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"Are any of you expecting the SP to get back to over 6p anytime soon ?"
For those who remain invested you have to imagine that the answer will be YES. It's just a question of how soon is soon.
Are any of you expecting the SP to get back to over 6p anytime soon ?
It’s a common approach.
Lace fear with a little truth, and then push another share they are invested in, hoping to get a few nervous holders to jump.
Maybe we are doomed. Who knows. But that’s the point, nobody does.
We could get an RNS saying 50% farm-out / JV of Halifax, fully funded campaign, and RBL secured on revised reserves to clear the bonds.
Anything could surprise, to the upside or downside.
ngms: your agenda is blatently obvious to everyone. You post a number of very valid comments (comments largely, not evidence-based facts) - many of which most Hur investors and watchers would agree with to some extent. However, your continuing use of your opinion (in place of facts, which most on here will agree are excessively thin on the ground, especially recently) is Trump-like behaviour and discredits you somewhat.
We'll find out a bit more in September (but i for one am not expecting a golden revelation, one way or the other.
Always appreciate an alternative view but surely you see value at 100 million mc with post 100 million in cash net profit at over 50 million and a low debt level in comparison to its peers.
Personally my target is 11p which is highly achievable in the next 3-6 months imo.
Interested to hear why you have not posted one positive at all?
Don't get me wrong. I fully understand the risks associated with this and at the current stage, i'm not too hopeful of a full recovery by Hurricane.
Regarding the financial obligations:
- Potential takeover
- Shallower OWC could mean that no longer need to commit to OGA obligation of the Lancaster 8 well
- Convertible isn't due until 2022, I don't think this is something to be worried about at this stage (will worry mid 2021).
- Some CAPEX for OGA obligation have been deferred to 2021 and 2022. So at this stage, this is not a worry.
Longterm, I'm as skeptical as you, Hurricane really need to turn this around and fix issues if they want to survive. But as it stands, most uncertainties have been priced in to the current share price.
Regarding the wells - I doubt that the wells will become so unstable. HUR have ESPs commissioned in both well to control and mitigate any interferences or instabilities.
"Will they sidetrack? Drill another producer?"
Who knows. Could even be another "production enhancement" option that noone else has thought of.
Essentially I see this like Frontera and Ascent. Lots of promise but ultimately end up in a death spiral. HUR in my opinion are now in that death spiral and it will take a miracle or divine intervention to get out of it.
They wouldn't buy other North Sea production would they for instance?
I’m assuming the OWC will be shallower than 1380m.
I couldn’t care less if the accounting reserves were reduced to nil, so long as production continues and the cash keeps rolling in.
The term OWC makes no sense in the context of the operation of this reservoir with it’s huge vertical super permeable features. In reality there are multiple bodies of oil and water within the reservoir so using a single value for OWC makes no real world sense when there are multiple oil/water surfaces.
In the Hurricane portfolio of fractured basements OWC is largely an accounting parameter, it is used because the model for booking reserves is old and rigid and not really fit for purpose for a fractured basement.
If anything this just demonstrates how the reserves model is being over applied, it’s a potential headache for any future RBL (but I don’t care what happens that far in the future, I will be far ahead by then).
Production and cash flow are reality, reserves and geology models are mostly a best guess. Yes they are linked, but here they are much less linked than usual.
The EPS is 6 years for good reason! It will result in a mountain of cash and new models for these new types of reservoirs. Part of that process involves demonstrating the inadequacy of conventional models and creating the space for new unconventional modes.
The current flaming wreckage of a share price was kind of inevitable at the outset. It’s an intermittent phase.
Not at all. My view remains equity being killed stone cold dead by July 2022 best case.
There maybe short term trading opportunities, but that's not what I'm commenting on.
Slift I hope that model works for you.
But what about the financial obligations along the way? The Convertibles will consume equity if there is any value to be had and HUR have insufficient capital to redeem. Then there's the OGA obligations.
Never mind all the what ifs such as either well becoming unstable and having to be P&Aed, which must be a risk given the instability experienced by well 7z.
It seems to me the heels of both wells are too deep, will they sidetrack? Drill another producer?
So NGMS, you have posted as absolute certainty equity worthless repeatedly. You now admit that there are many things unclear and it could end up rosier. Glad you admitted an agenda indirectly..
Cash flow is one thing, meeting financial obligations is another. I agree shorter term existing shareholders may get lucky with an RNS showing continued stability. The ESP will certainly help with the water issue. The question is how much?
" water cut is anticipated to increase quickly after breakthrough due to the high permeability of the fractures and may result in production rates being curtailed or potentially a well watering out completely."
This is unlikely. Sure at the time of CPR this was plausible. But following the recent pressure/production data (CMD 2020), indicate that the reservoir is connected well and therefore has a huge volume. I don't expect watercut to increase that quickly as a result - But that's not to say that the OWC is catching up to well 7z and soon to 6 (therefore the watercut will increase, but not quite exponentially).
Secondly, regarding the recoverable oil:
For the Lancaster EPS, the CPR2017 states that at the structual closure (1380m TVDSS), 1P reserves are 28.1mmboe. This is over the 6 year period of the EPS.
In 2019, 3.2mmboe of oil was produced. Assuming 15k bopd average to the end of this year, we can expect 5.5mmboe being produced in 2020.
With the above assumption for 2020, we can say that in 1.5 years the EPS will have produced 8.7mmboe.
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.
In total, circa. 21mmboe would be produced with the EPS. That's a 25% reduction in current proven reserves.
Currently, the wells are economical to run until 7k bopd (or 8k if you want to include downtime). Aoka Mizu is economcial to run up to 74% watercut total, or say c. 70% on well 6 or c.85% on well 7z.
I think majority of this is priced in with the reserve downgrade (up to 25%).
Mk111, I agree but September is to soon to come to any conclusions unless water cut increases or stability becomes a problem.
This is a bite yer nails share if ever there was one.
Sorry that should read above 1597m so a shallower OWC than stated in the CPR.
Sorry I don't follow?
The latest RNS states:
The Technical Review is ongoing and final conclusions have not yet been made. However, as a result of the review and analysis performed to date, which has incorporated both existing and new data, Hurricane's Technical Committee has concluded that there is a reasonable probability that the oil water contact in the Lancaster field is shallower than the range of oil water contacts envisaged in the 2017 Competent Person's Report by RPS Energy.
That's a massive hint that the water is coning from the aquifer to me.
The CPR states 3 cases for OWC:
So they are suggesting that OWC is below 1597m
Where that leaves STOIIP is then below the low case of 1330MMstb. but how lower? Best case was 2083MMstb so it looks like any downgrade is going to be in the order of 40% plus.
"Following the Company's most recent update on 8 July 2020, a period of ESP testing has seen Lancaster EPS production increase from c.15,000 bopd to c.17,000 bopd as oil and water production from the 205/21a-7z well has stabilised."
Stabilised.is the key word here . It will be interesting to see in September whether it has. In the meantime all explanations are not proven.
Non of that is inconsistent with what I posted previously.
A watercut increasing by 1% per month IS increasing quickly. The well will eventually water out one day.
But irrespective of that, by the time it waters out the well is likely to have produced over £200m of free cash flow.
The water cut on -6 is very unlikely to exponential grow until it smashes into 100.00%. Water cuts typically follow an S curve in a coning scenario, but this isn’t coning, it’s pulling a huge curtain of water up a fracture.
Some people have the capability to model dual porosity / dual permeability reservoir dynamics and those people are probably quite relaxed about this situation.
Former LTH’s are gifting this free cash flow to people like me. I am very grateful.
There is a lot more data in the public domain now than there was in January.
I suggest you plot the water cuts yourself. You can mark the choke settings and total fluid rates on your plot. It’s quite easy to see where this is heading over the next 5 years.
I thought you said you don't believe any pronouncement from hur regarding the WC, but you do as regards where it is being generated from? You are quite nasty aren't you?
No I don't buy that given that HUR have stated that both are producing from fractures close to the heel. The heel depths of both wells are fairly similar. 7z is more tilted and less horizontal than 6 so it's toes a little deeper than 6.
7z is shallower. Seenic's excellent posts from Friday
And a lot of speculation it could be a combination of acquifer and perched? Maybe wc in 6 will not get anywhere near 7. We just dont know yet.
Did you think about another alternative explanation, ngms? 7 too shallow 6 much better, learn from experience, set up next well learning lessons and so on....it could end up highly profitable
Which bit of the CPR haven't you read? I've posted it again for clarity:
Due to the limitations of the Material Balance modelling method, the models are not dual porosity/dual permeability models and therefore do not capture the impact on field behaviour of the fracture network.In the event of water breakthrough for example, water cut is anticipated to increase quickly after breakthrough due to the high permeability of the fractures and may result in production rates being curtailed or potentially a well watering out completely.
So the rate of 1% per month is highly optimistic, it's more likely to be an exponential rise a'la Coronavirus.
Then you mention 70% water cut. Have a look at what happened with 7z.
27th April 7z 47%, 6 7%
22nd May - 7z stability issues affecting production from 6
27th July 7z 53% on ESP, 6 12%
So well 6 nearly doubled water cut in 3 months.
Do you really think a single well producing say 2k bopd and 70% water cut will be viable with the FPSO?
The water cut on the -6 well is rising by 1% per month.
This well is still profitable at about 70% watercut, it’s currently at 12%.
The idea that it could water out “at any time” is hyperbole.
It’s plausible, but it is far from the central expectation.
If the water cut continues rising at the rate it has.... the EPS is likely to see out its 6 year license.
7z is in a perilous state. 6 is located higher up. 17000 a day from 2 wells, one of which is prolific