Member Info for InJamesweTrust

Biffa
With one hand you say trust the BoD and with the other tell me the presentation is wrong - I wonder which it is.

While I am quoting the presentation, I think it would be an astonishing waste were we to see no activity on LanFax until 2021. RT has stated a desire for drilling not to interfere with LanFax understanding but if there is a shut in period to tie back LinWick drilling in Q1'20 then surely that opens up the opportunity for an early further drilling on LanFax organically funded.

If the EPS is flowing as planned no funding is needed. RT may be nervous about the impact of an economic downturn and impact on PoO, which would inhibit cash generation in the timelines they want to prove resources within.

Based on the costs being quoted, can you provide a good reason not to take the above route (subject to cashflow from EPS supporting) it and instead giving away 50% of the asset?

Biffa
What isnt clear is the driver for HUR to go to market to expend $180m on drilling in 2019. The cashflow should be there to do this while leaving probably $170m in the bank for convi interest and non-EPS costs.
The absence of information around how the BoD propose to use these cashflow seems like a glaring omission to me. Between now and end 2020 they are in the magnitude of $550-600m id estimate.

Is it better therefore to get these 1.6bn barrels to 2C under our own steam and re-rate them instead of farming this out?

Activity on Lancaster is pushed to mid-2021 in any case.

From cashflow, drills and the back should have been feasible in the timescales proposed without undue stress.

Cebo
Even if one presumes there is 2.5bn barrels, with a 40% success rate making 15% of 1bn barrels or 150m barrels to ECO, that is c.12 times what JOG currently has. Lets say there is a 50% chance they will triple their numbers with no MCAP impact they are valued at £40m for an expected 25m barrels. We'd have 150m so expect a £240m MCAP or c.£1.55.
Clearly they do not read across naturally but it should suffice to demonstrate the potential here.
The CPR and TOTAL option will I think re-rate this very significantly perhaps upward of 75p by Xmas.

Jhaylock - don't see you on HUR board often.

Reverandy
Opening bell or closing price.........at what point on the open does the price indicate the news.

Something else occurs to me. What value does Dr Robert "We are not in this to be a producer" Trice see in a carry to FFD. It seems a bit contradictory of former statements.

Extrader
May be wrong but they cannot be bought back until maturity. If converting HUR must buy out bondholders at market price not.par if they do not wish them to convert. Hence, unlikely this is use of cashflow.

Shedful
If you look at the drilling activity plan pre deal and post deal in the presentation accompanying this morning's announcement.
As SiPP alludes to Halifax could have been a drilling option next year but it is now 2021. In the pre deal HUR claim it was not scheduled until mid-2020 but that is.not a timeline previously shared.

Shedful
Under the new deal, any drilling on GLA has been put back a year. That is from a date.none of us had previously seen. It's delayed nearly 2 years from what many expected.

That is a lucid and well reasoned proposition Ken10. Look forward to all future contributions if they are of this quality.

Wonder how this is better than continued drilling towards a 2 year IFD solution with a move of AM to GWA - anyone, anyone?

...it a benefit?

I think the commercial rationale for the deal is actually very hard to identify. It may accelerate GWA timings by 6-12 months but at a cost of GLA activity. It is not transparent where HUR cashflow will go (I'd accept to retire bondholders but this is not in our gift).

Such decisions RT indicated very clearly were the domain of the shareholders but it seems as CEO/the BoD they have pushed this through. Kerogen are not the only SH's but again the BoD has indicated a disdain for the PI base.

For my money, I would have taken the earlier location of AM on site and left Spirit to it.

DSPP has LinWick/GWA at 45c a barrel, we have sold 50% of it for $12c a barrel.

If the 3 drill programme does not produce results that JV are happy with, Spirit it seems have no further commitment. So any efforts to paint this as a much bigger value deal or bogus, it is $180m to see if the oil is there then another $90m to tie it back to our expensive FPSO with us sharing the remaining cost to help them prove it up to 2P valuation.

Jeez, and I thought the bond terms were poor.

I note the slide on activity showing what was intended pre-deal suddenly appears when it has never been seen before!

Biffa
Thanks for character ref, as regards rest of the post it helps to rebut comments you seek to discredit.
Unless I'm missing something, the upshot of today is HUR have sold a 50% option on the whole of the GWA for $90m. Is that REALLY GOOD VALUE?
This is as we hear from many to accelerate the proving up of this field but a) is it and b) if so in whose best interests.
Before this deal, RT anticipated potential arrival of AM in field was possible in Sept'18 (they are not given to random dates so this was a nailed on realistic possibility).This would allow commissioning and production testing to largely occur in 2018 and reduce weather impact on hook up. what price the SP if she was 2 weeks from being on site? Over 53p I’d wager
RT denied ever saying this at the AGM when I asked and said he had been misquoted which is BS they were words from his mouth (I have posted the link previously). I dare say he knew then of the coming delay and why windows were going to be tightened. Now, the AM will sail away at a date unknown but within the H1 2019 timeline as new work is completed -
What do Spirit bring to the party, ;let's take it step by step. First up they are paying $90M for HUR share of a $180M 3 well exploration programme. The $90m buys the 50% and the next $90M is their cost for appraising the GWA field. So for 604m boe 2C and 935m boe P50 (with a 70% CoS) they have paid $90m - across both fields that is 5.85c per barrel. That seems pretty cheap to me. Take the 2C alone and they are paying 30c a barrel.
Now the total cost of the initial programme is $180m and HUR could have had cashflow of $300M in this period. Not including contingent funds released for Ops through to end H1 2019.
Lets say AM was on site in Sept'18 and generated 1 month of oil at 17k bopd, c$24m The through 2019 cashflows would be c.$280M taking $45 a barrel free cashflow at c.$65 oil.
In the new world, we do not drill GLA until 2021, previously due Q2-2020. So proving up GLA with Halifax link is deferred – is this better value. Instead we get a $180m drill programme which we could fund from cashflow – where is the HUR cashflow going?
After spending this $180M, the JV gets the benefit of tying back to the AM (which we have all been diluted for a $260m refit of) at a cost of $46.9M carry in $187.5M cost. So we need to pay around $50m for this element. Spirit then get to use AM to prove up the production of the field.
Yes the gas solution de-bottlenecks but prize is not revenue from 40k bopd it is proving the commercial production capacity of the fields. Hence, the drilling on GWA could be done from cashflow next year as could long lead ordering for EPS tie back. When tying this back, one or both of the other producers could be shut off as it will have most of the data by Q3/Q4’19 (or at least would have).
This wld have given time for data to be reviewed on GWA, while GLA was drilled (RT said no drilling until EPS data is finalised. It does tie in GWA to VCP but is

With current SP we are valued at c.£64m.

Jog is valued at £39m for 18% of Verbier - a 70m barrel field. This has been drilled once.
With new CPR and what has been said about Exxon drill derisking a number of traps the re-rate should continue apace.

Genghis
I Think the least we deserve is a vote but the transaction has closed and is a dine deal.
For all his c r a p at AGM about this being the shareholders company and we will be the ones to make decisions it looks like Robert has gone ahead and done the deal. Big chunk of this is to prove up the GWA within the timeframe of the current VCP. So reserves are up the curve and can be included in a sale.
I'm curious about the single Lancaster drill in 2019. The AM should have set sail by now with hook up achieved in Oct - RT said himself it would be on site from Sept onwards. That is 3 months of casfow (minimal due to testing) and then 12 months of revenue in 2019 before contingency is released. That is $250m by my reckoning and if only drilling one well what is the restbused for. It appears the numbers are being massaged a bit to fit the facts as multiple drills would have been affordable surely.
Back to governance in my opinion and he is using his train set how it best suits him.
Using that cash on GLA and doing a Halifax tie back would have gotten most of GLA to 2P in 2019/early 2020. Thus facilitating a sale to repeat exercise on GWA where.long lead items could have been ordered from cashflow. That doesn't fit an accelerated timeline though.
Ultimately, it is a.positive that Spirit are willing to invest but it is contingent on a number of outcomes.
Value wise I think it equates to 10-15% of the MCAP value that has been ceded for $200m and rising....

Genghis/Wellwell
Still digesting as I battle the rainy streets this morning.

The acceleration I get, may also explain some of the AM "delay" as they are doing further mods it seems.

What is also interesting is the $150-250m kicker towards FID depending on number of barrels proved up. The GWA has a single "quick and dirty" drill on Lincoln to show the assets yet Spirit are happy to commit in excess of $600m to its development. This being the case the read across of data and aggregation of seismic across fields like enough to convince them to make a hefty investment.
Ultimately, the BoD are keen to get the fields up the reserve curve as quickly as possible and this allows activity on GWA and GLA simultaneously in 2019 to do this.
What price the rest of the company?
Potentially allows HUR to maintain a healthy interest in GWA post FFD by selling down a further stake for a full carry.

Is it just me or does $180m carry seem like a crappy value for GWA - valuing the field at $360m. Haven't read RNS in full but initial highlights a bit underwhelming. It is good that GWA has enough read across info for an investor to be confident but.....this seems more about monetizing in a timeframe and keeping majors at bay to me.

If the lower of 2 broker values is 95p and based on 25% CoS and 900m barrels. Expect new CPR to be North of 2bn barrels so prob 2.5-3.0x current level. CoS likely to be nearer 50% (possibly significantly higher on some prospects following Exxon drill). That makes 5x the 95p or 475p.

I'd say this, if you look at JOG value on 18% of Verbier (which has been drilled) then look at our value there is a bit of a gap to be filled. Exxon puts a very high chance of success on a chunk of the field.

Be interesting to know where on field this is based on what Gil has said before about what part of the field was analysed for 2Dpreviously and gave them numbers.

Its you
Fantastic bit of sluething and undoubtedly an excellent marker regarding the potential of the company. After a somewhat lacklustre RNS, I expected a slow drift down until news is forthcoming.

However, this news allied to the punchy interview from Gil seems to have turned sentiment. Interesting next few months seems like spud date for our drill in Guyana is pushed a bit.

News from Cormorant and Chariot drills will be very interesting.

Hopefully Gil will get the message out there on the constraints with being accurate in timings previsouly and why the current ones should have more store set in them. Ultimately an underwhelming RNS but, I do take the view that if there was nothing to look at it wouldn't be taking so long and they wouldn't be making drilling applications.

A key phrase for me is, "Our partners continue to make excellent progress on the pre-drilling engineering and resource evaluation." This sounds like they are prioritising the prospects and in some respect there will be jockeying for funding in 2019 planning of Tullow and Total budgets if indeed there are now 7 prospects as Itsyou mentions. Look at how quickly Exxon are working through drills on their own block - if the partners want to do same to Orinduik it needs a lot of thought.

Ricfle
The link between the SWF and Statoil is quite significant - it is the exploits of Statoil which has funded the SWF. If Statoil convinced them the returns were viable then funds would be forthcoming for an equity portion to be backed by debt.
The Lundin link is simply the privileged access Statoil analysts can gain to FB knowledge because of the holding they have in the company.
Operationally and financially Equinor/Statoil are capable of taking it on.