Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
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Great to see some insightful thoughts and comments today a Good read for a change .
"Clearly the technical committee aren't happy with the current reservoir models to call for this review. "
Not so sure it is clear anyone is unhappy. With the data from the 3 wells drilled last year I'd guess the models can be updated and/or with Dr Trice moved to the shadows 'a second pair of eyes' having a look at the data could be a just 'a good idea', as this years plans have gone pear shaped.
Be nice if the CPR is being done by a different outfit from last time though, just to get another set of independent views on whats down there.
fandg - that was my assumption - write off whirlwind and strath...i think lincoln will also take a bit of a hit - which gives the potential material downgrade they talk about. I am anticipating lancaster contingent resources going up from what trice said...- which if they can put a plan together increases reserves.
halifax was always the big one and trice said it was like lancaster.....but we will need a partner for that now.
Think you can forget about Whirlwind and Strathmore now. Seem to remember we are handing those back (see Dec RNS). Can't help but hope this is going to be the 'material downgrade' mentioned
I seriously doubt Warwick will ever produce commercially now. I can't see anyone having the appetite to drill there. HUR may as well relinquish the licence on it. If there's oil there, it's going to stay there in perpetuity now.
From what I can tell the current sp applies zero value to anything ....
"The 2017 Competent Person's Reports attributed independently certified reserves to the Lancaster EPS
development and contingent resources associated with the overall West of Shetland
portfolio. The outcome of the technical review may lead to a material downgrade of these
contingent resource estimates. "
From this they are saying there is a possible downgrade of contingent resources of overall portfolio. I think that will be a probable given the poor drill results of GWA last year. There has to be serious questions on the contingent resources of GWA element - which is why in my mind i wrote it off last year. immediately on drill results the market hammered the SP down at the time by a ridiculously large percentage so this is already priced in and then some.
They are not talking about Lancaster reserves which is what matters at this moment in time. In fact trice stated there is a lot more oil down there at lancaster than they have previously stated so the reserve figure at lancaster should go up in the CPR
From what I can tell The current sp is giving zero value to the contingent resources anyway.
Following the most recent RNS, Hurricane states that following the technical review, there "may" be a material downgrade in contingent resources.
From the 2017 CPR reports, ignoring associated gas resources with the oil (using oil case for whirlwind):
Lancaster - STOIIP of 2160 with a recovery rate of 22.5% --> 486 MMstb 2C
Lincoln - STOIIP of 2514 with a recovery rate of 22.5% --> 565 MMstb 2C
Halifax - STOIIP of 5143 with a recovery rate of 22.5% --> 1157 MMstb 2C
Whirlwind - STOIIP of 409 with a recovery rate of 30% --> 123 MMstb 2C
Strathmore - STOIIP of 182 with a recovery rate of 18% --> 33 MMstb 2C
In total, the 2C oil resources are 2364 MMstb (not including associated gas resources). Including associated gas resources, the contingent 2C resources are 2563 MMstb.
So my first question is. How much of a downgrade is this likely to be?
Personally, I think the WORST case would be:
Lancaster - 18% recovery rate
Lincoln - 18% recovery rate
Halifax - 18% recovery rate
Whirlwind - 24% recovery rate
Strathmore - 15% recovery rate
Or a downgrade of 20% overall at a WORST case scenario, providing 1890 MMstb 2C oil reserves, or 2050 MMstb 2C including the associated gas reserves.
My second question: Clearly the technical committee aren't happy with the current reservoir models to call for this review. The team at HUR spent years developing these models for each asset. What new evidence do they really have to justify all this rework?
And finally, as the downgrades are for 2C contingent resources, are the board confident with the Lancaster 2P reserves, or is this likely to also be downgraded with the resources?
Opinions?