Member Info for Exploration

Fairdealer20

I should have mentioned;

The retiring chairman’s current new project, apart from writing and charity work, is the development of a winery near Dover close to his home. There are several big, new wineries in Kent and Sussex and the idea is to market a new label known as ‘White Cliffs’.

I’ll drink to that.

Fairdealer20

It is all too easy to get sucked into a myopic position on CNRL and be consumed by every near-term event on a bulletin board ‘bubble’.

Mature investors in oil and gas take a wider view on a strategic time span of five or six years - which includes a succession plan for management. Importantly, today’s announcement is part of a succession plan with Mark Lappin taking over as Chairman. He knows CNRL’s areas like the back of his hand, has all the key industry contacts, both with competitors and OGA. Personal relationships are a key success factor in the petroleum industry.

CNRL’s stated investment policy is to ‘reward shareholders via capital growth’. The policy also makes it clear that assets - or the company - may be sold and proceeds returned to shareholders.

Referring to comments earlier today, from the retiring Chairman’s standpoint it is not as though he needs the money by selling shares etc - he already has plenty from previous transactions in oil, gas and mineral ventures going back to the 1970s. Cluff Oil, Cluff Gold, Cluff Geothermal and so on.

Some of these ventures could have done better, but the value created by the successes far outweigh the losses. Over the next couple of years we’ll find out whether CNRL will be added to the successes.

Shed - brilliant summary.

Some posters can’t help it, because they come into a social media discussion and post comments designed to upset or disrupt the conversation. Often it seems like there is no real purpose behind their comments except to upset everyone else involved and offend to get a response. 

Not surprisingly, psychologists have conducted studies, giving personality tests to each subject along with a survey about their Posting behavior. They were looking for evidence of personality ‘issues’ (which we all have, although some are worse than others). Scores were highest among people who said prolific social media posting was their favorite Internet activity.

The studies found these posters truly enjoy making you feel bad and they feel good at the distress of others. They just want to have fun ... and bulletin boards are one of their playgrounds.

PotPot

Intriguing video. Towards the end, and prompted by a question, Graham Swindells expands on the relationship with Shell. Let’s also remember that Shell operates as a 50/50 joint venture with Exxon - so a powerful combination. He portrays the P2252 Licence prospects as a new play opener with considerable upside which will attract interest in the 32nd Licencing Round.

In fact the Zechstein play was the original target in 1952 for one of the first wells drilled in the northern part of the Netherlands when exploring for oil. But it found traces of gas a little deeper in Lower Permian sands, The next well, drilled in 1955, also failed to find oil in the Zechstein, but eventually in 1959 the third well confirmed the discovery of the Groningen - Europe’s biggest gas field.

Exxon- with Shell - is Germany’s largest natural gas producer, with production from fields accounting for approximately 70 percent of all natural gas produced in the country and are familiar with the Zechstein play.

Back in UK, the Zechstein play is virtually untouched. The Maxwell gasfield was discovered in Permian Zechstein carbonates with 41/24a-1 in 1969. Two follow-up appraisal wells 41/24a-2 In 1981 and 41/24-3 in 1992 were drilled into the fractured Zechstein carbonate reservoir.

The maximum flow rate on test of 34 mmscfd from a vertical well and over 100 mmscfd from a horizontal well drilled by Conoco - and all this about 12km east of Scarborough.

It’s a drilling challenge with lost circulation zones, but Shell has pioneered successful drilling in the Drenthe area in Netherlands where they have discovered several TCF of gas in the Zechstein play.

In summary, if I were CNRL, I’d try to downplay the scale of the Zechstein play because they’ll have a competitive edge in the 32nd Round with an early view of how modern 3D can illuminate this new prospective trend. The ‘post-3D’ CoS may be greater than 20% - that’s the whole point.

n4aPound

GALP is Portugal’s big oil/gas company.

Below is a link to a paper on Spain’s development of a gas trading hub in SW Europe.

One of the conclusions is that, although the gas pricing signals there should be more north-south gas trading, the lack of political will between France and Spain means its not happening in immediate future.

Not a big deal for Sound at the moment, but it does mean sales beyond Spain are off the gas marketing agenda at least for now.

https://www.oxfordenergy.org/wpcms/wp-content/uploads/2019/03/A-Hub-for-Europe-the-Iberian-promise-NG143.pdf

Wh0thedaddy

At the BB event BM said they are using Italfluid for CT equipment. Italfluid started out as a fluid provider several years are. Then it morphed into a CT supplier as Smape.

http://www.smape.it/

It’s a leader in CT work in Southern Europe. The CT tower for TE-10 depths is a fairly chunky meccano set.

I doubt there are any delays, but rather hopelessly optimistic estimates of schedule by Sound.

Also, there as been some banter about the meaning of the word ‘discovery.

The definition of a ‘discovery’ varies according to where you are in the world. For example China and FSU have different meanings. In FSU countries ‘discovery’ meant the identification of an undrilled geological feature.

In the west the SPE terminology has been updated regularly. The current terminology is;

“Discovery

The term applied to a petroleum accumulation/reservoir whose existence has been determined by its actual penetration by a well, which has also clearly demonstrated the existence of moveable petroleum by flow to the surface or at least some recovery of a sample of petroleum. Log and/or core data may suffice for proof of existence of moveable petroleum if an analogous reservoir is available for comparison.”

https://www.spe.org/industry/docs/GlossaryPetroleumReserves-ResourcesDefinitions_2005.pdf

Philpolarbear

Quite. The nonsense quoted about IOG is simply the fallout from the LCF fraud connected to the London Oil and Gas loan. Hardly an example of a conventional placing.

a1m1

Writing on the Wall?

Looks like Sword of Damocles is about to drop on you a1m1 - several times!

Shell about to start broadband 3D survey on 41/5 and 41/10

Shell exercises option on 48/8 next month

ENI’s/Serica’s exploration well in 22/19 nearing completion

32nd Round coming up to re-licence 43/11

No immediate fundraising needed

a1m1

Well, since all agm resolutions were passed in 2018, I hope so.

Try getting out of you CNRL ‘bubble’, and you’ll quickly realize this arrangement is normal for public companies and nothing for shareholders to be concerned about.

a1m1

Nothing to dispute on dis-application of pre-emptive rights when allotting shares.

In fact I’d be concerned if a public company did not include this provision to be voted on by shareholders annually. Take a look at any public company and you’ll find they all maintain this authority on a rolling yer-on-year basis with limits appropriate to the size.

To be clear, these resolutions seek limited authority from shareholders for the company to allot shares, and limited authority to allot shares in certain circumstances without first offering them to existing shareholders.

They enable the company to raise capital quickly and easily when needed, and permit the company to allot shares as consideration in a transaction. Same for awarding options to individuals.

The approach is to seek authority to allot shares at each AGM for the full amount permitted by the institutional investor guidelines which you mention to allow as much flexibility as possible, which the board believes is in the interests of the company and its shareholders as a whole.

Since the board considers that it is in the best interests of the company and its shareholders generally that the company should seek the maximum permitted by the Pre-emption Principles and have the flexibility to conduct a pre-emptive offering without complying with the strict requirements of the statutory pre-emption provisions.

This allows CNRL to raise capital quickly and easily in order to finance business opportunities when they arise in line with the company’s strategy for growth. It’s how ‘all-share’ acquisitions are sometimes made. Alternatively, if there is an institutional investor keen to invest then, with shareholders existing ongoing support, the CNRL can move quickly to secure the funds.

CNRL has granted an option to Shell. That will be covered in the Option Agreement. The option has a value which is paid by Shell in the form of a (non-refundable) Initial payment. When/if the option is exercised and the Farm Out transaction completed, the Further Payment is made.

“P2437 farm-out: Cluff has granted Shell the option to acquire a 50% working interest by 30 April 2019.  If the option is exercised, Cluff will retain a 50% working interest and operatorship until a well investment decision is made, with Shell paying the costs to date.  The consideration receivable by Cluff is US$600,000, which is comprised of an initial payment and further payment upon completion.  If a decision is taken to drill an exploration well on P2437, Shell will pay etc etc”

Philpolarbear.

Thanks.

The 48/8 option is about transfer of equity.

‘Completion’ in this context is a legal term defining the final stage in the transfer of equity, at which point the P2437 Licence legally changes ownership.

So CNRL will have already received a ‘deposit’ - to use a house-buying analogy - and the balance of the 600,000k on ‘completion’, which will include OGA approval.

Mike007

You are correct - completion refers to completion of the farm in transaction on Block 48/8 - nothing to do with drilling. The Licence obligations do not include drilling, but it’s a low-cost way for Shell to review data etc and then decide whether an exploration well is warranted.

Contrary to Amtech’s assertion that a well on 48/8 has a low chance of success, the main risks are trap definition @60% and reservoir effectiveness at 60% with source, seal and timing all >99% as assessed by Centrica some years ago. So the overall risk at the time was ~ 36% - pretty low by UKCS standards. And with Shell’s expertise on the Barque/Clipper area they will probably move the chance of success to 60%. That doesn’t guarantee a well will be drilled, but I expect the project will rank well in Shell’s UKCS capital allocation.

I noticed some other nonsense about disapplication of pre-emptive rights in share allotments. This is a common ‘boiler-plate’ resolution in most public company general meetings. It provides for companies to accept chunky subscriptions from, say, institutional investors and save money on transaction costs.

Amtech

I suppose we should remember the P2437 deal with Shell just enables them to acquire 50% of the Licence until it expires in 2022 in return for 600k they pay to CNRL + do the required technical and commercial analysis to decide when/if to drill a well. The reference to ‘completion’ in the RNS refers to the transaction, which would normally include OGA approval and conclusion of a Joint Operating Agreement.

If you read Centrica’s relinquishment report for P1374, which includes CNRL’s P2347 Block 48/8 you can see Centrica gave up due to uncertainties in structure mapping and their perception the Leman sandstone reservoir would be sub-commercial. However, petroleum geology/engineering tends to advance surprisingly quickly - led in this area by Shell.

https://itportal.ogauthority.co.uk/web_files/relinqs/P1734.pdf

Shell’s Barque Field cluster is associated with some of the earliest gas discoveries in the southern North Sea. In the Sole Pit area the reservoir, the Rotliegend Group Leman Sandstone Formation of Lower Permian age, occurs between Carboniferous Coal Measures, which source the gas, and Zechstein evaporites which form an excellent seal. The Leman sandstone has generally very low permeability resulting from deep burial of the Sole Pit Trough. The deepest burial and hence the maximum diagenetic damage to the reservoir happened in the early Late Cretaceous prior to two phases of inversion (uplift) in Late Cretaceous and Mid-Tertiary.

Compaction and diagenesis reduced reservoir permeability to such an extent that parts of the Barque & Clipper fields would be non-productive were it not for the presence of effective natural fracture zones and well stimulation by hydraulic fracturing techniques.

Though appraisal and evaluation have been relatively extensive, remaining uncertainties dictated a conservative development in conjunction with the adjacent Clipper Field. A selected initial area was developed for first gas in October 1990. Good reservoir performance from horizontal wells led to later development of the whole field.

Antech

Reasons;

Shell needed time to review the depth conversion of existing PSDM 3D seismic. Shell has access to velocity control for all wells in the immediate area, whereas CNRL did not and would have taken months to do the same work.

Shell had to do more detailed work on the cost/schedule of an exploration well + fracking of Leman Sandstone reservoir found in 48/8-2. This well found gas, but the post well review by the then operator, Centrica reckoned it was drilled on the edge of a gas accumulation. Also, Centrica didn’t like the low porosity, but since then fracking is the norm in this part of North Sea.

Shell needed time to calculate costs and review timing of a tie-back to the Clipper Gas Hub.

Other;

As always, these things tend to slip so we might see an extension to Shell’s option.

Philpolarbear

At the recent Oil Capital meeting this week delegates said one of CNRL’s strong points as an AIM company is its level-headed, hype-free reporting. Also, CNRL has a track record of raising just enough money to fulfill going concern requirements with minimal dilution.

The CFO has to be prepared to ensure assets exceed liabilities, which, right now, are administration, licence rentals and the OGA levy. The CFO will also have in hand a range of options to cope with foreseeable changes in liabilities which can be activated when/if needed.

Shareholders will only be given the opportunity to increase or maintain their holdings in a well-reasoned circular which explains the use of funds and the associated risks and benefits.

Despite recent posts to the contrary, shareholder engagement in the CNRL is encouraged by the inability of the company to significantly dilute its existing shareholders without their consent. Same for all UK public companies.

Shareholders should not be too concerned if Shell’s option on P2437 expires or is extended because the first term of the Licence doesn’t expire until October 2022 and there is plenty of time to find another partner for this low-risk venture.

https://www.cluffnaturalresources.com/wp-content/uploads/2019/03/Oil-Capital-March-2019.pdf

Dickupham

Also - Shell has just spent 300 million refurbishing the Bacton gas terminal and diverted existing gas via their Clipper hub. Bearing in mind Shell has set a cap of $25,000,000 on a well on Selene, this type of cost might imply a horizontal well followed by a staged hydraulic stimulation. Selene is next to the Barque gas field so a successful well might be completed as a subsea producer and, subject to OGA approval, be on production relatively quickly. The arrival of purpose-built ‘frac boats’ in UKCS makes offshore fracking almost routine nowadays.

Maintaining a material interest in Selene would mean CNRL raising money - that’s where the discussion with a1m1 started. Selene is probably one of the lowest risk exploration projects left in the Southern North Sea.

If you read Centrica’s relinquishment report for P1374, which includes CNRL’s P2347 Block 48/8 you can see Centrica gave up due to uncertainties in structure mapping and their perception the Leman sandstone reservoir would be sub-commercial. However, petroleum geology/engineering tends to advance surprisingly quickly - led in this area by Shell.

https://itportal.ogauthority.co.uk/web_files/relinqs/P1734.pdf

Shell’s Barque Field cluster is associated with some of the earliest gas discoveries in the southern North Sea. In the Sole Pit area the reservoir, the Rotliegend Group Leman Sandstone Formation of Lower Permian age, occurs between Carboniferous Coal Measures, which source the gas, and Zechstein evaporites which form an excellent seal. The Leman sandstone has generally very low permeability resulting from deep burial of the Sole Pit Trough. The deepest burial and hence the maximum diagenetic damage to the reservoir happened in the early Late Cretaceous prior to two phases of inversion (uplift) in Late Cretaceous and Mid-Tertiary.

Compaction and diagenesis reduced reservoir permeability to such an extent that parts of the Barque & Clipper fields would be non-productive were it not for the presence of effective natural fracture zones and well stimulation by hydraulic fracturing techniques.

Though appraisal and evaluation have been relatively extensive, remaining uncertainties dictated a conservative development in conjunction with the adjacent Clipper Field. A selected initial area was developed for first gas in October 1990. Good reservoir performance from horizontal wells led to later development of the whole field.