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Penguins,
I must say your post was very fair and reasonable.
I might add that a recovery factor at the high end of SS’ range (10-45%) should be attainable, since the lower cost of operating onshore will allow production to continue down to low rates. A lot of oil can be recovered in late field life, but the NPV impact is reduced by the lower profit margin and the time value of the money.
Incidentally, ‘DCF’ is the same calculation as zNPV. The ‘discount’ is the restoration of values to ‘present values’.
One other assumption in these numbers is that the 12.5 mmbbls ‘seen’ by each well is not the same OIP, but two separate reservoirs.
GLA
Penguins,
I must say your post was very fair and reasonable.
I might add that a recovery factor at the high end of SS’ range (10-45%) should be attainable, since the lower cost of operating onshore will allow production to continue down to low rates. A lot of oil can be recovered in late field life, but the NPV impact is reduced by the lower profit margin and the time value of the money.
Incidentally, ‘DCF’ is the same calculation as zNPV. The ‘discount’ is the restoration of values to ‘present values’.
One other assumption in these numbers is that the 12.5 mmbbls ‘seen’ by each well is not the same OIP, but two separate reservoirs.
GLA
Peter,
you need to understand the difference between connected oil and recoverable oil.
The 11 to 14mmbbls per well is connected oil. To help you here's how UKOG describe connected oil (wizard continues to ignored this) in the RNS of 18/10/2018:-
'a volume of OIP that is demonstrated by collected pressure and flow data to be directly accessed and drained by a well during production. Only part (or a fraction) of the volume, known as the recoverable volume, will normally be recovered to surface during oil production. The percentage of the recoverable volume compared to the total connected OIP is known as the recovery factor.'
Recoverable oil for the Portland at HH has been stated as between 10% and 45% (slide 18 of November 2018 Corporate Presentation), SS used 30%. The 45% depended on full pressure support being provide - at that time 2 injectors for 3 producers). You are using 100% of the maximum connected oil not applying a recovery factor, but the lowest NPV stated by SS.
So going for a mid case of 12.5mmbbls connected oil per well, and accepting 30% that gets you 7.5mmbbls recoverable oil for the Portland - but this is unlikely to be classed as 1P reserves ie 90% certainty.
SS gave a ballpark figure of £15 to £18 per barrel NPV at $70 oil for the Portland so £124mm at £16.5 per barrel or about 1.9p per share (6.75billion shares estimated for 2020, assumes only £5.5mm converted and no further shares issued to Tellurian).
But I suppose you'll say that I always use the worst case scenario.
But of course it depends ultimately on the CPR not SS's guesses.
Ibug
......the gas production graph (in the air quality report, page 35) also illustrates the decline in production - although gas production may not have a linear relationship to oil production. Gas production is about 5% of the start rate by year 9.
JK1
Unless it is in a CPR I'm not really interested. You can work out the decline rates the company expect from page 36 from the Final Officers Report
HTTPS://mycouncil.surreycc.gov.uk/documents/s62690/OFFICER%20REPORT_Horse%20Hill_Final.pdf
Horndean is the only one we have at present. We wait in anticipation for the rest.
UKOG has estimated net attributable P50 reserves of 80,000 barrels of oil (effective 31 December 2018, see Table 1 below). This figure is 19% lower than last year, due to continuing production from the Horndean oil field (UKOG 10%) and Xodus’ independent evaluation of Horndean reserves. It is also expected that during the next period, once permissions for long term production are received, reserves, significantly greater than the current contingent resources, will be added from Horse Hill’s Portland and Kimmeridge oil pools.
Oil reserves are estimated quantities of crude oil that have a high degree of certainty, usually 90%, of existence and exploitability. In other words, they are estimated quantities of crude that oil companies believe exist in a particular location and can be exploited. According to the Securities Exchange and Commission (SEC), oil companies are required to report these reserves to investors through supplemental information to the financial statements. It is important to note oil still in the ground is not considered an asset until it is extracted/produced. Once the oil is produced, oil companies generally list what isn't sold as products and merchandise inventory.
JK1
Best if you go back and read the RNS's to get the real story. That is one of the reasons why the CPR has not been updated.
"Further to the reported Portland EWT results, Xodus have now delivered a report which details that, to date, the single HH-1 well has "seen" approximately 7-11 million connected barrels of the total full field OIP (or Stock Tank Oil Initially in Place "STOIIP") reported in the Company's July 2018 AIM re-admission document. Based upon modelled production profiles and oil recoveries, the Company and Xodus believe this to be a commercial connected OIP volume for a single well that supports the Company's envisaged multi-well Portland oil drilling and production programme. It should be noted that the calculated connected OIP should not be misconstrued as recoverable volumes or reserves."
I’m guessing now, but a guess by SS would me more of an educated guess, Than just a mere guess, like from a punter, but like I say, am just guessing:)
PSC
This was the original question. "Does anyone have an idea on how much per barrel the recoverable reserves may be valued at once a CPR is issued?" It cannot be answered unless you know what the recoverable reserves are. UKOG have not given out that information (1P, 2P or 3P) for either the Portland or Kimmeridge. It is not proven so SS is guessing. It is all supposition. They haven't even drilled the wells yet. If you couldn't work that out from his interview I give up.
Common sense post:)
Pcs, thanks for posting this. I have been trying to find it.
Does anyone have an idea on how much per barrel the recoverable reserves may be valued at once a CPR is issued...that is indeed a very good question I can’t find anything concrete but 2-5 dollars comes to mind...if someone comes up with factual evidence of higher i will be delighted
It has never been mentioned by SS. Only values that have been mentioned are production costs estimated which are $17 or $21 /bbl (Portland/Kimmeridge). How do you put a value on recoverable reserves when you don't have the data.
$15 to $18 has been mentioned before but if SS has stated $17, then use that for now.
Does anyone have an idea on how much per barrel the recoverable reserves may be valued at once a CPR is issued? I had thought something like $5-$6 but vaguely remember SS mentioning a figure of $17. Perhaps with it being onshore and high quality oil, it would command such a price?