The lower reaches of the AIM market seem to throw-up, on a daily basis, some sub-standard sub-scale company that sees its share price rocket for no good reason, only to fall back as reality kicks in. So far this week it appears to be the turn of UK Oil & Gas (UKOG). With ramping on Twitter and the LSE bullet board asylum in full flow, all it needed was a few tweets from Dave Lenigas to get things rocketing to the moon. Of course gravity will reassert control on the share price in due course and I have to wonder what part private investors in organised groups play. Rather a lot in my view, so having seen a UK Oil & Gas twitter group being formed at the start of the week I am not overly surprised to see the share price march ahead over the last few days. The fundamentals of the business remain as they always have...
It's a cash-burning, sub-scale operation that survives by issuing shares, and lots of them...With the AGM completed last week, it has once again reloaded its ability to issue a further 3 billion shares to add to the 10.8 billion currently in circulation. That is rapidly approaching 2 shares for every person on the planet, or 210 golden tickets for every person in the UK. Plenty to go around! Of course it raised £4.2 million (gross) earlier this month - lets call that around £4 million net. Almost half of this was spent paying off the convertible loan notes, including the 10% early repayment charge. The company also declared it was buying the Extended Well Test equipment currently at use at the Horse Hill site. The total consideration of £1.65 million will be settled over the next 12 months, using cash or shares. Funnily enough I think the majority will be settled in shares. I also find it interesting reading the accounts of the seller of the equipment P T Well Test Ltd. The accounts of this company show the written down value of “Other property, plant and equipment” at £166,241 as at 31st July 2019. It would appear to me the company is part of a small group of companies, which are not required to file consolidated group accounts. However reviewing each of the companies I can find linked to the directors does not take me anywhere close to seeing “plant and equipment” of close to that value that could have been transferred into PT Well Test Ltd from another group company. Perhaps I am missing something in the potential asset sources? Always possible. But perhaps UK has just done a p*ss poor deal, leaving PT Well Test the beneficiary of flogging kit at 10 times book value at UK Oil & Gas shareholders expense? Surely the most overpaid oil company CEO on AIM would not fall for that old trick?
The structure of the asset purchase deal with PT Well Test Ltd means the initial payment of £550,000, of which half is cash may have resulted in cash received on deal execution exceeding the book value of the sold assets, with lots of golden tickets to flog in the not too distant future. Perhaps the kit that UK has bought was purchased by PT Well Test Ltd after 31st July 2019? I think this is unlikely given the EWT programme has been on-going for several years now. If, as I suspect, the EWT kit is not new, then I would also question if will it have the operational life required to see the nodding donkey production thought to end of economic life? I will be interested to review the accounts of PT Well Test Ltd and associated companies to see the treatment of this deal in due course. I cannot reach a firm conclusion on what is going on with regards to this asset purchase deal but currently it looks rather intriguing and questionable, if I’m being polite, or smelly as a week old kipper left in the weald basin sun if I’m being more direct.
Meanwhile the rampathon saw the share price spiking up to 0.5p in early trading, before settling back at 0.35p. It remains well head of the placing price of 0.2p. Clearly the placees have had the opportunity to sell onto mug punters at a tidy profit ready for the next time the begging bowl is held out. With plenty more pot of gold at the end of the rainbow projects in UK Oil & Gas’s portfolio to spend punters cash on, it only a matter of time. I can only conclude, don’t get spiked and SELL.
Filed under: UK Oil & Gas, Elecosoft, Royal Mail, Trafalgar Property, Velocys, Transense Technologies
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