Angus Energy and UKOG update November 17 2017

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Angus Energy dropped over 50% earlier today and is currently down 36% to 17p after announcing disappointing flows of only 40 barrels of oil per day from its Lidsey X2 well (together with the expected 20 bpd from the older well  x-1). This is turn has hurt UKOG, down 10% to 4p as fears grow about the productivity of the Weald Basin. 

The problem was the following from the RNS "Initial start-up rates of production from the Great Oolite reservoir are coming in at forty barrels of 38.5 API of dry oil per day. The fluid column (oil) extends to 322m from surface (bottom hole depth of 1,009.3m) with a measured static bottom hole pressure of 764 psi. The Great Oolite is the first of three reservoirs with potential viability in Lidsey-X2 as per the Company RNS of 6 November 2017.

Compared to pre-drill assessments set forth in the Competent Person's Report ("CPR") of the 7 November 2016 Admission Document, flow rates from the Great Oolite reservoir are below expectations, and work is continuing to clean up the well. The Company is investigating the new geological and borehole information to update its understanding of the reservoir. In addition, the Company is currently examining evidence that suggests a partial flow reduction is the result of a hole in the production tubing, therefore not allowing the well to be fully drawn down. The Company is conducting further analysis and if confirmed, the Company will undertake operations to repair the tubing which will allow maximum draw from the reservoir. This is the priority for the Company over the coming weeks.".

Though the news is a big set back for the Weald dream it is important to reiterate that these are poor flows from the Great Oolite reservoir and not the Kimmeridge limestones found at UKOG's Broadford Bridge and Horse Hill developments. Angus " will submit an FDP Addendum to the Oil and Gas Authority to begin production appraisal of the Kimmeridge and Oxford layers at Lidsey."

Let's see what UKOG can come up with for KL2-5 in coming weeks. The drop in UKOG looks overdone given the reservoirs are not connected - Great Oolite for X2 and Kimmeridge Limestone for UKOG. 4p will be a bargain if KL2 shows any potential for unassisted lift. KL3-4, the same reservoirs as Horse Hill will make or break the story.

For Angus Energy they may well up the BOPD from Lidsey X2 but it won't be easy and will take time. The approval of the Field Development Plan Addendum for Kimm and Oxford also won't be  overnight.

UKOG update November 15th 2017

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At last the long awaited RNS from UKOG this morning with two critical areas covered, funding and ops update. The shares dived at the open with a fall of around 15%, and are down around 6% to 4.55-4.7p this afternoon but plenty of volatility. The challenge with the current funding arrangement is that interested parties would like a lower price to get more shares (and hence more dilution for existing shareholders), even if the lenders themselves can't actually short the shares.

With the lack of flow from the first and deepest zone KL1, investors are still concerned that the zones of interest will or won't flow. Expect some downside pressure until a hint of good news from KL2 and more probably KL3 and 4. Results from the latter will probably be December. 

In summary good that funding sorted for all the projects (albeit not the perfect mechanism) but a wait for what the key limestones will deliver. Of course the big question, what sort of flows and commercial. UKOG shareholders will know by end 2017 for sure all the answers to these questions and have a good idea in early December. Until then, more waiting.

Financing

The big worry was financing and a placing at a significant discount to pay for ongoing work at Broadford Bridge and the forthcoming Horse Hill drilling (near Gatwick) as well as the Holmwood drill near Dorking in Surrey.  These loan agreements aren't ideal but certainly better than a 3p placing.

Today UKOG announced a £10 million loan agreement with Cuart Investments PCC Ltd and YA II PN Ltd,  an investment consortium arranged by Riverfort Global Capital Ltd.  A first tranche of £7.5 million has been drawn down by the Company, with a second tranche of £2.5 million due to be drawn down on 31 December 2017. The first and second tranches are repayable on 13 November 2019 and 31 December 2019, respectively.

The Loan attracts 0% interest and may, at the sole discretion of the Investors, be converted into new ordinary shares in the Company. The conversion price is the lower of either a share price of 8 pence, or 90% of the Company's lowest daily volume weighted average price during the five days prior to the conversion date. The Loan is convertible in tranches of not less than £250,000, with a limit of £3 million per quarter, unless otherwise agreed by the Company.

The Loan includes a provision that, for as long as any portion of the Loan is outstanding, neither the Investors nor any of their affiliates shall hold any net short position with respect to the equity of UKOG. UKOG can repay the principal amount of the Loan at any time for cash, provided that the 5-day VWAP of the Company's equity is less than 8 pence and a prepayment fee equal to 10 per cent of the principal amount of the Loan then outstanding is paid by the Company to the Investors.

BB-1z Operational Update:

Investors have been waiting to hear what is going on at Broadford Bridge since October 16th. Today the position was clarified. Shame that no commercial flows of oil from the deepest Kimmeridge Limestone KL1, but the key reservoir sections are still to be tested. KL3 and KL4 were the zones which flowed at Horse Hill in 2016. "Although these two KL1 zones are hydrocarbon bearing, the Company concludes that sustained commercial flow rates from the shale dominated KL1 could likely only be obtained via reservoir stimulation beyond the scope of its existing regulatory permissions." i.e. fracking would be needed. 

Interesting that the existing well completion string was successfully removed without a workover rig. Pictures posted last week showed just the high-capacity linear rod pump to assist life, with the help of nitrogen.

News from these additional tests will be released over the coming weeks, KL2 in the next week or so. But its the KL3 - KL5 which are the company make or break. Sanderson seems to be certain that this section of perforations will flow at commercial rates. After the lower Kimmeridge zones are tested, a cement squeeze will be done for KL4/KL5.  Lots of news flow to come over coming weeks that's for sure.

The RNS stated: Following the successful removal of the original well completion assembly, optimised sequential flow testing has commenced at the Company's 100% owned BB-1 and 1z exploration discovery, located in licence PEDL234. The new testing programme, formulated in conjunction with the Company's well-test consultants in Houston, Texas and in the UK, encompasses up to nine individual test zones throughout the Kimmeridge Limestone KL1-KL5 reservoir section, each of around 50-100 ft vertical extent. It should be noted with Horse Hill only testing KL3 and KL4, BB-1z will be the first Weald Basin well planned to test discrete KL1, KL2, and KL5 reservoir zones. As previously announced, the first phase of optimised testing utilises much of the well's existing 1047 feet of perforations.

Two short initial tests over secondary shale-dominated fractured reservoir objectives within the KL1 were performed. The interbedded shale and limestone stringers returned gas to the flare. In the second test, completion fluids were returned to the well at an initial natural flow rate of over 370 barrels per day, accompanied by a wet gas blow. Although these two KL1 zones are hydrocarbon bearing, the Company concludes that sustained commercial flow rates from the shale dominated KL1 could likely only be obtained via reservoir stimulation beyond the scope of its existing regulatory permissions. 

Testing will now move directly upwards into the overlying KL2 limestone, and then to the primary KL3, KL4 and KL5 limestone-dominated reservoir objectives, where hydrocarbons were recovered to surface from recent BB-1z testing and BB-1 coring operations.

Flow testing is expected to continue until the end of 2017 to establish whether the extensive connected natural fracturing seen in the oil-bearing KL2-KL5 primary objectives can deliver flow at commercial rates and volumes.

UKOG update November 11th 2017

It has been a good few weeks since the last operational update from UKOG's Broadford Bridge site and the shares languish at 4.75p. Half their recent peaks. An RNS relating to an exercise of 8 million options by the estate of deceased director of Jason Berry has been the only talking point. 

However, the latest pictures posted on social media would seem to indicate that the flow testing is in full swing as the linear rod pump is clearly visible. Specifically "Flow will be initiated throughout the programme via the use of nitrogen-lift (without coil tubing), swabbing and/or pumping via the existing high-capacity linear rod pump". Good news that the rod pump is in action to stimulate flow and also to control flows. 

Broadford Bridge UKOG November 9th 2017
Broadford Bridge UKOG November 9th 2017

With nearly a month passed, understandably patience is wearing thin for news. It was surprising that Stephen Sanderson didn't issue a progress RNS following equipment delivery, well clean up etc. especially with the threat of a looming placing to replenish the coffers not only for Broadford Bridge but also for the Horse Hill development. News flow of a positive nature will drive the share price higher and lessen dilution. Surely, this week must be the week for the operational update. The longer the wait, fears grow of problems with flows. Patience is required, but for UKOG often no news seems to mean bad news e.g. BB-1-z sidetrack and cementing issues (RNS released in both cases after perceived delays). 

Fingers crossed for a good RNS to steady the ship!

UKOG update 1st November 2017

Waste tanker to remove drilling fluids and muds arriving late October 2017

Waste tanker to remove drilling fluids and muds arriving late October 2017

UKOG shares are back to 5p. Way off the highs of 10p due to the operational issues with the cement job at Broadford Bridge and worries about where the funds for the well re-completion work on BB-1-z and upcoming Horse Hill wells are coming from. The big share sales from SCDM haven't helped. But a nice base seems to have formed and plenty of newsflow to come over the next few days.

The last RNS said:

firstly, proceed ahead to isolate, acid-wash and sequentially flow test multiple 30-100 ft existing perforated zones in the naturally-fractured KL1-KL4, and then;

Perforate further naturally-fractured limestone reservoir zones in the KL1, KL2 and KL3, isolate, acid-wash and sequentially flow test multiple 30-100 ft zones, and finally;

Conduct a short cement squeeze in a section of the KL4/KL5, run a new cement bond log, re-perforate the newly cemented section, isolate, acid wash, and sequentially flow test multiple 30-50 ft zones.

The equipment for this was delivered at the end of October and with the French SCDM stake appearing to be completely sold, the overhang is out of the way. 

For those looking for impending big news, UKOG must be top of the list when it comes to small caps. Good flows and UKOG will fly, more operational issues and bad flows from these initial results and its back to 2p. Expect a return to the bulletin board frenzy we had back in October. Sanderson like investors must be desperate for commercial flows and I am sure he will inform the market as soon as he is confident. The longer things take, shareholders will get nervous. Placing will come but UKOG want good RNS releases before taking the plunge. 

This is a fantastic trading share. The volatility and liquidity makes it ideal to trade the highs and lows intraday.

Greatland Gold caught in tug of war

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Greatland Gold has caught my eye of late with the massive interest on the bulletin boards and the huge swings in share price over recent weeks. I haven't been a great fan of small cap AIM mining companies after some bad experiences over the years e.g. Angel Mining, Hambledon Mining, Solomon Gold etc. etc. 

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Greatland Gold share price November 2016 to November 2017

The precious and base metals explorer operating in Western Australia and Tasmania has been on AIM for over 10 years (admitted July 2006) and for many of those years has been set in a trading range up to 1p. That changed in October when it bounced to 2.4p on newsflow relating to its exploration projects. Yesterday it was down just over 8% to 1.76p. 

Excitement has been fuelled for GGP shareholders as a result of its link with Newmont Mining, "One of the highlights of the year was reaching an agreement with Newmont Exploration Pty Ltd, a subsidiary of Newmont Mining Corporation (NYSE:NEM), one of the world's largest gold producers, regarding the Ernest Giles gold project. Under the agreement, announced on 16th May 2017, Newmont was granted access to Greatland's Ernest Giles project tenements for a period of six months and was granted the right to apply certain proprietary exploration methods across the project area. Additionally, Newmont was granted a right of first refusal over the Ernest Giles project for a period of six months."

Ernest Giles Greatland gold

The Ernest Giles project is located 250km north-east of Laverton in the Yilgarn in central Western Australia. The project covers over 2,000sq km of unexplored Yilgarn Craton hosting greenstone belts and intrusives with over 210km of strike of prospective rocks. Greatland believes the project has the potential to deliver significant shareholder value with the discovery of large +5 mil oz gold camps and 5-10Mt nickel deposits.

So Newmont mining corporation has a first right of refusal ending around now. The question for shareholders is will they take up this option? If so great news, if not....

Results from Ernest Giles have been encouraging to date, hence the high expectations that Newmont will take the option. "In October 2017, Greatland announced that it had identified multiple gold targets at Ernest Giles East following the successful completion of Mobile Metal Ion ("MMI") surface geochemistry and ground gravity surveys. In particular, several clusters of MMI anomalies were identified, with key clusters exhibiting a strike in excess of nine kilometres long and up to three kilometres wide. Following the announcement of these results, Greatland further announced that it applied for a new exploration licence to expand the Ernest Giles project."

The shares have come off their recent highs due to a combination of factors.  Market cap is £36 million. First the exercise of plenty of warrants issued at 0.5p and clearly the shares issued as a result have been sold off into the market. The second is the news relating to the stake sale by Metal Tiger on October 25th.

Metal Tiger sold off its entire stake in Greatland, which at one point was 5.2%,  and Michael McNeilly stepped down as a non-executive director. He was appointed to Greatland's board in February 2017. The company held a 3.8% stake at the time of the exit, which had fallen due to the additional  564 million shares shares issued since February.  Tiger made a nice profit on the trade as they were acquired at 0.2p. 

Metal Tiger's investment in Greatland and the appoint of its CEO to the board came after the company's signed a deal in November 2016 to explore and cooperate on new opportunities in the precious metals and strategic base metals sectors with a primary focus on Australia and Asia.

The question is why would Metal Tiger sell now if the Newmont Mining Corporation deal was really likely. To be sure they've made a nice profit but to sell their complete stake indicates that it is probably more likely that GGP will develop Ernest Giles itself with around £4 million in the bank after the recent warrant exercises. 

There looks to be more near term weakness in the share price if further warrant exercises come to pass, but shareholders will be hoping for a positive Newmont announcement to reverse the trend in the last few trading sessions. Since 13th October there have been six RNS release relating to warrants. But the Metal Tiger sale puts a question mark in my mind - why bail now? The company is well funded in the short-medium term at least as a result of these warrant sales, but lots of shares entering the market is now what private investors need right now. It is the scourge of small cap mining stocks that funding constraints often mean lots of warrants floating around to tempt in outside investors. Greatland has six projects on the go so I'm sure the board will keep churning out RNS releases to keep investors informed. Penny share heaven for day traders that's for certain.