The UK Oil & Gas PLC (LON: UKOG) share price soared 39.8% after publishing the highlights of the Competent Person's Report (CPR) it received from RPS Energy Consultants (RPS) regarding the economic value of the Loxley Gas discovery, situated 9 miles south of Guildford in Surrey.
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The oil and gas company noted that Loxely contained recoverable natural gas reserves worth £123.7 million net to UKOG, based on the UK gas price on 31st December 2022. The estimates calculated based on RPS’s proprietary gas price estimates put the figure at £86.5 million net to UKOG, which is still decent.
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Investors cheered the announcement, as evidenced by the rally in UKOG prices, given that the company’s current market capitalisation is about £17.7 million. UKOG owns 100% of the Loxely Gas discovery, which means it stands to benefit from all the profits generated by the project.
However, UKOG could go alone and develop the project by itself, reaping all the profits, or it could partner with another firm through a farm-out agreement. Still, the company noted that the significant natural gas deposits at Loxely allow it to fund the project via traditional oil and gas debt funding.
UK Oil & Gas plans to execute an appraisal program at Loxely in 2024 and has received all the necessary planning and environmental consents.
The company also noted that it could offset most of the charges related to the Energy Profits Levy taxes and the Supplementary Charges against future investments and previous UK onshore sunk costs incurred by the firm, hence, earning more profits.
Stephen Sanderson, UKOG's CEO, commented: “The CPR confirms that Loxley, one of the UK's largest onshore gas discoveries, possesses material present value in today's prevailing higher gas price world. Its potential future revenue streams can deliver material shareholder value in the foreseeable future and its recoverable resources to contribute towards the UK's future energy security.”
UKOG plans to start producing natural gas at Loxely in 2026. The company is also considering a potential farm out of the project to a partner to fund its development.
*This is not investment advice.
UK Oil & Gas (UKOG) share price.
The UK Oil & Gas (UKOG) share price soared 39.83% to trade at 0.0846p, from Monday’s closing price of 0.0605p.
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