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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.
The old linc energy pipeline from 2015 I believe could prove a way forward for Umiat, peregrine and perhaps willow.
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......
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?
probably more global than Alaskan ...
https://www.alaskajournal.com/2021-10-20/oil-and-gas-prices-spike-global-investment-lags-behind-demand