US Oil & Gas plc: Questions raised over Nevada drilling project

US Oil & Gas plc is a Dublin-based company with an interest in oil exploration in Hot Creek Valley, Nevada, in the US. Incorporated in June 2009, trading in its shares on the London Plus market began in January 2010. The shares sold for as low as 7p each and for as high as 97p. Trading was suspended by Plus in October 2011, with the operators citing a “disorderly market”.

It has not been disclosed what was meant by this and Brian McDonnell, chairman and chief executive of US Oil & Gas, says the company has never been told.

The shares were delisted in April 2012, and immediately listed on the Danish-regulated GXG, a tertiary market considered to be less regulated than Plus. They rose in value to almost £7 during 2012. The Plus market has since closed.

Significant shareholders

Nial Ring and Liam McGrattan were directors of US Oil & Gas from June 2009 to May 2010, with Ring being finance director. Ring, McGrattan and McDonnell were significant shareholders in the company. McDonnell said Ring and McGrattan were asked by the board to resign, which they did. Ring said the decision had to do with differences on strategy.

In mid-2012 the media reported that the well in Nevada had produced evidence of oil potentially worth hundreds of millions of euros. The share price spiked. In November the company secured a High Court order aimed at identifying who had posted allegedly defamatory remarks about the company on internet message boards.

The company lost €132 million in value after “totally untrue” postings said its Nevada drilling project was a “scam” by “liars”, the court heard. The share price had fallen from £4.15 to £1.

An activities record dated March 2013 from the State of Nevada Commission on Mineral Resources mentioned the Nevada site: “Travelled to Tonopah with John Menghini on Wednesday, February 27th. Reviewed [US Oil & Gas subsidiary] Major Oil’s sundry notices and actual work performed with Tom Seley and Nazila Hummer at the BLM [Bureau of Land Management] Tonopath office. Travelled out to Hot Creek Valley and met with Brian McDonnell (CEO of Major Oil) and Soran Talabani (contracting petroleum engineer to Major Oil).

“NDOM [Nevada Division of Minerals] and BLM had been told the Eblana 1 was testing oil at a rate of 60 BOPD [barrels of oil per day] prior to our visit. There was no oil in the tank, and only a skim of oil on a flotation type tank they were using. We were told the 60 BOPD was only a calculated rate (but had been reported as a producing rate) and when asked to review the calculations, we were told they did not have them on hand.”

McDonnell did not want to comment on this but said the company had never declared that the well it drilled was commercial and that 60 BOPD would be a commercial well. He said the company expects it has a major oil field, but that it has not yet drilled a commercially viable well.

Further drilling

At September 2013 the company had $1 million in cash and accumulated losses of $3.9 million. It is in discussions about funding for further drilling. The first well cost approximately $2.75 million.

In the 2011 accounts it was stated that one million shares held by Ring, by then a former director, had been “gifted back” at nil consideration. “This is part of a share allocation adjustment following an over generous allocation of shares to him prior to the company’s flotation.”

Dublin company Spurt Concepts holds three million shares in US Oil & Gas for the shareholders in Captive Audience Display Systems plc. The directors of Spurt are McDonnell and Ring.