Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
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@Sankeys A key aspect of this is that the close proximity of Serenity to Liberator. It means that any 2020 drilling programme can be combined, as it was this year, such that appraising Serenity (which if successful will unlock substantial more value in the asset), comes with limited additional cost.
The June 2019 Proactive presentation states that the Serenity drill was to cost $13m. Even on a like for like basis, which I would think could be better, given they should be drilling twice and know far more about their subject there, we are talking 'just' circa $26m to appraise Serenity to a point that they would know what they have for an asset.
If I3E are indeed successful at Liberator, then they should/would have far better scope to achieve additional funding, and I do include the option of returning to the markets, be it in a fairly limited capacity, because it should come with no fear in my view.
Success at Liberator makes that c.$26m figure of no serious concern, such that other than a strategic desire to de-risk their assets, I3E would not need to entertain any low ball offers for a farm in to Serenity. So even though Serenity is at a fairly early stage, it should need a very good offer (see Majid Shafiq comments 29th Oct interview) for a new partner to enter the game there.
The words being used by I3E in that same 29th October interview, were delivered along side the words that they have had no direct contact with RRE. They were also highly likely delivered prior to any tangible discussions being held with any other interested party, because it was simply too early.
Yet the team is already busy looking at appraisal targets and a plan for drilling in 2020. They are able to do this simply because the funding needed to drill, is so achievable. What other junior oil play has 2 such sizeable assets within 10km of each other and an FPSO sitting on their doorstep?
The first drill at Liberator was a disappointment but that should not be allowed to undermine the strength of the deals that I3E have achieved, sometimes under a great deal of pressure, in order to give themselves not only their chance at Liberator in 2020, but also a 4th unexpected drill, which itself comes with a number of strategic advantages.
That sort of ability is very attractive in terms of investment and if they can do all that prior to finding oil, then what can they achieve if they have 2 fields, and one proven to produce at up to 20,000 bopd?
A2 starts the process and has to be brought home, but it also acts a trigger to much bigger prizes, which will not be reflected in the value of the company overnight, but given enough time and patience, should be well worth sticking around for.
Thanks for sharing. Fascinating read
2020 will be a very busy year for I3e, with the caveat of Senior lending - which given the planning you would like to think is more or less organised subject to the results of this drill.
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If they are going to push through 2 horizontal developments wells on Liberator (quoted very simply as requiring Q2 and Q3 in the Jan 2019 Environment Plan), plus possibly up to 2 appraisal wells on Serenity, then either the programme has got to run later, or it has to start as early as possible.
Of course, now they have a history with the Borgland rig and the team around it (Petrofac etc), they can fine tune their drill programmes and likely be more accurate with their programme assumptions. But it is still a lot of drilling with one rig.
The question may come down to ;
1. how much more additional surveying is required for the LIB phase 1 pipelines, which will to a degree, have changed now that LIB mapping has been updated plus ;
2. how long will it take to get the FDP revised/signed off and ;
3. how soon can they complete the funding.
I do not in any way wish to ignore or over simplify the substantial challenges that I3E have before them, to get their LIB phase 1 development into production, but the way that those two gentlemen were talking in that interview, the intent to me (and I would say the Dolphin strategic alliance is built on this), looks to be to get the Borgland Dolphin back on site after it leaves Shell, which right now looks to be around end of April.
Anything much later and Dolphin have a cost and logistics concern because they will potentially need to place the rig in storage once more. For me the strategic alliance is designed to help them avoid that.
It makes sense for everyone involved to keep the rig active and to get it on site at Liberator, after it has left Shell, which in turn gives the I3E team a very good shot at completing Liberator and those appraisal wells at Serenity, before the weather turns against them next Winter.
This is perhaps why the team have decided to drill the pilot well at A4 prior to the rig going to Shell, in order to save time next Spring/Summer. Perhaps.
If that is the case, then the meetings with the senior lenders, will be being tailored towards an accelerated conclusion to the RBL (be it perhaps in a manner that is advantageous to all stakeholders), or have been advanced in a manner that supports a faster roll out post the A2 result.
As Majid Shafiq says "we'd like to accelerate everything as quickly as possible" and that can be done if they can maximise their advantage by driving their strategic deal with Dolphin, by keeping the Borgland gainfully employed, which in turn gives them a proven drilling team on site, which itself will support their arguments and credibility, for the financial support that they seek.
Food for thought if nothing else.
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Good afternoon everyone,
Some things that Majid Shafiq and Graham Heath both said in the Proactive interview from 29th Oct, have been bugging me.
In answering the question regarding "how far down the track would you look to be developing Serenity?" (18m 50s), Majid Shafiq had this to say ;
"What we'll be doing now is analysing the data and deciding where we want to drill an appraisal well and then working out the timing for that. We'll need a site survey for it. . . Wouldn't be able to shoot a site survey until the weather improves next Spring. . . and then we would look at starting to appraise it"
"everything as always is subject to funding. . . so we would have to have funding in place but we'd like to accelerate everything as quickly as possible"
"And it would make sense (to accelerate) now that we have a very good relationship with Dolphin. We know that this rig performs very well, the crew, our entire group of people that are drilling this for us. . We know that we have got a good infrastructure and apparatus here to drill wells successfully.
"If we could drills more wells next year obviously we would like to but everything as always is subject to having the funding in place"
Graham Heath then adds ;
"Just to be efficient, it would make the most sense when we go to drill production wells next year for Liberator phase 1, that you would try and add on additional appraisal at that that point"
"Hopefully we will be in a position at that point to drill a couple more appraisal wells on Serenity"
The 29th Oct update stated that I3E have formed "strategic operational alliance for the use of Dolphin drilling rigs for i3 operations to August 2023"
However, given that this relationship is built on the successes achieved by the crew of the Borgland and that I3E will want to get the very most out of their funding and the 2020 drill programme, it makes sense to secure the one rig and crew, that you know you can trust, and that have already been there and done most of what you are going to ask them to do again next year.
The fact that Majid Shafiq refers directly to the Borgland Dolphin and its crew when speaking about having "good infrastructure and apparatus here to drill wells successfully," says to me that their aim is to do exactly that.
To date, the Borgland is due to go to Shell in February and drill and complete 1 gas production well on the Knarr field in the Norwegian North Sea.
For the 2019 programme, the Ocean Observer conducted its survey "over the course of March and early April" such that "sufficient data has been acquired to allow the company to proceed with permitting of the 2019 drilling programme" (9th April RNS).
So the possibility of appraising Serenity first is remote. However, Graham Heath in that same interview talks about Lib/Serenity efficiencies, with "no need to mobilise and demobilise twice," so we aren't talking 2 rigs here.