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JoeSoap,
"I think you are confusing the amount of oil HUR might still get out with the technical status of 'Reserves'. If they cannot get the volume from their wells because the rate is reduced, then they will not get to the current Reserve status. Edison only had 36mmboe in their 16 June update, for 10 years. The EPS is for 6 years. Current exploration licence extension was for 5 years from December."
I suppose that's one way of looking at reserves.
The CPR attributed 28mmboe 1P and 37mmboe 2P reserves to the current Lancaster EPS on a 6 year basis.
This works out to be on average 4.6m barrels/year on 1P, or 6.2m barrels/year on 2P.
Now, to the end of 2020 (c. 1.5 year of operating), assuming 15k bopd on average for the year:
Hurricane will have produced c. 8.7m barrels.
Going forwards to 2021, at the current rates of increasing water cuts (and only production from 6 and 7z), i estimate production to be c. 12-13k average.
In 2021, I'm expecting Hurricane to produce 4.5m barrels.
Going forwards from 2022 to 2025 (again above assumptions), I think it's safe to assume circa 6-8k bopd on average.
That would meant that for 2022-2025, production will be 7.6m barrels.
With that estimate, on a 1P basis, HUR's Lancaster EPS reserves will be downgraded to c. 21m barrels from 28m barrels.
Slift.
CaptainSwag (using your 10:38 post as ideally formatted) slift, Gritstone
personally my guess is that there will be enough reserves for a couple of years - even a 50% decrease would give that. Gives them enough time to sort plans for well 8.
-- I think you are confusing the amount of oil HUR might still get out with the technical status of 'Reserves'. If they cannot get the volume from their wells because the rate is reduced, then they will not get to the current Reserve status. Edison only had 36mmboe in their 16 June update, for 10 years. The EPS is for 6 years. Current exploration licence extension was for 5 years from December.
of course they need water cut to stay stabilised, oil price to stay good - which i think is highly possible - and no more disasters (covid/giant squid etc) - who knows?
--Stabilised is not synonymous with constant wc. The wc is rising. It will need to stabilise on start up from this week's shutdown.
Assuming spirit want to continue - lincoln will probably be the first plan - good oil prices could generate( some) income needed for well 8.
-- Remember the jv only have the licence extension for the eastern end of Lincoln, in P1368.
The large western part and Warwck are on P2194 which expires next month and will be subject to negotiations for any jv extension.
The thing is that it could be a long slow slog....and that is the best scenario i can see. my worry on the SP would be the reaction if spirit decide not to go ahead .
-- Do not overlook the possibility that HUR don't want to go ahead, because of their concentration on the balance sheet.
i think there could easily be a good trade if the plans are good but the reserve downgrade is significant. the market might initially overreact with downgrade but then recover.
-- There's always a trade opportunity! It's the LTH view that's been trashed.
jimo
joe
Hi CaptainSwag,
I agree on sentiment - weirdly, that's partly why I thought it might happen - someone has their eyes on the entire prize and one way of doing that at great value would to be continue the attack agenda with an un-certain board being negative and then manoeuvre Lincoln back in the fold depleting HUR cash/attention and then pounce for the whole lot with HUR having done all the R&D - warts and all discovered. I think that if i had the brass and wanted the whole lot - that's what i might try. G
gritstone - i had thought of that. however i think that would be another dent in sentiment. which the sp doesnt need.
personally i would like focus on well 8 and halifax - i am not sure if lincoln isnt more distracting than helpful at the moment.
"By the way, I notice the absence of PlantedBHA - so does the moniker have meaning or is he driving his truck somewhere with no 4G."
Probably in hospital getting his head checked.
Would it surprise anyone if Lincoln was sold back to HUR by Spirit? A single pound would be value.....
By the way, I notice the absence of PlantedBHA - so does the moniker have meaning or is he driving his truck somewhere with no 4G.
G
CaptainSwag,
Would have thought that Spirit would continue now that long lead items have been ordered. But yeah with Lincoln extended up until 2022.. and the current downgrades in reserves/resources.. who knows where HUR are with Spirit.
It might even be in Spirit's favour that the Lincoln has been extended (in hopes of oil price recovery).
slift - that is not a bad analysis.
personally my guess is that there will be enough reserves for a couple of years - even a 50% decrease would give that. Gives them enough time to sort plans for well 8.
of course they need water cut to stay stabilised, oil price to stay good - which i think is highly possible - and no more disasters (covid/giant squid etc) - who knows?
Assuming spirit want to continue - lincoln will probably be the first plan - good oil prices could generate( some) income needed for well 8.
The thing is that it could be a long slow slog....and that is the best scenario i can see. my worry on the SP would be the reaction if spirit decide not to go ahead .
i think there could easily be a good trade if the plans are good but the reserve downgrade is significant. the market might initially overreact with downgrade but then recover.
adoublecream... It must have been the "unique and ground-breaking computer modelling of the reservoir" you were wanging on about ..." a week or so ago...
That list of conspiracy theories is certainly growing from your earlier posts :
a) the OGA ....in bed with BP to squeeze HUR... blah blah blah....
b) Put two and two together.... It won't need a 'takeover'. Just starve Hurricane out of existence first, then quietly park Rona Ridge on the shelf for re-emergence when the time comes... blah blah...
and we've got ... " I can't help wondering why Shell and others suddenly bought up all the leases surrounding Hurricane's, about 18 months ago? If the area is so worthless. And how some other unknown outfit with unknown backers has bought the rest from Halifax to bordering Claire? "
I'd say we only 9 lines of text from you ...with more nonsense.....
Hi adoubleuk,
"Following various 'shifts' in the BoD (of a major sort), I take whatever RNS's (especially following the latest one) with huge pinches of salt. I consider the current crew to be nothing other than a 'caretaker government', busy spreading further 'iffy' messages,"
Yup, the RNS provided by HUR is written with NO CONFIDENCE in the company. The "ifs" and "probables" and "likely" and "no final conclusions" and "risk of" and "expects to" are all words whereby anyone can use to defend themselves when they are wrong. I know because I use this a lot.
But I think that this OWC is the biggest downside to any potential news that may come. It's priced in now, the only thing is how big of a downgrade is it?
- If it's enough to completely write off the EPS in the next few months then that's the worst case scenario.
- If it's a small downgrade that allows the EPS to operate for the next 1-2 years with wells 6 and 7z, then that's not too bad and IMO would be priced in. Obviously this would mean that HUR needs new wells to produce over the contract period of the FPSO.
I previously said that I wouldn't hold through September Review, but now I feel like it's been derisked. I'd definitely like to see the 15k production guidance at the September Review.
"Be fearful when others are greedy, and be greedy when others are fearful". - Warren Buffett.
Slift.
Makes much sense to me. The fact that with a relative modest drawdown they get all this produced water, which they cannot with CONFIDENCE argue all of is perched water, the OWC COULD be shallower (so that the drawdown pressure is sufficient to lift the water up to the wellbore). Only if with time water production decreases to suggest perched water (only) the reserves is re-booked. In the meantime this is a nice excuse to delay? commitment well.
>Perhaps if HUR can find a way to disappear the primary question that is answered by the commitment well, then the OGA could be much more receptive about reducing the drilling commitments?
I think that is probably close to the truth. It appears to me Hurricane can afford to drill one well next year? A 7z sidetrack / 8-well on Lancaster way more useful than a delineation well.....
DrT said a long time ago something along the lines of
even if the EPS trials are the lowest figure there would be enough barrels of oil sold that it would break even or similar wording.
Anyway from memory maybe 19mb from EPS or similar it was a long time ago and I cannot remember exact words.
Also remember he filled his pockets when the first drills were completed earlier than scheduled and that was prior to receiving funding.
Anyway lets see where the SP heads
I've held this investment for along time and am currently sitting on a heavy loss. Today's news wasnt great and we have really had any decent news for a while... But in fact we have but it depends how you see it, productivity is up and we have a new board that is business focused. I do hold faith that we can see this rise again. My personal opinion is that I would like to see some inside buying. Also I have noticed while painfully averaging down struggled to get any trades for hours. I feel if this stock got more limelight more public investors would take interest, I've noticed this stock ain't placed on any of the free trading platforms.
Anyways this is a wild card in my portfolio and I'm holding.
Slift,
"I work in the project management sector and I can 100% say that this statement: "given the design and procurement lead times likely to be involved" - is an excuse that they used to not commit to any wells this year."
Yes, I agree with you, and the reasons you gave following that.
Following various 'shifts' in the BoD (of a major sort), I take whatever RNS's (especially following the latest one) with huge pinches of salt. I consider the current crew to be nothing other than a 'caretaker government', busy spreading further 'iffy' messages, and perfectly happy with the absurdly low SP. Because 'takeover' doesn't seem such an absurd idea, after all. To the great benefit of the potential 'takeoveree' should that happen.
There have been numerous CPR's in the past, regarding not only GLA (including Halifax), but also GWA. But the new mob are now purporting that those CPR's may have been wrong, OWC with the aquifer may not have been correctly interpreted as before (and that includes Schlumberger, who did a lot of the legwork and analysis) and is wrong. Which may lead to 'downgrading' of reserves and recources projected.
Which of course would put Hurricane dirt-cheap on the auction block.
I can't help wondering why Shell and others suddenly bought up all the leases surrounding Hurricane's, about 18 months ago? If the area is so worthless. And how some other unknown outfit with unknown backers has bought the rest from Halifax to bordering Claire?
There's a saying that 'in London, you're never more than nine feet away from a rat'.
It may be true.
Hi Stu255,
I have questioned the following from one of their RNS:
"While no decisions have been made on the nature and timing of future activity on Lancaster, the Company believes that, given the design and procurement lead times likely to be involved coupled with the constraints of the operational weather window West of Shetland during the winter months, any well operations activity at the Lancaster field location would commence late in the first quarter of 2021 at the earliest."
I believed then and still believe that the reason they provided for this was an "excuse".
The RNS was provided in July.
I work in the project management sector and I can 100% say that this statement: "given the design and procurement lead times likely to be involved" - is an excuse that they used to not commit to any wells this year.
During these times, manufacturers of said lead items have a free order book and would have been looking for orders to fund them through the coronavirus crisis. Especially when the CAPEX investment in this sector (oil) have been deferred and/or dropped.
Had HUR placed an order for these long lead items (at say May or earlier), they will likely have been manufactured AND DELIVERED on time (even if this was at an extra cost due to shorter lead times). NOTE: HUR had contracted a rig from April to September for a well (but terminated the contract in July).
What a waste.
Hmmm.
Some investors are zipped up the back, others not so much.
From the April Presentation: https://www.hurricaneenergy.com/download_file/force/526/221
Page 8 final paragraph reads...
“On Lancaster, a commitment well is required to be commenced by the end of 2021 to demonstrate the presence of mobile oil at Lancaster below structural closure (1,350m TVDSS), following which the Lancaster field may be subject to re-determination.”
Hmmm.
How can Beverly Smith, negotiate with Andy Samuel to find a common ground for HUR to successfully seek to amend the P1368 license extension commitments and thus save HUR the expense of organising an expensive and unwanted drilling campaign, to drill a well that has no spare facility capacity?
Hmmm.
Maybe everyone can agree the oil below 1350m just isn’t there? If it’s not there, nobody needs to delineate it.
Hmmm.
Perhaps if HUR can find a way to disappear the primary question that is answered by the commitment well, then the OGA could be much more receptive about reducing the drilling commitments?
Hmmm. Can a committee look into that?
What about extending the EPS?
Well the whole purpose of the EPS is to reduce uncertainty. As the uncertainty is gradually reduced so to is the need for the EPS. Whereas the greater the uncertainty, the greater the need for the EPS.
Hmmm.
If the EPS keeps throwing up all these new questions then HUR are just going to have to keep shipping all this oil until they can get to the bottom of it. Which apparently is somewhere above 1350m (even though they have already produced half the oil above there, and are still on the plateau and under natural flow).
Hmmm.
What would shareholders prefer?
1). Some bullish CPR paperwork that massaged your ego.
2). Boat loads of actual cash in the bank.
Hmmm.
Hopefully the OWC is moved (easy to move it up on paper) and then the commitment well is taken off the table.
= +$30m cash to HUR shareholders.
Hopefully the EPS is extended by another 12 months in light of all these new water cut questions.
= + $60m cash to HUR shareholders.
Meanwhile the bonds are trading at 48c on the dollar, might also be an idea for HUR to start acquiring those via some proxy.
Before you know it HUR have improved their hand by $100m+ cash, all with some savvy book keeping.
I’m riding it out. Drop wasn’t as low as anticipated off the back of quite sobering news.
Dare I say tomorrow could be blue.
haggis - There was one new bit of info and that was the word "reserves" . it was that single word that drove me to sell most of my stake.... they had to issue an rns cos the stoppage had leaked out. the question is why mention " reserves" . i agree that there is something very odd in this rns.
if it turns out to not be an issue then there are going to be some seriously urinated off LTH . on the other hand you cant ignore a potential warning like that - you have to consider the implications.
i agree that the likely rns in september will be owc is higher, reserves lower and plans going forward. however at the moment it feels like a gamble.
i agree that a lot of people have sold and easily - so who was buying?
I bought back in at 5p today for a short term trade after selling on the 28th. I think there will be a lot of volatility here for a few days. A lot of people will try and make the most of this situation.
Got carried away with fomo here and have piled in at the 6.1-6.5 level . Sitting on a £7k paper loss at the moment and weighing my options on whether to cut my losses . Seems to a very linear play here now , leaning towArds the exit and Moving on . Aim always bites back If you get complacent . Anyone in the same boat thinking of riding it out ?
Hi Maths,
"Slift, unfortunately for current holders, there is a gap below 4p that needs filling"
I don't see a gap here, the gap was filled early this morning. I'd appreciate it if you could point this out..
I don't think anyone can be as bad as Swazers, he doesn't even explain the charts to anyone and just had a bunch of indicators and trendlines.
^ I am no expert : but the water contact may not be uniform. Potentially 7z well hit unlucky pocket (jelly fish model)
"Fwiw : my feeling is the September technical review will contain some bad news (higher owc) but also proposed remedial action (7z sidetracked or 8-well)."
What about sealing off the water producing fracture at the early part of the 2km horizontal! and then producing from the supposedly more productive fractures further along the horizontal? Not sure what technique(s) could be used to seal off such a fracture in open hole, but Dr T has alluded to this as a possibility!?