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Here’s what I’d do about the UKOG share price right now

Rupert Hargreaves — Wed, 06 Nov 2019 12:04:38 +0000

The last time I covered UKOG (LSE: UKOG), I concluded that shares in the oil minnow might be an attractive investment if the company manages to execute its drilling and production plans without any setbacks over the next six-to-12 months.

That was at the beginning of October. Since then, the firm has continued to push ahead with its drilling and testing schedule. The company is currently concentrating on developing its Horse Hill-2z (HH-2z) Portland horizontal well. This is designed to tap into the Portland reservoir’s most oil-productive zone, or “sweet spot“, which was defined by the HH-2 pilot well’s successful coring and electric logging programmes.

These operations were completed in the middle of October, and management is hoping to get the HH-2z well into production by year-end.

Risky business

Drilling for oil is a risky business, and there’s never any guarantee everything will go to plan. However, UKOG’s operations at HH-2z are making progress. We should find out in the next week or two if the company has successfully managed to complete drilling at the prospect. The next stage will be the clean-up and flow testing.

As I noted last time I covered the business, the results from HH-2z could be make-or-break for UKOG. Management claims this new prospect could be “capable of delivering flow rates significantly higher” than the HH-1 vertical Portland discovery well, which has been recorded as being able to produce just over 300 barrels of oil per day.

As my Foolish colleague Alan Oscroft recently noted, on October 9 the company reported production from the Horse Hill-1 test well had reached 41,800 barrels although, as he went on to add, this figure “tells us nothing whatsoever about any prospective daily production rate.” However, what does tell us is that UKOG is now producing oil and, perhaps more importantly, producing revenues.

What’s next?

So what does this all mean for investors? Well, the next few months are going to be critical for the UKOG share price. If the company does have success at its HH-2z well, then there’s a genuine chance this business could become a fully operational oil producer in 2020. On the other hand, if the new prospect fails to live up to expectations, then there will be more delays, costs, and dilution for shareholders ahead.

With this being the case, I’m not a buyer of the stock at current levels. While I believe there could be a significant upside on offer for shareholders if the company does push through and strike black gold. But if it doesn’t, there’s no telling how far the stock could fall. I would rather sit on the sidelines and wait for news of further progress before initiating a position on this particular oiler.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The UKOG share price has plummeted 22%. Is it now a steal for investors?

Rupert Hargreaves — Sat, 05 Oct 2019 10:22:05 +0000

Last month, shares in oil minnow UKOG (LSE: UKOG) added more than 20% as the company continued to move forward with its growth and profitability plans.

Over the past two months, the company has announced a string of positive trading updates and drilling reports. These seem to confirm the business is finally moving towards the stage where its operations can be self-sustaining.

Indeed, in a 12 September trading update, UKOG Informed the market it had produced a total of 36,559 barrels of oil (bbl) from testing the Horse Hill-1 Kimmeridge oil pool. Production hit an average rate of 313 bbl/d in the 48 hour test period before the well was shut-in.

The shut-in was required to relocate oil storage tanks and flowlines before testing started on the next prospect, the new Horse Hill-2/2z Portland horizontal well. In total, UKOG claims to have produced 66,127 bbl from test production at its Portland and Kimmeridge prospects.

Further progress

Since that update, UKOG informed the market at the end of last month drilling of the Horse Hill-2/2z prospect has started.

The market is now waiting with bated breath for the results from this prospect. Management claims it could be “capable of delivering flow rates significantly higher” than the HH-1 vertical Portland discovery well.

When drilling and testing of Horse Hill-2/2z is complete, the company’s latest trading update reports “both HH-2z Portland and the HH-1 Kimmeridge well are expected to be put into long term production by the end of 2019.“

As long as everything goes to plan, it looks as if UKOG’s net oil production and associated revenues will jump substantially by the end of the year. That implies the fourth quarter could be a landmark year for the business and could completely change its outlook. And based on that, it would appear the recent decline in the oil group’s share price could be a good entry point for risk-tolerant investors.

One key risk

Having said all of the above, shareholders are still at risk of dilution. This is something that’s been weighing on the share price for the past few years.

Only a few days before the company announced it had started drilling at its second Horse Hill prospect, a further 37,362,227 new ordinary shares were dumped on the market to satisfy part of a £5.5m loan put together in August.

I don’t expect this to be the last time the company issues shares to satisfy loan obligations, or raise additional cash. UKOG has a lot of drilling and test work to do and, so far, it’s not self-funding. While the increased production that’s expected to come onstream during the next few months might help improve its financial position, until this is confirmed, I think it might be worth sitting on the sidelines for the time being.

UKOG’s future looks bright if everything goes to plan. But if the company stumbles, shareholders will have to foot the bill.

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Thinking about buying the UKOG share price? Here’s what you need to know

Rupert Hargreaves — Wed, 11 Sep 2019 09:28:27 +0000

Shares in oil & gas minnow UKOG (LSE: UKOG) jumped in early deals today. Investors rushed to buy shares in the business after it announced the completion of the acquisition of a further 35% in its flagship asset.

Specifically, UKOG has completed the acquisition of Magellan Petroleum (UK) Investment Holdings Limited from Tellurian Investments LLC.

Acquisition detail

Magellan’s 35% direct interest in the Horse Hill oil field is held through the PEDL137 and PEDL246 licences. This significantly increases UKOG’s holding in its flagship Horse Hill oil field asset from 50.635% to a controlling 85.635%.

The firm also notes that this gives a 69% increase in UKOG’s associated Horse Hill net asset value and net reserves/resources.

Following the deal, the company is now poised to crack on with further drilling and testing operations. UKOG is planning to commence simultaneous Horse Hill-2/2z Portland drilling and HH-1 Kimmeridge test operations before the end of September, which should give shareholders some positive news before the end of the month.

Commenting on the conclusion of the deal in today’s press release, CEO Stephen Sanderson said: “The remainder of the year at Horse Hill looks set to be highly eventful and, hopefully, financially transformative, as we drive to seek to establish permanent oil production by year-end.“

Pushing ahead

UKOG’s latest deal gives the company a solid base to grow and develop from over the next few months, and I am excited to see the development of the business from here. Oil is already flowing, and further success at the wellhead could put the enterprise firmly on track to becoming a profitable, self-sustaining business.

However, in the meantime shareholders need to keep an eye on dilution. The company has historically relied on issuing new shares to fund its operations, eroding shareholder value. The Magellan the deal has been partly funded using this method.

UKOG has issued £3m or 275,988,960 new ordinary shares to satisfy part of the £12m purchase price. The balance was settled in cash. Following this issue, the company’s enlarged share capital stands at 6.4bn ordinary shares, up from around 2bn ordinary shares at the end of March 2016.

Until UKOG stops issuing new shares to fund its operations, it is going to be challenging to try to compute the value here. Issuing new shares dilutes existing shareholders and per share valuation metrics.

Turning point

The good news is that if UKOG can ramp up its drilling and production activities over the next few months, then this risk should start to dissipate. In my opinion, that would mark a turning point for the business.

If UKOG can become self-sustaining with cash generated from operations, and break its reliance on shareholders to keep the lights on, I reckon there is a good chance the stock could rise substantially from current levels. But until the business reaches this point, I think uncertainty will continue to weigh on the shares. That’s something to consider if you are thinking about buying the UKOG share price today.

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Does the UKOG share price make it a bargain?

Rupert Hargreaves — Sun, 25 Aug 2019 11:06:38 +0000

At the time of writing, shares in oil and gas minnow UK Oil & Gas (LSE: UKOG) are trading at 1.1p, which looks cheap compared to where the stock was 12 months ago.

Indeed, at the end of August 2018, investors were willing to pay as much as 2.45p per share to invest in the business. Two years ago the UKOG share price was more than 8p, 700% above current levels.

So, looking at the company’s historical share price, it appears as if the stock is cheaper today than it was two years ago. However, this isn’t the case. The share price doesn’t tell us much about the underlying business. It only gives us a rough gauge of market sentiment.

We need to take a look at the underlying fundamentals of UKOG to establish whether or not this stock is a bargain at current levels.

Growth on the cards

One of the reasons why the UKOG share price has been on a downward trajectory over the past 24 months is the fact that the company has been issuing new shares at an alarming rate.

For the six months ended March 2019, the weighted average number of ordinary shares was 4.2bn, compared to 2.2bn at the end of 2016. By issuing new shares, the company has been able to keep the lights on and use the new capital to acquire additional interests in existing and new oil prospects around the UK. This investment is beginning to pay off.

At the beginning of June, the company announced that aggregate Portland and Kimmeridge test oil production from the Horse Hill oil field reached a significant landmark of 50,000 barrels of oil. UKOG owns 50.7% of the Horse Hill field. A month later, following additional testing and drilling, total production from the Horse Hill oil prospect hit 60,000 barrels.

Oil production is giving UKOG the most important thing in business, cold hard cash. Management is already deploying some of this capital to improve the group’s position.

Further investment

On August 7, UKOG announced that it had signed an agreement to acquire an additional 35% interest in the Horse Hill oil field. Under the terms of this key acquisition, UKOG’s share of Horse Hill’s net oil sales revenues, net reserves and recoverable resources will increase to 85.7%.

UKOG has agreed to pay £12m, of which £5m is payable in cash on completion, with a further £3m in shares. On top of this, there will be £4m of deferred payments in UKOG shares.

In my opinion, this deal, coupled with UKOG’s rising oil production indicates that the business has reached an inflection point. It is no longer a minority owner in its primary asset, and it is no longer just an exploration company.

However, at this early stage, I think it is still too early to tell if the shares are cheap. We do not have any facts on profitability and cash flow at this point. It is likely we will have to wait until the company publishes its results for the year ended 30 September 2019 in the first quarter of next year for more colour on this.

So, for the time being, it might be better for investors to sit on the sidelines and wait for more information.

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The UKOG share price: What’s next?

Rupert Hargreaves — Thu, 11 Apr 2019 09:12:54 +0000

The last time I covered UK Oil & Gas (LSE: UKOG), I concluded the company’s future success depends on its ability to make good on management’s 2019–2020 drilling and production plans. It looks as if it’s doing just that.

Growing production

Today, the group published a trading update informing investors that so-called dry oil production, which is oil produced without water, from the Portland reservoir at the Horse Hill oil field has now exceeded 15,000 barrels of oil (bbl). The well has been producing at a “stable rate of over 220 barrels of oil per day (bopd)” for the past few months, and production “continues to be maintained below the previously reported 362 bopd calculated optimised sustainable rate” for “prudent Portland reservoir management purposes.”

After several months of steady production, management believes the “Portland and Kimmeridge extended test programme has now produced a significant aggregate volume in excess of 40,000 bbl.“

In my opinion, this is a significant step for the business. Owning UKOG shares has always come with a lot of risk because oil exploration and production is a hit-and-miss industry. Even if a company believes it has stumbled across one of the world’s largest oil reservoirs, there’s never any guarantee the business will be able to start production successfully.

Now that UKOG has moved from the exploration stage to the production stage and is producing revenues, the risk of owning the stock is greatly reduced, in my view.

To borrow CEO’s Stephen Sanderson’s words: “The Portland’s proven ability to sustain a stable dry oil production rate of over 220 bopd for two months provides a further landmark that solidly underpins the validity of the company’s planned field development.“

The firm and its partners are planning to drill further wells over the next few months, which should help UKOG meet its 720–1080 bopd production target.

Dilution risk

Further progress towards this target will boost the company’s investment case, in my view, but it won’t eliminate all of the risks.

As I’ve mentioned several times, until UKOG becomes self-funding, shareholder dilution will remain a risk.

The company has a long track record of issuing shares to fund its operations and keep the lights on, diluting existing shareholders. For example, at the end of March, UKOG raised £3.5m through a placing of 333,333,330 new ordinary shares at a 12.5% discount to the prevailing share price at the time. This is earmarked to fund the drilling programme over the next few months.

Raising funds this way is an attractive alternative to borrowing money but, as noted above, it does mean existing shareholders get diluted and will have to invest more to maintain their share in the business.

The bottom line

Overall, the next six months will be crucial for the UKOG share price. If the company continues to proceed with its well development plan, and it successfully achieves the stated production goal, I think the shares could rise substantially from current levels.

However, the firm still has plenty of work to do before it reaches this point. So even though current production might have de-risked the investment case, the UKOG remains a speculative investment, in my opinion.

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Here’s what I’d do about the UKOG share price right now

Rupert Hargreaves — Sat, 09 Mar 2019 09:45:01 +0000

Over the past 12 months, shares in UK Oil & Gas (LSE: UKOG) have plunged a staggering 22%. The stock’s performance did pick up slightly in early 2019 when, following the publication of the company’s 2019 strategy and drilling plans, investors rushed to buy into its growth story.

Indeed, as I commented at the time, if management can successfully execute UKOG’s published 2019-20 strategy and drilling plans, 2019 could be a transformational year for the company.

A transformational year

If the group manages to move Horse Hill “into permanent production by the end of 2019 via two new horizontal wells,” UKOG could exit the year producing as much as 1,000 barrels of oil per day — that’s not much in the grand scheme of things, but it will be a landmark for the firm.

Most importantly, if the company does manage to get production going, then it could become self-sufficient over the next 12-24 months, negating the need for further share issues.

Shareholder support

Over the past few years, UKOG has been able to keep the lights on by issuing new shares to investors. For example, even though UKOG’s book value (the total value of shareholder assets minus liabilities) has increased tenfold over the past 10 years, the share price has only risen around 200% as the number of shares in issue has ballooned, from under 100m to more than 5bn.

Unfortunately, it doesn’t look as if the business is going to stop issuing shares to fund its operations anytime soon.

At the end of last month, the company announced it had completed the acquisition of a 6% shareholding in Horse Hill Developments Ltd for £2.1m, which was funded by the issue of 130m new shares. Following the issuance of these new shares, UKOG has a total of 5.71bn shares in circulation.

Buy, sell or hold

So, how should investors trade the UKOG share price over the next 12 months? Well, I would be lying if I said I didn’t see further weakness ahead for the shares as the company progresses towards its goal of commencing production this year. Any delays will be costly, and it’s likely that shareholders will be asked to foot the bill for any cost overruns.

That being said, when oil does eventually start flowing from the company’s acreage, I believe investors will be well rewarded for their patience.

Using a back of the envelope calculation, we can see the potential here. If the group manages to produce 1,000 barrels of oil per day for $50 a barrel, it has the potential to generate revenues of £13.8m a year. The rest of the UK oil & gas industry is trading at a price-to-sales multiple of just under three, implying the company could attract a market capitalisation of £42m in the best-case scenario.

That might not seem like much compared to UKOG’s current market-cap of £76m, but once the firm has started production, I don’t see much that will hold it back. Doubling production to 2,000 barrels of oil per day could justify a market capitalisation of £90m-£100m.

With this being the case, even though there could be further volatility ahead for the stock over the next few months, I think it’s worth owning a few shares in UKOG as a speculative investment and bet on the group’s success later this year.

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Why I think the UKOG share price has the potential to triple in 2019

Rupert Hargreaves — Wed, 30 Jan 2019 10:03:34 +0000

Whenever I’ve covered UK Oil & Gas (LSE: UKOG) in the past, I’ve always tried to make it clear that this stock isn’t for the faint-hearted.

I believe only the most experienced investors should dabble in early-stage oil/mining companies, because there’s so much that can go wrong, and if you don’t know what you’re doing, you could see your hard-earned money evaporate very quality. Indeed, over the past 12 months, the UKOG share price has declined by more than 60%, mainly thanks to a series of disappointing testing updates at its huge Horse Hill asset.

However, I’m starting to see some light at the end of the tunnel for the UKOG share price. After years of watching and waiting, it now looks as if the company is firmly on track to report a profit. And when the funds start flowing, the shares could pop.

Profit potential

For the past few years, I think it is fair to say that UKOG has really struggled to realise its ambitions. The company owns an interest in several potentially high-quality oil prospects, but unlocking the potential of these assets hasn’t been as easy as many investors and management might have liked.

Luckily, after many disappointments, last year the company’s subsidiary struck oil — quite literally — during testing at its HH-1 oil well. Since then, the subsidiary has been testing the well, and this extended well test has yielded over 25,000 barrels of “dry oil and solution gas.” UKOG now wants to capitalise on this success.

Earlier this week it published its 2019-20 strategy and drilling plans document, which sets out the goal of moving “Horse Hill’s ongoing test-based oil production into permanent production by the end of 2019 via two new horizontal production wells.” Based on an independent analysis, management reckons the first of these horizontal wells could yield 720-1,080 barrels of oil per day (bopd). If successful, UKOG is planning further wells with the goal of boosting “gross production to over 2,000 bopd.“

It’s for real this time

We’ve seen forecasts like this from the company before, and so far, UKOG has disappointed. However, this time around, I think the odds are in the firm’s favour. Production is under way, and the enterprise is already selling production, generating at least some cash to reinvest back into operations.

That being said, there’s still a lot to be done here and dilution remains a significant threat to investors’ holdings. For example, the firm recently issued a further 18m shares to acquire an additional 30% interest in the PEDL331 onshore Isle of Wight licence from Solo Oil.

Still, profit forecasts are starting to emerge. Based on the company’s own production targets, analysts have pencilled in a potential net profit of £13.4m for 2019, a substantial figure for a business that has generated nothing but losses. Based on these estimates, the stock is trading at a forward P/E of just 3.

Of course, there is still plenty that could go wrong between now and the end of 2019 when production is expected to be in full swing, but UKOG’s profit potential is starting to get me excited. If it does meet these forecasts, I reckon the stock could be worth three times more than it is today as the rest of the oil sector trades at an average forward P/E of just under 9.

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Why I think the UKOG share price will make a comeback in 2019

Rupert Hargreaves — Sat, 22 Dec 2018 10:20:55 +0000

Over the past year, the UK Oil & Gas (LSE: UKOG) share price has taken a hammering. As the company has struggled to win over investors, the stock has slumped 63% since the end of December 2017. Virtually all of these declines came at the beginning of 2018 when the enterprise published a disappointing update on progress at its Broadford Bridge-1 prospect.

The stock slumped on the news that further work would be required after several months of drilling activity, which had yielded almost negligible results.

However, after this set-back the company re-grouped, and management has spent the rest of 2018 working on re-focusing drilling efforts. A huge breakthrough occurred in October when it declared its Horse Hill Portland oil field commercially viable following an extended well test.

One step forward…

As I wrote when last I last covered UKOG, this discovery “transforms” Horse Hill and the firm’s outlook. Further testing work saw the production of 13,920 barrels from the well, “with gross oil sales revenues of approximately $1.1m.“

While this is a huge step forward for UKOG, as my Foolish colleague Alan Oscroft recently pointed out, the company is not expected to generate any revenue from production “this year, or next.“

With this being the case, the biggest problem the group now faces is funding. Finding enough money to keep the lights on is one of the most significant headwinds all small-cap companies face — especially in the resource space. UKOG is no different. Finding funds to proceed with the development of its assets has consumed a considerable amount of management’s time and effort.

Funding efforts

So far, shareholders have been happy to fund the business. UKOG has been issuing shares to investors, who’ve been more than happy to pay up. This process has kept the firm alive, but shareholdings have been diluted.

As I’ve covered previously, over the past five years, UKOG’s number of shares outstanding has increased from 83m to somewhere in the region of 4bn. While there’s a chance that this damaging theme could continue, I think that now the company has proven to the market that it has a viable oil prospect, management will have other funding options available to them.

Funds produced from early oil production will also likely be reinvested back into the business, taking the burden off investors.

Big catalyst

I think this could be the most significant catalyst for UKOG’s share price over the next 12 months.

If the business can prove that it’s a self-sustaining entity, then the investment thesis will change entirely. The company will no longer be labelled as a small-cap startup, but a fully-fledged oil producer, which should result in a re-rating of the shares.

Having said that, there’s no denying that there are still plenty of other risks to the UKOG investment thesis — oil & gas exploration is one of the most uncertain businesses around. But if the group can show investors that it’s moving forward on a sound financial footing, much of the risk surrounding the stock should evaporate. Put simply, 2019 could be the year that the UKOG share price makes a comeback.

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Is time running out to buy the UKOG share price?

Rupert Hargreaves — Sat, 17 Nov 2018 10:45:33 +0000

I will admit I have always been sceptical that UK Oil & Gas (LSE: UKOG) can live up to the hype surrounding the company. However, last month the business took one step closer to proving to investors that it is a viable enterprise when it declared its Horse Hill Portland oil field commercially viable following an extended well test.

Big step forward

It is fair to say that most analysts had written off the Horse Hill well, nicknamed the Gatwick Gusher, after several high profile failures to produce oil from a prospect. But now the company has confirmed that there is real, recoverable oil in the ground. This, says CEO Stephen Sanderson, “transforms” Horse Hill and UKOG’s outlook. Following the initial announcement that the prospect was commercially viable back in October, on Thursday, another press release announced that total production from the test wells had reached 13,920 barrels, “with gross oil sales revenues of approximately $1.1m.”

Sustained oil production and revenue is a huge step forward for UKOG and its partners. But the group of oil prospectors working near Gatwick are not out of the woods just yet. There is still a long way to go before UKOG can rely on a predictable revenue stream from the prospect. Even though the results of the extended well test were better than directors initially expected, Horse Hill Developments, the firm that owns the prospect (of which UKOG holds 47%) plans to start drilling its first permanent horizontal well in early 2019, which management reckons could produce 720 to 1,080 barrels of oil per day (bopd) in the best case scenario.

After this first well is drilled, two more are planned along with two pressure support wells, assuming all of the regulatory approvals required are granted. Full-time production is not expected to commence until the end of 2019/20. This can’t come soon enough for UKOG. As I covered the last time I wrote about the business, it is running dangerously short of cash and has been relying on placings to raise the funds required to keep the lights on, diluting existing shareholders significantly.

Funding problems

Over the past five years, UKOG’s number of shares outstanding has increased from 83m to somewhere in the region of 4bn. The result of this is that even though the market capitalisation has risen more than 400% since the end of 2013, shareholders have seen a gain of only 100% as each share is now worth a smaller percentage of the business than it was five years ago.

As UKOG is unlikely to receive any significant revenue until the end of 2019, I think it is highly likely there will be more fundraising over the next 12 months, diluting investors further. And with this being the case, even though news flow over the past two months has been significant, I am in no rush to buy the stock. In my opinion, the risk still outweighs the reward here.

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Is it finally time to return to the UKOG share price?

Kevin Godbold — Mon, 05 Nov 2018 12:23:49 +0000

Something momentous happened last month. UK Oil & Gas (LSE: UKOG) declared its Horse Hill Portland oil field – the so-called Gatwick Gusher — commercially viable following an extended well test. The firm even transported several tankers of crude oil to Fawley refinery during the test – this is real oil we are talking about, in Surrey, under the Weald Basin. Amazing.

Preparing for field development

Are the Home Counties set to become a new Texas? Will we see the gentle English landscape covered with a forest of nodding donkey oil pumps, just as the highlands of Scotland have sprouted acres of wind generators? I hope not, and with a bit of luck, that vision is just me getting carried away with my imagination. In any case, I think technology has moved on since the days of the nodding donkey so that oil wells can be less visually obtrusive.

However, the company did say Horse Hill Developments, which is the operating company, plans to begin long-term Portland oil production during 2019, as long as it gets the necessary regulatory consents. The directors’ current vision is to develop three production wells and two pressure support wells. UKOG owns around 47% of the project.

UKOG’s chief executive, Stephen Sanderson, said in last month’s update that the declaration of Portland commercial viability “is a significant milestone for the company.” He pointed out that it “transforms” Horse Hill from an exploration endeavour into a “fully-fledged field development.” Indeed, UKOG could become a producing oil firm with significant cash inflows ramping up during 2019 if all goes well. The results of the extended well test were better than the directors expected and they now think the first planned horizontal producer well, HH-2, could deliver sustained oil rates of 720 to 1,080 barrels of oil per day (bopd). The company plans to spud (start drilling) the well in early 2019.

Potential long-term production

Looking forward, Stephen Sanderson anticipates“the possibility of combined long-term production” from both the Portland and nearby Kimmeridge prospects, which he said would be a “potentially transformational prospect for Horse Hill and the company.” However, the firm noted in the announcement that there is no absolute guarantee that forecast, targeted or calculated rates of production will be achieved. Perhaps that’s why the stock market’s reaction to the news has been so muted.

Indeed, the share price has barely budged since the announcement last month, which is a far cry from the big jumps and plunges it has been making over the last few years. But I think there are good reasons for that. Firstly, there’s still a long way to go operationally before oil starts flowing and cash starts rolling in. Secondly, the firm has been back to the market repeatedly for funds with the consequence that long-standing shareholders have been diluted. When I first wrote about the company four years ago, the market capitalisation stood at around £17m. Today it’s at almost £106m, so the stakes are a lot higher. Finally, with UKOG as a producer, will it be valued more like a producer by the market than like an explorer? I think we’ve seen something like that happen with Soco International,for example, where a lower valuation has depressed the share price to a shadow of its former self. In summary, I think UKOG today is interesting, but still highly speculative.

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Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.