Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
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Slift - of course it can be tied back to kraken.
You will be long gone by the time it happens so I will have to make peace with the fact I won’t be able to tell you I was right. Anyway, your game is pretty obvious and we now have the L3 trader engaging. Another self styled expert.
S’later
Hello Slift,
Thank you for sharing your thoughts on both Bentley and Bressay. They are very useful for my own assessment of the investment case in ENQ.
Therapist and Londoner7: as for the pom poms better to offer them...
GL
mrc,
"you’ve added all of the capex onto the first 2 wells!!! Why would you do that?"
Lol, it seems like you still think that a full field development can be tied back to Kraken.
As i've said before, you're not even worth responding to.
Slift - more personal abuse and very little substance from you.
Would love for you to tell me what this $20 million mods to AK per well is for. Smells like BS to me.
I actually think Capex will be considerably higher than your $100 million, but the costs will be mainly subsea infrastructure. However Capex per barrel will be at least half what you are suggesting. We have substantial reserves in these fields to recover. It is worthless to give a per barrel development cost the way you have - you’ve added all of the capex onto the first 2 wells!!! Why would you do that?
I get the feeling you are not involved in oil and gas projects so very little point trying to have a sensible discussion with you.
mrc,
I think you're just lacking research here.
For example, please tell me how you expect ENQ to do a full field development and tieing it all back to Kraken.
I'd like to hear your logic and understanding in regards to tieing back to Kraken of Bentley or Bressay. Because as it stands, I don't feel like you even know the Kraken field or existing infrastructure.
The $200m comes from $20m modification per well to Kraken FPSO (i'll let you work out exactly what that modification is), and $80m to drill each well in the North sea (including all equipment, and heated flowlines for flowability).
Also regarding water injection, do you read?
"And then subsequently after, should production fall significantly, new wells can be drilled cheaper (as no requirement for modifications).. or EOR techniques such as water injection can be used to further reduce this development cost."
You don't need water injection for at least 2-3 years of a couple tiebacks. There is an acquifer that provides pressure support.
You will need a water injection thereafter though.
So rather than looking like a complete idiot, i'd suggest you do some reading because you definitely can't do a "full scale exploitation of the fields" using existing asset - especially when that existing asset is mostly utilised for another field.
Also, you'd be an idiot to state "there is capacity to produce more using AK".
Slift - what you are proposing has no basis in reality. ENQ will produce a development plan for the full field. You are throwing out costs per barrel for a bizarre 2 producer well development. Your costs for modifications to AK are complete *******s. Where did you pull them from?
You can’t just add all capex investment onto the first 2 wells. It needs to be spread across the full development.
I will say again. It is nonsense to suggest that $200 million would be spent to add 2 crap wells (and no water injector??). Cash better spent on the likes of GE if that were the case.
The value in Bentley and bressay is due to the use of existing asset and full scale exploitation of the fields.
laidback
It may have been a success from the companies point of view, maybe ask AB that question, but from the point of view of shareholders it has certainly not not been a success - simply look at the SP over the last five years - it only wakes up when Brent spikes.
Chiltimg
Kraken is a success even at low oil prices. With no further development spend Enq could be debt free in two years and still producing 40boepd
Both these fields have to be developed using AK via tiebacks, otherwise debt simply perpetuates with only the bankers profiting.
Up to now the investment in Kraken and AK have been a financial failure because of the low oil price - Enquest has managed to pull through but the lackluster SP tells its own story.
Now, its the future that matters, with Brent on the rise Kraken will be profitable, add on Bressay and Bentley and the potential becomes very exciting - AB's big gamble with Kraken will eventually reap rewards.
mrc,
Not really guessing the cost..
The costs are based on estimates for drilling wells in the north sea as well as modifications to FPSO.
I think there is potential for some barrels to be developed in a $50/barrel environment (depending on flow rate ofc), but wouldn't be many.
Don't forget that Equinor deferred development of Bressay when oil price dropped back in 2016.
As with Bentley, you're looking at 2-3k bopd initial flow from Bressay wells, however should be cheaper than Bentley due to a more flowing viscosity.
Romaron,
I was about to reply to your question . However, slift has answered it perfectly.
A good question however I suspect he does not have the true costs to Enquest worked out yet, so was never in a position to answer it factually. Although he did say that we have obvious advantages that no one else has !
With poo now going to rise in the coming years way over 75 it is a great long term investment.
The free cash flow alone this year will cover it :-)
I agree with your comment that significant investment is required. It is pie in the sky stuff that enquest can afford this investment. No wonder the market is giving enquest a wide berth
No need to be rude slift, it’s not personal.
I think it is foolish to guess costs. You seem to have based yours on a wet finger in the air? Not much in the way of sources to back up your figures.
What I stand behind is that they will not be developed if you are right about the development costs. And I don’t think ENQ would have bought in to Bressay without a good idea that it could be developed in a $50 price environment.
As I say, it will either be developed at scale or done via tie backs. No way are they going to spend $200 million on 2 crappy wells.
Best option forward for Bentley would ideally be..
Have a standalone operation/field development for Bressay with an FPSO and infrastructure..
Then have ENQ tieback wells from Bentley to both Kraken and Bressay considering they will be operators of all 3.
But significant amount of investment required... And would need oil price stability and future security.
I disagree Squif. This company is serious and I sense OGA influence around Bentley. I doubt very much that Equinor give a toss about our reserves but don't play games (Bressay). Bentley is a challenge. Get it right and a reliable bread and butter operation. it won't blow the doors off but provide long term support. I've given up on popularity. EnQuest will be more like a bond and still have Moody's holding their nose but the figures are becoming impossible to ignore.
I think his response was along the lines of..
"I cannot really comment on their observations.. but what I can say is that we have infrastructure and FPSO already in place that we can tie the field back to, so we will be coming up with a potential development plan for the field.
However we haven't yet completed the acquisition, but we will look into it further when we complete the acquisition and provide any details of any further development or plans"
Obv along the lines.. not word for word lol
Hi romaron - it was a great question but ABs answer was as always difuse AB speak and i remember being left none the wiser. AB has a tendency to speak a lot without saying anything. He really needs media training but i am afraid it is a case of teaching old dogs new tricks
Hi Slift - you have me at a disadvantage because I was unable to listen to the webcast and it seems EnQuest are in no hurry to put it up on their site. Poor PR imo. Your explanation makes sense in the same way that the first barrel of oil might cost $1.5bn but the second barrel $30. There were a lot cleverer people than me invested in Xcite and I'm hoping to revive a few contacts. I have no idea what the response was to my question or how it was phrased. I made it to give the board an opportunity to respond to the comment by Steve Kew which I didn't see as helpful and basically stated that everything he'd been saying whilst at Xcite was disingenuous.
I think a lot of the logic for acquiring booth Fields lies in the need to bolster reserves. AB stressed the topic of rbl lending on the call and this guides his actions. A slight of hand.
mrc,
"Your costs to develop are too high IMHO and would never be developed if that was the plan. I don’t think it will need significant modification to accept fluids from bressay."
Do provide your costs for development. Otherwise, you're coming across as an idiot (again).
Slift- your costs to develop are too high IMHO and would never be developed if that was the plan. If these fields are developed it will be at scale or as cheap subsea tie backs. We have an FPSO which has significant sore capacity in the years to come. I don’t think it will need significant modification to accept fluids from bressay.
"I think it's more to do with booking some reserves to shore up the balance sheet for the debt negotiations."
Maybe so for Bentley (although I think Bentley probably added $20-40m to balance sheet, so not significant).
But I wouldn't say that was the reason behind Bressay. Enquest are currently exploring options for development of this field, including using Kraken to tie back. Luckily, this field already has JV partners to fund the development so as for development costs, it'll only be 40.8% to ENQ.
The Bressay field should be viable at $60-70+ oil price, even if it's a standalone development with new infrastructure.
Also, there are several benefits to developing this field, including reducing CO2 emissions by using Bressay produced gas to power FPSO - contributing to ENQ long term Scope 1 and Scope 2 emissions goals.
So no doubt ENQ will seek OGA approval for this field in the next few years, assuming Brent is $60-70+/barrel.
If sanctioned, it will significantly add value here - more than the production asset acquisitions.
However, it may also mean taking on more debt, if cannot be developed via cashflow alone.
For Enquest, the Armada Kraken can be used as the FPSO and infrastructure for Bentley.
However, it will require modifications.
The two wells (7 and 7Z) have now been plugged and abandoned too. So Enquest will have to drill new wells.
I think overall, it cost Enquest approx. $100m to modify FPSO, drill and tieback each well.
Assuming that two wells are drilled (to produce approx 4k bopd), it will cost around $200m.
The wells will produce at around 2-4k bopd average, over around 3 years before optimisation and reservoir management CAPEX has to be spent due to natural decline - so taking this as the stop point..
The cost to develop would be approx. $61/barrel.
And then subsequently after, should production fall significantly, new wells can be drilled cheaper (as no requirement for modifications).. or EOR techniques such as water injection can be used to further reduce this development cost.
So all in all, definitely viable for Enquest.. but only at high oil prices.
Bressay is similar, but would produce higher flow rates and faster payback period. I think Bressay wells can be tied back to Armada Kraken FPSO at development costs of $40-50/barrel, if not lower.
Romaron,
I heard the question you had asked AB during AGM regarding Bentley and Breakeven development. It got me thinking what can ENQ really do to develop the field.
Pros of Bentley:
- Already discovered huge STOIIP
- Long life field
Cons of Bentley:
- Heavy oil
- Low productivity
- High development costs
- Long payback periods
No doubt that previous FDP by Xcite and Whalsay was unattractive due to the above.
But to answer your question on whether who was right regarding the development costs for the above FDPs ($80/brent or $35/brent)..
I think both are. It just depends on how you look at it.
Both the previous FDPs required c. $700-750m investment for FIRST OIL.. then subsequent investment (whether through cashflow from first oil or further investment from investors) was required to further develop the field to have 20 successful wells all developed to produce (at peak) up to 45k bopd. However, the FDP was a 35 year plan.
Over 35 years, the development costs would be $35/barrel for the field.
However, the development costs over the first 5 years or so would have been over $80-90+/barrel (due to sequential drilling).
"FIRST OIL" would have involved pre-drilled wells tieing back to infrastructure. So all in all, it would have cost Whalsay and Xcite c. $700-750m to have two wells (7 and 7Z) tied back to the production platform occupying one of the 20 slots. The production rate (using ESPs) would have been c. 4k bopd.