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Hi SpruceGoose,
"It's beginning to align with dspp's view"
I believe dspp was before I took an interest. Could you provide me with an idea of what dspp's view was?
hydrogen,
"Nothing a few horizontal wells shouldn't sort out as far as i'm aware."
This comes back to my discussion yesterday. HUR need to figure out a way to properly identify perched water sources then start digging cheap wells to produce from different fractures within the basement. Heck, two wells in the same fracture network (similar to 7z and 6 well) would also work to ensure that oil recovery is maximised with the rising OWC.
I mentioned before that the biggest risk that I feel here is the concept and the structure. It's the viability of ECONOMICALLY extracting oil (going forwards). I think the methodology to identify perched water sources plays a big part in this.
johnpwh,
"upwards dead end whose base is in the aquifer,"
Yes, but it doesn't have to be just an "upward", it can be upward than sideways. It just requires that pressure differential from the aquifer to the perched water. Without any connections to the main fracture network. Hope that makes sense.
"which to my mind means that there is an awful lot of granite and very few fissures containing the black stuff, so that production to date has already significantly depleted available oil?"
This depends on exactly how big the CONNECTED fracture network is. Also, depends on if there are huge storage spots within the fracture network (e.g. a large storage area similar to a tank that the fractures are connected to).
At this moment, it's very hard to say exactly how much oil reserves exist. But that graph on the presentations showing a decrease in gradient shows that there is more volume of fluids than expected (remember, this is including the aquifer and any other fluids that are exposed to the fracture network).
That's right garyn, but the current price reflects that.
People still arguing about the 2019 picture are lost (and there is a lot of that still here).
The portfolio was overvalued, it was priced to defy the odds. There is still a huge amount that is unknown and plenty of prospects get re-evaluated and re-interpreted later on only to be proven hugely valuable. This is normal for exploration.
Back to today, there is plenty of value here at this price.
HUR are still producing 17kbopd at sub $30 b/e.
Cash is flowing in, that's valuable. There is no better indicator of the future than today's production numbers.
The company have a liabilities hurdle to get over, but they are chewing through it every day, and if/when they can clear that everything above is equity. Personally I think you have to take a very gloomy view, to assume the wells will water out and be abandoned before HUR has made an armful of free cash.
The -6 well is currently the single most prolific well in the entire UK sector and we are talking about it being abandoned? Come on.
If they change the commitments and extend the EPS, it helps HUR test the WoS play and that in turn is good for UKCS.
I just don't think the OGA will kill the play when they can afford to be patient.
If the OGA go ahead and kill HUR with onerous commitments then nobody else is going to restart an FB EPS any time soon. Everyone is watching Lancaster. The unspoken truth is that the OGA are desperate for this EPS to succeed.
Stu: a good analysis imo. Hur's frac model is built on fracture orientation and width distribution probabilities with an overall field perspective rather than that of any individual well, so there is bound to be significant variability in results. What is needed, aside from 6 & 7z well output qty-time, are further wells - eventually the probabilities should balance-out to the mean. It's unfortunate that a Black Swan (Sars2 cv19) has come along just when Hur needed poo stability to fund L8 and maybe a Hal horizontal. Oil seems to be diving firmly into the 'unloved' resource category, like tobacco did 20 or so years ago, but will still be in-demand at >80mmbbl/d as far into the future as I can see, so someone - probably not current Hur shareholders - will make handsome money from LanFax divs for a while yet.
On a slightly different note, i fail to understand why a few more fpso's (bit bigger maybe than the AM) couldn't be acquired at todays interest rates and on a similar basis to the Bluewater AM contract; that only (eh?!) leaves the wells & subsea....
gla
A lot will come down to how much of a downgrade there is to reserves and the amount of recoverable oil there is now at a manageable water cut - which will in turn determine how long the EPS can actually produce for. Hurricane were the first to drill one of these basement type plays in the UK, so I suppose there were always likely to be some issues, but they're now a long way from where they were 12-18 months ago when all was going fairly well.
I'm just not sure it's correct to talk/think about OWC as a concept in a fractured reservoir. I think as a concept 'OWC' is misleading in this type of "reservoir" application.
Conventionally you have fairly uniform porosity and permeability and then yes, you have a reservoir wide OWC and it can have some contours, but it is basically a neat way to describe two distinct bodies of fluid (one oil, one water) with a single contact surface, all organised by buoyancy.
In a fractured basin I just don't see how that terminology is even relevant.
You have oil and water both present, but there will be upward seals and downward seals and lots of fluids trapped in quasi-equilibral buoyancy locations (perches and umbrellas?) the whole thing will be full of permeability dams and dykes and all sorts of stuff because it is fractured rock.
You can have water above oil (perched water) and also oil below water (dunno what they call that?). But the existence of both kind of invalidates OWC as a useful concept because it is too simplistic.
I think it is now very clear that the OGA should give HUR a lot more time to run the EPS to see how the early years of WoS fractured basements perform and how the mixtures of different fluids go up and down as the drainage area expands from the well bore to draw from different fluid accumulations.
All of the super majors are taking licenses in the WoS region, it doesn't make sense to push HUR into difficulty with hard commitments when there is still a lot of potential and appetite in the WoS basin and the industry wants to know how much water knock out capacity it might need to specify should this stuff get seriously developed in future.
Delaying the commitments and extending the EPS is in everybody's interests here.
Including the OGA. Including HUR shareholders.
The industry and the BGS are still learning from this EPS. It should be extended.
Hi Slift,
Is the OWC really an applicable concept in a FB reservoir? The oil migrates into the basement fractures over millions of years and so can establish an area wide level due to pressure communication. But when you are pumping out along fractures in a matter of months then you draw up the water quickly into the fractures and therefore its not a conventional OWC as such. These expensive wells can water out very quickly and unless you have a huge water handling capability, then its impossible to develop such wells commercially. I am really pessimistic about this play because its in such harsh environmental conditions - short drilling windows and very expensive wells. You could drill a lot of wells and not really understand the reservoir. Each well taps different fractures and each fracture could be open or closed and have different properties. Can't compare to onshore fractured basement where wells are cheap and need less recovery to be commercial
hi john pwh; it's easy to get confusedand often misled by some of the guff here. The important bits are those Pi-vs-extracted volume values - as that curve tends towards asymptotic ('orizontal) the reservoir vol tends towards infinite (-ly large, for avoidance of doubt); obs it'll never get there. Of course, the aquifer also comprises part of the reservoir volume, increasingly so as oil (or gas) is extracted. 'Perches ' can also include closed-downward volumes, and even - as i think some recent RT stuff has indicated - even both at the same time, connected but open to the reservoir - it's easily possible that 7z has transitted one of these and is merrily taking low-viscosity water partially preferentially. at currrent rates, a year of 7z water-cut would only drain about 150k m3 from a 'perch'. Either RT was lying (v unlikely), the tech analyses were plain wrong (also v unlikely), or Dr T was correct but there is a previously unconsidered factor in-play at Lancaster - we'll find out in a month or so.
gla
Hi Slift
I used to post here but haven't for some time. probably too depressed!
I'm not an oilman, but I like to think logical. Isn't perched water attached to the aquifer just an upwards dead end whose base is in the aquifer, per the one area illustrated in the video? Furthermore what little oil has been extracted (relative to previous published reserves) wouldn't have moved the OWC unless those reserves were massively overestimated - which to my mind means that there is an awful lot of granite and very few fissures containing the black stuff, so that production to date has already significantly depleted available oil? Confused.com.
Slift agreed...thank u for your input...
Hi johnpwh,
Personally, i've kind of written 7z off. Dr Ts conclusions regarding perched water behaviour is logical and explanatory. However, there are potential scenarios where the conclusions could be contested. E.g. if the perched water is connected to an aquifer. This would be a very rare scenario, but it's one of several scenarios.
Regarding the OWC, i don't think anyone would have falsified this. The OWC at the time of estimation was probably correct. However, as mentioned before, the company probably has a better understanding of what's occuring and why the OWC may rise with production and hence the estimate of RECOVERABLE reserves may potentially be lower.
It's just unfortunate circumstances for this company. But I'm more optimistic now that the company is being conservative and identifying this.
Slift.
indeed, Slift - or a gas-cap may have got there first.
Noting (July 2019 CMD, slides 36-38) that predicted owc's seem 'confident', but (slides 13-14) 205/21a-4z indicate 'trapped water' @ ~ 1340m tvdss, whether there was something properly wrong with the former data, and the latter is owc reality? (Re-estimating oil vol in-place shouldn't be to difficult from here. ) Given the stated 'low' tvdss of 1597 m, that would unmake Hur's year, for sure. Am off to look for the 7-z heel depth now; sure this has been discussed before.
It's beginning to align with dspp's view, unfortunately - hat-tip to him if he's proven right.
gla
Slift
Glad you wrote that . I was just re watching the Lancaster EPS part of the CMD. There is an interesting video in there showing perched v aquifer water and the related pressure differentials. It explains why you would have different effects on water cut after shut ins, as in perched scenario the water is overpressured and in the other under. I am hoping that the 7z behaviour after its most recent shut in hasn't contradicted Dr Ts CMD conclusions. Has 7z drilled a large upward dead end? Surely from the original wells there was a very good estimate of OWC, and I don't think anyone would accuse Dr.T of falsification of evidence, I certainly wouldn't.
Hi SpruceGoose2,
"Wasn't this what you were expecting anyway?"
Yup, I was expecting this, because the aquifer will rise.
People should not think of this concept as conventional oil. In conventional oil, the aquifer will not rise so you can estimate an OWC. In a FB, I believe this is much more difficult. Very hard to estimate reserves and the OWC. At the end of the life of the well, the OWC will be at the well.
Slift; wrt comment "rather the OWC will rise with production over time (hence becomes shallower than first estimated as more and more barrels are removed)" - wasn't this what you were expecting anyway?
https://www.onepetro.org/conference-paper/SPE-180000-MS is a good read for numpties like me.
gla
Personally, I think this RNS regarding shallow OWC provides a very good conservative estimate of reserves, based on what I believe the model is.
Sure it's bad news but this news was going to come out regarding lancaster reserves sooner or later (either a shallow OWC or a downgrade in oil reserves). I wasn't expecting this before the September Tech Review.
Now that it has come, I believe that the Tech Review is much more derisked and provides a good opportunity for people to invest.
From what I understand, the OWC in Lancaster is probably not shallower than what was previously reported in CPR, but rather the OWC will rise with production over time (hence becomes shallower than first estimated as more and more barrels are removed).
So in essence, you have both the aquifer AND perched water having an impact on productivity going forwards. It's good that management have realised this now rather than later.
I'm always conservative and I like the way the current management is going (although I'm disliking the fact that they're providing little info every so often, should just be the whole lot at once).
Slift.