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probably more global than Alaskan ...
https://www.alaskajournal.com/2021-10-20/oil-and-gas-prices-spike-global-investment-lags-behind-demand
Hiya Brom - you obviously have plenty of time to write posts today so you must just have missed my question. I'll have another go.
https://www.adn.com/business-economy/energy/2021/10/20/conocophillips-and-biden-administration-wont-appeal-court-ruling-blocking-permit-for-major-north-slope-oil-project/
The journalist is pointing to a multi-year delay in development of Willow. So, Brom, you obviously agree that mathematically this decision will have a negative effect on the NPV per barrel in the ground calculation for Umiat and Peregrine owing to the time value of money variable alone? The decision also, prima facie, adds another layer of uncertainty as to whether either asset will ever be developed in the future. The owner of Willow, Conoco, remains the only strategic buyer (owing to the necessity to piggyback Willow's infrastructure for Umiat/Peregrine to be financially viable) so they're not going to be approaching 88E anytime soon, are they? Why would they?
Do you therefore agree Umiat remains a stranded asset and Peregrine looks like joining it for the foreseeable future?
In the light of this news, do you think the 88E BoD ought to reconsider its plans to drill Merlin-2 this coming winter season? If Umiat and Peregrine are to remain stranded assets for the foreseeable future, spending shareholders' funds on drilling at Peregrine can surely no longer be viewed as an optimal use of available cash?
The owners of TAPS have a serious problem on their hands. They will have factored in those 100k+ bopd from Willow in their forecasts for future throughput. It is therefore a logical progression that this decision has just increased the NPV per barrel in the ground calculation for the NN and decreased the same figure for 88E's Umiat/Peregrine.
Can't help wondering if Erik Opstad and Dave Wall saw this coming? Looks like they bailed before the market woke up to the fact that Umiat and Peregrine both look pretty stranded for the foreseeable future. Unless 88E has a few hundred million dollars to construct a 100+ mile pipeline eastwards to TAPS? Hmmmm, nope, don't think it does.
Reaction anyone or just collectively sinking your heads further into the sand?
you make some interesting valid points. However, I believe that 88e is attempting to prove as many discoveries and presence of resources, in as many locations as possible, then move the company merge or sell on. Thats the strategy, they have never said they will do it all......
The old linc energy pipeline from 2015 I believe could prove a way forward for Umiat, peregrine and perhaps willow.
14:54
Indeed, alpha90, but what's the point in directing shareholders' funds towards a project which, due to its location only ever had one strategic buyer in mind.....and that strategic buyer is now looking at a "multi-year delay" in developing Willow? The northern route to market for 88E oil (at Umiat/Peregrine, if it's proven) has just suffered a crucial blow today because it relied on Willow's infrastructure. Peregrine/Umiat is literally and metaphorically at the end of the pipeline which *would have been* the northern route to market. Why would Conoco not just wait until Willow was 5 years into production before looking at Peregrine/Umiat? Willow, and thus Conoco, were essential to the northern route. If Conoco has no need for Peregrine/Umiat for the foreseeable future, who else is going to buy it?
Ah, but what about the 100 mile pipeline to the east solution? Ok, let's be serious for once. How much will such a pipeline cost 88E to construct? "Won't be our problem, we'll just prove up and sell on......at which point it becomes the new owner's problem." Yes, true......but the cost of the eastwards pipeline solution will be reflected in the NPV per barrel in the ground anyone is prepared to pay for Umiat/Peregrine. The sheer cost of the eastwards pipeline solution may render Umiat/Peregrine worthless.
Do readers now begin to appreciate why Umiat has never produced a commercial barrel of oil in 70 years?
With all the above in mind, a bunch of you will presumably be writing to the company asking legitimate questions about the wisdom of drilling Merlin-2? Or will platitudes from an anonymous avatar quell any stirrings of unease that the Willow news brought this morning?
88E's NPV per barrel decreased today after the Willow news. That is a mathematical fact. And yet the SP is up. That is *not* a sign of a rational market and Irrational markets are not perpetual.
Perhaps this makes Umiat the missing piece of the jigsaw. I’m sure you’re aware that ConocoPhillips did actually try to acquire peregrine before 88 did!
You mean this Umiat?
https://www.rcinet.ca/eye-on-the-arctic/2017/08/21/arctic-alaska-oil-field-remains-alive-despite-bankruptcy-isolation/
At least we now have a definitive answer for the length of pipeline required for the eastwards solution - 92 miles. Now then, serious question.....how much is a 92 mile pipeline going to cost the owner of Umiat/Peregrine?
It may not be apples and apples but the estimated cost of constructing an 800 mile gas pipeline in Alaska was $38bn. So 92miles over virgin ground, on a caribou migration path, admittedly requiring a smaller diameter pipe.....how much time, money and legal challenges will that require before it's open for business? Anyone?
15:29
I am unsure whether CP actually ever bid for Peregrine, do you have a Link?
As for Linc Energy I do not believe there is any pipeline, the company did drill & test Umiat 18 and 23H the latter flow tested before their over ambitions in many markets led to their downfall.
More at;
Umiat Oil Field Purchase
http://clients3.weblink.com.au/clients/_88energy/headline.aspx?headlineid=61015127
http://www.searchanddiscovery.com/abstracts/html/2009/arctic/abstracts/huckabay.htm
https://finfeed.com/small-caps/energy/88-energy-acquires-strategically-situated-umiat-oil-field/amp/
Well Data available at https://dggs.alaska.gov/gmc/seismic-well-data.php
https://www.petroleumnews.com/pdfarch/496392442.pdf
https://www.alaskajournal.com/business-and-finance/2015-01-07/linc-energy-wont-need-access-road-umiat-field-project
https://www.gem.wiki/Oil_and_Gas_Pipeline_Construction_Costs
A bit dated, but maybe some use as a guide?
More up to date guide on Alaskan pricing. The tough operating environment is a multiplying factor on the costs per km.
https://www.gem.wiki/Alaska_LNG_Pipeline_(AKLNG)
Is the pipeline eastwards a viable option? Current judgement has got to be that it's not.
https://static.conocophillips.com/files/resources/fact-sheet-willow-october-2020-final.pdf
All depends on how serious and committed the ‘developer’ is regarding solving the emerging oil crisis, together with authorities, governments and green lobbyists. I remember the power cuts in the early 1970s. Pretty grim memories. We remain the explorer and 88e bod can do the maths (yes it’s plural). COP can do maths too. Can anyone else, who matters.
Simples.
GS
16:48 only a few weeks ago COP were still committed and confident they would ultimately get their way, with the USA plunging into an energy deficit perhaps the way the game will be played has also changed.
How long before the next election in the States (2024) could be all change yet again - life is full of surprises.
Imho it may well be that politics will end up being the denominating factor in "do we, don't we" go ahead and produce. Awareness is growing that fossile extraction will continue for quite some time, and recent suggestions of Biden's reign seeing an uplift of external purchase won't go down too well. It could well be a case for Congress that allowing construction of a delivery system through environmentally delicate areas would be "in the nation's interests", and imo I wouldn't be surprised if it was the case. The hard bit is estimating when they will smell the fresh coffee....
16:48 and 16:59
There's moral support on a tough day and then there's wilful ignorance. I contend Goldstinger's opinion is ignorance but Brom's content is something a great deal darker. Readers will note that Brom hasn't even acknowledged the ***mathematical fact*** that the NPV per barrel in the ground at Umiat/Peregrine today is *less* than it was yesterday. Just one variable in the calculation needs to be adjusted to reflect the extended timetable until Willow is available to be piggy-backed. Not one poster can deny this mathematical fact. No matter the futile attempts at deflecting, the maths do not lie.
Looking again at the pipeline eastwards solution. The gas pipeline parallel to TAPS is budgeted to cost c.$47m per mile. A Peregrine/Umiat/Icewine/TAPS pipeline will have a narrower diameter, but the construction will be on virgin land, crossing multiple rivers, on a caribou migration trail.....hell, let's just call it $10m per mile, shall we? 92 miles x $10m = approaching a billion dollars and how many years to completing construction?
Is anyone here seriously thinking any potential buyer won't be taking into account the capex cost of an eastwards pipeline ***before*** coming up with an offer per barrel in the ground then you're living in cloud cuckoo land.
All of which takes me back to something cbaron, Rabito79 and I have been suggesting for weeks/months now. Project Icewine looks to be 88E's best chance of achieving any value whatsoever for its loyal shareholders.
88E's own partners on Peregrine, a bunch of grizzled Alaskan veterans we were told, valued Peregrine at $28m plus add ons. Let's call it $30m because I'm in a generous mood.
The 88E BoD themselves value Umiat at $1m, from the purchase price.
Yukon? Entirely reliant on partnering with companies located to the west of Yukon and raising 88E's share of exploration, appraisal and development costs. I reckon $20m max but let's call it $50m because, as already stated, I'm in a generous mood today.
That's $81m plus Icewine plus cash at hand supporting a mkt cap of $275m. Thus, using my numbers, the market is ascribing $190m to Project Icewine minus cash of, say, $35m......call it $150m for ease of maths?
So there we have it. I contend the market is today valuing Project Icewine at $150m. My research suggests the maximum 88E can hope for from the "overlap theory" is 10% of NN's volume of oil resource. 10% = $150m, so therefore the owner of 90% of the volume must be valued at $1.35bn....isn't it? Nope, the NN is today valued at $743m.
QED if any 88E shareholder is implacable in their contention that 88E is today worth £200m, then the NN is selling at the equivalent of 0.92p v's the closing price of 1.65p.
QED +1. 88E is either massively over-valued or the NN is massively under-valued. Your call?
Anyone reading this who *wouldn't* buy 88E shares at 0.92p tomorrow?
Loads of info on linc and pipeline. With your calculations of a billion it’s still a lot cheaper than ConocoPhillips estimate of 8 billion. Umiat has an air strip already, it’s state land and I believe linc estimated 200 million for the pipeline. Anyway who knows, one day we’ll see. Knowing that 88 is hype, sentiment and potential, why are you still pursuing this nonsense
Which by the way is what trading and investment is about!
How can an objective assessment and calculation be nonsense. The basis for the mathematical calculation is from public information, not dreamed up. The historical articles and assessment produced by those far more in the know tell us that Umiat is uneconomic.
Objectivity and sensible conservative calculation are not the friends of many an 88e investor, including many here, because when you press the equals button on the calculator the answer is unpalatable.
Let's dream about the next election, political support or the fact that green lobbyists will assist in arguing for more fossil fuel extraction. the last one is my favourite.
Get on with exploring the viably explorable!
17:51 and 17:54
FORD707 - you're kidding, aren't you? Investing is all about "hype, sentiment and potential". You can't be serious.....was that some sort of joke, FORD707? If so, I don't get it?
Everyone and their dog knows I'm a fundamental investor. For anyone who considers himself a trader, there's a huge value arbitrage opportunity between 88E and NN. Perhaps that's more your thing, FORD707?
I suppose this thread is making tiny steps of progress in the journey towards reality. More and more posters are finally admitting 88E is a hype and sentiment trade only and that they recognise the fundamentals ***do not support*** the mkt cap of £200m.
Question for you, FORD707? Would you buy 88E shares tomorrow at 0.92p?
17:51
Fact check - Umiat is located on Federal land.
Investment = potential
Trading = hype,
Scot, you know yourself that no-one cares for the fundamentals. If we/I did, nobody in their right mind would invest in 88e. It's all about the hype, the March drill. Any sniff of success could send the SP well over 2p and then some.
Just looked again and it says state land, dunno perhaps my phone is wrong