Member Info for itsyou

Plus ECO get $3-4m as a penalty.

That'll nearly pay for that extra hole in Guyana :-)

From H&P note :

"If it isn’t exercised, Tullow will have to pay Eco ~US$3-4mm instead and will return the entire WI to Eco, after having fully carried Eco for the 3D seismic shoot. Thus, the block will be drill ready and Eco can offer a large stake (it will have 57.5% by then) to a third party for probably at least 1 carried exploration well. The other partner Azinam announced it would like to proceed with exploration of the block. "

Not sure why its anchored up in no mans land(on no licence area), 90km sw of Hammerhead-1 and halfway to the coast from Hammerhead-1

Maintenance?

The Stena Carron drill ship finally moved off of Hammerhead yesterday.

According to the following link, well testing was supposed to take 6 weeks(8 weeks since discovery)

https://www.google.co.uk/url?sa=i&source=images&cd=&cad=rja&uact=8&ved=2ahUKEwjD6ZjVs57eAhXGJFAKHfrsAyEQ5TV6BAgBEAs&url=http%3A%2F%2Fwww.surinamechamber.com%2Findex.php%2Fbeyond_files%2Fget_file%2Fc259c517ebdbdc532701364b6c592e69.pdf&psig=AOvVaw1Inl9fNsCJt7VyGXOLlk16&ust=1540447151493863

Hopefully we'll find out soon what the numbers are and whether the "several sources" are correct...

"according to several sources, this could put the Stabroek block's resources closer to 5 million boe"

"closer to 5 million boe."

Obviously a typo, should be billion.

Stabroek currently 4bn.

If Hammerhead increases that number to "closer to 5" bn, then there is the possibility that the part of Hammerhead over Orinduik will also be the same size, as commented in H&P's note, as the structure looks like its 50/50 over each block. In addition to 600m boe in Latuk-D

and comment from Gil :

"And there is more to come. Exxon's latest discovery, Hammerhead, has yet to be factored into the estimate and, according to several sources, this could put the Stabroek block's resources closer to 5 million boe. Tullow is expected to spud its first well on the Orinduik block in late 2019. Tullow operates the block with a 60% stake and Eco Atlantic holds a 40% interest.

"There is potential for additional production from significant undrilled targets and plans for rapid exploration and appraisal drilling," ExxonMobil said recently in a statement.

Indeed, Eco's CEO Gil Holzman could not contain his enthusiasm in an interview with S&P Global Platts. "Guyana is the jewel in the crown, the mother of dragons. That is the hottest exploration area in the world. It's no longer frontier, it's a sub-mature basin," he said earlier this month.

"This is phenomenal, over 4 billion barrels of pure, sweet, high grade API oil, which the refining itself is much easier than say neighboring Venezuela [which produces heavier sourer crude], in a place that is easy to operate. It's a paradise for exploring in that sense."

Analysts Wood Mackenzie's latest research also sounded an upbeat tone, noting the production ramp-up would be faster than anything ever achieved in a complex of giant fields in frontier deep water.

"The [Guyana] basin as a whole may hold another 8-10 billion boe of reserves...This would take the total to three times what's been found so far in Guyana's Stabroek block," WoodMac said.

"We expect around 50 exploration wells to be drilled over the next five years. Guyana itself might be headed for over 1 million b/d of production if exploration succeeds in converting YTFs [yet to finds]; the broader basin higher still if the plays extend into Suriname and French Guiana."

It was a view shared by Holzman who said he sees Guyana joining the world's top 10 oil producers in just a matter of years."

https://www.spglobal.com/platts/en/market-insights/latest-news/oil/102218-analysis-guyana-could-rub-shoulders-with-oils-producing-elite

According to H&P note, it's $2.25m. Plus they get $0.75m back, so it appears that it's effectively $1.5m cost to ECO.

" If Tullow exercises its further farm-in to Namibia it should get ~US$0.75mm in back costs. Eco’s net cost for the Namibia well is capped at US$2.25mm"

They then go onto comment of the scenario where TLW don't plan to drill, in which case ECO receive $3-4m penalty fee :

"Tullow must exercise its option on a further 15% of Cooper block by mid-December 2018 (which is still likely in our
view as the Cormorant well gave some encouraging signs that there was oil in the area). If this happens Eco will receive around US$0.75mm covering back costs and be partly carried on the Osprey well. If it isn’t exercised, Tullow will have to pay Eco ~US$3-4mm instead and will return the entire WI to Eco, after having fully carried Eco for the 3D seismic shoot. Thus, the block will be drill ready and Eco can offer a large stake (it will have 57.5% by then) to a third party for probably at least 1 carried exploration well. The other partner Azinam announced it would like to proceed with exploration of the block. "

Cantor aren't advising anyone to do so

https://www.sharesmagazine.co.uk/news/shares/fire-sale-at-chariot-as-namibia-well-fails

Bit of chat on CHAR's duster and drilling in frontier plays, as apposed t0 Guyana as they mention..

"“I think everyone hopes to be the next Cove, but the only one that really offers something like that is the Guyana blocks,” said Ashley Kelty, a Cantor analyst. “That’s the closest to Mozambique that we’ve had for a long time.”

Tullow Oil Plc has stakes in Guyana, which is why shareholders could shake off the well they missed in Namibia last month, he said. Eco Atlantic Oil & Gas Ltd. also has stakes in both plays and its stock is up 80 percent this year. Hannam analysts are watching for the appraisal of Exxon’s Hammerhead discovery in Guyana, which extends onto Eco’s block as a possible “catalyst” for the company."

https://www.bloomberg.com/news/articles/2018-10-11/wildcatters-still-a-gamble-for-investors-despite-oil-s-rise

But I would image that the partners(TLW, TOT & ECO) are waiting for the full appraisal numbers from Hammerhead, before shouting from the rooftops.

With the Rig still onsite at hamemrhead-1, six weeks on from the discovery, lets hope their appraisal of Hammerhead is not too long from now.

Correction

Where on AIM can YOU GET a 75% COS, plus backup >22.5% in the companies first ever hole?

Hi Fernan10,

"I think ECO´s management should have made clear for everyone to know that their most likely prospect (the potential continuation of Exxon´s Hammerhead discovery in the Tertiary into Oriunduk block) is not included in the CPR.

I didn´t understand that until I read your posts."

I agree with you 100%; I didn't when first reading the CPR RNS, but then had to read the full CPR, where as most investors clearly didn't. I posted the same on Sept 15th - "ECO really should've made it clear in the press release, that this was just the initial CPR, disregarding all of XON's nearby discoveries and didn't include the Tertiary zone on Latuk, where Hammerhead-1 is."

Most would've probably looked at the COS in the RNS and made their decision, without understanding that the 10 leads COS was based on the nearest oil production being in Suriname(not Lisa under development), no data available from Exxons discoveries as if they didn't exist. Plus a mention of them still processing the western PDSM data. Let alone the number of Tertiary leads that may exist!

ECO did later comment on it being an initial CPR in the Total farm in : "After our issuance of the initial resource report on Orinduik (CPR), which identified our initial exploration leads with close to (3.0) three billion barrels (BOE) of recoverable oil "

Investors may also be missing the fact that the first drill on Orinduik maybe a multi play hole, targeting Hammerhead(tertiary) first followed by Latuk-D(cretaceous) slightly lower down.

H&P in their research note last week thought that the 3D(which covers both Orinduik and over Hammerhead-1 on Exxons block) shows the Hammerhead structure and to be at least the same size over Orinduik.

If correct they assigned a COS of 75% to the part of Hammerhead that maybe over Orinduik.

So the first hole could be targeting an appraisal well at Hammerhead with a COS of 75% and Latuk-D with at least a COS of >22.5% (will be a lot higher in next CPR)

Where on AIM can a 75% COS, plus backup >22.5% in the companies first ever hole? Not even taking into account it could hold 1bn bbls over both zones!

Hi Fernan10,

Firstly, the quote "Furthermore, the Tertiary potential was hardly evaluated and after the Hammerhead well we expect several Tertiary prospects to be considered by Eco" came from Hannam & Partners(H&P) research note, not myself, so can't take credit for it ;-)

As for why the initial CPR didn't take into account the Tertiary zone, I assume that as all of the previous Exxon discoveries(apart from Ranger further to the north) are in the Upper Cretaceous zone, they didn't look in the Tertiary zone. When the preliminary CPR was being finalised, they wouldn't have known that Hammerhead was targeting this zone. There's so much data to process and look at, so I guess they only concentrated on the older age UC zone where previous discoveries had been made in the area.

They're finalising the PSDM data from the west and predict that COS(and possible resource sizes) will improve for those western leads.

As you quote, they'll also now be looking at the Tertiary zone, that's now in play(I assume Exxon will now also be doing the same other their block), so a new CPR will be released in at some point.

We should hear more from TLW on the final number/leads/COS, as they haven't really commented too much; preferring to wait for the final numbers, I assume. Where as ECO were probably under pressure to announce something, having promised the CPR many months ago.

IJWT,
Yes, a good note showing the potential valuation of 2 of the 10 CPR leads and then a 7.5% holding in Hammerhead-1(50% of ECO's 15%)

The only bug I have is the " plus a 50% chance of commercialisation to take into account development risk as well as potential funding/dilution impacts"

What? They'll never get to production before being bought out and if they do, it'll be worth far more than the $5.2/barrel they've used! Liza-1 has a breakeven of <$35/bbl and thats in deeper water and POO now trades at $85/bbl

A valuation of $5-8/bbl is the correct for an in the ground resource, so they should never have reduced it by 50%!

Oaw,
TLW issued a new presentation yesterday and on page 26...

2019+ programme

• Portfolio of robust prospects supports investing up to
$150m per year to drill 3-5 high-quality wildcat wells

• Initial focus on Guyana hotspot; multiple prospects
adjacent to Liza oil discoveries

http://www.tullowoil.com/Media/docs/default-source/3_investors/tullow-oil-plc_overview-presentation_october-2018.pdf?sfvrsn=0

Timelines for Guyana /Suriname show seismic end 2019; which is probably for the new Block 62 acquired by them in Suriname, announced 2 days ago

http://www.staatsolie.com/en/news/2018/tullow-oil-to-explore-in-block-62-offshore-suriname/

"RE Orinduik- "The prospect hasn’t been finalised yet but assuming it is one of the ~600mmbbl targets, it would be worth >£2/sh unrisked to Eco. ""

CORRECTION Latuk-D, not Orinduik.

RE Latuk-D- "The prospect hasn’t been finalised yet but assuming it is one of the ~600mmbbl targets, it would be worth >£2/sh unrisked to Eco. "

Here's the important bit, they've given a 75% COS to the part of Hammerhead-1 that extends onto Orinduik, which we know management see as an "appraisal" well.

As I've said before the Latuk-D prospect defined in the CPR is in the upper cretaceous zone and is up dip of Liza.

However Hammerhead-1 is in the Tertiary zone, so they are now looking at the part of Hammerhead-1 that extends onto Orinduik. This hasn't been included in the CPR as is the Tertiary zone.

Interesting comment they make about regulations..

"Exxon’s recent Hammerhead discovery in Guyana has the potential to be several hundred million-barrels and based on the seismic it looks like a large part of the structure could be up dip on Eco’s block. There are regulations in place (Petroleum Act) to ensure unitisation of the discovery if developed. Assuming a 500mmbbl discovery with 50% is on the Orinduik block, at US$5/bbl it alone would be worth 88p/sh unrisked to Eco."

Then their numbers for Hammerhead in the Tertiary zone

"We assume that the Hammerhead discovery on the Stabroek block extends into the Orinduik block and is 500mmbbl with 50% on each block – we are assigning a 75% geological COS for Eco plus a 50% chance of commercialisation to take into account development risk as well as potential funding/dilution impacts. Overall we get 32p/sh in risked value for Hammerhead"

Looks pretty good to me(well 75%) that they'll find big oil and an 88p/sh valuation target, for a target that isn't even in the CPR! DYOR

Out this morning.

Some highlights...

"we think management would sell for the right price. Our risked NAV of 103p/sh suggests 100% upside to the current share price and unrisked is >15x the current share price. "

"Eco is well funded for its two highly likely exploration wells and will have cash left over for either further exploration or a new country entry"

"Hammerhead - Exxon’s discovery could be a company maker for Eco: Without even having drilled a well, Eco appears to have a large resource to APPRAISE on its block"

"It doesn’t appear wedded to the assets either and we’d expect it to monetise assets or the entire company, if an attractive enough offer was made."

"Eco received the depth migration seismic data for the western half of the block and will merge the data from the CGG and PGS seismic shoots and begin interpretation. After this we think there is a high probability that the chance of success increases and also we could see the prospect sizes increasing. Eco also sees several leads that weren’t included in the CPR, which could become viable drilling candidates. Furthermore, the Tertiary potential was hardly evaluated and after the Hammerhead well we expect several Tertiary prospects to be considered by Eco."

RE Orinduik- "The prospect hasn’t been finalised yet but assuming it is one of the ~600mmbbl targets, it would be worth >£2/sh unrisked to Eco. "

http://www.hannam.partners/umbraco/surface/MediaDownload/Download?file=1980

From 1:40

https://audioboom.com/posts/7024220-eco-atlantic-oil-gas-eco-john-meyer-on-bmn-geo-cra-and-chris-bailey-on-saga-igg-boo

Olderandwiser,

The Hammerhead-1 discovery was in the Tertiary zone, but they didn't expand on whether the whole 197ft was in the Tertiary zone, or some in it and some in the upper cretaceous zone. The rig is still onsite(over 3 weeks since discovery), continuing to fully appraise it.

Latuk-D discovery defined in the CPR, is in the older and lower down upper cretaceous zone.

So if Hammerhead-1 is solely in the younger and higher Tertiary zone, then IMO the Latuk-D in the CPR doesnt directly relate.

They suggest that Hammerhead directly feeds into to Latuk, so there is likely to be another zone above Latuk-D in the Tertiary zone. Maybe they'll call it Latuk-U, if it exists?

That's what they're looking at now and any updated CPR will take this into account, meaning another zone that directly relates to Hammerhead, which will clearly have a much higher COS.

So basically, they've modelled the eastern leads in the upper cretaceous zone, but now need to look above it in the Tertiary zone and model the new leads that relate to directly to hammerhead-1,

Then I assume they'll update the CPR.

Unfortunately TLW and Total are now in control of this and will IMO only issue a fully report when all is know, whereas I think ECO were rushed into announcing their interim CPR, due to having promised it many months ago .

Vegass = Jimarillo

Sorry to intrude here.