The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
Production ytd has averaged 426b/d. Perhaps they thought if they just gave the gross number no-one would spot that the 450-500 current production number they kept giving was misleading.
And $51.31 per barrel pricing is not very impressive for those suggesting they are profitable. Brent has averaged $63, so a 19% discount. Even Columbus used to give those numbers. (And we still have no production number for T&T Jan-Jul 2020; CEG bought the company not the assets - that production is CEG's production it should be reporting.)
And still no sign of the promised £2m from Bizzell
I'm also very interested to see if the trading update does come tomorrow or Wednesday as promised, or is held back until the next S2 update. We're unlikely to hear on S2 by Wednesday morning, if Wednesday is the expected completion date. It will also likely take a few extra days to analysis the logs and be able to give details (net reservoir ft) on what they've found.
In fairness, five days ago they were at 3,870 ft. So they have since drilled down to 4,126ft so they haven't just been setting the casing. I would imagine much of the time has been trying to keep the shales stable to work in the open hole: trying to open hole long the firth Lower Cruse section, unsuccessfully.
We don't really how long cementing the 8 1/2" pipe and running the intermediate casing has taken; in fact we don't know if that has been done yet. As far as I can see they are saying the decision to case has been taken: it's not clear if the action has been completed.
Tiburn, yes the detailed net pay of for Saffron-1 is here: http://docs.publicnow.com/viewDoc?filename=70768%5CEXT%5C3628E505B2E1344FB5FC733C3D17D45D2070C357_C4EF11042A2526718DA8312001E1C53BE1E66F68.PDF
Indeed it doesn't gel with what the CEO is now saying. But then again the deeper Middle Cruse was a primary zone of interest two weeks ago and now, after finding 60ft, it's been re-termed "secondary" so that also seems to signal how encouraged they are.
Saffron-1 reported 900 ft of net pay down to 3500ft, so 200 ft is still bafflingly low.
The other news is that they are having similar problems in the deeper section to Saffron-1: mobile shales. I read it that they have been unable to conduct open hole logging on the first part of Lower Cruse which is now behind pipe (they were also planning to MDT sample it). It also doesn't actually say they managed to cement at the current casing point yet- cementing being the other problem for S-1.
CEG has already applied for the renewal as the deadline has passed, whatever their further analysis of P1.
I went looking for clarity on the renewal terms and found: https://d1ssu070pg2v9i.cloudfront.net/pex/bahamas/2008/09/01180256/2008-09-02-bpc_-_admission_document_2008.pdf page 100
“If the licensee has complied with the provisions of the Petroleum Act, the Petroleum Regulations and the terms of the licence the Governor General will renew the licence for a further period not exceeding three years for the whole of the licence area. Thereafter he may, in his discretion, renew the licence for two successive periods, each not exceeding three years, on application made by the licensee not less than three months before the date of expiry of the licence. The terms and conditions of the renewal shall be agreed at the time of such renewal.”
So the terms are agreed at the time of the renewal, not preset. But worse, it seems very clear here that the first renewal (in 2015) was automatic but the current second renewal is at the government’s discretion.
The government can and will have requested all the information from CEG. Otherwise frankly they have no idea if CEG performed all its well obligations and, since they have the right in their legislation, why wouldn’t they collect it.
Neither of us know what confidentiality commitments the government would have given CEG, but CEG had no ability to insist on any.
It is quite normal for a new licence grant to include receipt of all the historic data: well data and seismic. For example Chariot getting Lixus/Anchois and Jersey getting Buchan.
There’s no bidding frenzy because there’s nothing to bid on. Only CEG can renew the current licences. Either they agree terms to do that or the licences expire.
If another company wants in, either they approach CEG or they wait to see if the licences expire and then apply for fresh licences for the acreage they want. If they prefer the latter because there’s no need to carry CEG, they might try to have the government squeeze CEG out, but of course they won’t do it publicly.
But the government set the terms of the renewal. If they want rid of CEG, why can't they price CEG out of the renewal: demand $4m in rental and $4m in escrowed funds for seismic work in the first year of the new term.
If CEG don't/cannot renew, there's then nothing to stop someone else applying for some of the acreage. Except whether politically the government will grant fresh licences.
SC, I wasn't aware I was improving on your figures. It doesn't take a lot of research to figure out that $1.8m-2.6m of CF at 200-300bopd works out at profitability of about $24/b (at $60) and therefore costs/royalties/discounts are over $36. At $70 it would be more like $40 costs, so double what you've described.
A 100b IP well giving $1m in the first year is not going to repay in three years because it's going to decline, and literally no-one knows how quickly. Please do find me an example of a bank lending on a new play type on anything like similar terms.
Yes I am short but I've said this is relatively small scale - still it's currently paying me for my efforts here reasonably well. Primarily I post here to provide some balance, hence I have to lean bearish. Hopefully I may have given a few readers a bit of cause for caution since the price was 5-6p. And if I have, the current price says I've done them more good than you have.
CEG have given their own, less rose-tinted, economics for S2. At $60 it will return $1.8-2.6m per annum at 200-300bopd. We can extrapolate to something like $1m at 100bopd.
Nobody sensible - not a bank nor an equity institution - is going to give CEG $2-3m to drill another well that returns $1m in the first year until S2 has substantial production data so they know if/how the production declines in the first year. This will be the first production from the Lower Cruse so I'd want to see 6 months data at least before further investment. The company also has to clear a development plan with T&T gov before proceeding and a pay $0.5m to the BOLT vendors.
Personally I think even at 200bopd, a £30m market cap for the next fundraise is full, if it done in the near future to keep the Saffron wheels turning (or to pay the old bills).
And neither Stena nor Bizzell (who continue to renege on their £2m commitment) are going to put any money at any kind of valuation >5p.
S1 has been producing for nearly a year and looks to have declined for about 30 barrels a day to less than 10. Because it has drained much of the oil around it and potentially around S2 as well. Why else would it decline?
You can take a guess from the monthly data here. S1 production would be some but not all of CEBL's barrel count, noting the jump in May 2020. https://www.energy.gov.tt/publications/
Ooh - look what I found: Columbus' April 2020 presentation with much more detail on the net/gross. http://www.publicnow.com/view/3628E505B2E1344FB5FC733C3D17D45D2070C357
So in the upper section to 1,593ft, S2 found 145ft net. S1 found (intervals 1&2) 395ft net.
In the middle section to 2,804ft, S2 found 20ft net. For S1 that covers interval 3 - 136ft net, and about a third on interval 4 - so perhaps another 100+ft. Seems strange to cement a drill string in a sand interval, but certainly not my expertise.
So the upper and middle sections do look disappointing to me. The disparity is rather glaring that you've got to question the accuracy of Columbus' results.
On the plus side, S1 found net 200ft in the Lower Cruse starting at 3760ft depth. That implies at 3850ft for S2 they've got through the Detachment Surface which felt like a big operational risk to me. But I'm not going to rush to trust Columbus' net 200ft logging data.
We know the Upper and upper Middle should produce "commercially" as Saffron-1 has produced 10-30b/d from these intervals over the last year. I can't find anything to compare the 145ft to from S-1 but it would be a surprise if it's much different S-1/S-2 given they are twins - particularly close at the top, but S-1 may already have drained much of the oil close to the wells.
But what about the deeper Middle Cruse. While it's not as significant as the Lower Cruse, this could have been a new deeper source of development at Bonasse and was previously termed one S2's "primary targets of interest". They only found 20 net feet there so that seems a bit disappointing ... and today's RNS seems to now class this a secondary target. So overall to me, today's news looks to me (predictably perhaps!) like a quietly glossed-over negative.
I’m not sure what I’m meant to do with the information that I am irritating you. If you post something that in your own words needs a clarification, you might get a correction. As to my short, that is not my reason for posting: the share price is not down by a half since I was warning at 0.5-0.6p old money - not even a fraction; it is down because my analysis of the company finances was correct.
My numbers were researched. Exxon is putting a 220k/d FPSO on the 600mbbl Payara find in Guyana, that’s my comparison for CEG. But indeed I was too high: the royalty at that level is 17.5%. But even at 17.5% or 15% the government take is not really any different to the UK take. You haven’t given a calculation of how big you think the total tax differential is and how that would offset a 25% CEG minority.
Ironically tax wise the best place for exploration drilling is in fact ... Norway. They’ll give anyone a 78% tax loss refund on exploration even if they aren’t profitable in other production. In the Bahamas/UK would might drill a $100m well hoping the find a $3b asset. In Norway, taxation might make the asset only worth $1b but the risk reward is still better since the well will cost you only $22m net.
I'll grant you that Norway taxes are higher, but Bahamas vs UK taxation look much in line to me - Bahamas rates are certainly not "a lot less".
The royalty rate for the Bahamas is notionally +/-20%, i.e. at $70 oil that's $14/b. In the UK the tax is 40% on profits. A new Bahamas-like find might be profitable to the extent of $30/b at $70 oil. Feel free to contest that but I'm basing it on Hess' $35/b breakeven for Guyana (opex+capex) which has best in class productivity, and a notional $5 for financing costs which are also deductible: 70 - 35 - 5 = $30 profit, so in the UK life of field tax would be 40% of $30: $12/b.
Bahamas will get majors' attention if they believe there is Guyana-like potential for massive finds, but I don't think it's down to superior tax economics.
"compared to its fully owned licenses where royalties alone are punitive. For example, the North Sea."
You do realise the UK abolished royalties two decades ago and the Bahamas intends to "tax" hydrocarbons entirely through elevated royalties?
Meanwhile, hardly a surprise to me but no sign of the £2m CCN injection that was meant to arrive no later than yesterday. Without this money the company does not have the minimum £16m funding it says it needs this year. Shareholders should be spitting feathers about this: the £3m CCN were meant to convert at 20p to 15m shares. On the promise of £2m in February that was altered to 8p / 375m shares; on the revised promised of the £2m by yesterday it was altered again for £2.5m to be converted at 3.5p to 75m shares. All told this has given the bondholders over 60 million extra shares in the company, even though they haven't delivered the £2m on time and the company is in the lurch without it.
I don't think those things should be held back for auditor sign-off. We already have production and financial highlights for TRIN for Q1-2021 - crazy that we don't have similar updates from CEG, but in fact we don't even have T&T data for any part of 2020 yet.
I agree with Chesh the Lower will be much more important that the deeper Middle, but CEG have always said that both Lower and deeper Middle are the primaries for S2. All we've been told is they found the deeper Middle as prognosed: it would be nice to be told of the prognosis.