RE: Production by month26 Sep 2019 10:18
However that 362 bopd does tend to confirm we are somewhere around the CPR base case for the Portland. With the Portland being a conventional fault delineated traditional reservoir that’s as I would expect. The company also tells us horizontal wells have been predicted to produce some 780 to 1080 bopd from the Portland but with no update on the potentially recoverable volumes. I can see the 2C increasing as a result but to what extent is pure guesswork at this stage and will the decline rate simply increase?
So with water injection that gives a 2C recoverable oil of 2 million barrels. The company share is only some 50.6% of this. That is, frankly, not a lot – Wytch Farm for example has produced some 440 million barrels and has an estimated 40 million still to recover. The company guides us to an Opex cost of $20 per barrel for the full production case, so at $60 oil, that’s some $40 million of netback. Of course this needs discounting back, and on an NPV10 basis I make that around $22 million, or £17 million assuming planning consent is granted for production.
I would note Premier Oil (PMO) sold its Wytch Farm stake back in late 2017 at a valuation of $13.4 per barrel (2P) which would tend to support my calculation of worth. The company mentions in its year end results RNS, the potential for Reserve Based Lending to fund Horse Hill. That would need an updated CPR to declare reserves and I just don’t see any sum raised getting close to the capex required.
For the Kimmeridge Oil we are told this has been producing at a rate of 340 bopd. In the absence of any recoverable volume or decline rates I cannot see how I, or anyone else for that matter, can put any meaningful value to this. Clearly a new CPR post the current EWT will be very useful to say the least - currently it’s all down to wish and hope!
With that potential £17 million NPV10 in the Horse Hill Portland oil and no clarity on the Kimmeridge, I see little to get excited about. The rest of the assets are a piddly producer at Horndean worth only £400,000 on an NPV10 basis to the company and a few other licences with 2C contingent oil and 2U prospective oil that I just cannot have any enthusiasm for.
With the risk that IF the company gets it’s consent for Horse Hill, the well-used begging bowl will be duly passed around yet again. At 1.125p the market cap is £68 million. The analysis above shows that to be a total joke and that makes the shares a massive SELL
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