PLUS MARKET – A Platform for Growth
Brian McDonnell, the CEO of US Oil & Gas, a PLUS-listed company with assets in Nevada, USA, shares his experience of starting up an E&P company, raising funds on PLUS, the junior stock exchange to London’s AIM market and plans going forward.
USOil & Gas is the success story of a small oil and gas exploration company listed on the PLUS Markets in London. When the company listed in London at the beginning of 2010, it raised just over 300,000 pounds at 5p per share. Today, one year later, the company boasts a share price at around 60- 70p, market cap of around GBP 20 million, proved up reserves and raised enough money to fully fund an upcoming two well drilling program.
Can you say a few words about your company? How did it all get started?
The state of Nevada is the exception to the mature oil states along the US west coast from Alaska right down through to California in that Nevada has always proved elusive due to its disruptive geology. This means that because of the continuous fault and thrust nature of the geology, traditional 2-D and 3-D seismic had largely proved ineffectual. What ignited our interest in the area was the discovery approximately four years ago of a 1 billion barrel field within an area called the Sevier Thrust. This got us looking very closely at Nevada and its geology and we came to the conclusion that there were vast areas in Nevada that have not actually been studied properly from an oil exploration point of view. After our own investigations we felt that on the basis of geology there was the potential to prospect .
Why did you choose London PLUS Markets to get your company listed?
The London PLUS market was ideal for us because at the time we were following what we considered to be a hunch and therefore we were doing it on a very small footprint of money; so the London PLUS market was ideal because we could get a listing for a fraction of the cost of the AIM market. We felt that that would give us the platform to allow the shareholders to evaluate the company and move to commit to the company without all the costs involved in a full AIM listing.
How expensive is the listing?
The plus listing can be done all in all for GBP 175,000. Which is quite reasonable as compared to the costs of an AIM listing, which could be anywhere around GBP 600,000-800,000.
What does the process involve?
The process is quite detailed. You can join PLUS either by introduction or by subscription. By introduction, it is very quick. That’s if you have your funds raised and you are looking for a trading platform. Or you go to the PLUS market in order to raise funds. We went by subscription and then successfully used PLUS to raise funds in order to move forward.
Would you recommend a PLUS listing for other high growth companies ultimately seeking a listing on AIM?
It’s ideal for a start up company but in fact PLUS has some huge companies, some well known household names like Arsenal Holdings (football club)is on the PLUS market right down to the very small companies. PLUS has been very good to us. We have consistently been one of the most actively traded shares on PLUS, competing with some of our peers on the main market in terms of trading capability of the shares.
How long does it take?
By introduction you have to give yourselves two months to get listed, by subscription – at least five months. So in relative terms it’s a quick process. There is a detailed preparation process of due diligence etc.
How much did you raise at listing?
At listing, we raised quite a small amount. We raised GBP 305,000 which provided us with adequate working capital for twelve months of activity and covered all the costs of listing and all the technical work we needed to do.
The recent fund raising of US$ 8.5 m including loan notes was mainly from London with some Irish investors. So we are quite happy with the profile the company is developing with the international investor community.
You share price rocketed from 5p to over 75p within a year. How did you achieve such a tremendous growth?
The share price reflects the solid progress that the company has made. We have been utilising a relative new technology called a Direct Hydrocarbon Indicator to pinpoint with a high degree of accuracy the location of oil. As part of this process, we completed a very comprehensive set of data collection. To date we have collected over 40 sets of data. And as we announced the data to the market, the market responded by increasing the share price.
Has it been difficult for a start up company such as yours to get investors in London interested?
It was a lot of work to start up the company. We had to stay very focused and we had to be very clear about what our intentions were and what our agenda was. In any start up company there are challenges that you can never even imagine. Some things went well, and some things were a little bit more difficult but I am pleased to say that we are here now with a clear program of activity which includes a drilling campaign which will be executed by the second quarter of this year.
London investors are very savvy. They do their background work and their due diligence. They are very specific about the questions they ask and they are able to identify which companies have huge growth potential. I would like to think that we fit within their expectations in terms of the company with huge potential.
What is your advice to exploration companies that are looking to raise funds for drilling programmes?
I would say that the funds are available in London for exploration companies. But you have to do your homework, ensure that you have the right advisers, from good PR to corporate advisor on board, and you have to make sure that your investment proposition fits.
Without a doubt, I would recommend PLUS market to new companies that are coming to London to raise money. The PLUS platform has worked extremely well for us and the low cost of entry allows companies like us to get a profile very quickly.
What are your plans going forward?
Our intention is to dual list on the AIM market. The PLUS market has served us extremely well and the AIM market gives us a platform from which to address the American investment community because of its greater profile.