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Wider market sell off but oil price fundamentals very strong. Ultra cheap Eog.
Given the plateau rate of Wressle production is likely c.1200 bopd the current Mcap of £8m for Eog all in is just plain stupid. Is it going to take a partial selldown of Wressle for the market to attribute a fair value? You can't rule out a joke low ball offer or cash and share Ujo approach at the current sp.
In other words, major shareholders have persuaded or rather directed the board to ditch aspirations for an expanded portfolio and concentrate on shareholder capital growth. Big plus.
In addition, i thought the wording of the RNS purposely ruled out a potential disposal of Eog percentage of Wressle (to fund alternative asset acquisitions). Just my reading and taken to be a positive as removes prospect of a concurrent equity raise.
GP - good point re gassy challenges on other reservoirs, presumably this is why they are looking to sort out a long term solution to the gas handling at this stage. If they get this right it could presumably be another nice little earner.
Liquidity is healthy so took the opportunity to add at 1/59
Sound medium and long investment here I think
Thank you Serif. IMO any further consent(s) that might be required, presumably from the OGA, to develop the Wingfield Flags would IMO depend on whether it's already been included in the field development plan (the FDP), or not. Could this be the "development scope" mentioned in the FinnCap note? I rather doubt it but, in any case, a finalised version of the FDP must soon be submitted to and approved by the OGA to allow Egdon to produce Wressle on a commercial basis, rather than via the current EWT / extended well test consent. I'd imagine that this might well be happening now. I recall that the published Wressle-1 log header indicates that in 2015 the Wingfield Flags were tested at 182 bopd of 39-40° oil plus 0.456 million cu. ft of gas per day, which is a lot more than the Ashover Grit produced in the 2015 test. This was long before the proppant squeeze, of course. The Wingfield test rates imply a Gas / Oil Ratio of 2,506 cu. ft per barrel, so it's much more "gassy" than the Ashover Grit oil. I therefore wonder if Egdon might prefer not to make their excess gas problems any worse by producing both oils at the same time. So I think we'll just have to wait and see how things develop.
Here you go just found the extract from the FinnCap note of June 2020 which we discussed last January:
“The current development scope includes the re-entry of the Wressle-1 well, recompletion of the Ashover Grit interval and perforations of the Wingfield Flags. These two reservoirs will then be comingled, with the produced oil trucked to market”
GP - I am wondering what type of application (and to whom) would be needed to develop Wingfield Flags. If you recall in a broker note predrill early last year (or 2020) it was said that the Ashover Grit and the Wingfield Flags would be accessed at the same time and “commingled”. This clearly didn’t then happen, but to appear in the note it was presumably a plan at one point. Suggests to me that perhaps no additional application was/is needed for this? I think PStone Flags are different as they have always said they would need to drill again to access the reservoir optimally.
Hi Vauch. That's absolutely correct. It's worth bearing in mind, though, that the other two reservoirs are a still a very long way from being produced commercially. The Pen'stone and the Wingfield Flags were both successfully tested (presumably as short drill stem tests) back in 2015 and these two reservoirs seem to be more gas-rich than the currently producing Ashover Grit. No application has been made yet to develop them, but Egdon and the partners seem to be thinking about it. In fact, I suspect they might require additional, separate wells if they are gas-prone, or perhaps they will be developed via the Wressle-1 well, but only after the Ashover Grit has been depleted. Still, I reckon they're good to have in our back pockets.
Also we must not forget that this well is just one of three areas from the down hole
@ GP, pretty obvious where his bias is , firmly with UJO. Nice little ramp for them. We are OK without that, starting to build nicely here on potential alone. Finally the market is noticing little Europa Oil And Gas.
Good Old Malcy. I'm probably being a bit picky here but, when he's not cut and pasting without any serious analysis what the operator and partners have said in their RNSs, he often makes a slightly off the wall comment. What on earth did he mean by "an immediate uplift in production"? At least he goes on to say that "The potential increase in revenue terms is substantial ". In any event, I'm sure it's extremely good news for us however Malcy choses to describe it .
From Malcy's blog..
As can be seen from the similar comments from the company bosses, this work by ERCE is of significant interest to them all in different ways. Whatever they all decide to do though there is an immediate uplift in production and at record oil prices into the bargain.
The potential increase in revenue terms is substantial and also makes for a material rise in the asset value of Wressle, even a few weeks ago the idea of 1,500 b/d + would have been fanciful, now it can transform the profit and loss accounts of each company. Whatever they decide to do, the appeal to a larger entity may lead to Wressle being the target à la Angus of a potential bidder for the asset is a possibility, although Wressle means different things to each of the owners. For example after its good news from West Newton earlier in the week the Union Jack portfolio is bulging with upside.
Either way this ERCE valuation is a significant boost to the value of all three companies not yet in the price in the market but the accumulation of its stake in Wressle is a standout success for UJO.
Yes Serif, that's why this is an absolute steal sub 2p and fair value at 3p or £15m MCAP given the info now in the public domain
Should read 1216 bopd not 2116 - that would be greedy!
Just sinking in why Simon was so excited by these measurements. If Wressle does finally deliver something close to 2116 bopd - and of course there is no guarantee that it will although these are no longer blue sky figures but based on pressure analysis - then that is 365 bopd to EOG.
Back of an envelope calculations:
Non Wressle production is c75 bopd and brings in revenue of about £1.7m with oil at $80.
Wressle production of 365 bopd is roughly 5 times larger, so would bring in almost £8.5m.
So total annual revenue for EOG would be £10m!!
In other words you could buy us for 4p a share, pay this off from revenue in about 2 years and be left with all future Wressle development revenue, Morocco, Ireland and Causeway opportunities for free.
Sure there are lots of unknowns such as OP, depletion rates, recovery rates, handling the gas etc, but the bottom line is that Wressle could now be seriously offering a different level of valuation for EOG.