Reabold Resources gets placing going at around 10 percent discount to raise £24 million - news tomorrow

RBD share price october 8tjh 2019

West Newton in Yorkshire - About Rathlin, Reabold and Union Jack oil

Rathlin Energy drilled the initial well at West Newton in 2014, but struggled to get enough money to drill a second due to low energy prices. Reabold, was formed at the beginning of 2018, invested £3 million in Rathlin, giving it a 36 percent stake in the company and a 25 percent share of the gas project. Union Jack Oil, has a 16.7 percent interest in the project at West Newton.

On August 29th 2019, the partners in the West Newton project announced that they believed that it is a “significant oil and gas discovery”, and now deemed more significant than simply a “pure gas discovery” as was previously thought.

A CPR (Competent Persons Report) is being produced by the companies to provide details on the oil in place, gas in place and recoverable volumes. This is expected at the end of 2019 or early 2020. All being well this should raise the NPV10 calculations.

The Extended Well Test (EWT), running at the time, was paused to allow the test equipment to be reconfigured to design and implement a revised production test and validate the identified oil column.

Implications of placing

Investors will know tomorrow whether the £24 million placing has gone to plan. All seems positive and the discount to the prevailing share price is not outrageous showing decent investor demand for the story.

Once the £24 m is banked at the end of the month following the General meeting. RBD will buy a stake in Rathlin giving it a 75% ownership of the company and hence a very strong stake in the Yorkshire West Newton A and B project.

The EWT this year, CPR end of this year or early next and drilling of WN-B in late Q1 2020 will be critical to further the Net Asset Value of the project.

It has been a rough time for the UJO share price, despite a 17% share in West Newton, with Chris Williams @chrisoil selling down to below a 3% stake from 7%. They stand at 0.2p right now. But good news for UJO coming tomorrow when the placing conclusion is confirmed and all set for West Newton. Hopefully, Chrisoil will cease his selling, which has been at a big profit for him. More than doubling his money.

Its got to be good value for UJO at 0.2p given this news!

The Proposed Placing to Raise £24 million for Reabold Resources

At 4.45pm today, further to its announcement on 7 October 2019, Reabold Resources (RBD), announced a proposed Placing of 2,666,666,666 new ordinary shares ( at a price of 0.9 pence per Placing Share, raising £24 million, compared with the closing price today of 1.01p.

The Placing is being conducted through an accelerated Bookbuild which will be launched immediately following the 4.45ppm RNS and made available to eligible institutional investors.

The Bookbuild is expected to close no later than 8 a.m. on 9 October 2019, but Stifel and the Company reserve the right to close the Bookbuild earlier or later, without further notice. Stifel Nicolaus Europe Limited is acting as bookrunner for the Placing.

Previous RNS relating to RNS

On October 4th, RBD Reabold said: "The majority of the proceeds intended to be utilised to meaningfully increase Reabold's interest in Rathlin Energy UK Ltd, to fund and accelerate the permitted, two well work programme at the West Newton project, and to exercise its existing option in Danube Petroleum Ltd, providing the required funding for the IM-2 well."

On October 7th, Reabold Agreements confirmed that it was planning to increase its interest in Rathlin Energy (UK) Limitedto up to 74.99 per cent., through a £16 million cash investment and, potentially, a £7 million equity swap with existing Rathlin shareholders.

rathlin logo

Rathlin Subscription Agreement

 RBD has entered into a binding subscription agreement with Rathlin, conditional on completion of the Placing, to make a cash investment of £16 million in Rathlin, at a valuation of £2.75 per ordinary share in the capital of Rathlin.

 Proposed Equity Swap and Lock In Agreement

The Company has verbally agreed, with certain shareholders of Rathlin, to complete a swap of their Rathlin Shares for new Ordinary Shares at the Placing Price at the same value at which Reabold is subscribing for new Rathlin Shares pursuant to the Rathlin Subscription Agreement, up to a maximum value of £7 million. 

Discussions and terms are at an advanced stage and the Company is targeting finalising the Proposed Equity Swap ahead of a General Meeting to be held on October 28 2019, with the intention of concluding the Proposed Equity Swap, with admission of the Swap Shares to trading on AIM expected to occur concurrently with the admission of the Placing Shares, which is anticipated for the 29 October 2019.  

The Company requires that as a condition to completing the Proposed Equity Swap and under the terms of the offer, that the Swap Shares be subject to a three month lock-up period and a further three month orderly market agreement. Further announcements regarding the Proposed Equity Swap, including the level of uptake by Rathlin shareholders, will be made as and when appropriate.

Woodford Patient Capital Investment trust catches my attention as share price continues to fall

Woodford patient capital trust

Woodford Patient Capital Trust (WPCT) has had a torrid few months. It is a closed-end investment trust, unlike the Equity Income fund, this structure means that Neil Woodford and his team have not been forced to suspend it because of high redemption caused by poor performance.

woodford patient capital share price 2018-2019
WPCT  performance

About Woodford Patient Capital trust

Market cap £360 million, shares in issue 908 million

Listed April 2015

Fees 0.17% (HL)

From the Woodford web site: Hmmm. Looks dicey based on what we know now.

A compelling investment opportunity

  • Portfolio exposure to a mix of exciting, disruptive early-stage and early-growth companies and the scaled, commercial enterprises they become if successful

  • Buying stakes in businesses with outstanding intellectual property and helping them fulfil their growth potential through the deployment of long-term patient capital

  • Aiming to identify the best, untapped growth opportunities and deliver attractive long-term returns

  • An innovative fee structure, aligning manager and investor

The opportunity

  • Despite some of the best universities and finest intellectual property, the UK’s record of converting this into commercial success is poor

  • This is primarily due to a lack of appropriate capital investment – which creates a compelling investment opportunity

  • A long-term ‘patient capital’ approach can deliver extremely successful outcomes and help businesses fulfil their potential, while also helping to develop the UK’s ‘knowledge economy’ and support economic rebalancing

  • Untapped growth opportunities offer potential for attractive long-term returns

An investment team that shares a single goal

  • The fund is managed by Neil Woodford, who has more than a decade’s experience of deploying long-term patient capital to young businesses

  • Neil is supported by a dedicated team that shares his approach and absolute focus on client outcomes

  • Five experienced analysts work with Neil, providing him with valuable analysis and support on specific investment opportunities – each with a different skill set for depth of cross-market coverage

  • Understanding early-stage risks

  • Young businesses have a very different risk profile to more mature companies – risks are much more stock-specific, which implies a lower correlation with equity markets in general and the wider economy

  • This may offer diversification benefits

  • It also means long-term outcomes are more binary – extremely attractive rewards for success but also risk of capital loss (as some businesses will fail to fulfil their potential)

  • We aim to mitigate this risk through rigorous analysis of the opportunity, an unwavering focus on valuation and diversification across a larger number of smaller positions

Top 10 holdings

top ten holdings WPCT

NAV and share price

WPCT NAV Oct 2019

The shares of WPCT at 39.7p and trading at a discount to Net Asset Value (NAV - the sum of all the holdings the trust has) is 36.2 per cent as of October 4 2019. The shares have suffered hugely because of the troubles of Neil Woodford and Woodford asset management. A series of bets on risky, unlisted companies have unravelled the Woodford dream and cost investors dearly.

The issue with WPCT is the gearing of the company i.e. debt, which stands at 119%. The trust’s management is currently trying to renegotiate this debt facility before the deadline of January 2020. With a closed end investment trust, investors can buy and sell at will. The 60 percent decline in the share price over the last few weeks caused by sentiment, worries about this debt and also underlying portfolio performance (partly caused by redemptions and short selling of Woodford positions by speculators like Hedge funds) has made WPCT pop up on my interest screen.

I believe that WPCT will rebrand under a new fund manager in 2019 and if the debt can be sorted it looks like the discount to NAV could make things interesting. The worry is that Woodford fund management is finished and therefore when the Equity income fund reopens to redemptions in late 2019, it is likely that a further wave of sales will force Woodford to wind down his mutual funds. Because WPCT is an investment trust, separately listed on the LSE, this won’t happen. The directors of the company will rebrand and move the portfolio to a new manager.

The risk/reward looks good at less than 40p. I’m a buyer at these levels. The risk is no refinancing of debt and a huge sell off in any liquidation of other Woodford funds but 39p looks to have taken this into account.

UKOG update October 8th 2019 - RNS ops update Horse Hill - all looking good

All looking good at Horse Hill for UKOG (85.6%) and Alba (11% share).

Following the completion of the 12¼" diameter hole section in its Horse Hill-2 ("HH-2") Portland pilot well, 9⅝" casing has been set and cemented into position from surface to 2,019 ft below rig floor. After setting and testing blow out preventers, expected to be completed today, the well will drill a short section of 8½" diameter hole down to the coring point, where three 60 ft cores are planned through the oil-bearing Portland reservoir.

Following the coring programme, designed primarily to acquire key technical data that will ensure the 1000m HH-2z horizontal section is correctly positioned within the Portland's most oil-productive zone, the well will drill ahead to total depth, be electric logged and then plugged back to the "kick-off" point, delineating the start of HH-2z's planned 1000m horizontal trajectory. HH-2z will follow directly afterwards.

Stephen Sanderson, UKOG's Chief Executive, commented:

 "The HH-2 pilot continues on schedule and according to plan. We look forward to the imminent coring programme, the data from which will ensure the HH-2z horizontal is optimally positioned within the reservoir, a key step towards  delivering flow rates significantly in excess of the HH-1 vertical discovery well."

Controversy as Chris williams aka @chrisoil sells down UJO stake

chrisoil twitter

A TR-1, Standard form for notification of major holdings at 3.55pm yesterday, from Union Jack Oil (UJO), caught investors attention with Chris Willams (also known as @chrioil on Twitter) reducing his holding in the company.

Chrisoil share sale October 7 TR1

He sold down his stake below 3% as announced yesterday but has been selling for some time,. On August 30th, a TR-1 announced he had gone from 7 to 4%. Williams had his maximum stake during May 2019 (16th May TR-1).

With the price action over the last few days it has not been surprising as there has clearly been a larger seller in the market suppressing the price. For Chris, a nice little earner as the share price was around 0.1p, pre-West Newton drilling results, and has doubled to around 0.2p. With 12.1 billion shares in UJO right now, a reduction for 7 to 3 % at those price points would be a profit of :

Investment May 2019 12.1 billion x 7% x 0.1p = £847,000

Proceeds of Sale October 2019 12.1 billion x (7-3) 4% x 0.22 = £1,065,466

Profit = £218,466

Now bad for 5 months work!

chris oil

What has bothered UJO investors is not that Chris had made money, no problem, as a profit is not a profit until you’ve banked it, but the fact that according to reports he was tweeting positive comments very recently. Interestingly, I see his recent UJO tweets have disappeared from his account which is a little disingenuous, but I would be fascinated to see if anyone has screenshots. For the sake of transparency, it would be nice for @Chrisoil to reinstate those Tweets and set the record straight, both for his own integrity and for the benefit of shareholders in UJO. But let’s see. I have nothing personally against Chris, as we have both been Rockhopper followers for many years and have been in touch.

A similar thing happened with Stephen Beecham on Greatland Gold (GGP) who was and is a major investor in the company and was posting on the LSE board what a great investment GGP was, whilst at the same time selling down a major part of his holding. Naughty!

UJO share price October 7 2019

UJO shares were down after the TR-1 RNS into the close with a near 7% decline to finish the day at 0.22p, despite the excellent news from Reabold Resources (RBD) in relation to their placing document and the West Newton prospect. Today RBD will announced the results of its £30 million placing, 2/3 to be spent on West Newton. Given the action on RBD share price it is looking like the placing shares will get away OK.

The TR-1 may have been issued yesterday but Chris has been selling all last week and the week before with a lot of shares in the market at 0.2-0.25p. The rumours of Reabold from Broker Man Daniel etc. were an opportunity for him to take his stake down as liquidity was improved on the Reabold rumours and then subsequent announcement.

I for one increased my holding in UJO near the close by a few million as the RBD announcement on the placing is due today and if it completes as expected, West Newton will have been funded. Unlike some I did not believe a CPR was imminent for WN and the RBD placing doc confirmed that this was the case. A CPR for a large size field takes time and expect one towards the end of 2019 or early 2020.

On the subject of UJO and financing. According to the latest info from the company, it has around £2.8 million in cash (as of September 20), no debt and is fully funded for the next well at West Newton, due to commence drilling end Q1-start Q2 2020. Given this, I don’t expect a placing just yet but one will be needed to contribute to Wressle and West Newton field development in 2020. The planning meeting for Wressle with North Lincs council commences Nov 5th and I fully expect it to pass this time given the Planning Officer’s comments to the company and operator Egdon Resources.

Contrarian now has quite a few million shares around 0.2-0.22p because of the RBD news, prospects for West Newton, Biscathorpe and Wressle. At 0.2p I don’t blame Chrisoil for cashing out a big stake in the company for a sizeable profit. But the weakness in the share price caused by his sales is a good opportunity to buy in at a reasonable price (52 week high 0.38p following WN oil/gas result). I am seeing David Bramhill on Friday for a chat. Will keep readers informed.

See news flow post:

For the info of UJO holders, remember that major private investors will sell down stakes and have no loyalty. I’s about making money at the end of the day and those with £££ will deploy their money where they see fit to maximise returns. Will Chrisoil sell down his entire stake in UJO, who knows, but if the overhang of his selling is cleared it’ s good news not bad. He didn’t sell from 5% to under 3% yesterday, only the TR-1 came out that day. Trust no one…and make your own decisions...

Reabold Resources placing document details - a good read for Union Jack Oil Shareholders

Reabold resources logo

West Newton

  • A-2 well resulted in a significant discovery in the Kirkham Abbey formation; gross oil column of c.45m and gross gas column of c.20m

  • Well logs and 28m core cut from Kirkham Abbey indicate encouraging porosity and natural fracturing within the oil zone

  • Extended Well Test ("EWT") paused to optimise evaluation of oil column. Revised EWT planned for Q4‘19

  • Oil discovery materially enhances economics; Kirkham Abbey pre-drill NPV1 of $247m ($99m - $124m net2 ) based on gas. Oil coupled with better than anticipated reservoir quality anticipated to result in value uplift. CPR 1 assumes NPV/bbl of $11.50 for Cadeby oil target

  • Revised CPR post EWT to reassess volumetrics given oil discovery and better than expected reservoir parameters

  • Two further wells permitted at West Newton B site, optimally located to define the deeper Cadeby oil play. Next well focused on

  • Cadeby reef flank: 24% CoS1 or NPV 1 $850m ($340m - $425m net 2 ), as well as intersecting the Kirkham Abbey

  • Cadeby intersected in A-2 well and oil bearing; reservoir quality (porosity), as expected, was poor. Seismic and geological model indicate significantly better reservoir quality at West Newton B location

Reabold Resources West Newton 1
Reabold West Newton 2
Reabold resources west newton 3
Reabold resources west newton 4
reabold 5.PNG

Link to September placing document Reabold Resources

Metro Bank - FT article October 6 2019 Extract and Link Investors’ - Metro Bank victory could be short lived

Metro Bank and vernon hill

After Friday’s sharp share price reversal to send Metro Bank (MTRO) 5% higher on the day after moving down to lows around 181p, plenty of potential for excitement for investors this week.

With Chairman, Vernon Hill departing in the next few weeks, who knows if the Telegraph article to take the bank private will come to pass. With the £350 million bond issue out of the way, at a market cap of less than £340 million, even with all the bad news over the last few weeks looks mighty enticing. It is still a top rated bank for customer service and appears to have much to offer to a predator, especially one that can refinance the latest debt issue at more favourable terms than a 9.5 percent coupon.

It looks like some shorts were closing on Friday given the share price rebound as they bought back shares to settle their positions. I would be very surprised not to see a further rebound today.

See previous posts:

Information on MREL and EU capital requirements, strategic issues and metrics from September bond issue, Telegraph private buy out article etc.

Investors’ Metro Bank victory could be short lived

Kate Burgess October 6th 2019
Extract

This summer, as the bank revealed £2bn deposit outflows in the second quarter and post-tax losses, Mr Hill agreed to surrender the Metro chair. But he would stay on the board, he said. No way, responded bond investors stonily last week as Metro’s shares hovered around £2 from a peak in 2018 of above £40.

Neither Mr Vernon’s departure by December, nor the BCR’s funds, nor the rights issue, nor last week’s bond issue will secure Metro’s future. Investors’ spirits may lift a little at the latest news. But the regulators’ probes continue and markets are braced for lower interest rates for longer and rising loan impairments. And Metro has to pay close to 10 per cent in interest on £350m. That will constrain earnings.

Goodbody analysts are calling for “a wholesale strategy recalibration [for Metro] to survive in an independent capacity”. Barclays analysts argue it is “hard to see [Metro’s] returns much above low single-digit any time soon”. They and others reckon Metro may still have to sell non-core assets or raise more equity to facilitate the expansion needed to take on the big high-street banks.

Last week’s news was better for Metro. It has surmounted one Hill. There are many others ahead, though.

I3 Energy Commences drilling ops at Serenity prospect

i3 energy logo

On Friday, I 3 Energy (I3E), announced that the Borgland Dolphin semi-submersible drilling rig had arrived on location at the Serenity field and that the SA-01 appraisal well has now been spud. The shares rose 5.5 percent on the day to 22.95p, close to the 52 week low of 20p. The shares have been hampered during this recent drilling campaign as the results of the 13/23c-9 pilot well in early September proved disappointing.

I3 Energy share price oct 3 2019

The Company will provide SA-01 drilling results to the market when the well has reached total depth and acquired data has been evaluated. The SA-01 well is intended to confirm that the Serenity structure, which the Company has previously announced is estimated to have a P50 resource of 197 MMbbls of STOIIP, is hydrocarbon bearing and that it is a material extension of the Tain discovery which is situated in the adjoining Block 13/23b. Upon completion, the Serenity well will be plugged and abandoned as planned.

Majid Shafiq, CEO of i3 Energy commented:

"We are excited to be drilling this potentially high-impact well at Serenity which could add materially to i3's reserves and resources and may become a fast-tracked development alongside the neighbouring Tain oil field. The Borgland Dolphin continues to perform very well with operations running smoothly to date and we look forward to updating the market as our well objectives are achieved."

Serenity well I3E

13/23c-9 pilot well result and impact on share price

On September 10th, I3e announced that the 13/23c-9 pilot well drilled by the Borgland Dolphin on i3 Energy's 100% owned Liberator Field has reached total depth at 5818 ft True Vertical Depth Sub-sea (TVDSS) in the Valhall formation.

The objectives of this pilot well are to enable a future development well to be positioned at an optimal location in the upper Captain sands channel in the south-eastern area of the Liberator field. Preliminary petrophysical information obtained from the Measurement While Drilling (MWD) tools indicate that the targeted upper Captain sand has not been penetrated and is pinched out at the 13/23c-9 location. The lower Captain sand is present in the well and is below the estimated oil water contact as expected. On initial tie to the seismic data, the well appears to be located proximal to the main upper Captain channel fairway and further well data is required in order to interpret and locate the key reservoir upper Captain channel edge.

The suboptimal drill location and result sent the shares down heavily from around 55p to 30p. Since then, they have drifted down further as confidence in the company’s North Sea assets has waned.

I3 Energy share price May to Nov 2019

SA-01 well

Serenity is not an exploration well, but an appraisal well and therefore should have a chance of success around 70 per cent. The next few weeks of October will be critical for I3E shareholder sentiment, with the shares close to lows.

Further Reading