Member Info for BILLFISH

Interesting post Boderisimus. I had a chat with JP about this very subject about a year ago. He knew about it then but didn't think they were going to use it. Things seem to have changed.

If you are interested in satellite based spectral analysis you may be interested in this presentation made 7 years ago to the geological society by one of the companies involved in that area.

https://www.youtube.com/watch?v=cIRhkDqRNRM

There are quite a few nuggets for others with a more general interest in exploration metrics.

That same company has produced their map for Tendrara which can be viewed here.

http://www.scotforth.com/cgblog/24/83/Direct-Hydrocarbon-Mapping-in-the-Tendrara-Discovery-District-Eastern-Morocco

I hope you find these interesting for your research.

GLA

BF

Hi Guys,
The next bit. If you listen to Slumbergers Q2 webcast you will learn that they delivered profits below expectations. This was caused by incurring significantly more mobilisation costs and startup costs than expected.
They expect to mobilize 90 rigs before year end.

The most telling comment from our perspective was the statement that they had ALL their land kit out on hire from the end of 2018 onward. This is encouraging them to enter commercial negotiations with their customers to rebuild the margins they gave up during the price slump, they are also looking to prioritise customers who agree to shorten payment cycles. In short the day rates are going up and you have to pay more quickly. This will increase the capital intensity for operators. Ironically when Schlumberger decide where to disburse their own $2 billion capital budget for next year Capital Intensity is the metric they are using to grade their projects.

So the price of gas is going up at the front end of the deal while the cost of delivering the gas is also going up at the back end of the deal. It is also worth noting that the front end of the deal is fixed while the back end of the deal is variable. The degree to which one cancels the other will be determined by the volume agreed in the deal.

Then there is also the maverick in the white house slapping 25% tariffs on steel and the retaliation by others. This has the potential to raise the price of the spur pipeline. Puting back the GSA might, I say might, help if common sense were to prevail there.

Finally a wee word on pricing. The following prices are taken from the SDX presentation dated May 2017 which I just happen to have to hand.

SUPERCERAME $8.1/mcf 19/12/2011 - 18/12/2016
SUPERCERAME $9.9mcf 01/01/2017 - 31/12/2021
CMCP $7.9mcf 01/01/2016 - 31/03/2017
CMCP $8.1mcf 01/04/2017 - 31/03/2018
PORCHER $12.0mcf 5 year
PORCHER 3RD PARTY $12.0mcf 5 year
PEUGEOT (potential) $12.7 mcf 10 year.

These are burner prices but are also close to well head prices so I would expect the GSA price to rise from the $8-$10 guidance so far provided by JP.

This price of course is the price paid by ONE to the operator of the assets. How much of that will fall through to the SOU investors is something that neither JP or JJ have addressed yet.

All in all, taking into account the need to drill a few wells to calibrate the seismic I am in no rush to see the GSA concluded.

Looking forward to an interesting few months running up to Xmas.

GLA

BF

Hi Guys,
This post uses the meeting I had in the Spring with JJ, the SDX presentation pack I got from Paul Welch last year and the Q2 webcast from Slumberger ( which may not last long on their website so don't delay if you want to listen) as information to set the GSA in context.

The meeting with JJ turned out to be the best one I have had with the company, coming as it did in the middle of a raging blizzard in Edinburgh. The result of this was there were only a handful of us and it meant that each topic was dealt with completely rather than the staccato of a Q&A where it is hard to keep track of what has been asked and answered.

JJ got a robust reception when the GSA came up with some questioning the wisdom of tying the purchasers hands when their balance sheet strength gave them more flexibility than SOU in slanting the deal more to their advantage,

JJ explained that the GSA is intended to strengthen our hand in dealings with the potential purchasers by agreeing a price and a guaranteed volume which would then be sold on to our purchaser. This in effect turns the GSA into a quasi bond with a guaranteed revenue stream set against the purchase price of the SOU company and the development cost of delivering the agreed gas volume.

As the year has progressed both ends of the deal have seen significant pricing developments. SDX have published their half year results showing realized average pricing of $10.51 with guidance of current deals being signed between $10-$12. SDX is a completely different beast from SOU. SDX explore, produce,process, deliver and sell the gas to the end user. They have no intermediaries "providing services" which dilute the wellhead price from the end price. Another significant difference is the quality of the gas. The gas being sold in Kinatra is 99.6% pure. It only requires a wee bit of drying so there is virtually no loss (well 0.5%) at the processing plant.

This means there is virtually no difference between the wellhead price and the burner tip price.

The Tendrara gas has significant volumes of CO2 some say 10%-15%-20% so there will be a significant volume loss at the gas processing plant. They will also levy a fee (2%,3%,4%). then there is transport two pipeline fees ( the new spur plus the GME) GME currently charge approx 5% for gas transit, taken as payment in kind, to feed two power plants. Will we get charged two sets of %5 or only one. I will split the difference and use 7.5%.

You can see that there is a loss of somewhere between 25%-30% of volume between the well head and the burner ( in a power plant). JP has guided $8-$10 for the GSA but he has given no indication so far on where title to the gas transfers from producer to ONE. That point has as much influence on the value to the producer and hence us as does the raw price.

I an running out of characters so I will stop here and start a new post for the Schlumberger bit.

GLA

BF

Hi Guys,
With my first substantive post on here I think I will displace Trellis and hope that we do not see the GSA being agreed until after the new year at the earliest.

The GSA is meant to act as an inducement to potential purchasers of the company and comes with an obligation to develop the assets to produce the agreed volume of gas.

The amount of cash required to develop the assets along with the time frame within which the cash has to be spent defines a metric called Capital Intensity. Signing the GSA then holding up the sale of the company for example while waiting for the results of TE9 reduces the window that the potential purchaser has to deploy his capital thus increasing the Capital Intensity, This metric increases even further if you are to wait for TE10, TE11 and whisper it TE12.

For me I would go for signing the GSA much closer to the LE event.

I am going to post this now to make the 9pm cut off, but I will follow it up with a post that develops the concept a bit further and also develops the reality of comparing the SOU and SDX gas price.

GLA

BF

Hi Guys,
Another refugee from the old iii board here.
The vehicle in question is not a desert bulldozer, nor is it a tatty truck. It is in fact a grader or sometimes called a road grader. What is not obvious due to the stoor it is kicking up is that there is a blade behind the front set of wheels.

The normal set up when pushing in access roads or gravel roads is to have a dozer,grader and a roller ( normally of the vibrating kind).

In this instance Sound have hired a Caterpillar D6 , which is a mid range dozer with what looks like a "S" or straight blade, so not much material to shift. They have a grader which will be used to put a camber on the road to help shed water, it will also be used to level off the drilling pad and compound. Somewhere in the background there will be a roller of some kind but have not seen it yet.

From the pics it looks like they are pushing on with a fairly rudimentary access road that will suffice to get the kit in and support the transportation of consumables and staff. The enemy of all dirt/gravel roads is water (hence the grader to effect the camber) so I would not expect this road to stand up to much harsh treatment if it became necessary to truck out liquids from say an extended TE10 well test. It will be interesting to see how they intend to cross that bridge if it becomes a necessity.

If anyone wants to see what a grader looks like google up grader or road grader and click on images. They do look a bit like some of the homemade dune buggies from a distance but the experience of driving them is a little less spectacular.

GLA

BF