RE: Big week25 Mar 2019 13:38
I am inside and so am a bit restricted on what I can say. The RNS said 21 days for the work at Austin. You wouldn't want them to come out with immediate results. Previously the company has been criticised for coming out with results immediately instead of waiting a bit. I expect them to wait a little bit to make sure that the initial results are maintained.
Obviously, what they don't want to do is what they did on Morris 1 last time around, which was come out with a good result and then shortly afterwards the production started declining.
Secondly, just because they have got a well pumping doesn't mean it is optimised. These older wells at the Austin Field produce a lot of water (this has been referenced several times in RNSs), luckily we have enough water disposal to deal with a large quantity of water. I am pretty sure that they will seek to optimise the wells: that will include moving any downhole pump's position in the well bore, or change the pump stroke or the rod diameter etc.
Optimising the wells will be about minimising the water cut, maximising the oil production, minimising the production costs and maintaining well integrity.
Unfortunately there is no magic wand. Thom Board and his team have to go through each well in turn and go through a routine. If it can be done in a few days then great but if it takes a few days longer because they need to do something different or get a particular piece of kit then so be it. Cost is also relevant, we want them to get a result that can be maintained consistently over a long period of time but we want them to do it within a budget: we don't want them to constantly order the latest fancy piece of kit regardless of cost. If they can knock $40k off the price of a job by doing it slightly differently, ordering a different piece of kit and it takes 3/4 days longer as a result then so be it.
I think we will do well in due course. I also think we have people doing a bit of stirring in the background because they haven't got what they want.
The bottom line is that because of the cost structure as it stands we don't need much production to break even. At current prices I reckon break even is maybe 60 bopd. We are at 100% WI and 75% NRI at the Austin Field: so about 80 bopd gross would get us to break even.
There is a lot to play for here, which is why people were trying to get control of the company without paying for it last year. The hidden asset is the carried forward O&G losses: once the company can monetise them, the value is greater than the current market capitalisation. Paolo's firm specialises in that sector, if he and they can't monetise those losses then no one can.
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