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21.47
I think most ppl understand your questions and doubts about 88e acreage and value by now.
My view is to let my free shares ride in 88e, because we have a 57% cos next year on Merlin 2. I am 100% certain the shares will be higher next year running into the drilling of the well. But it's my opinion, based on what we know.
I am also in the Northern Neighbour because of their compelling recent advances at Talitha, but I have reservations regarding their integrity and with good reason. Frankly, your posts don't help my 'reservations' because of the way that you present them. Which is why some many become antagonised with your posts.
We get it. We really do. I and many others are invested in both. Both companies will gain by PANRs success, when proven up next year. In my opinion.
What we can't do is put a value on icewine conventional right now because there is lots more work to do. 88e have already said they are looking back at our previous data in the light of Talitha info. I don't see that us novices would be able to make any comment about icewine acreage until 88e release new hindsight information. It would be scourilous to expect someone to pass comment when one knows that the data is not yet out there. So why should we guess.
So yes, we have ideas in our heads about what might be, with a generous overlap of NN fortunes into 88e acreage. But quite impossible for me anyway to quantify. It's just simply an idea in my head. Which you criticised last week. Does that now make more sense?
I am still over 100% up on my NN shares btw. I just hope they skyrocket too. I can afford to lose on both. All very well calculated in my overall portfolio which has to mature in 2 years maximum.. hence my objectives are clear.
I'm not so sure about your objectives though.
GS
...and of course 41.67% + 12.76 + 1.27 = 55.7% cos on at least one zone.
GS
Blackadder2708,
I recall a to and fro with Rabito79 when you stated you worked for an exploration company. Is that correct? If so, I wonder if you could answer the following question please? And before anyone jumps on me, I actively *want* to understand from someone who says he works for an E&P company why no flow test is being planned for Merlin-2?
Other than a) lack of funds or b) lack of available equipment/personnel, what other reason would you suggest for an Alaskan E&P company to drill a *seasonally-dependent* appraisal well but to make no plans whatsoever to flow test that well? Would you agree the standard operating procedure for an Alaskan exploration company would be to immediately flow test the well if data from the logs supported that activity?
Some have accused me of asking trick questions. I do *not* know the answer so the question is 100% sincere and 100% genuine.
All of 88E's acreage is located on seasonally-dependent parts of Alaska (for operational purposes) so is it the case that even if logs supported conducting a flow test, it will be another 11-12 months before shareholders will see the well flow-tested? Is it not a rather questionable use of shareholders' funds if it'll require a whole new access road to be built (whether snow road or ice road) in winter season 22/23 v's making use of the road to be built this coming 21/22 season? I don't get it.
GS - unless new facts arise which I am not aware of at time of writing, no. I believe at c.£200m, 88E is overvalued in absolute terms. I assess 88E is also vastly over-valued v's its immediate peer and northern neighbour. I think that whatever statistical method is applied, a Chance of (complete) Failure at Merlin-2 of 43% is waaaayyyyyy too high for an E&P appraisal well in Alaska.
Many thanks to Turnstone for his comments. My method was the one I felt offered the best fit with the variables as I understand them to be. I "get" folk aren't comfortable with all the conclusions and they're possibly right to be. However, what is hopefully now crystal clear is that there is a 43% chance that *not one of the three horizons at Merlin-2 will meet the threshold of geological success*. For those not placing their fingers in their ears and who understand it's not about the SP it's about the mkt cap (*always, OTC punters!), then I hope you're all ware that the northern neighbour's 1.9bn barrels of contingent resource has been assessed as meeting the threshold for geological success, ie. 100% CoS for Basin Floor Fan, SMD-B and Alkaid.
So that's NN: 1.9bn contingent x 100% geological CoS x commercial CoS (assessed as "60% to 70%" by BoD) and there's
88E: 600mmbo recoverable resource x 57% geological CoS x 60% commercial CoS...........and no-one else thinks that 88E isn't hugely over-valued in absolute terms and v's its immediate peer? Can you not see now why establishing the value of the shared asset at Icewine is so crucial to 88E shareholders and NN shareholders bot
I'm not a full blown statistician but do have a degree which included maths. I've crunched Scots numbers. So long as all the possible outcomes =100%. It's hard to argue with really.
So. 14% + 10.43% + 17.24% + 3.28% + 5.44% +4.04% +1.27% + 44.3% =100%.
Ie the first 3 numbers are one well zone is successful = 41.67% (14.0+10.43+17.24)
The next 3 numbers are 2 zones successful = 12.76% (3.28+5.44+4.04)
The seventh number 1.27% is the Holy grail, all 3 zones successful.
And of course, the bummer number 44.3% makes 100%.
Back to my rest and recuperation now.
Will you be investing now Scot?
GS
16:34 Thanks for clarifying where your figures came from, do you have a view as to why the difference?
My older brother once said to me
“drop some bad ass fancy words and abbreviations into a conversation, then move to the next subject quickly creating the illusion that you know something when you know sweet fA
Unfortunately I’m not quick enough or clever enough to do it…. But seems to work on this BB
Also
‘That would be an ecumenical matter’ Hehe
Hi Scot, A lot of big words there I don't understand, all I can say with in confidence that you cannot or should I say should not use a formulae for valuation of flow rates that is based on resistors in series as they are intrinsically linked. the reservoirs or the target areas are being quoted as independent targets.. not having a pop at you, just saying the formula you have used is flawed.. and No I won't be drawn into a long verbose response, chill and wait for the drill season.. On thing I am interested in is based upon your many years of experience you have been clear that your are not invested and never will be in 88e, Im curious as to what you would invest in and why ??
Hi Turnstone - understand.
Are the reservoirs distinct geologically? Yes. However, does the 2D seismic mean that whatever volume is calculated (for forecast purposes alone) in the 2U column is liable to downward revision even if there is success in either/both of the other horizons? Does achieving a "success" in one reservoir not mean that the volume targeted for the other one or two horizons has to decrease? I was attempting to take that into account and saw that method as the best fit? Perhaps it was too simplistic a method? Or wrongly applied if the downward volume revisions are not quantified?
Hmmmm, let me ask you a more clear cut question, if I may? Is the statistical probability of *all three* targeted horizons at Merlin-2 failing circa 44%? No matter which method is used, the probability or yield method, that answer remains 44%. correct? Again, happy to be corrected.
should say it relies upon the previous ( EVENT / MEASUREMENT) in the series
I Need a new key board .. sorry about the crap spelling :-)
Hi Scot, who showed you how to calculate the probability of success based upon that calculation ? the calculation you have just shown is for resistors in series it ills used in rolled through put yield for determining the true yield of a process.. not fro calculating probabilities.. the reason it is not used is release upon and is li led to the measurement taken prior in the series, I could be wrong and stand to be corrected, but each horizon is independent and not a factor too be used in probabilities.. for example the national lottery if you purchase a series of numbers and have them for 52 weeks, the probability does not change from week to week as the numbers are indepenandt of each other and each week is not dependant on the other one.. just thought , all the best :-)
16:34 & 15:13 & 14:25 & 14:05 & 13:46 & 12:21 & 06:46
CoS metrics.
We know Merlin-2 is targeting three horizons: N20, N19 and N18. The company has guided to geological CoS of 24%, 19% and 28% (for each horizon) respectively. I suspect many shareholders have trouble working with the statistics behind the guidance (I know I did when I first started analysing E&P stocks way back when!) so I thought this might help folk if I laid it out more simply. Happy to be corrected.
(a) The CoS of *all three* reservoirs attaining the geological success threshold is 1.3% (0.24x0.19x0.28)
(b) The CoS of N20 & N19 reservoirs attaining the geological success threshold is 3.3% (0.24x0.19x0.72)
(c) The CoS of N20 and N18 reservoirs attaining the geological success threshold is 5.4% (0.24x0.81x0.28)
(d) The CoS of N19 and N18 reservoirs attaining the geological success threshold is 4% (0.19x0.28x0.76)
(e) The CoS of N20 alone attaining the geological success threshold is 14% (0.24x0.81x0.72)
(f) The CoS of N19 alone attaining the geological success threshold is 10.4% (0.19x0.76x0.72)
(g) The CoS of N18 alone attaining the geological success threshold is 17.2% (0.28x0.81x0.76)
(h) The Chance of Failure, ie. where *all three* reservoirs do not attain the geological success threshold is 44.3% (0.76x0.81x0.72)
Points (a) – (h) list *all* the possible outcomes (presuming a definitive decision is reached on each horizon of course).
Then head to page 18 of the 88E presentation slide deck dated 15/8/21. Look for the column “unrisked net entitlement to 88E prospective oil resources (MMstb) 2U” and you’ll find the best guidance (the unrisked figure which the *company* considers has the highest probability of being correct) on the volume of oil attributed to each horizon at Merlin-2. That is N20 = 254mmbo, N19 = 223mmbo and N18 = 252mmbo.
If we overlay those volumes on the percentage CoS in each of the scenarios (a) to (h) above, we arrive at the following figures:
(a) Chance of confirming 729mmbo meets geological success threshold is 4%
(b) Chance of confirming 477mmbo meets geological success threshold is 3.3%
(c) Chance of confirming 506mmbo meets geological success threshold is 5.4%
(d) Chance of confirming 475mmbo meets geological success threshold is 4%
(e) Chance of confirming 254mmbo meets geological success threshold is 14%
(f) Chance of confirming 223mmbo meets geological success threshold is 10.4%
(g) Chance of confirming 252mmbo meets geological success threshold is 17.2%
(h) Chance of confirming 0mmbo meets geological success threshold is 44.3%
Something to ponder?
*and that’s before we examine the 729mmbo figure for all three reservoirs succeeding because these is some uncertainty when it comes to the success of x horizon subtracting from the volume(s) applicable in y or z horizons.
13:46
Hello Brom, the numbers are in the detail section of the link you posted, page 18
https://clients3.weblink.com.au/pdf/88E/02406997.pdf
14.25 Brom as olderwiser has pointed out the individual COS are stated now. These combine to give a 56% geological COS of one zone being successful. As olderwiser pointed out to me:
COS of 24% & 19% & 28% is the chance of success
Restate as chance of failure
76% x 81% x 72% = 44.3% chance of failure, so 55.7% chance of one success out of three ~56%
You of course can be positive or negative about the numbers but they don’t change. The good news is they are better for Merlin 2 than they were for Merlin 1.
It is not going to go lower than 1.5p before the next wave up. It would have already gone down by now knowing that from December it will be impossible to buy under 2p. The thing is people fear on missing out so they are buying up if it goes down a little, which brings it back to 1.50p+ almost as soon as it dropped a bit. MM are trying to lower it but can't brush off the demand. Pretty sure anyone buying now will be able to at least double their investment.
" COS represents the geological chance of success of at least one of the stacked layers which comprise each prospect"
so could be one, two or three."
Or that is how I read it.
Not sure if development risk has changed since last resources report 160821.
https://clients3.weblink.com.au/pdf/88E/02406997.pdf
Sure Willow decision disappointing but long way to go yet.
13.46 56% geological COS of one of the layers with a further 60% commercial risk. Therefor a ~1 in 3 chance of commercial success in one of the layers.
Not sure if their commercial assessment has been affected by the willow judgement.
06:46
Request for information was in respect of Merlin2.
ERCE has calculated Merlin2 (N20,19,18) 56% COS.
https://clients3.weblink.com.au/pdf/88E/02406997.pdf (page 2)
Those odds are terrible. Am still waiting on a much lower price to buy. Do not think it will be the same frenzy as last March, but even from here, their should be a little profit to be made
If it was known that oil would be there, the company would not give these odds on geological success.
N20 = 24%
N19 = 19%
N18 = 28%
It may go some way towards explaining the lack of a flow test plan.
Charlie 1 had much better odds, and still the expense in having flow test equipment on site, proved to be a waste, as the equipment was unsuitable for the hydrocarbons found ( High gas to oil ratio). An expensive lesson learnt .
17:27
Per. company ann.
"Merlin-2 appraisal drilling locations identified to the east of Merlin-1 where enhanced reservoir
thickness and quality expected, with appraisal drilling planned for Q1 2022."
http://clients3.weblink.com.au/pdf/88E/02406997.pdf
When (hopefully) permitted the well will be classed as "an exploratory - oil well" as AOGC do not list / recognise "appraisal".
https://www.commerce.alaska.gov/web/Portals/18/pub/Forms/10-401.pdf
Am i right in understanding that Merlin 2 is not an exploratory well but an appraisal one. That means we know there is oil there but just trying to quantify, qualify etc what is there. I thought we were hoping to find a whole new structure hence the fact this is Merlin 2 and not Merlin 1 1/2 so to speak.