Member Info for Exploration

Don't know. It could be Neptune - they need a 'hopper' of new gas to keep the Cygnus system operational. Spirit's strategy is to minimise spend on exploration so Neptune might end up running the whole thing. Just speculating, but forget Shell, BP etc - they have better, bigger options in UKCS.

Dickupham

There are signs of life with current drilling near CNRL's P2248 blocks.

Neptune spudded 44/12b-7 on October 29th using the Ensco 101 jack-up rig. This well targets a fault block east of the Cygnus Field to which it will be tied back if successful. Estimated drilling time is 80 days.

Although un-announced there is speculation the rig will then go to re-enter 43/13-7 on the Pegasus discovery for Spirit Energy. The idea there is to lay a pipeline eastwards to the Cygnus platform and export line. After that, perhaps Spirit will drill the Andromeda prospect in 43/12.

Thereafter, perhaps CNRL’s prospects in 43/11 will be next in the queue by mid-2019?

ddboy

Here is a link to a youtube video of running 9 5/8" casing in Oklahoma.

https://www.youtube.com/watch?v=xsg1bBUNIac

ddboy

But - red is Weatherford's colour

ddboy

ddboy

Based on news from Sound and previous drilling it looks like the Tagi age-equivalent, ‘non-reservoir ‘in TE-9 is actually a pretty good cap-rock! Very similar as to the Mercia Mudstone which is the top-seal to the Sherwood Sandstone at the Wytch Farm oil-field, except at TE-9 there was no good lower Tagi sandstone.

Furthermore, cementation of the pore spaces probably took place soon after the fine-grained sandstone was deposited or possibly just before the gas was migrating. The TE-9 results reported ‘gas readings in both the TAGI and Palaeozoic intervals showed a range of C1 to C5 hydrocarbons’. So, we’ll probably see same in TE-10. Either way, unless petroleum arrives to completely fill a trap before diagenesis clogs up the pores, reservoir effectiveness will be destroyed, but some gas bubbles remain.

Moroccan geologists see distinct lithologies in the Tagi with the best reservoir near the base. These comprise a first-order trend over the Tagi sequence. At the base are perennial braidplain to ephemeral sheetflood systems (good reservoirs) which grade upwards to ephemeral lacustrine/playa lake conditions (non-reservoirs). This trend culminated in deposition of the salt, and reflects a long-term waning of sand supply and increasing ‘flashiness’ of river water arriving in the fluvial system which was touched on at the DD.

Work by Onhym and Prism Seismic during Fastnet’s tenure improved the understanding of both the structural mapping and the reservoir presence in the area covered by 3D seismic. Simple RMS amplitude analysis enabled extraction of ‘geobodies’ where the best TAGI sand development may be present - although this approach has never been tested by the drill. Maybe something for TE-11 instead of a high risk Palaeozoic prospect.

3D seismic seems to be the key. As well as the TE-5 Horst, Fastnet mapped a number structural leads in the Contract Area, including SBK that tested gas in 2000. Fastnet realised that none of the structures - including SBK, the A1 structure and the TE-10 strat trap - warranted drilling on 2D seismic and 3D seismic would be required over the leads to develop prospects with a tolerable CoS. In contrast, Sound elected to drill rather than spend more money/time on 3D seismic, which seemed like a reasonable compromise at the time. Fastnet identified further leads within the 3D seismic grid over the TE-5 Horst which remain un-drilled and might become satellites to the TE-5 development.

I imagine similar discussions have taken place in `Sevenoaks and Rabat in recent weeks. BM and the team have a real challenge on their hands - one of the most difficult geo-puzzles to solve. Yes, the gas is there, but where is the best Lower Tagi reservoir?

Woodrow,

JP's answer is fair enough - I'd missed that. Thanks for the reply.

But - in my years of experience in Morocco, neighbouring countries and Middle East formal business letters as usually dual-signature and notarised with the stamp of the company involved.

OGIF is unusual, being effectively run by AFG and comprising investments from several state and private institutions.

JP knows how it works, so we can accept his judgement.

Shaugreen47

The logo on the OGIF letter is the old logo of Maghreb Petroleum Exploration dating back many years.

The letter would have carried much more weight if it had included Mohammed Benslimane's signature, an office address for OGIF and had been motorised.

Fair enough SO.

New directors I would propose would include Crudehope, Jez-the-Fez, and yourself as Chairman.

Let's leave this thread for now.

ddboy

Well, David Clarkson is no non-exec on Sound BOD. He oversaw the meltdown at Bowleven where an over-active, under-achiever, over-paid CEO was voted off by investors. He has background in project management - 'who is accountable, what will it cost, when will it be completed' - I'm sure you get that!

Partridge

I wonder if the performance of Sound’s Board over recent years has provoked a move by M6 to replace them, using OGIF’s shareholding via an EGM. Sound would remain as an entity, but under new management - preferably with Moroccan specialists whole can recover the lost value in our investment.

The procedure for preparing and holding a General Meeting of shareholders, a shareholder or shareholders who own >10 percent of the Company’s voting shares are entitled to demand an Extraordinary General Meeting. Calling an EGM as requested by shareholders owning at least 10 percent of the Company’s voting shares shall be carried out by the Company’s Board of Directors. OGIF and CIP can do this.

Then, Sound's Board of Directors can either call or refuse to call the EGM within 5 days from the date that the corresponding request was lodged.

If the Company’s Board of Directors fails to make any decision during that period, the shareholders demanding that an EGM can appeal to a court to force the Company to hold an EGM. If the court decides in favour of holding an EGM, the shareholders who made the initial request must prepare and hold an EGM on their own.

If Sound’s Board decide to either call or refuse to call an EGM during the 5-day period, the shareholders who demanded that the EGM be called are notified of the relevant decision within 3 days from the date it (the decision) is made.

If the Board of Directors decides in favour of holding an EGM, the EGM must be held within 40 days from the time that the request was filed.

The request to call an EGM must specify issues that will be included in the agenda of the EGM. The request shall also include a draft resolution and suggestions on the format for the EGM. i.e. voting directors off the Board and nominating new ones.

By drilling TE-10, Sound can reclaim its bank guarantee, which is a promise from a bank to fulfill Sound's contractual obligations. It's actual cash in a Moroccan bank which will go back to Sound's account. That way, Sound can continue to operate Tendrara until 2022, but effectively do nothing except pay themselves until an LE.

Levelup - some good points - thanks

I don't think the Board has misled shareholders BUT they are deficient in Corporate Governance and even really believed the figures for resources, £10, golden tickets, etc mentioned in various videos and public meetings.

Misleading shareholders is serious stuff. For example, the TE-9 CPR references it is inside information for the purposes of Article 7 of Regulation 596/2014. This regulation is about market abuse and obliges a company to release information which may affect the value of shares in the company. Sound's Nomad should keep that in order.

For big time ‘misleading’ look at the Shell reserves scandal which led to the departure of the CEO and Chairman. A whistle-blower exposed the scheme to overstate reserves by 20%. That performance would have led to a big bonus for the CEO. Instead, it went pear-shaped; Shell were fined and had to fight an expensive class action in US courts. The CEO went on to qualify for ordination as a priest. An idea for JP's next job?

https://www.independent.co.uk/news/business/news/independent-report-lifts-lid-on-shells-fatal-thirst-for-reserves-56749.html

At the far extreme in the energy sector, one sees ‘house of cards’ companies like Enron which heightened nervousness among average investors about the transparency of corporate reporting, not to mention the associated collapse of Arthur Anderson, their auditor. This case ended up in court too.

On Governance, I’ve mentioned before that ‘Risk Management’ is covered by Sound’s Audit Committee which is the Chairman and Marco F. Were they asleep at the wheel?

By accepting internal technical & commercial views, here-in lies the weakness of Sound’s surface assessments at even basic levels. For example, the TE-8 RNS bragged about it being the only Palaeozoic test in Tendrara, whereas several earlier wells in the TE-5 horst had penetrated Carboniferous; TE-3 drilled >1400m of it. Someone had not reviewed previous drilling and RNS news on TE-8 was just plain wrong.

Most importantly for TE-10, petroleum geologists have known for decades about the challenges of producing gas from low-permeability Tagi reservoirs. Numerous studies have been published. Yet Sound only fessed up about it at the DD. From memory, Fastnet’s CPR and Maghreb’s farm-out brochure both forecast a range of prospective resources of between 1 and 4 tcf for the whole Tendrara contract area.

About time for the Chairman to commission a proper CPR and commercial assessment of Sound’s Morocco portfolio and make it public. It would restore shareholder's confidence in this share and is an essential component to getting a fair price at the LE, whenever that happens.

yes - sorry, thanks for correction

seaton

I agree; today’s RNS could have been better and clearer.

Firstly, when defining Chance of Success AIM has guidance notes to clarify CoS of exploration wells. Society of Petroleum Engineers PRMS system relates mainly to how to define ranges of uncertainty of recoverable resources. It cannot takes into account all the fiscal regimes which apply across the world – that’s why CPRs are desirable to determine commercial outcomes.

Secondly, the range of recoverable resources simply represents the uncertainty range of petroleum volumes discovered.

But back to TE-10; the AIM Guidance Notes, for Prospective Resources discovered by an exploration well denotes CoS as “the probability of discovering hydrocarbons in sufficient quantity for them to be tested to surface”.

In simple terms, no flow test to surface = dry hole under AIM guidance. Given that the Tagi at TE-10 underwent possible early diagenesis which seems to be similar to TE-9 and TE8 TE-10 is high-risk venture.

Numerous industry studies of pre-drill vs post-drill exploration well results show risk is usually under-estimated (i.e. it’s riskier than originally perceived) and volumes are under-estimated (less petroleum is discovered than was estimated). This is why exploration acreage usually has low/zero value as BM mentioned. But now and again, someone realises all the small commercial failures fit a bigger picture and ‘hey presto’ a super-giant field is discovered.

dickupham

Percentage?

In practice, the commercial team of the new entrant will have done their homework based on CNRL’s comprehensive CPR and commercial analysis. On our side, the team will no doubt be prepared with our own commercial objectives and boundaries.

https://www.cluffnaturalresources.com/wp-content/uploads/2017/04/P2248-Economic-Feasibility.pdf

The new entrant will likely have some minimum corporate commercial thresholds that all their projects must exceed to compete with other options open to them. The common measure is usually Internal Rate of Return, which for petroleum industry is typically around 25%. The new entrant will simply re-run the economics to determine how much they can afford to pay (a fixed number for an exploration well) to earn a certain participating interest AND fulfil their corporate IRR objectives.

Using this approach there is an objective basis for negotiations with CNRL and conclusion of a balanced, sustainable farm in transaction. This maintains strategic alignment between the parties (and their shareholders) which is quite important in successful JVs.

Also, if the new entrant is a qualified UKCS Operator for drilling, that would be an advantage, and perhaps would fit in with their wider drilling programme. To qualify for assignment to our licences and extensions, the new entrant also has to demonstrate adequate financial capacity and capability to OGA. Literally they will have to prove they have the money in their bank. CNRL will have confirmed this before starting talks.

Dickupham

One cannot accuse CNRL of ‘ramping’. Their CPR and valuation
is completely objective and realistic.
The other detail in the 2248 and 2252 area is the presence
of ‘wet’ gas containing condensate - quite unlike the
‘Dry’ coal-sourced has in the Southern North Sea.
It implies the gas in Breagh and Pegasus West is probably
source from deeper, oil prone source rocks which have been ‘overcooked’.

The relatively early emplacement of this Petroleum has preserved
the reservoir quality - hence the exceptional flow rates
in Breagh and Pegasus West. I recall the latter flowed at over
90 mmscfd on test.

So CNRL properties are ideally positioned in terms of geology
And access to infrastructure. All that is needed is money!

Probably better to use CNRL's CPR-based, 'bottom-up' valuations to be consistent.

Here is Xodus methodology for valuation of CNRL’s best prospects;
In 2248

https://www.cluffnaturalresources.com/wp-content/uploads/2017/04/P2248-Economic-Feasibility.pdf

and here is the whole 29th Round portfolio EMV

https://www.cluffnaturalresources.com/wp-content/uploads/2018/06/Corporate-Presentation-June-2018_FINAL.pdf

draft

It's not rocket science if you approach value using a 'mark to market' approach in UKCS. This involves looking at recent deals over last few years..

Prospective Resource change hands for ~$1/boe
Un-appraised discoveries fetch ~5/boe
Proven undeveloped reserves are about $25/boe
Proven, producing reserves sell for ~ $40/boe

So, if you multiply CNRL's risked prospective resources by 1$/boe that is what it is worth.

Two wells -

One well for oil;

Hassi Messaoud field - 1956, 9 billion bbl

One well for gas

Hassi R'mel - Algeria's biggest gas field.

Finding oil and gas is quite easy, but finding the money to do it is hard!

great story zippy - the seismic acquisition people are the unsung heroes of the north sea - with or without hot chocolate.

cgg have reprocessed and merged several 3d surveys in the area

here is another link which shows the regional context for cluff's 2248 licence shown on their website. looks to me like we're part of a large productive trend.

https://itportal.ogauthority.co.uk/web_files/relinqs/p1334.pdf