United Oil and Gas 1H20 Reports maiden Production, Revenue and Positive Cashflow
Vox Markets
RNS Newswire
10:08, 29th September 2020

United Oil & Gas PLC (AIM: UOG FOLLOW) 1H20 results for the six months ended 30th June 2020 outlined a successful period for the Company despite a period unprecedented for the industry over the past 10 years. 

Financial Highlights 

Maiden group Revenue for the period of $2.4m delivered Gross Profit of $0.3m with an exceptional fair Value Gain on a Derivative Instrument of $2.8m delivering Profit after Tax of $1.8m. 

The Company finished the period as at 30 June, with cash on the balance sheet of $1.2m (FY19: £$1.3m) after repayment of the BP Pre-payment facility of $0.7m, which was lower than projected due to hedge impact. 

Operating Highlights 

The portfolio covering Egypt, Italy, Jamaica and the UK demonstrated both a collective and individual positive period: 

  • Egypt - The Company experienced strong production growth of 59% during the period with operating costs equivalent to less than $20/bbl. Importantly, the 100% drilling success rate also delivered an 190% reserve replacement ratio, ensuring sustainable production across the asset. 
  • Italy – There was significant operational progress in Italy, which is operated by ASX-listed Po Valley Energy Ltd, with ministerial sign-off now expected to enable 1st gas production next year. 
  • UK – The 32nd licensing round was particularly positive for United across the North Sea with multiple opportunities including the Palaeocene Zeta prospect, which is estimated to contain 90 mmbbls STOIIP. 
  • Jamiaca – The high-risk/high-reward offshore opportunity in Jamaica is now wholly owned by United. Furthermore, the Company received an 18-month extension on the exploration license from August 2020. The Company understand over $30m has been invested across the asset to date, which provides compelling evidence of the potential for a high-graded 229+ MMstb Colibri prospect. 

Shares in UOG have traded relatively flat over the past three months with the shares opening at 2.875p following 1H20 results. 

Brian Larkin, Chief Executive Officer commented: "2020 has been successful for United, with integration of the Egypt assets which are delivering low cost, sustained production, material reserves growth and positive operating cash flow. Post period end we were also awarded operatorship and 100% ownership of the high impact Walton Morant exploration licence in Jamaica, we have strengthened the Board and we recently welcomed new institutional shareholders onto our register, all of which marks our arrival as a full cycle oil and gas company.” 

Outlook 

The Company continues to focus on progressing its high-quality asset base whilst maintain tight control on costs and operating cashflow. 

Given the Company is no longer dependant upon the equity capital markets for growth capital, it is therefore confident it can deliver: 

  • Re-engage drilling operations in Egypt, with the ASH-3 development well expected to spud in late 2020/early 2021. 
  • Instal a gas pipeline at the ASH field, Egypt to reduce flaring and deliver up to 7 mmscf/d (1.5 mmscf/d net) of gas 
  • Progress discussions with the Abu Sennan Joint Venture Partners on further development drilling at the ASH field and the location for the 2021 exploration commitment well 
  • Complete the programme at the Walton Morant licence, to further derisk the acreage, including the Colibri prospect, estimated to contain gross unrisked mean prospective resources of 229 MMstb 
  • Commission a CPR over at least 10 further targets in the Walton Morant Basin ahead of a farm-out process and drill decision in 2021. 

The Company is guiding investors to expect 2H20 production of 2,300 boepd net to United with pricing discount improvements and reductions agreed with EGPC to potentially deliver between $600,000 to $800,000 uplift in revenues at current production levels on an annualised basis. 

From the above, investors can see the portfolio provides a strong platform of earnings and positive cashflow from which to approach new frontier locations and opportunities, which if successful would drive a significant re-rating on the Company. 

Timeline

"Looking ahead our focus remains on managing United in a responsible way as we allocate capital prudently and efficiently to grow the business. We are well placed to manage the challenges the industry is experiencing and to take advantage of an improvement in market conditions." Added Brian. 

Disclaimer & Declaration of Interest

The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.

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