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I think this share is still susceptible for downside and upside. I still wouldn't consider current share price as priced for bankruptcy.
I agree, it's very bad reporting via RNS. There has to be some motive behind it.
Regarding whether they can afford both wells, I guess we'll find out in a months time.. or less..
I agree. I still believe 15-15.5k bopd production guidance is possible for this year. Next year at best estimates 12-13k bopd, if it's just from well 6 and well 7z.
"And the more they increase production then the quicker the water cut will increase."
I think 17-17.5k bopd is the maximum they can get with current limitations. POTENTIALLY 18k, but that'll likely be unstable.
I wouldn't be surprised if this drops down to 16.5k bopd on restart.
I'd like to believe even with the material downgrade, HUR can produce for at least another year, albeit at much lower rates due to increased watercuts (if it really doesn't stabilise/decrease).
There seem to be many who feel that once the shallow OWC is confirmed then it is just a case that the company will keep pumping 17k per day and that the finances will take care of themselves.
IMHO it’s not that simple. The shallow OWC replaces the perched water model and explains the 50%+ water cut in the 7z well and the growing (12%) water cut in the 6 well. I don’t think we have enough information to guess how fast the water cut in both wells will increase, but I think we can have a degree of certainty that it will if the OWC is the issue. And the more they increase production then the quicker the water cut will increase.
A pessimistic view? Maybe, but HUR May only be producing from the current wells for a few months at worst and a few years at best.
Slift - badly worded rns inmho again. I took it to mean that there is reasonable probability that reserves will go down with current set up. Their upgrades that could possibly increase reserves are not factored in yet. So that is a good sign as could get it back up etc.
The problem is that they already have some of the long lead items for Lincoln already so that was considered more of a priority. Plus they will prob want to get on spirit goodside if they want to progress. Personally I would prefer well 8 but can they afford both? Oil price has recovered but still must be a serious doubt and therefore income.
They did have the Stena don scheduled in to drill earlier this year slift before the pandemic so if resources are viable enough I would imagine they will carry on with the planned drill but probably at a discounted rate then first agreed. Bleak day for shareholders, nothing short term In terms of raised SP but next year could be a different story, slow burner this SP but with a bit of luck in 6-8month time it’ll be a far brighter outlook. But as of now it’s ride out the bleak low SP storm to all those who are willing to wait, myself included
I'm a little baffled. There is little correlation between increase in production options to material downgrade in reserves and resources.. E.g. Why do they need to consider increase in production to downgrade reserves or resources?
Regarding production improvements:
I don't think we should be worried about removing the fluids from the perched water source.. at this stage, it'll likely be too long to be even worthwhile (or that's what I think). I mean of the current 3 year EPS proven reserves of 28.1mmboe, HUR have already produced c. 9mmboe. Sounds kind of pointless to empty the perched water for the potentially remaining 18mmboe. But 7z should still run to ensure maximum production from well 6 can be achieved.
Rig Cost - I think this can be covered with rise in oil price for 2021.. (assuming that production at EPS can be depended upon).
I think there will be Lancaster improvements in 2021. Well 8 i'm hoping. But we will wait until September to find out.
HUR needs to contract a rig soon if they do plan on drilling any wells in the first half of 2021.
slift - i took this to mean possible options to increase production such as
1) aggressive attempt to drain (perched) water
2) isolation of (perched ) water zone
3) sidetrack well 7
4) well 8
1) dont know how large a volume / how long it could take- if it is perched
2) need a rig , cost of $30-40m plus downtime
3) and 4) not until 2022?
i looked at 2). if the reserves go down then that will have a detrimental effect on balance sheet.
Personally, I value a company based on assets and growth.
I think at the current stage, the bottom up approach is very important for the "growth" of this company.
From a top down approach, yeah sure it's all good and well producing 17k bopd and getting revenue in for today, but these assets pose a threat for the future potential cashflows.
SP always trades based on the future prospects. In almost all cases for all companies, both ways of valuation should be considered.
All IMO. Slift.
Referring to page 33, the CPR provides estimates for the EPS.
Yes, you are correct in saying that the low case of 1380m is for the structural closure of the main field. I'd assume EPS falls into here.
The TVDSS of 1600-1700 m is for the full field (of 2C resources).
Or that's how I understand it? Someone can correct me here.
You can value this in two ways.
1). Bottom up, you appraise the geological assets. You try and figure out what the geology is worth and what value can be extracted from them.
2). Top down, you look at current cashflow and liabilities. You figure out what the cash flow needs to look like for the company to pay all liabilities and buy the equity back at the current market cap.
1). Involves trying to determine exactly what is happening inside some rocks miles underground, below the Atlantic seabed and hundreds of miles from the coast of the Shetlands.
2). Involves looking at the company financial statements.
At the moment everyone is using method 1). because everyone is thinking this is an exploration company still.
I think HUR under the new CEO is e&P rather than E&p.
I think they are talking OWC from logging which is stated in the CPR as between a choice between circa 1600 and 1700m. The low case picked the arbitrary value that aligned to a more localised structural closure.
No way to be certain but as I’ve said from July last year when WD failed, the CPR low case is the best model we have.
The following from the RNS:
"Consequently, the Company believes there is a risk of a material downgrade to estimated reserves attributable to the Lancaster Early Production System, and that there will also be a material downgrade to estimated contingent resources across the West of Shetland portfolio. This assessment does not take into account any production enhancement options for the Lancaster field which are currently under evaluation."
According to the CPR:
The current estimated reserves of 44.5mmboe is based on a 1597m TVDSS OWC.
At the Low case of 1380m TVDSS OWC, the CPR has estimated the reserves to be c. 33 mmboe.
Since production began, working on a 1597m TVDSS case, the reserves would have now dropped to c. 35mboe.
I don't know exactly which value HUR will be working from, but let's assume worst case and say they'll be working from the already reduced reserves following 1 year of production.
At 1380m TVDSS OWC, and following 1 year of production, the reserve estimate will be c. 24mmboe.
The RNS also states that the reserves may be shallower than the ranges envisaged in the 2017 CPR.
So if there is a downgrade, the reserves attributable to the Lancaster EPS will be less than 24mmboe. (This is including additional volumes from the supposed extension of the EPS from the past).
The statement: "any production enhancement options for the Lancaster field"
Could this be the volumes from the extension of the EPS?
If so, current Lancaster EPS reserves following review is likely to be c. 10mmboe.
the shorters will be buying in at this current price then when (if) it goes back past 6p then they will be selling like mad again, we are going to need a real strong RNS to see this to 7p ish i reckon now, I am still hopeful thats why I re invested after my loss this morning. But its more a case of how long will it take to get there
You bought less out of choice, right? Otherwise you would still have 85k+ shares.
mr nation - i have to say i feared the worst too. i think the share has done well today with that rns.
What a result here, I thought 50% down minimum
An honest post mate, I feel your pain. I lost money here 3 years ago and haven't waded back in since.
It looks like a good recovery stock at this level.
Good luck, I mean that. Losing money is a nasty sick feeling that we want to quickly forget.
You cannot assume that the sale trigger by the stoploss went through at the trigger price. The sp opened at 4.5p so the sale price could have been sub 4.5p
Well thats where you are wrong ! i had 87k shares.... £4800 worth
they sold at 5.1, I bought back in at 5.2 got less shares now have only 66k shares, and £3350 worth !
so not back to square one at all, less shares and less investment meaning I have lost £1450 today , I have lost over 2k total on this share in the last 8 weeks though... I keep giving it hope that its going to come good, this is the last time
What are you talking about? You can buy in at less than 5.1 now. You simply need to purchase them again and you are back to square one with a few extra shares.
I had set a stop loss to 5.1 which I dont remember doing I must have done it months ago, I bought back in but now need to hit 8p just to break even...... which at this rate could be years away
Iron, how can you set a stop loss without realising it and surely the stop loss is there to protect you? Of course it's not much use if not guarenteed.
Thanks Mk111, I'll have a skim through later on.
anyone else lost big today? i had a average of 6p, and a stop loss set for 5.1 that I never realised about, shares sold and lost 2grand just like that. This SP is a **** show, when bad news comes it drops 20% when good news come it goes up 1%
Helli Slift. I'm surprised you haven't seen dspp's view.
I did start a thread a while back called "Coning & conning" to discuss it. Hope this link works .