3 Reasons to add Upland Resources #UPL to your Watchlist - Vox Markets
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3 Reasons to add Upland Resources #UPL to your Watchlist

The content of this blog (or content associated with it) is not intended as investment advice. The author holds an interest in the company mentioned. Please do your own research.

UPLAND RESOURCES #UPL
Share Price: 1.28P
Market Capitalisation: 4.9M
Cash: £2.25m (as of 30th June 2017)

Upland Resources Limited is listed on the main market of the London Stock Exchange and are, “actively building a portfolio of attractive upstream assets, with a wide geographical remit and with the potential to deliver excellent returns to our shareholders. We target assets with an attractive risk – reward profile.”

To read my previous blog on Upland Resources click here

Upland are building a two phase strategy.

The first phase calls for the acquisition of stakes in assets with a favourable risk/reward balance that can provide Upland with revenue to underpin its ongoing costs and to help finance the second phase.

The second phase involves securing assets with potentially higher risk than Phase 1, but with the potential to be transformational for the Company.

Upland Resources currently have 3 assets:

HARDSTOFT

Upland holds a 16.67% interest in Block SK46c. This acreage is located in the East Midlands Oil Province, where numerous discoveries have been made, particularly since the early 1980s.

Blackwatch estimates that total recoverable resources on Hardstoft are 6.75 million barrels of oil on a best, or base, case scenario (1.125 mmbbls net to Upland).

WRESSLE

They have a 10% interest in each of UK onshore petroleum exploration and development licences (“PEDLs”) 180 and 182, which include the prospects of, Wingfield Flags, Ashover Grit, Penistone Flags, Broughton North.

A competent person’s report the Wressle Discovery and Broughton North Prospect has oil and gas reserves and resources identified by the as follows:

Gross 2P reserves across the Ashover Grit and Wingfield Flags:

  • 0.62 million stock tank barrels of oil & 0.20 billion standard cubic feet of gas

Gross 2P reserves in the Penistone Flags:

  •  1.53 million stb of oil & 2.0 billion standard cubic feet (“Bscf”) of gas

Prospective Pmean unrisked recoverable resources for Broughton North

  • Mean Prospective Resources of 0.51 million stb of oil & 0.51 billion standard cubic feet of gas.

A high geological chance of success of 40% to 49% has been assigned by Blackwatch to Broughton North, which is in a fault block immediately to the north-west of the main Wressle structure.

An appeal by Wressle’s licence operator, Egdon Resouces is ongoing following North Lincolnshire County Council’s Planning Committee’s decision to refuse planning consent for the development of the oil field. See reason 3 below for more information.

 

WICK PROSPECT

This week on 30th November Upland Resources, announced they’d signed a, “North Sea Farm-in Agreement”. See below for more details.

3 REASONS TO ADD UPLAND RESOURCES #UPL TO YOUR WATCHLIST

THE POTENTIALLY TRANSFORMATIONAL WICK PROSPECT

“A conservative NPV of only $7.50/bbl indicates an unrisked valuation of up to US$225m net to Upland”

On 30th November Upland announced they’d signed a farm-in agreement with Corallian Energy Limited for a 40% working interest in UK Seaward Production Licence P2235, containing the Wick Prospect in Scotland.

The Wick Prospect lies in the Inner Moray Firth, only 2km from land and in shallow water and is estimated to contain P50 oil-inplace resources of approximately 250 mmbbls.

The licence area benefits from an extensive 3D dataset. Upland continues to interpret the data and believes additional, attractive prospects are likely to be found in the permit area.

In a note on this farm-in their broker, Optiva Securities state:

“If we assume a commercial discovery at Wick leading to a 75 mmbbls field development (assuming a 30% recovery factor), a conservative NPV of only $7.50/bbl indicates an unrisked valuation of up to US$225m net to Upland. Although a range of administrative, technical and financial factors will need to be addressed and appropriate risk factors applied, we believe that deal enhances Upland’s UK oil and gas portfolio significantly.”

 

MORE ASSET ANNOUNCEMENTS

“The state possesses around 30% of its known 5.85bn barrels of oil reserves.”

On the podcast, this week, CEO of Steve Staley re-iterated the progress continues to be made as regards other assets in North Africa and South East Asia. He also stated the time it’s taking, to finalise these deals, is frustrating but continues to be excited by the potential of these prospects.

The reasons for the delays just seems to be administrative within the government departments they’re dealing with.

News on these assets are way over due. I remember talking to Steve, this time last year and he seemed to think then, that positive news would be out before year end (2016).

It’s also worth noting Upland Resources have strong connections with Malaysia / Sarawak. Just check out the shareholder register. Have you seen the amount of skin in the game the directors have? Especially the directors from Malaysia.

The above photo was members of the Upland team with the Chief Minister and State Secretary of Sarawak, taken on a visit to London in May.

Sarawak borders Brunei, where the Sultan lives. He’s one of the richest guys in the world. Do you know why? You got it, oil & gas.

Sarawak is one of the two Malaysian states on the island of Borneo (Sabah being the other).

The Sarawak basin is one of Malaysia’s richest geological areas for hydrocarbons development, particularly natural gas.

According to the Malaysia Energy Information Hub, the state accounts for half of the country’s proven natural gas reserves and possesses around 30% of its known 5.85bn barrels of oil reserves.

Apart from these deals, it is good to see is that Upland are not standing still, whilst talks have been on going in South East Asia and North Africa they have also signed an agreement to farm-in toUK Seaward Production Licence P2235, containing the Wick Prospect in Scotland.

 

NEWS ON THE WRESSLE APPEAL

“We now look forward to the resulting decision, which is likely in early 2018.”

On 11th January and 3rd July 2017, North Lincolnshire County Council’s Planning Committee refused planning consent for the development of the Wressle Oil Field.

This refusal was against the positive recommendation of their own planning officers.

As a result an appeal has been lodged by Wressle’s licence operator, Egdon Resouces.  The appeal hearing was on 7th November, was expected to last for around 6 days and a decision expected within six weeks of the end of the appeals hearing.

In Egdon’s Resources Final Results, released on 31st October 2017, they state:

We remain committed to, and optimistic about, obtaining planning consent for the development of the Wressle oil discovery, despite the refusal of our applications in January and July 2017. We now look forward to the planning appeal in early November and the resulting decision, which is likely in early 2018.

It’s worth remembering that this is of little risk to Upland. They entered into a agreement for the farm-in conditional on receipt of certain planning and other approvals, which may be waived at Upland’s discretion.

 

“A conservative NPV of only $7.50/bbl indicates an unrisked valuation of up to US$225m net to Upland”

Upland Resources have suffered from a setbacks and delays on both on phase 1 and phase 2 of their strategy but it hasn’t stopped them from advancing. They continue to work behind the scenes on potential deals and have released a bit of a surprise development, in the shape of the north sea farm in.

With a, a conservative NPV of only $7.50/bbl indicates an unrisked valuation of up to US$225m net to Upland”, this prospect alone has the potential to be transformational.

News will be forthcoming on the Wressle asset within the next month and operator Egdon seems confident of a positive outcome to the appeal. If this is the case, it should be good for Upland’s share price but a negative outcome will have limited impact as they’ve signed a conditional agreement, to only farm in, if planning is approved.

For reasons unknown to me I do not think the market appreciated the true potentail of the north sea deal, this week, as Upland still have a valuation of just £5m. I’d be very surprised to see it stay at this level for long especially if they release positive news as a results of their advanced discussions concerning the North Africa or South-East Asia assets.

To add UPLAND RESOURCES #UPL to your Vox Markets Watchlist, click here and tap the, “Follow”, button

The content of this blog (or content associated with it) is not intended as investment advice. The author holds an interest in the company mentioned. Please do your own research.

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Mentioned in this post

UPL
Upland Resources Limited (DI)