Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
The data actually suggests flowing well 7z in July has materially altered the dynamics for well 6. This is the voidage issue they alluded to.
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The voidage issue can be interpreted as being either/both a) the 6 well slugging (aka dynamic instability) when 7z is flowed coincidentally; and/or b) the reservoir pressure dropping much faster than they would like towards bubblepoint when the 7z well is flowed (i.e. a lot of liquids are pulled out of the reservoir via the 7z well, but not a lot of the liquid is oil).
And why, despite every interpretation from yourself being negative, do you continue to be “long”
Go on, tell us some positives.....I dare you!
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Go and read my historical analyses of price vs value. FYI I have already said the value will be significantly marked down on my next revision, which will take place when I have sufficient facts to do it. However there is still IMHO a sufficient upside to merit the very considerable risk. Anyway I have other things to do now.
I disagree. You quoting statements from Hurricane and they writing "Hmmmmm" after each one is saying that you believe they are announcing half truths, or half lies. Pure and simple
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Fine. You can disregard data as much as you like. Meanwhile I have just given you a pretty good impression of what is going on elsewhere. Why do you think there are have been no bids for HUR.
So dspp, you are saying that Hurricane are deliberately pulling the wool over investors eyes. Correct?
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No. Don't misrepresent me. I am saying that HUR are very carefully setting out the bare minimum of facts whilst they take the time to assess the situation. And that any competent professional will be demanding the full facts, not the minimum. In the meantime individual investors can either take note of the risks on the table that the divulged facts indicate. Or they can disregard and operate on faith. YMMV.
I am long HUR. But I know that the only way to assess a reservoir is on the basis of actual data. Not faith. And certainly not someone else's reports of faith & hope. Data is the way to do it.
Genghis, I haven't called this at all wrong. I have drawn attention to some interesting results that are embedded in the OGA data, and pointed out that this could arise from a number of hypotheses, four in total that I could think of. You and many others may prefer to ignore data that doesn't suit you, but I am very keen on understanding data that puts my investment at risk. The company has now come forwards and said that watercut in the wet well has increased to 25-30%. Hmmmmm......... But that they don't think it is rate dependent. Hmmmmmm........ But that they'd rather not produce it for the time being, instead preferring to suck on the dry well. Hmmmmmm...... I'm sorry but when you are working through the field development decision sequence you don't just hand wave away data that you don't like. Instead you go out and look for answers before putting $bns at stake on the FFD. Why else do you think that they will be drilling wells specifically to look for the OWC in the various reservoirs in the coming years, at the OGA's insistence ? You only handwave stuff away if you are trying to do a sale to a bunch of mug punters. However HUR know full well that they have to deal with professionals at both the buying majors, and in the OGA (who have to sanction any FFD etc), which is why HUR are being very careful about their steps. So I am sorry, but this is not a rah-rah moment if you are a HUR holder like me. This is one where we drum our fingers on the table because the risks are still very much there. Spirit's post-mortem on their farm-in would be a fascinating document to read, and we are unlikely to read it. But HUR drilling a third horizontal producer into Lancaster (which ought to be unnecessary from a wellstock perspective .....) should tell you that reservoir risk is still very much on the table. What we are also seeing is (apparently) good pressure support, which may simply be a matter of good connectivity to connected hydrocarbons, but may also be good connectivity to an active aquifer, or both. Now if you think that the wet well is not connected to an aquifer, why are you preferring the dry well ? If you think that the wet well is only producing perched water, and that once that single pocket of perched water is produced then it will run dry, then why are you preferring the dry well ? (and by the way I don't subscribe to such a simplistic explanation of perched water). Basically there will be people like me, with much the same backgrounds as me, and the same experiences (but more) as me, in all the majors going Hmmmmm........ That is why the only bid that has come in so far was from Spirit who were desperate to do something, anything, to prop up their declining reservoirs. And is why Hur played a blinder on them with the farm-in deal that was done on LinWar. The rest of them are going Hmmmmm...... I know this because I have done this stuff for real. Which is why HUR answered my very valid concern as sparingly as possible. dspp
This does not put to bed the water issue, though it does partially explain it. The wet well has been going to 25-30% watercut, which explains why the monthly blended average from the (3-month dated) OGA data has reached 8% or so. This means an initial watercut of (from memory) 8% in the wet well has increased to 25-30%. This explains the scatterplot result which is blended averages. Their view that it is not rate-dependent is not yet backed up by public data. It is very interesting that it is only the one well cutting water (increasingly so from the data we have seen), and the other one not at all, yet in all other respects the wells are acting pretty much as one. However for the time being (!) we have to take the statement "The Company is confident that the water cut observed is related to perched/stranded water, based on temperature data, lack of rate-dependency, and water production behaviour after shut-in periods." as being the best view that one can form. Despite this they seem to prefer to flow the dry well (why provoke more bad news ... especially when one doesn't understand what is going on ... ). The pressure info is very welcome and seemingly good. But overall not as good a year as hoped for, hence relinquishing Whirlwind (that drill or drop issue, plus subsequent capital requirements).
dspp
SG,
I think you are overthinking this. Having said that subsea tie-backs are not my speciality. However I think you will find that the well flow is primarily choked at the subsea tree. The flowline length is therefore not ordinarily (if ever) exposed to full CITHP or full FTHP. One then manages the topsides control valves (I cannot for the life of me remember if these are referred to as chokes, it is a very long time since I have worked on FPSO stuff, there may be a PCV or FCV in there, or not) so as to get the first stage sep entrance pressure one desires. So the well drawdown is primarily controlled at the tree choke, ideally critical flow. Only if reservoir pressure has dramatically decayed would one need to switch on a ESP so as to bring flowline pressure up (and increase drawdown). So far HUR have not released any production pressure data of consequence AFAIK. The ESP rumor may be incorrect, innocuous, or not.
regards, dspp
Wellwell,
Think through what one would need to do with each well for a month, on a day-by-day basis. Make an assumption about flow rate and watercut for each well. Do it in such a way as to match the OGA data for the five months. Build yourself a little excel spreadsheet. Plot the resultant scatter plot. It is possible, but not as obvious as one might think. Your latest is a small subset of those perms & coms, and one of the more unlikely ones as it does not obviously correspond with other statements that HUR have made that also need to be respected. I am afraid that trying to figure out what is going on subsurface from surface data is challenging at the best of times, but even more challenging when there is unknown (or unreleased) data. Hence my very cautious four hypotheses.
regards,
dspp
wellwell
4. If you have a problem with the four hypotheses I posted (of which the last is "something I cannot think of") then please post carefully and thoughtfully here, or better still on TLF. When doing so don't worry about minor issues, concentrate on the big stuff. So far no-one has figured out an alternative hypothesis.
**I gave an alternative hypothesis that you discounted even though the wording of the RNS lends weight to the theory that the wells have been shut in for individual testing and if true supports 8% WC from 7z (assuming that's the one on production) with 6 shut in.
= not discounted, it is in fact hypothesis #3. However as I have pointed out it would need to be in a very particular sequence to obtain that result.
= so you don't have any other hypotheses ?
7. That information (rumour) about ESP VSD commissioning is also relevant. One brings ESPs on line to increase drawdown. Why does one seek to increase drawdown ?
**this is a red herring in my opinion and I subscribe to the 'being tested' argument rather than them being needed to increase drawdown
= I hope so too (i.e. either "false rumour" or "finally being tested and commissioned due to POB constraints in previous months"). There are other possibilities, but I definitely am not hoping for them, however I am watching very carefully.
dspp
DiveCentre,
Re other sources one needs to keep an eye on OGA numbers, partner & contractor press releases, ship movements, and academic papers & presentations. Plus of course absolutely everything that HUR put out which is of course not just RNS's. And the tame house brokers occasionally give an insight by the direction of the padding they wrap around the core data. Plus of course BB rumours which may or may not be true, and may or may not be relevant. It is just like any other intelligence plot - all the data needs to be collected, assessed, and placed in position for verification (or rejection). As one does this one also develops the analysis. To do this well requires an understanding of the possibilities inherent in any given piece of data and its significance in the overall plot. Some people have deep knowledge in one area (kudos to them) but lesser knowledge in other areas (and they don't always recognise their limitations). Ideally it is a team endeavour, so we all balance out, that's called the market. However in this arena one also has to remember that there are people who are either deliberately or mistakenly seeding misinformation and/or muddying the waters. We all do our best.
regards, dspp
1. The TLF site is down for a while due to some server changes. The changes only took an hour or so. The DNS propogation can take up to 72 hours depending on a lot of things, but for most people less than 24 hours. Personally I can see the 'old' TLF site but not yet the 'new' TLF site. YMMV.
2. If you have a problem with the data I have used then please contact HUR and the OGA as they are responsible for data quality matters.
3. If you think the only information that comes out is via RNS then I suggest you wise up.
4. If you have a problem with the four hypotheses I posted (of which the last is "something I cannot think of") then please post carefully and thoughtfully here, or better still on TLF. When doing so don't worry about minor issues, concentrate on the big stuff. So far no-one has figured out an alternative hypothesis.
5. If you have a problem with the shareprice then I am the wrong person to discuss it with. I am not a trader and the real fundamentals here are the ones that HUR and the OGA see. I am very long, and it has been a good while since any shares moved in my account.
6. But that doesn't mean I don't pay attention to information.
7. That information (rumour) about ESP VSD commissioning is also relevant. One brings ESPs on line to increase drawdown. Why does one seek to increase drawdown ?
8. That is a really good lyell paper, posted today, worth reading. But it doesn't actually say anything that hasn't already been chewed over (with fewer words) already on the relevant BB's.
9. There are many issues with HUR that lead to low shareprices. The big ones are technical (primarily reservoir) risk; project risk; funding risk; and shareholder risk. A few (%) of PIs panicking and running for the exit (or being stopped out) are very low on the scale of that very last item.
10. There will be a reason HUR feel the need to come to the market with an RNS (or similar) re EPS during December, which is in advance of their previous Q1 2020 intent. Quite what it is I do not know, but I watch with interest and I hope it fills in the information gaps that ought by now to be fillable.
11. Do not come to me for a comfort blanket. This is a high risk share.
regards, dspp
Someone asked a question about whether flowlines being displaced to water would affect the reported watercut when produced. The answer is no, at least not when I've dewatered, as that is subtracted from the relevant reported data. It is possible a mistake has been made, but I must admit I didn't even consider it as being a possible explanation.
Aduk asked whether I was for hire, history, etc. My current day job is somewhere else in the energy sector and probably doesn't leave me time to be for hire (I control my own job, so as always it does depend). However (comma) surely I'm allowed to take the **** occasionally about the lack of analysis I often see in the public-domain debate, whether from brokerages or individuals. If a rate-dependent watercut is occurring it is very important. If it is not occurring that too is very important, in fact it is one of the big Qs the EPS is designed to answer. We are only looking carefully at the issue because Carcosa dropped a package of data in front of me and scratched his head, figuratively speaking. Otherwise I too would have ignored it. Now it isn't causing me to panic and sell, but is sure as heck has caused me to sit up and pay attention to detail (and note that more study is required). Unfortunately there simply isn't enough detail data in our hands yet (as opposed to HUR's) to conclusively answer the question. As to my views on investing & general market matters there are plenty of them all over TLF if you want to read, though I don't suppose it will do you much good.
good luck all, regards, dspp
wellwell & aduk,
As we all know "however comma" and "more studied required" are feared phrases in any funders' ears. I think we all know the implications and therefore await the necessarily much-anticipated clarifications. I shall go back to my day job until then.
regards,
dspp
wellwell, you are indeed misunderstanding. May I suggest you look at the watercut vs monthly flow rate SCATTER plot I posted on TLF along with the accompanying notes in various posts. Not the month-to-month calendar trend, but the x-y scatter plot. Then you will probably understand the concern, and the (so far) three hypotheses that I have been able to propose.
yasirasmi, thank you. HUR will have far more data than we do, so I hope they are seeing things very differently. HUR have been very straight with the data that they have shared, but have not shared all the data. That is their prerogative but it does create issues at times like these. They are also somewhat casual at seeing things from the other side of the fence. We live in hope.
regards, dspp
Wellwell
"I can't recall when that was rectified"
See operational update 2nd September:
"Operations have now recommenced with two flowlines. As operations move into the next phase of commissioning over the coming months, production and availability are likely to be constrained as certain planned works and delayed data gathering activities will require periods of production shut-in."
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That dual flowline resumption date falls slap into the middle of the required Aug+Sep single well flow period, therefore it makes hypothesis #3 less likely. regards, dspp
So you don’t know but there’s clearly something going on? Or they flowed 7 on its own for the month of September at 17k and got 8% WC? You may not be wishing to influence the SP DSPP but I fear you’ve done exactly that.
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If the % watercuts are unchanged, they would have had to have flowed the 7z well on its own for pretty much all of Aug+Sep; and the 6 well on its own for pretty much all of May; and roughly 50/50 splits for all June+July. On the public data given, that is about the only way to achieve the outcome shown by the OGA numbers. As I have pointed out this is entirely possible, but is it plausible ? Is it more plausible than either of the other two hypotheses ? Is there a fourth (+) hypotheses and if so what ?
- dspp
JoeSoap - I don't know as sufficient information to form a view has not been given. There is clearly something going on. It is indeed possible that as you suggest in the near-well-bore(s) area there is limited fracture connectivity that chokes production, in such a way that opening one or the other well can influence where the fluids are preferentially drawn from, and hence the oil/water %. What quite a lot of people are misunderstanding is that the 'new' information in this respect is not the RNS information, it is instead the OGA production data. The OGA data quantifies exactly how much water and how much oil were produced in each month, which is information that HUR have not released directly to the public (it would be nice if they did). Also they are misunderstanding the reasons for discussing it. We are discussing it because it is vital to understand it, and because there are questions that it raises, not because I (at least) wish to influence share price. regards, dspp
wellwell,
The simple answer is I don't know, and there is insufficient data in the public domain to be sure. The data that there is suggests three hypotheses, only the first two of which are plausible:
1. A rate-dependent watercut, which would be a bad thing as it would mean at least one well accessing water that is not perched/stranded.
2. Water breakthrough from perched/stranded water into the hitherto dry well, which would not be alarming if the total watercut were to then be stable at 8% (or so) irrespective of flow rate.
3. A fiendishly cunning management of the respective flow ratios, and total flows, from both wells, by calendar month, so as to needlessly scare the pants off any investor analysing OGA in-arrears data. I find this implausible.
4. Can you think of any others ?
It seems to me that there is a reason why HUR will be giving an EPS update in December, which is prior to their previously advertised Q1 2020 update. I have no insight into what they will say. I would very much like them to be firmly questioned in public by a competent questioner, however I suspect they will not subject themselves to that.
regards, dspp
dspp,
What is your answer to HUR's IR, Sept 2019 re:
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Jiffybag,
Never confuse what you hope to happen, with the data that tells you what is actually happening. The E&P game is about data, and data interpretation, not hope. If you have a problem with my data interpretation please tell me. If you have a problem with the data itself please tell HUR and the OGA as it comes from them. If you don't understand then I really don't know what to say.
- dspp
aduk / sg2,
I look at all boards as I have more value-at-risk than most people here, and I am wondering who is seeing things I am not, or who has better explanations than I do for the things I am seeing. What is interesting is that Carcosa has a knack of putting the data out and standing back and saying, "now analyse that", and he tends to do it with the more interesting data. He is not shooting random bullets.
aduk: putting a ruler on the OGA charts will not suffice. You actually have to plot the scatter chart to see that the most obvious hypothesis is a rate-dependent water cut. Now it is a long time since I did ResEng-101 or PT-101, but a rate-dependent water-cut ought to strike fear into the hearts of any owner of a fractured reservoir. Which is anybody who is long HUR since it is the world's purest fractured reservoir, i.e. all fracture and no porosity.
SG2: I get that this is not piston displacement, and that after all is precisely why a rate-dependent water cut ought to be of concern. Anyway, Q1. Have I made a mistake in my analysis. I will be the first person to admit I am often wrong. Am I wrong on this occasion ? If so where am I going wrong. because it is a long time since I have paid attention to these details and I am very happy to relearn the basics, genuinely ? If I am not wrong and if indeed this is a rate-dependent watercut then Q2: what else could be going on and how significant might that be ? These wells ought to be a very long way from the water leg. Q3. What do you think will happen to the share price over the next few weeks between today, and whatever day that HUR makes a market announcement of their interim EPS assessment. Q4. If I am right in my analysis, how material do you think this is for the NPV of Lancaster phase 1 FFD ? For that matter will they ever get to a phase 1 ...... (I think so, and I think there is adequate value cover).
I am not seeking to induce a share price movement in any particular direction, and it certainly is not in my interests to have a downwards shareprice move as I personally have maximum exposure and don't want to increase it. However anybody out there who is playing with borrowed money ought to understand the real risks in play here or they could easily get very burnt, in either direction.
regards, dspp