648 – The Weekend Podcast: Upland Resources: The Sensible and Sexy Asset Strategy

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648 – The Weekend Podcast: Upland Resources: The Sensible and Sexy Asset Strategy

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648 – The Weekend Podcast: Upland Resources: The Sensible and Sexy Asset Strategy
Upland Resources #UPL
UPLAND RESOURCES
Share Price: 1.34p
Market cap: £5.13m
Shares in Issue: 383m

On Friday, I had Dr Steve Staley, CEO of Upland Resources, on the podcast, click here to listen (scroll into 6 minutes to hear the strategy).

Upland Resources: The Sensible and Sexy Asset Strategy

sensible-and-sexy

On Friday, Upland Resources announced that they’d raised £2.2m via a placing of 169,230,770 shares at 1.3p. This fundraise is in order to advance Phase 1 and Phase 2, of their, “Sensible and Sexy”, asset strategy (this is not Steve’s phrase btw).

I’ve written about Upland’s management and shareholders, in a previous blog, which you can read by clicking here. This blog post will focus on Upland’s strategy.

The funds raised in this placing will be used to do:

3-things

1. To Acquire 10% of PEDL 180 & 182

pedl-180-182

On friday Upland announced, they’d entered into a conditional agreement for the farm-ins to a 10% interest in each of UK onshore petroleum exploration and development licences (“PEDLs”) 180 and 182.

This is now their second, near term producing asset, alongside the 25% interest they have in PEDL 299, Hardstoft.

The Wressle oil and gas discovery is in North Lincolnshire and lies within PEDL 180 and PEDL 182, approximately six miles to the east of Scunthorpe. Edgon Resources, the operator, drilled Wressle-1 in 2014 and in extended well test operations carried out in 2015, the well successfully flowed oil and gas from three separate reservoirs: the Ashover Grit, the Wingfield Flags and the Penistone Flags. This totalled 710 boepd from all zones.

Commercial oil is initially expected to flow at an estimated constrained rate of 500 barrels of oil per day gross in early 2017. This is expected to increase as further wells are drilled. Working at an oil price of $45 – $50 per barrel this would give Upland a revenue of around £1m for the first twelve months.

This fits Upland’s strategy of seeking, “material stakes in oil and gas plays that represent an attractive risk – reward balance for its shareholders”.

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

 

2. Funding work on its existing stake in Hardstoft (PEDL 299)

hardstoft-v2

Total Hardstoft resource net to Upland, based on Blackwatch’s CPR, is estimated at 1.125 MMbbl. Blackwatch estimates the chance of success for the contingent resource at 80% and 64% for the prospective resource.

The Company estimates its interest in Hardstoft alone to be worth about 2.2p/share on a risked basis.

 

 3. To fund new ventures and on the ongoing costs of running the business

upl-sexy-assets

As Steve mentioned on the podcast (6 minutes in) that phase 2 of the plan, is well underway. He metioned that news on Morrocco, the first of their sexy assets, is due within the next few months.

He also said, due diligence on potential assets in Malaysia are ongoing but are a bit further down the line than that of Morrocco. You’ve only got to read about the boards previous experience in Malaysia to realise they have a wealth of connections in this area.

These phase 2 assets will be higher risk but will also have the potential to transform the size of the company.

in-summary

Here’s my 3 reasons why Upland Resources are worth putting on your watchlist:

1. Steve is Sticking to the Plan Man!

dream-house-v01

You may think, their first two assets aren’t that excting. They’re not meant to be.

If you have a plan to build the house of your dreams, you have to start with the foundations. It’s not sexy or exciting, you don’t even see it when the house is built but without a strong, well constructed base, your dream house will crumble.

These first two assets are essential to underpin the bigger plan. A plan filled with ambition, back by an experienced and well connected management. More importantly Steve has re-iterated this plan from day 1.

Like the dream house, when it’s completed, the foundations will probably be forgotten about but at the moment it needs to be built, to be built upon.

 

2. Skin in the Game

skin-in-the-game

I’ve spoken to plenty of CEO’s who are more than happy to big up the potential of their company but when it comes to putting their money where they mouth is, they’re positively coy. This is not the case with Upland Resources.

In the fundraise, the directors subscribed to 38% of the shares in the placing. Norza Zakaria, the Chairman, purchased 56,692,302, of shares, worth £737,000.

 

3. New Flow

news

Upland Resources listed on 26th October 2015, in the December they were awarded the Hardstoft licence. It took the oil & gas authority almost another 10 months, to formally rubber stamp this annoucement.

In the meantime, Upland have not been sitting on their hands. They were conducting due diligence on assets in the UK and further afield, namely Morrocco and Malaysia. Judging by my conversation with Steve, I’d harbour a guess that the majority of this due diligence has now been completed on the Morrocco asset. I’d expect news on this before the end of quarter 1 in 2017 and in the meantime, along with their partners, they’ll be drilling and hopefully producing commercial oil from their Wressle assets.

So there’s plenty of news to come in the next 3 – 6 months.

It’s probably worth pointing out, based on Hardstoft and Wressle alone, a brokers note,  puts a price target on Upland Resources,  of 3.5p, that’s 269% above the current share price of 1.34p. And this is just the sensible part.
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The content of this podcast (or content associated with it) is not intended as investment advice and people featured may hold positions in the companies they talk about. Please do you own research.