Upland Resources Share Discussion Threads

[argyle underclap] 08/5/2018 07:13

Full on the offer even for small amounts

[tburns] 08/5/2018 07:11

Expect a tick up very soon, some good solid buys to start off the day.

[hmgouda] 08/5/2018 06:37

Good morning all and good for all holders

[jp1962] 08/5/2018 06:18

Thanks Stark for posting that report

[doughty] 08/5/2018 06:16

Yes...we are involved with the perfect storm of a stock !...onwards and upwards...

[tburns] 08/5/2018 03:34

Excellent report there Stark, thanks for posting. Here's to another very positive week. GLA

[stark industries] 08/5/2018 00:02

hxxp://www.valuethemarkets.com/index.php/2018/05/03/wick-true-game-changer-firm-size-upland-resources-ceo-staley-talks-next-stages-companys-global-development-upl/?utm_campaign=shareaholic&utm_medium=twitter&utm_source=socialnetwork



‘Wick could be a true game-changer for a firm of our size’: Upland Resources CEO Staley talks next stages in company’s global development (UPL)

by ValueTheMarkets • May 3, 2018


Last November saw Upland Resources (LSE:UPL) enter phase two of its business plan with a 40pc farm-in to UK offshore permit P2235 including the Wick prospect, which is thought to hold hundreds of millions of barrels of oil. This marked the beginning of the oil and gas explorer’s move away from focusing solely on low-risk assets nearing production to also investing in higher-risk assets that could have company-changing potential. The market has so far responded well to this switch in approach.

Since the Wick investment, Upland’s shares have nearly tripled in value to 3.3p thanks to a hefty £1m cornerstone investment and the announcement of major progress in the firm’s focus area of Malaysia. With a well planned at Wick and plenty of newsflow imminent, ValueTheMarkets.com spoke to Upland’s CEO Steve Staley about the firm’s future and the importance of a diversified approach.

Opportunities at home

Wick is part of the UK Seaward Production Licence P2235, where Upland (subject to final Oil & Gas Authority approval) owns a 40pc stake and is partnered with operator Corallian Energy. Based offshore North-East Scotland, the total Wick structure is estimated to hold in-place P50 resources of around 250MMbbl. Upland also believes additional, attractive opportunities lie in the permit area.

Although Wick is at the higher-risk end of Upland’s portfolio, it has already been de-risked somewhat by 3D-seismic and the presence of several nearby discoveries.

Upland, Corallian and partners will drill a well at Wick in Q3 this year in 35m-deep water using a jack-up rig for a total estimated cost of around £4.2m. Upland’s share of the costs – which at 53pc come in at c.£2.2m – are fully-funded, and Staley believes a positive outcome could be genuinely game-changing:

‘Wick will be drilled in very shallow water, which is cheaper than drilling an offshore well in deep water and also avoids many of the onshore planning delays common to onshore UK wells. When you combine these low costs with the fact we could have a 40pc share of a very large resource, Wick could be a true game-changer for a firm of our size.’

Upland also owns a 25pc stake in licence PEDL 299 in the UK, which contains a low-risk, low-cost conventional field rejuvenation project called Hardstoft. Based in the East Midlands, Hardstoft was Britain’s first oil field and was last drilled in 1925. Oil production continued for several years from a simple vertical well.

Ineos Upstream, which owns 50pc of PEDL 299 and is also its operator, will focus on unearthing the area’s unconventional potential. Meanwhile, Upland, Ineos and fellow 25pc stakeholder Europa Oil & Gas will all focus on realising conventional potential at Hardstoft missed by the earlier, less advanced, drilling techniques.

The firms believe the bulk of Hardstoft’s hydrocarbons lie in semi-vertical limestone fractures that old wells were unlikely to uncover. It plans to access these by drilling a directional well once it has acquired the necessary seismic data.

Hardstoft has a much smaller estimated resource than Wick at just 6.75MMbbl, made up of 3.1MMbbl contingent resource and 3.65MMbbl prospective. But it also much lower risk due to the earlier production from Hardstoft Oil Field- indeed, it has an 80pc chance of success for contingent resources and 64pc for prospective resources. Due to its low cost of development, the site is also expected to be value accretive at oil prices somewhat below $30/bbl.

With a 25pc stake, the total resource net to Upland is an estimated 1.6875MMbbl. This figure is nothing earth-shattering, but Staley believes it could be enough to provide a decent low-risk revenue stream:

‘In general, whether or not we hold an asset until production depends on several factors. If we are lucky enough to make a huge discovery, then it is likely that the capital required to develop it would be well beyond our means, even with project financing, so we would probably sell this project on or at least sell a majority stake. With things like Hardstoft, which is onshore, not very big and cheap to develop, we would probably try and stay with it into production.’

Malaysian potential

Last month saw Upland shoot up by more than 11pc after revealing a memorandum of understanding with a state entity called Brooke in Sarawak, one of the four states that make up Malaysia. The partnership – which is the first ever such public/private collaboration with a Sarawakian upstream oil & gas entity – will see the businesses jointly assess, explore for and develop hydrocarbon assets in Malaysia. Upland will offer international experience and technical expertise while Brooke will provide local contacts and knowledge in the oil and gas industry and Sarawakian society.

Details on Upland’s progress in Malaysia had previously been thin on the ground. The firm had bolstered its weight in the country with the help of chairman Dato’ Norza Zakaria, political secretary to the Malaysian Minister of Finance from 2004 and 2008. It also brought on board Datuk Haji Bolhassan Bin Haji Di, an elected member of the Sarawak State Legislative Assembly from 1987 to 2011. But last month, Upland said it has been working with Brooke for some time and is well-advanced in its assessment of several upstream oil & gas opportunities.

Importantly, the collaboration also comes at a time of political change for Sarawak. The region holds a more significant share of hydrocarbons than any other Malaysian state and has a longer history of oil production. It is looking for more autonomy in recognition of this. Staley said this political backdrop provided an excellent opportunity to team up with Brooke:

‘We are seeing some exciting technical opportunities arising out of the changes in Sarawak and our unique local position in the state, thanks to Brooke’s vast local knowledge. Overall, the beauty of Malaysia is that it is politically stable and there is a lot of oil. Our operations here are very much ongoing, and there is a lot of newsflow to come.’

Diverse approach

Upland is also looking for opportunities in North Africa, focusing principally on Morocco and Tunisia. In February, it said it had made substantial progress in the assessment several low and higher risk discoveries and prospects, including a permit with estimated in-place resources of more than 1Tcf gas potential.

Importantly, Upland’s North African focus means it will eventually split operations between three critical geographies with very different geological opportunities and political backdrops. From a risk perspective, by spreading itself in this way and focusing on both low and high-risk projects, Upland is partially mitigating any potential risks arising from an individual project or location.

In the future, this approach could separate Upland from many fellow AIM resource plays that are severely hit by bad news because they pin all their hopes on just one project or region. Staley told us the company is in the process of creating an ‘optimum size of portfolio’:

‘We don’t want all of our eggs in one basket, but we can’t stretch ourselves over too many projects and geographies. It is nice to have a geographical spread to reduce the geopolitical risk, and three areas is probably about right in my experience. We are putting together an optimum-sized portfolio with a spread of risk across three main areas. We plan to have some assets that are relatively low-risk but offer less reward – like Hardstoft in the UK – alongside larger, potentially higher-risk sites – like Wick in the UK.’

Strong footing

Upland also boasts a strong financial position to support its growth strategy. In its results for six months ended 31 December 2017, released in February, the firm reported no debt and cash burn of just £294,815 cash over six months – around £49,000 a month.

On the cash side, near-term growth is fully-funded. In January, it received a £1m investment from Tune Assets, run by Tony Fernandes – the Malaysian businessman who bought AirAsia for less than £1 and turned into Asia’s largest low-cost airline. Upon its announcement, Upland’s share rose by 35pc. The cornerstone investment has been combined with the business’s £2m cash balance at the time to fund its obligations at Wick as well as contributing to existing assets, new ventures, and working capital.

In the absence of any revenues, the fact that the majority of this cash already has an allocation means Upland is likely to need to raise money at some point to pursue its expansion plans. However, for the time being, it is worth noting that in March the company announced a £3.5m convertible loan facility, giving it the option to draw down sums at short notice to protect against cost over-runs at existing projects.

This convertible loan is particularly interesting because of the “death spiral” reputation such facilities have. Convertible loans are often associated with poor share price performance, but in the case of Upland since the loan was announced the company’s shares are up 35%.

The facility is provided by Tune Assets, Upland’s chairman Zakaria, and clients of its broker Optiva. It is unsecured, interest-free and can be paid back in any combination of cash and shares (these are locked in for six months), minimising shareholder dilution. To access the facility, Upland paid a £105,000 commission to the facility provider split between £64,000 in cash and £40,000 in shares. Staley told us:

‘The facility gives us a quick solution in the case of cost over-runs on the Wick well – which we do not expect… I was keen to avoid death spiral financing options, so we have established a facility with people who already have skin in the game and do not want our share price to go down.’

Talking of skin in the game, Upland’s directors own 38.3pc of its issued shares, aligning their interests with shareholders.

A question of value

Upland had net current assets of £2,134,302 at the end of 2017, as reported in its most recent results. With a current market cap of £14.2m, this means the market is giving its assets a future value of c.£12m. At current oil prices of $74.65/bbl, Upland’s 40pc share of Wick’s 250MMbbl estimated resource alone makes this figure look conservative. On the other hand, Upland’s netback per barrel at Wick are currently unknown, and there is always the risk that drilling will not even be successful. Regardless, investors are buying into a lot of potential at Upland’s current 3.3p share price if they take the firm at its word- it has promised to try and deliver a lot across Malaysia and North Africa as well as at Hardstoft.

The business also has a good record of success across its management team. Aside from chairman Zakaria having good connections in Malaysia, Staley was a director of highly successful Cove Energy plc, co-founder and managing director of two AIM-listed exploration companies and has 35 years of experience in international oil, gas and power. For what it’s worth, Staley said he believes Upland is undervalued at its current price, although he acknowledges that this is common for firms of its type:

‘I think we are undervalued given the potential we have even just at Wick, let alone our other assets. We are not alone, as the market tends to do that- we have to cope with this and push on. We have plenty of catalysts, we are well financed, and we are in relatively stable regimes.’

Bright future

Since listing in 2015, Upland’s lack of debt and low overheads have allowed it to benefit fully from the buyers’ market for oil and gas assets in the wake of the 2014 price crash- something Staley says continues to this day. This dynamic sets the scene nicely for Upland as it prepares to step up in Malaysia and North Africa.

With a good chance of Hardstoft delivering a steady future revenue stream and Wick offering the opportunity of something transformational in Q3, Upland’s prospects could be very bright if things work in its favour. Of course, there is a risk with exploration companies that projects will fail and the macro environment will sour. But Upland is at least mitigating this somewhat with it highly-diversified approach to risk and geography and its strong financial grounding. At 3.3p a share, it could soon leap in the face of the right newsflow.

Author: Daniel Flynn

[gersemi] 07/5/2018 20:19

thanks fellas -

[druidinvestor] 07/5/2018 18:30

Brooke are a "fully owned Government Statutory Body under the BDEWC Ordinance"

[druidinvestor] 07/5/2018 18:07

Highly possible, especially given the partnership with Brook too

[soulsauce] 07/5/2018 18:05

Anything is possible with Steve Staley at the helm 😉

Brooke not state sanctioned oil company though. They are an engineering based company with o&g specialisation, perfectly complementing our explo expertise.

[gersemi] 07/5/2018 17:50

Is there a prospect of UPL securing both a production deal and exploration deals considering they have secured a partnership arrangement with a state sanctioned oil company?

A great thread, by the way

[euclid5] 07/5/2018 09:36

A little recap from pg 25 from below report:

Exploration history and petroleum systems of the onshore Baram Delta, northern Sarawak

The lowstand delta play, the lowstand turbidite play, the topset highstand delta shoreface play in the MiriAsam Paya Anticline area and the moundform stratigraphic
play in the southern limb of the Badas Syncline are among the identified untested plays.

The identified and assessed prospects and leads within the block suggests that the study area may contain a total undiscovered in-place resource of
up to one billion barrel of oil equivalent

[jp1962] 07/5/2018 06:20

Good luck mate with 2 million and hope you get a good price

[stark industries] 07/5/2018 06:11

Jp don't worry mate I hear you and been there many times also.

[jp1962] 07/5/2018 00:51

I hold quite a lot but nothing goes up in a straight line and I hate for any investor to be screwed by opportunistic market makers because they want to buy a considerable amount! Many times I have paid well over the odds for a large order only to see it drop back later when I could have taken advantage by spreading my order throughout a period

[jp1962] 06/5/2018 22:48

Spook buying that many in one go will mean you will end up being screwed by the market maker in my opinion.From experience there is normally profit taking throughout the day when you will probably get opportunities to buy the amount of stock you want by spreading your order in smaller chunks and getting a much better price! All in my opinion of course ( I have to say that)

[spook74] 06/5/2018 21:21

Great thanks the advice. Hopefully get the buy orders filled first thing Tuesday morning?!

[spook74] 06/5/2018 17:29

Thanks chaps best to get in early doors or do you think they may mark it up early to gain some stock for the day?

Spook