Member Info for Mirasol

EOGL i s correct even if there was a new CPR any buyer/farminee would want their people to crawl all over it before signing

But I don't think UKOG want to farm - they have spent a lot of time and effort getting rid of partners in Horse Hill, plus I'm sure they've had offers (eg the French) to come in - Sanderson doesn't seem to like partners - he probably sees them as a major potential for delay & argument.

This is the exact opposite of the Egdon method of getting 100% and then financing it through diluting interest - UKOG would rather hold the interest and dilute the shareholders....................

Argus is wrong see:-

Magellan/Tellurian statement 2nd March 2016 "The Horse Hill-1 well lies within the license area of PEDL 137. Pursuant to a farmout agreement executed in December 2013, HHDL is the operator of and owns a 65% interest in both the license and the well, and Magellan is carried 100% for its 35% share of the costs of this well, including drilling, testing, and completion costs."

Also their SEC submission of 2014

Note THIS WELL

The more Pro 88 posts "GOOD NEWS" the faster the price is falling..................

Correct Penguins tho' I suspect Tellurian don't NEED to exit - they probably spend more on toilet paper than HH would cost them.....

It just makes life simpler for them - one less thing to have to cover off in their vast fund raising paperwork, no need to have to ship cash to the UK etc etc

Argus1 has it wrong I'm afraid - the carry only applies to drilling and testing HH-1 (and maybe HH-1z )
HH-2 and beyond has to be paid by the Tellurian Interest in full.

Theoretically they'll get a small edge from DOR & Alba paying for the remainder of HH-1 but Alba will probably not pay and dilute slightly and DOR will just want to be bought out and won't pay..............

It has just occurred to me that UKOG as UKOG have taken out Tellurian they now absolutely have control -. The Joint Operating Agreement requires 2 parties as a minimum to vote for anything.

UKOG now have a direct vote (the ex-Tellurian 35%) AND they control the HHDL vote

They can really turn the heat up on the remaining shareholders in HHDL who will have to dance to UKOG's tune like it or not

As Alba have already seen signs of strain in financing Horse Hill I foresee interesting times ahead............

"Any comment from Mirasol today? A simple admission that you got that one completely wrong will be fine."

What did I get wrong? I 've been saying for months that the cash raised might be to buy out Alba or Tellurian..............

And I repeat the JOA and the Farm-out Agreement are separate but linked - Tellurian are carried through the HH-1 and the well test - then they have to pay - that's probably why they decided to met out of what (to them) is a miniscule interest

All solved now anyway - only Alba left standing.........................

The best place to find oil is on the Stock Market................. 35% of an asset and no extra risk..... very good deal

May explain part of the delay in bringing the rig on - Tellurian wouldn't want to be on the hook for any costs while they were negotiating a sale to UKOG...........................

How long will Alba hold out now?

"The Joint Operating Agreement in 2014 postdates the Farmout Agreement which was to drill and flow test HH-1 only. (in
2014)"

They are separate Agreements Thorpy.... Before they signed the Farmin Agreement Magellan/Tellurian had 100% of the Licence - so they didn't need a Joint Operating Agreement - they could do whatever they liked as sole owners. The JOA had to be produced as it became a Joint Venture with HHDL and its based on the standard 1970's UK JOA (which has become pretty much a world standard).

I've also heard mention of an Investment Agreement between the HHDL owners but that has never surfaced AFAIK
You can bet your life the lawyers have crawled all over them to make sure that they are all aligned

"If each party can sell its own share of the oil separately then who pays the operating costs?"

I'd have thought it was obvious..

The Operator, HHDL, bills the co-venturers for their share of the total costs (after the carry expires). This will be a budgeted number adjusted monthly to reflect actuals. From an accounting view this is separate from the income stream.

The Operator sells the oil and credits the co-venturers with their share of the cash in and makes a payment to them (normally monthly).

IF the co-venturer think they can get a better price themselves (or maybe they need the oil as a feed stock for their own refinery) they just tell the Operator and make their own arrangements. A separate tanker arrives when their share is big enough to justify one, gets topped up and drives off to whoever and wherever they've sold it to. The cash goes directly from their buyer into their account . The Operator adds whatever extra costs (minimal TBH) to the monthly OPEX bill. The Operator sells the remainder as above but doesn't credit any payments to the people who took physically took delivery.

Offshore, where the numbers are a lot bigger, there are often quite complex arrangements as to when you can call for your share to avoid people NOT taking their share when the price is falling and everyone wanting a delivery when the price is rising.

"and at that point everyone pays their share as per the JOA. "

Shoudd read "and at that point everyone pays their share of future costs as per the JOA. "

Penguins is correct about the Magellan/Tellurian carry (or farm-in) AFAIK no-one has seen the actual agreement but HHDL/UKOG have never disagreed with that statement of Magellan's.

As Penguins said it's normal - Magellan hold the Licence but don't like the risks (or haven't got the cash). They lay off the risk by farming down to 35% and HHDL pay 100% of the costs for whatever work is defined in the agreement to earn 65%. Tellurian pay nothing until those works are completed. At that point the group will decide on further work or no work and at that point everyone pays their share as per the JOA.

as for oil sales each company can take it's own share and sell it separately - this sometimes happens offshore but it makes no sense onshore as the amounts are so small - the Operator goes out for bids and informs the partners of the results and they normally all choose the same customer to sell to

"5. They spend all remaining cash on EuroMillions and win a double roller. Probbaly not likely."

and JTP would probably have used the ticket to light his BBQ.........................

100 per cent correct Adam

We should also note the Licence Interests are transferred (after OGA approval) by novating the Licence documents - and you can do the same with any contracts (such as the rig) so that the incoming party has the same rights and responsibilities as the outgoing company without having to renegotiate every b***** piece of paper work. It's legal boiler-plate.

"So you are guessing then, based on your misplaced interpretation of the term free carry. Free Carry means no cash outlay not that once the project turns good that the capital expenditure wont be recovered out of the profits."

I think you'll find the EXTENT and the TIMING of any carry is set out in various legal contracts such as the Farmin/Farmout Agreement, and Investment Agreement etc and varies from deal to deal - these are normally VERY specific defining at which point the company carried starts to pay (eg " after cementing production casing" or "on submission of a Plan of Development to the OGA" etc etc).

In this case I understand Tellurian are carried through all of Horse Hill 1 including any testing . Now does this include any work on a sidetrack (HH-1z) ? Not sure.

The carry doesn't cover the new HH-2 well - they will have to pay their share for that

Cost recovery will also be set out in the various Agreements - and TBH without the full text of each and everyone we can't be absolutely certain about anything

They may not have been asked yet

There is a Budget , which is approved by the group, then an Authorization For Expenditure ("AFE") which costs out the well in detail based on firm bids and contracts which also has to be approved and then a series of staged cash calls - not all the money is taken at once.

I assume they have an approved Budget , and I'd hope by now they have a rig contract and a signed AFE but the first big cash call probably won't be made until the rig moves. They may have already cc'd the prep work

So no-one is buying and we're drifting south...............

Forget the small time traders - to me this suggests the bigger players are waiting to see what happens next - not so much the rig but the Planning permission for Production and the results of the horizontals.

Plus of course what ever the Mystery Money Fund is used for.

And as the clock ticks there is the usual worry at UKOG that time = increased chance of further dilution so why increase your holding right now when it may be 3 months minimum before there is any REAL news here? The small fry will jump in when the rig arrives but the bigger guys know that's only starting the clock on the real issues.

Penguins is correct - "A carry" or "to be carried" is a very common phrase in oil field commercial & legal deals. It may not turn up in general practise but it's meaning is well known to those who need to know.

It does what it says on the tin - the devil (as always) is in the detail which is rarely released

Penguins is correct - "A carry" or "to be carried" is a very common phrase in oil field commercial & legal deals. It may not turn up in general practise but it's meaning is well known to those who need to know.

It does what it says on the tin - the devil (as always) is in the detail which is rarely released