Member Info for foresight

You literally know nothing about the commercial reserves in this asset. Normal reservoirs comply to the science and can be estimated with a degree of certainty after a few wells. This type of reservoir takes so much more data and time and the current exploration results show that we are right at the beginning of discovery with no idea of what is ahead - unfortunately. All we know is that there is oil in some fractures and nothing else. Hence the risk is off the chart especially given the tough environment west of shetland

Does anyone know what the actual problem is? Interfearance between the two wells causing one to be shut in. What is instability? Suggests to me there is a water problem - this would lead to the well not flowing properly. Water was now getting from one well to the other so needing to shut in the source of the water. When water comes up the fractures it can totally kill the wells. They have not got the water handling capability for which you would need one of those big N Sea platforms. So we shall see - but water ingress is the biggest risk and this doesn't bode well. Its a shame the company doesn't actually say what it thinks the problem is and again is obscure in its messaging always trying to be optimistic. Might be better to under promise and over deliver for once. A 90% SP drop in 12 months often leads to worse....

You can't escape reality for ever. Fractured reservoirs are virtually impossible to predict and the tragedy here is that the company has not been transparent in the uncertainty and challenges. The oil in place is meaningless and always used as a way to hype the SP. What matters is how much you can get our and how much that costs. Here, we have no idea and will only have better clarity as and when many more wells are drilled. But these wells are too expensive to keep on drilling. Initial production rates are also meaningless as you need long term reservoir pressure and connectivity data - time and money to be spent. But how do you keep going to the point where you have confidence - the company could not raise more money and no serious player has shown any interest in farming in. The writing is on the wall (or in the well)

I agree - we need new management here. There are plenty of excellent people around who are not so connected with this that we could get a truly objective and honest opinion in what is an incredibly uncertain project. Dr T is too close to the baby he conceived to ever be totally unbiassed. And his BoD have been too timid or uncertain to challenge him - never a good thing. This is one company that could do with a clear honest communication so everyone is on the same page and understands the risks.

Wells in Vietnam are cheap - shallow benign environment. When water comes, drill another, and another. Here, every well has to count and unless you have a well head platform, you will not be able to drill many subsea wells. Would be wonderful if the field was in shallow warm water...

I think the issue here is that all the wells will be drilled into he oil zone and drain oil from the fractures in that zone. The pressure comes from the underlying aquifer pushing the oil up. You can get excellent production rates because fractures have great permeability until water comes up from the aquifer and kills the well. Time will tell but the worry is that you spend a fortune developing this field and will never know whether water will be a problem until its too late. The perched water in one well now is a red herring. Fractured reservoir is the most difficult reservoir to develop and it only really works where you can drill cheap wells to drill yourself out of trouble. There is no mitigation here being in rough offshore conditions. It will be difficult to get a decision point to spend billions to develop the field with such uncertainty. Maybe we will live on a well by well approach until we have enough confidence that the water is not an issue. Unless the water in this well build rapidly and kills it, then confidence will evaporate for more drilling now. At this price there is not much to lose I suppose

I think the issue here is that all the wells will be drilled into he oil zone and drain oil from the fractures in that zone. The pressure comes from the underlying aquifer pushing the oil up. You can get excellent production rates because fractures have great permeability until water comes up from the aquifer and kills the well. Time will tell but the worry is that you spend a fortune developing this field and will never know whether water will be a problem until its too late. The perched water in one well now is a red herring. Fractured reservoir is the most difficult reservoir to develop and it only really works where you can drill cheap wells to drill yourself out of trouble. There is no mitigation here being in rough offshore conditions. It will be difficult to get a decision point to spend billions to develop the field with such uncertainty. Maybe we will live on a well by well approach until we have enough confidence that the water is not an issue. Unless the water in this well build rapidly and kills it, then confidence will evaporate for more drilling now. At this price there is not much to lose I suppose

I agree if you expect the company to be self financing at this stage. However, if they really have the reserves, then they can raise the money to develop at whatever break even economics makes sense in the future. They will have to drill a lot more wells to be sure of what they have and commit to something bigger and they probably dont have the money to do that so they will need to raise money for further appraisal. Hence dilution will impact the current SP as well. The risk is that they spend a lot more of their free cash trying to prove up the story and don't quite get there with the cash they have. The RNS to me has a lot of uncertainty despite all the wells and testing to date. They should keep producing at a loss as this is real data that will determine commercial viability - its like drilling an exploration well - you dont make money from the well itself but the data it reveals. The testing is purely data gathering and partially offset by selling the oil. If this was a well funded major, we would not be discussing break even but only reserves potential.
500 million barrels sounds a lot - but the recovery here could be 10% especially without water injection. a 50m barrel field could be marginally viable if not too many wells. There is still so much uncertainty despite all the money spent.

This is not really a production company so reference to break even at all is misleading. This is a pure exploration and appraisal company still and so its all about future reserves and cost to develop. They are still trying to find out what they have. They seem to have enough cash to drill and appraise more before going to a full field development. That is when break even is relevant. Who knows what the oil price will be then - lower oil prices tend to be accompanied by lower service costs. I am still not convinced by the water cut however, not sure this RNS has given any more certainty about perched vs acquifer upon which the whole story resides

Futures hit $1 today - not real but shows the crazy world we live in

Short term Brent and WTI are different markets - takes time to arbitrage between the two. Need to get tankers from the US to Europe and the cost of shipping that should set the price difference. Current spread is too high so Brent should come down some more as it doesn't cost $15/bbl to ship so you could make a fortune buying there and selling here. But our tanks are filling up as well so have the same issue. Solution to low oil prices is low oil prices. Wells will need to be shut in - costly ones first. Hard choice - damage done through ceasing production if its a short period not worth it. How long will demand be down and can OPEC do more - I suspect at some point they will but this is their chance to destroy the US shale. Maybe they will go all the way. They need to sell their product before people don't want it so a balance between short term over production and lower price vs longer term lower production at higher price with time value of money and uncertainty as to future demand.... we live in interesting times!

Not really, if they need more cash than they have to develop then it should be worth less than the cash. Only should be worth the cash of they are going to give that back to shareholders which they won't. They need even more now as well with their partner not funding as much. And they will need a huge amount drilling expensive multiple wells to keep the water flood from killing the wells in due course. They could do with $100 + oil to help them out

Fractured basement impossible to develop long term offshore in rough conditions. The welfare already showing rapid water cut increase and so will not produce longer term. The OGA do not want to be holding the abandonment of this when HUR goes bust

I think that to force shareholders to sell - they have t offer the $1.95. Otherwise there is no way of calculating the price that should be paid. You do not have to sell your shares to Delek just because they delist. It would be ridiculous for Delek to have a small rump of private shareholders to contend with. So they either keep the listing and do not buy any more (seems unlikely given the small free float) or they offer to buy the shares over time (no rush) at the $1.95.

agree - I think Delek can force the squeeze now if they want to. I can't see the point in having such a small float so expect they will. But do they not have to buy at $1.95? So this represents a great buying opportunity? If so, why is the price so low other than there are few buyers?

It is now. Still in shock as to how a takeover can happen of a company with no premium which is where we have ended up! Very sad to see it end this way - I was excited for the future and having been involved for a long time, felt I understood the company well. Maybe Delek had a similar view - I would love to buy the company for this price. We shall see what happens to Stella and the other assets and in the fullness of time, we shall see whether we were robbed by a board who seemed to represent us for a time at least. I am cynical about the way the markets work now - if the board had done a proper defence job with an advisor, we would have got a better deal. But then it was not in their interest to do so. There has been collusion between Delek and the board to effect this deal and the shareholders through fear or apathy have rolled over. It is a shame the main institutions do not want the publicity and at the end of the day do not really care when they have so many companies in their huge funds that they have not got the time to focus on any one individual. Hence we end up with a way to get a company on the cheap if the board can see it in their best interest to support a low ball offer. Maybe a class action law suit next.... Farewell folks and caveat emptor in future!

Quite unbelievable... for those holding in GBP how the FX rate has just suddenly moved so significantly against us. Given that Delek will be paying in a foreign currency, the deal keeps getting cheaper for them. We are now at nil premium. A fully recommended take over of a solid company at no premium because a) the board just rolled over and exploited their conflict of interest and b) the exchange rate moved against the majority of shareholders through no fault of their own. If you tendered your shares at £1.20 then see the measly premium wiped out, what a sad situation. Who is representing "all shareholders" here. As the management are in effect buyers, they must be laughing all the way to the bank.

We are a few pence above the pre offer price. At this rate we will have a nil premium takeover. they should have fixed a floor in both gbp and cad prices. It's disgraceful that those who have tendered in good faith based on what was offered are now losing out just through the FX which has nothing to do with them. So Delek are getting an even better deal by waiting. It's sad to see a good company end this way.

The question is do Delek want to have a London Listing for future activities. They will end up with at least a mid 80's % after this period. Do they want the pain of a listing for such a small free float? Or do they see value in the listing which legitimises them. If they think the going 100% private is best for now, then they may need to sweeten the deal to get over 90% and I believe that that deal then is given to all who have already tendered. If they finish in the 80's then they will keep the listing but what would happen to the share price? There will not be any institutional buyers as it is too small a free float. So will the SP go down, at least for a while? If so, best to sell now and buy back in. The only reason to hold now would be if you believe that released from this bid, the SP will go up immediately. I suspect it would go down but who knows. But if we all had that attitude, then they will get over 90% and its all academic anyway. Ultimately, this is a messy situation for us long term loyal shareholders who have been in before the crash and so are sitting on a loss. The board did not try and get the best deal for us but then they had no incentive to as they stay on. A bid at £1.5 would have made everyone happy but this makes me high sceptical of the collusion between the board and Delek. I was trying to get my head around £1.2 and now I have to contemplate £1.13. So a nil premium take over of an undistressed company - one for the M&A books I think!

I sadly agree with you Londoner. I think Delek have done a great deal for themselves. They got the company before the major news flow at pretty much no premium. This has to be one of the best deals ever. It sickens me that they have succeeded. Ultimately, the board capitulating with them has resulted in this. If the board had a defence strategy we would have had a better outcome. I truly believe we have been robbed of the opportunity to share in the upside after so long and so much support. This is an example of corruption at work imo. The management will cash in now and then get a big slice of the upside in the years to come at our expense. Many people will have done well over the last 6 months so do not care. I have been in for years and so have a different view. It makes me sceptical of the systems in place to regulate and protect shareholders when this can happen but maybe its time to just reluctantly move on...