; 9 months to 30 September 2018 £0

Cost of sales: £0; 9 months to 30 September 2018 £0

Gross profit/loss: 9 months to 30 September 2018 £0

Admin expenses: £241,925; 9 months to 30 September 2018 £257,854

Operating loss: £241,925; 9 months to 30 September 2018 £257,854

Interest expense: (£913,280); 9 months to 30 September 2018 (£254,813)

Loss for the year: £1,155,205; 9 months to 30 September 2018 £512,667

Exploration and evaluation assets: £16,417,933; 9 months to 30 September 2018 £13,521, 890

Current assets: £1,334,132; 9 months to 30 September 2018 £3,559,673

Net current liabilities: £594,082; 9 months to 30 September 2018 £1,386,625

Income from sales of oil generated by long-term testing: £2,410,945; 9 months to 30 September 2018£47,694. This figure is credited against the exploration and evaluation assets on the balance sheet.

Loan balance outstanding to UKOG, Doriemus and Alba Mineral Resources: £14,636,896; £12,572,617

Decommissioning provision at 30 September 2019: £144,341; at 1 October 2018 £148,170

Link to accounts (see accounts dated 5 October 2020)

Updated 7/10/2020 to include link to accounts and correct figure for 2019 income from sales of oil

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13 replies »

  1. Not sure that the statement about ‘discretionary spend’ being flexible would tempt me to invest much. Sounds like the Directors could manage to exist on house wine rather than classy Champagne if required!

  2. Well, Peter, I suspect they would not rely too much on your investment. However, subsequent to this period further major investment has been made by UKOG, so others-maybe with deeper pockets-have not had your reservations. And, as far as HH is concerned, major cost adjustments have also been achieved subsequently.

    • It really is quite unbelievable the rubbish that is pedled by ‘Drill or drop’.

      The reality is the nine months figures to September 2018 were only 2- 3 months of EWT as it commenced in July 2018.

      Under EWT rules oil sales are not counted as income or revenue & operations costs are likely higher during that period.

      If Drill or drop was not bias & reported objectively it would at least report the facts not this balony.

      The reality is that Horse Hill is now in full time production & UKOG will have added an additional 35% of the income from Horsehill.

      Should anyone care to look at the other recent negative slanted articles published here about UKOG you will see how costs have been reduced.

      I try to be objective & will consider that this year will also be a difficult year for UKOG which takes into consideration the global fall in oil prices which has left no oil company unscathed.

      Fortunately looking forward with production costs of around $11 per barrel thing should improve as the oil price & production rates rise.

      Rome was not built in a day but things are progressing against all the negativity here.

      • I don’t see how you can defend a company that took investor cash at 10p a share down to 0.015 p a share and blame oil prices , even at $100 a barrel you have to be producing to make money. UKOG are producing more and more water which knocks the hell out of profits , Market cap of 20 million down from nearly 140 million is not due to biased reporting by DrillOrDrop and you want to blame anyone except yourself for being so stupid to be sucked in by UKOG who won’t even tell you what is going on, they leave it to Swampy and Ruth to make your life miserable while you go into denial . The OGA production figures are out on first of the month .

        • Jono

          At $100 per barrel that would be $89 per barrel profit & the number of barrels you would need to produce to make a profit at a $40 oil price is significantly different.

          Fortunately going forward UKOG has production costs of about $11 per barrel compared to may who’s production costs are over $50 per barrel.

          You like to mention water production which may or may not be from HH1 but fail to mention that UKOG has permission for a water well to dispose of produced water which will significantly reduce water disposal costs, raise production & revenue.

          I wander what you & Drill or drop will be saying when UKOG are in profit?

  3. Maybe Jono should try a new attack, rather than try and construct something to fit his anticapitalist ideas? I also read what a FEW “investors”??? post about Sanderson. Looking at the number of shares in issue, the number of shareholders, they are a pin prick on an elephants behind.

    Their comments are equal drivel. If you wish to look at bosses of companies earning good money and having a significant shareholding meaning the private shareholder is being looked after, take a look at what was Sirius Minerals! All AIM watchers will be aware of that misconception-apart from Jono and a few more whinging around UKOG, whilst reality is avoided. Of course, if enough shareholders wished to do so, they can remove directors. Perhaps the pin pricks are not able to do so because they are pin pricks?

    For those who are really worried about salaries and company debt, Mr. Musk and Tesla set the bar pretty high!

  4. Jono is absolutely right. The collapse of share price in UKOG has not been caused by disgruntled posts on Drill or Drop. It is a recognition that this Company is highly unlikely ever to produce enough cash to service its debt.

    The truth is that we have reached peak oil. All the esoteric methods of extracting oil and gas in the UK by drilling sideways,upstairs ,downstairs or in my lady’s chamber were conceived when prices were sky high.

    Now that demand can be met from conventional strata that have much lower unit costs of production, the world price for gas and oil will not support those Operators using absurdly complicated methods of extraction.

  5. pT:

    You may believe that UKOG is highly unlikely to service it’s debt. You may be right, but if any investor investing in small scale UK on shore oil/gas exploration is not aware of that possibility, then they are indeed mugs. AIM is a market where funding is available for start ups and high risk. Oil/gas exploration is at the upper end of risk. Yes, if you back an outsider you may get very good odds and make a lot of money if it wins, but if you back an outsider you know that the odds are against you.

    The TRUTH is that we have NOT reached peak oil, and please lead me to a producer with lower unit costs of production than UKOG.

    I am sure you are desperate to make a point, but you repeatedly seem to have this compulsion to include factually incorrect statements.

  6. This is just waffle, Martin, and does not disprove Philip’s point, despite the Trumpian capitals. “I am sure you are desperate to make a point, but you repeatedly seem to have this compulsion to include factually incorrect statements.”

  7. Collyer,M

    It’s always difficult making the move from Year 11 to Sixth Form but you will find as you progress through your Economics syllabus for “A” Level that terms such as ” unit costs of production ” are relatively simple.

    One of the requirements before unit costs can be calculated is that you actually need a physical product that has been produced. You will see in the last published accounts for UKOG that Turnover was a big fat zero. The most recent Accounts are a week late in submission to Companies House. When they do emerge, It will then be possible to see the unit costs of production at Horse Hill and anywhere else that UKOG is engaged in extracting gas or oil.

    Until then Jono and I are entitled to believe that the tanking share price is a reasonable view of the expected level of performance. Shareholders regretting their acquisition and eager to free themselves from their holdings but finding few buyers.

    As regards places where there actually are low unit costs of production, might I suggest – after you’ve finished your homework – you take out the School Atlas and turn to pages that show the Gulf States and even the Norwegian coast ?

  8. Well done, pT.

    More fake news. You really do not know much about this, do you? And, more surprising, are very keen to show it.

    Production costs are certainly higher off the Norwegian coast. Production costs have been detailed for HH SEVERAL times since these data. You are obviously unaware of that, but just fabricate to replace what you don’t know. Seems standard for the antis.

    Also, EWT rules have been explained to you by MH, yet you make out you are ignorant of that, as well.

    Whilst you have not bothered to keep up with UKOG you might have seen the same sort of cost details from Egdon.

    Finding few buyers? Yet you quote maths?? Factually incorrect again-you can check sales of shares today versus purchases. If you had been doing any research over recent months, you would note that is not unusual.

    Some of us are interested in the facts around these situations. DoD do try and add to that. Shame that a few just see it as an opportunity to offer fake news to counter and adjust the reality. However, there will be others who will correct the fake news, so keep on supplying it and undermining the credibility of your buddies.

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