Member Info for Oily_rag

@loadsamoney. Question for you, have you ever been involved in a farm out process?

Clearly that isn't the case, it does have a value, but it all depends on the farminee's appetite for risk.
You have to be very careful about looking at prospects. There are a number of elements broadly used in the industry to rank risk. I don't have the relevant information to be able to do that.
The majors (and I used to work for one for 35 years) wouldn't consider anything less than a 12% chance (GCOS) in a proven basin. In an unproven basin with no infrastructure the pass mark is higher. So you have both a technical success (GCOS) and a commercial risk (is the discovery large enough to warrant a positive FID, CCOS)
IF UOG drill the Colibri prospect and make a discovery then the asset becomes very significantly more marketable and valuable.

Ginger, Prospects are just that. The outfit I work for has prospects amounting to over 2.1 Bbbls in a 175KM2 licence. Doesn't mean anything until you penetrate the prospect! Also mine are in a working basin.
Please don't compare apples with oranges

So the markets open with news of the OPEC+ production cuts. The big boys are up by 4% (Total, Shell, BP) but UOG is a rather anaemic +0.25%. Even the midcaps are rising strongly. Harbour etc.
Perhaps the markets don't see it as a linked oil stock? Or other issues weigh on it. I really dont know?

So, I am familiar with the background of some of the senior execs in UOG and liked the idea of buying into a growing organisation (not friends or even acquaintances!!). If you study the O&G industry, shares in the big boys haven't risen in value much over the past 10-15 years. EG Total shares peaked some years ago (I think around 15) at 60 Euros even 10 years ago they were similar to quoted price today, Shell and BP are similar. The great thing about them, however, is the dividend they pay. Runs at between 5-7%. So I was looking at a small cap oil company with potential to grow to grow a small investment.
Bought some stock and sat back for the ride.
As for Jamaica. It would be a game changer if (1) a White night came on the scene and UOG farmed out with a carry through exploration and (2) The well was successful. But I certainly wouldn't advise anyone to buy on the back of an expectation that Jamaica will succeed, remember it has a GCOS of around 16-19%. In my first incarnation, with a major, they wouldn't look at an exploration play with anything less than 12% AND it had to be in a proven petroleum system.
If you look at Namibia, Total and Shell took on the risk of drilling in circa 3,000 Mtrs with no proven petroleum system in the Country, but an active system in the region (i.e SA and Angola) although they were (I believe) going after the Albian. They took the risk because the potential STOOIP was huge. The whispers are that between the two they may have 20 Bbbls. Jamaica will not attract the Super Majors, but middle sized Indies would bite off UOG's hand if a significant (and I mean 200-300 Mbbl) discovery was made. This would prove the Petroleum System and make further finds more likely. I.E. The GCOS for other prospects would be raised.

The industry measure I'm used to seeing is GCOS and CCOS. I think my other statements hang together in that the size of the potential STOOIP really isn't big enough for the Super Majors. Fortunately (unlike where I'm drilling) water is relatively shallow and therefore early production would be possible to an FPSO. The lack of infrastructure to support the well is of some concern, but a carry through exploration would be a great outcome.
FYI My lot are drilling in close to 2.000 mtrs We have four prospects targeted with a single twin bore well with GCOS ranging from 38% down to 27%, and we are targeting 2.2 Bbbls STOOIP. Before anyone asks, the Company is privately owned! Our well cost is estimated at $70M. Rather more than a Colibri well!

Loadsamoneeeey,
FYI The GCOS is calculated on the cumulative effect of a source, migration, reservoir, trap and seal. In a known working petroleum environment you don't have to worry too much about sourcet. On top of the GCOS you have to look at the CCOS (Commercial Chance of Success) this looks at the economics of bringing a resource to market and you need much higher reserves for a new development area. The Colibri Prospect at just 16% is unlikely to bring the big boys in, especially with STOOIP numbers as are quoted in the Gaffney Kline report.
They are being attracted by the likes of Namibia (upwards of 20 Bbbl in Orange Basin) and Guyana.
As an Oily, I would look at Jamaica as possible upside and no more than that.

So the initial enthusiasm after the latest ASH well results has dissipated and we are headed South, again.
I've just left my holding on the back burner as it's hardly worth selling. Something might pop up to lift the shares but I'm not holding my breath.

The Guyana finds are driven by the Atlantic margins. You need to be careful about using this as an analog for Jamaica.
The Guyana discoveries have more in common with Nigeria, Ghana, Cote D'Ivoire and even Namibia.

Greg, I would be wary of Jamaica for a number of reasons. Firstly the GCoS of the colibri prospect is a rather lowly 16%. Secondly, if a farm out was achieved then the cost of a well has climbed significantly with day rates for 6th gen semi's at over $400k/d, more than double what it was. In a frontier area there aren't many operators who'll take the risk of dropping about $50M into a wildcat. If it comes good then you are looking at the prospect having a value north of $5 Billion. The only means of production would be with an FPSO so it'd probably take about 3-4 years to bring to market, however, the sensible route would be to farm down further at the discovery phase.

The GCOS for the Jamaica prospects are very low. I certainly don't hold out much hope for any quick return on Jamaica. You also have to remember it is an entirely new and untested basin.

Ginger, I'd just had enough of the pain! Never mind, we live and learn.

O2B. I've had enough, sold out a couple of days ago and took the hit. With oil at $130 this SP makes no sense.

O2B@C
Don't forget the Royalty take of 57% (I think) so the $40 premium is closer to $17. OPEX costs have also gone through the roof in the past 6 months, as have 3PSP. Just as an example, I'm tendering for a drillship for West Africa, 12 months ago the day rate was $180k/d today we are looking at $350-400k/d. Our well services contracts are 25% up in the same period.

It's a completely different basin, target and geology. So sadly no comparison

Oil up TotalEnergies down 4%, RR down 18%, IAG down 10% I think you'll find that Ukraine is having an impact!

Have a look at who actually owns Kuwait Energy!

Thinking it maybe time to cut my losses and bail out. Hard to see how the sp is going up in the near future. Vast majority of trades today have been 'sell', not encouraging in a $90+ Brent environment.

Jono, interesting post. I tend to think that Jamaica adds nothing of value. Way too speculative.
The key is the production in Egypt. There are too many numbers that are contradictory. I've shown patience with the share but am thinking about cutting my losses (they are the number one loss maker in an otherwise solid portfolio). It's very hard to see a significant rise in the short term and the long term is dependent upon exploration success, and that is a notoriously fickle animal. Jamaica is a wild punt that adds nothing to the share price.

Managed to sidestep the nett 2P reserves question! Reserves replacement is an important metric.
It's a pretty simple question Gross Increase-production +initial reserves.