Reabold Resources

Contrarian Investor Portfolio Review October 16th 2019

Greetings from Shanghai Contrarians! In order to aid transparency in what I write about, here is the first Contrarian Investor Portfolio. I will only cover my larger and more speculative or interesting holdings and put down a few of the stocks I am watching.

Please note I scale in and scale out of a position. Never sell at the top and hopefully never at bottom. Use Spread bets and CFDs., increasingly the former. Don’t use automated stops on small caps because of volatility and accidental stops being triggered on “shakes”. Tend to cut a position after a 20 percent loss.

UK Oil and Gas (UKOG) Average purchase price 1.2p Curret share price 1.10-1.20p

I have followed UKOG for many years and was a large investor during the Broadford Bridge drill in 2017. It was a profitable trade then, but didn’t manage to sell at the top at 7.4p. Broadford Bridge was a real cock up because of drilling issues.

I started buying UKOG again in the last few weeks before Surrey County Council Planning and the arrival of the drilling rig at HH. At around 1p, even with 6 billion shares in issue, it does look very good.

The news from Horse Hill yesterday on the coring samples from the HH-2 well was excellent..

“Preliminary visual analysis of a total of 241.45 ft of core has clearly identified the Portland reservoir's most productive zone or "sweet spot", which will now be the target of the planned circa 1,000 m HH-2z horizontal trajectory, expected to commence next week.

Live oil was observed "bleeding" profusely from core throughout the sweet-spot, the Upper Portland reservoir's most porous, permeable and oil productive interval. Lesser degrees of oil bleed, together with oil shows and oil staining were also observed from porous sandstone intervals lying above and below the sweet-spot. The core is now at a Surrey-based laboratory, where an extensive geological and petrophysical analysis programme is now underway. Results of analyses that directly impact the field's possible increased oil in place and recoverable oil volumes will be reported in due course.”

UKOG looks very undervalued at 1.2p. See https://contrarianinvestor.net/posts/2019/9/26what-is-ukog-worth-part-2

The drilling is HH is going very well. No cementing issues or acid wash problems like at Broadford Bridge. The geology of HH is different and lessons have been learnt. The excitement begins now as the HH-2-z horizontal well is being drilled right now, with the newly identified “sweet spot” as the target. Horse Hill has planning for up to 16 tankers a day initially, is in a calm geo-political environment of Horley Surrey and the site is already producing 250 bopd from the kimmeriddge. Tankers are leaving on a regular basis to Horley.

UKOG is an exciting prospect and I am targeting 2-3p once the Yorkville Associates shares for the Tellurian aqcquisiton (to enable 86% of Horse Hill to be owned by UKOG), further good news should boost things nicely. Don’t forget the new horizontal well will be 1000 metres long and 1000-1500 bopd choked is more than possible, New wells will be drilled in Q1 2020 to allow 3500 bopd. Lessons have been learnt by Steve Sanderson and the team over the last few years and hopefully the perfect drill so far contunues into the end of 2019.

Union Jack Oil (UJO) Average purchase price 0.22p Current share price 0.20-0.21p

I managed to see David Bramhill, Exec. Chairman of Union Jack Oil last Friday and it was a very interesting chat. I have bought in recently and it was great to hear about the forthcoming plans for Wressle, West Newton and Biscathorpe over the coming months.

Link to David Bramhill meeting notes Meeting with Dave Bramhill (Exec Chairman of Union Jack Oil) October 11 2019- exciting times ahead

Just to reiterate, no short term plans for a placing but there will be medium term.

Timings Summary (CI estimates):

West Newton

Extended Well Test November 2019

CPR Jan/Feb 2020

WN B Spud March 2020 (could be earlier or later)

Wressle

Planing inquiry November 5th - November 9th 2019

Biscathorpe

New seismic assesmment October - November 2019

Metro Bank (MTRO) Average purchase price 210p Current share price 204p

Even with the Brexit banking bounce Metro Bank hasn’t benefitted, compare with Lloyds bank for example. At 204p, the bank looks very undervalued, even with all the bad news over the last few months. The bank won’t go bust after a succesful bond issue (albeit at 9.5% coupon) and it looks very cheap versus book value. It has come down from 3000p in 2018 and the last placing in May was at 500p. Vernon HIll has been forced to leave to get the MREL related bond issue away and there are rumours that he is trying to take MTRO private. Hedge funds are shorting but upside on any good news looks strong.

See full SWOT analysis on Metro Bank at https://contrarianinvestor.net/posts/2019/10/9/swot-analysis-for-metro-bank-good-punt-or-too-risky

It has been a challenging year for Metro Bank, with the lender facing intense speculation over the health of its balance sheet earlier this year due to a £900 million accounting error. However, concerns have been redcued after the bank successfully raised £375 million via a share placing in mid-May which was over subscribed. In September MTRO raised $350 million in a bond issue.

The bank is likely looking to put the first half of 2019 far behind it and instead focus on delivering costs efficiencies and continued growth in capital-light fee income.

The bank is also busily expanding its presence in the North of England in the hopes of empowering growth for SMEs in cities like Manchester, Liverpool and Birmingham. Metro Bank plans to open around 10 new branches in 2019.

Highly capitalised - after ¢350 million bonds fundraise in September and $375 million equity raise in May to meet MREL (Minimum Requirement for Own Funds and Eligible Liabilities) requirements, oversubscribed. See more on MREL, SRB, and BRRD in link: Is the Bank of England behind the Metro Bank Chaos?

  • Deposits of £13,7 billion, net outflows of £2 billion in H1 2019 caused by bad publicity (buy July has seen £700 million in net in-flows)

  • Year on year loan growth of £3 billion to £15 billion

  • Number one bank in UK for quality of service according to latest Competition and Market Authorities Survey. Watchdog BBC calls them the No.1 UK bank for customer service.

  • Customer account growth of 190,000 to over 1.8 million, though rate of growth down from 201,000 in H1 2018.

  • Net book value over £10 per share, compared with £2.10 share price

  • Full banking licence in the UK

  • Increasing number of UK branches

  • Good initiatives with Fin Tech companies to improve service and customer analytics.

The shares have lost more than 85% of their value since the beginning of January, with the Metro Bank’s share price closing at 204p on Tuesday’s session, down from the £17 levels it saw at the start of the year.

The management says 2019 is a ‘year of transition’, with the lender focused on upgrading its cost savings guidance to the upper end of its original range and rebalancing its lending mix.

Q3 earnings are key on October 23rd and watch this space for a replacement for Vernon hill.

Reabold Resoures (RBD) - Average Purchase Price 0.94p Current Shares price 0.9-0.95p

RBD succesdully rasied £24 million at 0.9p this week, only a 12.5 discount to the prevailing market price to develop the West Newton field (17% share for UJO). The fact that the company got away the placing succesfully in this difficult market for AIM oil and gas speaks volumes. Lots of news flow for West Newton, extended well test and Competent Persons report to confirm volumetrics and once flow test completed, reserves.

See https://contrarianinvestor.net/posts/2019/10/9/all-systems-go-for-west-newton-and-union-jack-oil-as-reabold-gets-24-million-placing-done?rq=reabold

Other recent trades

Woodford Patient capital investment trust - one week trade at loss (fortunate timing before yesterday’s bad news) https://contrarianinvestor.net/posts/2019/10/15/woodford-asset-mananagement-to-close-equity-income-fund

Short S&P 500 - closed, too much good earnings news and Brexit, china deal head wind. Will revisit as S&P hits all time highs of 3000.

British American Tobacco - short trade as shares fell to 2600-2700p range as most earnings in foreign currency and £ rising.

Watching

Hurricane Energy, Imperial, BAT, I3E, Petro Matad, VAST.

What's happening with AIM oil and gas - pretty bombed out

AIM oil and gas october 2018 to October 2019

Both AIM (Alternative Investment Market) and the Oil/Gas stocks within it have been pretty dire over the last few months. Double digit declines and investor’s shouldn’t forget that 50% of a shares value is related to what sector it is in (approx). With Brexit and China trade fears, risk is off the table. Hence AIM is sold off as well as smaller FTSE 350 in economically sensitive areas e.g. financials, oil.

I have investments in UKOG, Union Jack Oil (UJO) and Reabold Resources (RBD) in oil and gas AIM at the moment which I bought in the last few weeks on hopes of a rebound in sentiment if Brexit deal sorted etc.

Contrarian Investor generally looks at valuation and critically news flow. All three of my Oil and gas minnows have plenty of news flow.

  • UKOG - Horse Hill drilling of HH-2 well during October. All on track so far.

  • UJO - Updates on West Newton, Wressle planning (Nov 5) and Biscathorpe. No placing imminent.

  • RBD- Update on West Newton, specially Extended well test and CPR. Exciting prospects after placing.

ukog share price 2014-2019

Others on my watch list include Hurricane Energy (HUR), I3 Energy (I3E), Petro Matad (MATD) and Rockhopper (RKH). Watching but not pounced yet, HUR and I3E in particular look oversold, but dependent on well results. Rockhopper could be a good one if Sea Lion ever gets off the ground and progress in financing seems to be being made.

Many bargains out there in this bombed out sector but if a Brexit deal is done, “riskier” assets might be back on the table. So many have lost so much money on AIM that I don’t blame fear e.g. UKOG down from 10-11p (intraday following Broadford Bridge well news) in 2017 to 1.15p now (partly due to botched Broadbridge Bridge cement job), UJO halved from 0.38 to 0.2p now due to @chrisoil share sales (he’s gone into RBD) as well as sentiment, RBD, a 1.75p 52 week high, now 0.92p.

Bombed out, but there looks like some good stories out there. I’m being very contrarian and brave and buying now as I think Brexit will be sorted before October 31 (hopefully with a deal), and AIM oil and gas may be back on the table soon. News flow from UKOG’s Horse Hill and UJO/RBD West Newton will be great to see and I think it will be positive.

Always looking for investing ideas, please contact me at contact@contrarianinvestor.net


Reabold Resouces CEO interview October 10th 2019 following £24 million placing

Sachin ozin co- ceo Reabold

Thu, 10 Oct 2019, 08:00am BST

Sachin Oza, Co-Chief Executive of Reabold Resources (RBD) interview following placing of 2,666,666,666 new ordinary shares at a price of 0.9 pence. Sachin discusses the highlights of the placing, what the funds are to be used for, and the opportunity this presents for Reabold and its shareholders.Interesting for RBD and Union Jack Oil Shareholders.

Oza has 17 years investment experience and has spent the last seven focusing on the energy sector. He joined Guinness Asset Management in April 2016, having previously worked as an investment analyst at M&G Investments for 13 years, where he covered the Utility, Transport, Mining and Oil & Gas sectors on a global basis. Mr Oza has also held investment analyst roles at Tokyo Mitsubishi Asset Management and JP Morgan Asset Management.

West Newton is transformational in value to the company and the funding takes the asset to point of sale. Great for Reabold and UJO.

All systems go for West Newton and Union Jack Oil as Reabold gets £24 million placing done

Reabold resources logo

Reabold, RBD, has announced the successful completion of the Placing announced on 8 October 2019.

A total of 2,666,666,666 new Ordinary Shares have been conditionally placed with new and existing institutional investors by Stifel, at a price of 0.9 pence per new Ordinary Share, raising gross proceeds of £24 million.

The Placing Price represents an 12.2 per cent. discount to the mid-market closing price of 1.025 pence on the 8 October 2019, being the last practicable closing price prior to the announcement of the Placing.

Application will be made to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM. It is currently expected that Admission will become effective and that dealings in the Placing Shares will commence on AIM, at 8.00 a.m. on 29 October 2019.

With funds now in place, the development of West Newton will be guaranteed. Surely UJO shares due a bounce on this excellent news for the WN consortium? 1.2p is too low with enough cash, £2.6 million to fund B well at West Newton. Placing will come, hopefully after CPR Q1 2020?

News flow West Newton

  1. A restart of EWT October/November 2019

  2. Completion of Extended Well Test End 2019

  3. CPR for West Newton Basin End 2019/Early 2020

  4. WN B well end Q1 2020/early Q2 2020

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.

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