Is it too late to buy UK Oil & Gas Investments plc?

After stubbornly remaining flat all year, UK Oil & Gas(LSE: UKOG) shares have more than four-bagged since late June to 5.5p, having peaked as high as 9p in September.

The big uplift came from initial findings at the company's Broadford Bridge exploration well at the Weald Basin. The company found light mobile oil in the fractured Kimmeridge shales, and told us this was "highly significant".

This was similar to findings from Horse Hill-1, and the company was examining the possibility that it had "encountered a single 600-700 feet thick, naturally fractured oil reservoir section, encompassing all four Kimmeridge Limestones and underlying a significant proportion of the wider Weald Basin."

Broadford Bridge may just have tapped into the so-called Gatwick Gusher and the hoped-for 100bn barrels of oil that might underly the region.

Time to buy?

But the wheels came off a bit after the company revealed that due to cement-bond quality at Broadford Bridge, the drilling had "not effectively connected the wellbore to much of the best open natural fractures" and that the flow potential had not been properly evaluated.

But that's an operational problem, and a further update this week told us that the well "continues to flow light, sweet oil and gas from the Kimmeridge Limestones", that the firm is confident there's a "thick regionally extensive continuous oil accumulation" there, and that flow testing of multiple 30-100ft zones should start by the end of the month.

The teething problems at Broadford Bridge don't suggest any major issues with the underlying discovery to me, and I see the recent price dip as a tempting buying opportunity.

Turnaround?

Nostrum Oil & Gas(LSE: NOG) has also seen its shares slipping of late. After a slide from late May, which lopped 30% off the share price, it was starting to recover a little.

Until Wednesday, that is, when an update on the completion of Nostrum's third gas treatment unit (GTU3) led to renewed dip. At 391p, the price is down 5% in two days, so far.

It seems there's been a delay in the delivery of some special valves for connecting the new plant to the other two (GTU1 and GTU2), and so GTU3 is not going to be seeing any gas in 2017, as previously planned.

The problem is compounded by the oncoming winter, as welding joints need to be hydro-tested prior to the admission of any gas, and that will not be possible when temperatures are below zero.

The planned shutdown and tie-in is now not going to happen before next April, which means production guidance for the first half of 2018 will be hit, limited to the existing capacity of 45,000 boepd.

Recovery potential

I can't help feeling that this latest problem has presented investors with a renewed buying opportunity. In the longer term, Nostrum still expects to get production up to 100,000 boepd by 2020, and the overall cost of the GTU3 plant and commissioning should remain at $532m.

Interim results showed what looks like sufficient liquidity after a successful bond issue, and the company says its is "fully funded to complete GTU3 and ramp up production".

My only concern is debt, which stood at $868m net at 30 June. But barring any significant further delays, I think that should be easily manageable in the long term.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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