Member Info for Penguins

This is from a post by the 'positive' poster rodders74 on November 26 2018

These are soundbites from an interview with SS:-

'Loads of great positives. Some SS quotes as follows:

1. "Fortunately the wells are not expensive"
2. "Plenty in the piggy bank to not need to tap up the market"
3. "The orientation of the HH well is not optimal to recover the oil at the best rates." So next well they drill will be at a more optimal angle.
4. "The rates we are looking at, the Portland and the Kim.... conservative.... £20million revenue a year.... pretty decent change.... planning further drills and wells at HH"
5. "This is very real, it is not conceptual. people have seen the tankers coming out of site each day"
6. "I mentioned value.... what do we mean by the asset value of an oil and gas field.... how much oil can you get out to the surface and how quickly can you get it out..... these tests at HH give us the metrics, in terms that we know, how much a well can produce, and how much it can sustain..... what volumes of oil can you get out..... Net Present value, we get some very healthy numbers"
7. "£150 to £200 million in the Portland alone"
8. "For each Kim well lokking at £15 to £20 million per well, multiple wells per pad. HH is just one pad, data shows our concept... laterally extensive across the wield. replicate HH at multiple sites."
9. "each site at £100 million" (for the Kim)
10. "IoW.... 127 million barrels of OIP... 4 times that in place at HH (portland), big chunk of value if we get that working"
11. "The train has just left the station, the journey will be in 2019, putting HH into production...
12. "its not like we will be shutting up production now, we will be producing oil and producing money"
13. In asnwer to; Will production be increasingly used to fund exploration? "it doesnt' take you too many wells at £20 million sales that means you can build a piggy bank that means you dont need to tap up the market"'

Goodwill is an intangible asset that is a way of representing the difference between what a company is 'worth' and it's assets - an acknowledgement of market position, sales, profits.

Maybe for UKOG it's a way of bridging the fact they have few identifiable assets because they haven't revised the 2018 CPR, but in March 2020 could hold on to a higher valuation based on potential oil sales, though by June when these results were published it must have been clear a lot of that potential based on the money spent so far had evaporated, unlike the water in the oil.

Let's see what happens to the FY results. Perhaps another take from the March 2020 figures is how dilution has affected the per share 'value' which was then 0.67p per share.

Ocelot,

Doesn't matter how many times you post it it doesn't change the fact the only oil and gas properties in the'assets' are worth less than £1.5mm. The market sees through the accountancy niceties of putting overpayment for assets (eg ca £11mm to Magellan) into goodwill, and spending money on something that underperforms, for example increased activity at HH (drilling HH-2z ? £7.8mm), and £0.92mm of technical staff costs - on the books as 'exploration and evaluation assets'. Like everyone here they hope the asset it's mainly spent on (HH) will come good, and not have to write it off in the future.

Examining these assets might be a way of arriving at a discount to these assets. For instance oil and gas properties are just over 0.01p per share - one hundredth of a penny, is £1.427mm a fair value for maybe about 150 bopd production (including Horndean which has the only CPR'd reserves) and a possible injector? Probably not, but is it £18mm (0.145p) or more?

What would you pay for a company with so many other potential assets that need cash to find them and UKOG is far from open about them.

But if you like intangible assets like goodwill then it's about 0.14p (£17.443mm)

and if money spent on 'exploration and evaluation' including paying nearly a million for UKOG's technical staff that's even more - about 0.27p for another intangible asset of £34.032mmm

There's a few other assets (about £3mm/ 0.025p), and there's some liabilities totalling about £8mm (about minus 0.06p) - hence these figures don't exactly match Ocelot's 0.38p for the net figure.

Mirasol,

The link to the server is 'http://docs.petform.org.tr/' from ibug. There's a long list of documents. The scout reports are mostly listed as just a numerical date.

I've had a look at the 7 scout reports - or twisting facts as apparently analyzing data is now known.

This gives a good picture of E Sadak monthly production from mid 2014 to late 2016, during this time E Sadak 2 and 3 were put in production.

Eight months of production data from 2019 that span when E Sadak 11S was put into production are also available.

These show that E Sadak-1 produced very l1ttle - June, July and August 2014 it produced less than 30bopd.

E Sadak-2 fared better starting at about 450-460bopd but within a year had more than halved (total production from the field was 196 bopd).

E Sadak-3 was then put into production at about 400bopd - but in the second full month of E Sadak-3 production the field production dropped 90 bopd to 501 bopd from 591bopd - but that's the last data from 2016 - maybe well/s were being worked on

In April 2019 average production was 849 bopd. June was 738 bopd, and in July E Sadak 11S was put into production, in August the first full month of E Sadak-11S production the average total field production was 885bopd suggesting that E Sadak-11S started at about 150bopd - but by November (last month of this data set) total field production had dropped to 626bopd - again maybe well/s were being worked on.

From the production data it's possible to make a reasonable estimate of production from E Sadak-2 during its' first year.

This was about 83,000bbls. At $60 OP and $15 OPEX and 12.5% royalty (I just checked it is on all production except oil 'used' not on the profit) that makes $3.1mm profit.

If Basur-3 were to produce and decline at a similar rate there would be pay back in about a year at $60 oil.

One worrying thing from the limited data available on E Sadak is the apparent number of non-producing wells and mechanical difficulties with drilling requiring sidetracks. Maybe ensuring the well design and location is robust is part of the delay.

Lots of ifs and buts - but until UKOG start giving some figures this is at least based on the analogue field to Resan/Basur - E Sadak monthly production figures, make of it what you will.

One useful characteristic of salt water is it's conductivity. The resistivity log is run in wells as it can help identify oil in the reservoir - oil is not conductive. Knowing the salinity of the water helps with the analysis of water saturation.

ozzy seems to have a few 'on the hook', even this thread which started with a technical post has descended into presumably an ozzy fest. I count 12 green lines out of (now 31 posts) on this thread. Judging by the replies it's diruptive not informative.

Ibug,

Thanks.

Not sure they would be happy that the scout report was available on their server, bur v interesting.

Ibug,

Interesting. I'm sure you've also read the bit on the AME website:-

'The E. Sadak (Oymantepe) Oil Field was discovered with a 43,05 API gravity oil from Cretaceous Reservoir in January 2014 by AME. The field is producing with 6 wells. AME holds %88 WI in Eruh Production Leases.'

The AME licence descriptions look like they were written some time ago, and the way it's written could just mean there were 6 wells, not 6 wells producing. More smoke and mirrors.

Where are you finding this information, including the AME 'update' you had in your 18 December post?

What UKOG have said about E Sadak is:-
it was brought quickly into production,
had 10 wells drilled on it (in an RNS in October),
Wells on East Sadak have flowed at 1,300 bopd from naturally fractured and dolomitized Cretaceous Mardin limestones, [note: same as Basur Resan target reservoir]
it has 28mmbbls 2P reserves
The oil goes to the Batman refinery, OPEX about $15 per barrel.

No mention of number of wells producing or what they are producing, but then they only 'do' initial flows.

Ocelot,

'So it's for each investor to assess for him/her-self the probability of their success'

How, what success?

UKOG has been very selective in what it has released to the market with three recent presentations with more or less the same information bigging up Turkey with an acreage grab reminiscent of the Weald vs the Weald but little information on the target reservoir.

Concentrating on OIP and recoverable oil mainly from a different reservoir nearby (only 28mmbls in the Mardin) whilst failing to release production information from E Sadak helps very little. The only information from the wells that have already been drilled on Basur and Resan released by UKOG was a short term flow rate in one well; elsewhere there's information that this test was terminated because of water production after a few hours. An OIP with no subsurface mapping shown or any information on the reservoir apart from it's a limestone and probably fractured, and 'undiscovered resources' figure based on Xodus figures of recoveries - where Xodus were acting for the vendor.

Whilst E Sadak (the analogue field to Basur/Resan ESE along the same anticlinal feature) has 28mmbbls recoverable the production from this field seems to be a closely guarded secret. From Ibug the field was producing up to 600bopd, and the AME whole company production figures presented in early December certainly suggest this is right. The report Ibug quoted had recent E Sadak wells 11 and 12 as dry (!) with the sidetrack to E Sadak 11 (11s) completed as an oil well. At least at 600bopd E Sadak will last over 100 years.

For most recent UKOG 'investors', and those that have aggresively averaged down, a success defined by a short flow test will be enough, maybe just an announcement of 'oil shows' - maybe just the rig has arrived, to lift the SP and see a massive bale out of SH. But will that, like BB and HH (admittedly so far) be it. How many will be holding and gambling on the field being brought into production that matters, but might not happen?

Perhaps a good indicator of how good this acreage is will be if they fail to get all four new blocks they have applied for, meaning another company is at least interested in the area.

Ocelot,

Here's how UKOG describe their assets (I suspect you know but it's always worth looking behind the spreadsheet to find out what those assets are) - extracted from my post responding to you in November 2020:-

£34mm was 'As a result of the increased expenditure on exploration and evaluation assets, associated with drilling on our Horse Hill oil field, these assets increased to £34.03 million'

So expenditure = exploration and evaluation assets

and even better they acquired about £11mm in 'goodwill' from Magellan.

'The Company's goodwill increased from £6.29 million to £17.43 million as result of the acquisition the entire share capital of Magellan Petroleum (UK) Investment Holdings Limited for a total consideration of £12 million.'

So £11mm is based on how much it cost (£12mm) less 'net identifiable assets' (£0.847mm).

So although the exploration and evaluation 'assets' includes Horse Hill the 'identifiable' asset bought from Magellan for £12mm was..... £0.847mm

So 'assets' includes £34mm of assets which seems to be based on what they've spent drilling etc at HH (BB drilling expenditure was written off, there may be some costs remaining from the site though)- and £17mm in goodwill.

The only actual 'oil and gas properties assets' are worth (cough) £1.427mm, and the rest must predominantly be HH goodwill and money spent.

NPV - in the success case.

Don't know about you but to me that requires each 'project' to be a success to be counted as an asset which is what you originally posted ("The Weald ASSETS each provide net present values in the 10s of millions in the success case" so in terms of what he actually said 'projects' is clearly correct - perhaps as he is reading off a script, judging by his eye movements, he's being more careful (than you) referring to projects rather than assets.

But then again EACH project could be worth tens of millions and we could still only have tens of millions of projects.

Ocelot,

He said 'projects' inn the Weald that provide tens of millions of value.

But not so long ago these same projects were going to provide values in the 100million plus. Have a look at the 2016 EY study. Using figures provided by UKOG ( 'A description of UKOG’s production scenarios which underlie the economic impact assessment') even the low case tax paid on the Kimmeridge production was going to be £2.1 billion. Then there was the November 2018 interview where each Kimmeridge site would be worth over £100mm, and the Portland at HH worth over £100mm. We now have projects worth tens of millions - projects!

So rather than relying on SS's 'opinion' as to how great Resan and Basur will be perhaps some information as to how much the multi well E Sadak field is producing per well, decline rates,etc rather than how quick it was put into production. Getting a field on stream quickly is important but whether it can support much more than the next well being drilled to keep production up and a small private company owning a high percentage funded would be useful to know.

Ozzy, you're back!

But very little is opinion, and if it is I quote facts to back up my opinion, something a lot don't think necessary - eg 10p:-

So to back up my opinion 'Unfortunately we've heard it all before - and much the same story'
'except this time it isn't the Kimmeridge that will be transformational' - SS said the Kimmeridge would be transformational for UKOG, I suppose he couldn't say it was 'of national significance' to the UK (14/7/17).

'geologically right address but slide 10 of the Turkey Agreement with Aladdin Middle East Ltd presentation shows they are in a different reservoir.' - the larger fields Raman and Garzan on slide 10 of the first Turkish presentation are in the Garzan reservoir, not the Mardin reservoir targeted by Basur-3.

'like quoting Wytch Farm for the Weald' - UKOG has compared Wytch Farm, where production is predominantly from the Bridport and Sherwood Sandstone, to the Weald where UKOG production is from the Portland, and they've ewt'd the Kimmeridge.

'much further away huge fields in equivalent stratigraphic units - (ie same age) but with differing lithological units - there's some sandstone layers in the Kurdish region - not all limestone' - Fact from slide 8 of the first Turkish presentation.

'no mention of possible production flow rates which will be known from AME operated E Sadak, which is the only field with the same reservoir' - UKOG haven't mentioned production flow rates from E Sadak

Maybe one day you'll post something factual about UKOG to base an opinion on, but then it couldn't be about other posters.

Whereas what you post is opinion, usually opinion about other posters - so I guess it's goodbye again.

Unfortunately we've heard it all before - and much the same story, except this time it isn't the Kimmeridge that will be transformational.

Oil shows, short term flow test (that ended with water production in Basur-1) - adjacent to reasonably large fields - 'geologically right address' but slide 10 of the Turkey Agreement with Aladdin Middle East Ltd presentation shows they are in a different reservoir - like quoting Wytch Farm for the Weald, and much further away huge fields in equivalent stratigraphic units - (ie same age) but with differing lithological units - there's some sandstone layers in the Kurdish region - not all limestone, suggesting a different depositional environments.

They haven't played the 'Majors missed it' though - yet.

Reasonable OIP, and estimated recoveries, but no mention of possible production flow rates which will be known from AME operated E Sadak, which is the only field with the same reservoir - though they have quoted the old staple, initial rates.

Just the same old BS for posters who want to believe rather than examine, with some weasel word quotes from SS to 'beefed it up' - is this presentation for touting around loan sharks?

Whatever happens they are probably going to be in a tight cash position, unless the SP rises, until the next AGM which last year was mid June (unless they call a GM) as they anly have authority to issue (only!) about 1.5 billion shares which is around £2mm at the current SP.

It's impossible to know how much cash is left. You can have a pretty good idea how much cash has come in - cash raises of £2.2 + £4.2 + £1.275 and a stab at oil revenue (28060 + 7045bbls from HH-1) since March; and there was £780,000 left at the end of March according to the interim results.

Outgoings - more difficult. There was a cash payment of £275,000 to PW and £1.925mm to YA to pay off the balance of the CLN. There may also be fees associated with the cash raised.

The problem lies with what else they have spent. Whilst UKOG has indicated an OPEX for HH before and after the PW equipment purchase it was based on about 300bopd and the water production in June onwards adds an unknown cost for disposal. There have been a few workovers of HH-1 with cranes, and a workover with a rig. They may have had additional costs associated with producing HH-2z though it appears any oil production was cancelled out by water disposal casts. They have probably had technical work done externally on the data from both HH-1 and HH-2z and there will be planning consultants, lawyers and barristers associated with the legal and planning sides of Loxley and and HH JR. Other than that there's the G&A - salaries, office costs etc. And possible license payments for Turkey, and maybe initial payments for the Basur drilling, if not putting the whole lot in escrow.

What might happen in the next 5 months, drilling Basur-1, seismic in the Resan/ Basur licence started, work to convert HH-2z to an injector (needing a workover rig, or CT unit) and more than just producing HH-1 - fiddling around with choke and pump, more planning and legal stuff (IOW and Loxley), plus indeterminate oil income from HH-1 and a dribble of cash from Horndean.

My guess, PW will get shares (or maybe PW have agreed a delay on the understanding they get all cash at the next 6 months payment as their agreement doesn't have a discount to the vwap) allowing a delay to a cash raise, hoping for a better SP based on a Basur drilling announcement, or even hoped for production improvements from injection announced - so less shares needed. I can't see the cash in being enough to cover the work done and expected up until mid June otherwise, the question might be is the current authority enough?

Ocelot,

66% of what. It doesn't seem to be the 'asset' level costs per barrel UKOG were blowing their trumpet about, because this time it's 'total' operating costs or alternatively 'general field operating costs'.

They are also vague, are they comparing the the 12months to January, the month of December, the first two weeks of January? We will have to wait until end June to know.

Interesting figures about production day:-
37% October = 11.5 days
85% November = 25.5 days
and 57% of Oct, Nov, Dec (92 days) is 52.5 days, leaving 15.5 days operating in December.

With 7,045 bbls produced in 52.5 days I make that under 135bopd. So production figures per month would be about, assuming no decline or increase from month to month in the daily rate:-
October :- 1552bbls
November : 3442bbls
December : 2091bbls
These add up to more than 7045 as 135bopd is rounded up.

What else
UKOG are holding the line that more than halving the production rate after 6 months of production is 'normal', although the 2018 CPR, which used both 2016 ewt data and other Weald field data, expected somewhere between 70 and 80% decline in the first year.

As for future plans first up is HH-2z conversion to a water injector, if permitted by the OGA. OGA's remit is to maximise ultimate recovery, not recover as quickly as possible so they will perform their own assessment. The fact the well was optimally positioned for production, not injection, may mean it isn't suitable- but as the field is small I'd expect the OGA to allow it with careful monitoring.

Additional wells - For the Portland it all depends on what happens with HH-2z injecting, and this:- 'The PBU data also helped identify a potentially significant contribution to Portland fluid flow from a natural fracture system. Technical work is ongoing to further characterise the Portland reservoir's delivery mechanisms'.

For the Kimmeridge, the reservoir that was going to be developed across the licence (and the Weald) targeting the multi billions of OIP, now requires another well to establish the lateral extent of the oil pool at HH, what were 5hose 'learnings' from BB?

Both wells will follow the Turkish adventure, which is apparently still in the planning stage, so not a 'fish in a barrel' appraisal.

The problem with these plans (despite the months of ewt) is the uncertainty of the outcome with dependency on understanding the fracturing, probably for both reservoirs . Fantastic initial flow rates (also possibly true for Basur-3 if successful) if they miss the water filled ones in the Portland, but rapid decline.

Maybe these will be the get out of jail cards for lth, though the probability of further fund raising to fund these plans (and Turkey wells and seismic) may mean off a lower SP.

Amazing how posters can read the same RNS and come to different conclusions.

This seems to happen with almost every RNS - posters say great RNS, maybe quote the 'good' bits, and then some evil poster comes along and points out the shortcomings and glaring omissions - then in my case Tollesbury comes along and says - 'you're always negative', failing to consider that the SP has dropped considerably in the past 3 plus years - even when there have been many 'great' RNS - even if there's been a temporary rise eventually the SP reacts to what happens, when UKOG's plans or expectations don't happen as UKOG expected.

The most recent example was probably the workover where UKOG withheld the information as to what HH-1 was producing in the run up to it, initially RNS'd the workover would bring material improvement, then finally 'optimised' production. But some posters still believing HH-1 was producing 300bopd expected more, not an average of 135bopd since the workover, plus an unknown but at least stabilised water cut - although in the 4 months of production it appeared to be fairly stable..

UKOG had a chance to come clean, reset, be bold stop the BS and give some figures and some expectations based on the reality of production, previously they were happy to publish forecasts based on the ewt that are demonstrably wrong, with a proper 'plan', budgeted and economically justified.

I suppose UKOG raising cash from issuing shares doesn't require an economic case, or a budget - just 'brass neck'.

Insidious

UKOG have 'said' lots of things - one thing they missed was the test of Basur-1 was stopped because of water production.

Ocelot,

Surely you misspelt obfuscation. No real details, water production amount? and a 'plan' to drill lots of wells where have I heard that one before, and no discussion of paying for it. Not clearly stating the daily oil production, and the calculated amount of 135bopd (or is it 137) with intermittent flow allowing mini- build ups,so likely unrepresentative of long term flowing - probably also reducing during the short flow periods while water increases.

Do you really believe what UKOG tells you or are you hoping others do.

Cynderlad,

Using HH-2z as an injector was one of UKOG's options - and some time ago a horizontal pump was photographed on the site - which can be used for injecting - here's what I posted. eg 12 June:- 'This sort of pump is for shifting liquids around a site once they are at surface, or they can be used to push liquids into a well (gulp, eg converting HH-2z to an injector)'. But you did indeed tell me!

You might be right, no real intention (or cash) to drill more wells, they're just keeping the dream alive in case Turkey turns out to be......well......a turkey.

A thought out statement on paying for these ambitious plans would have been nice as no bank would lend against a single well development, CPR or not, that might pack in (or be messed up) any day.

All eyes on Turkey.

Erm,

7 - 11 mmbbl is connected oil. If recovery is 30% it's theoretically taken from that. Not understanding (characterising) the reservoir when it's fractured and then pumping water into it isn't trivial and could be disastrous.

Any previous recoveries quoted will need to be re-examined as full voidage replacement (required to acheive the range of recoveries quoted previously with injection (14% to 45%l is extremely unlikely from a well originally placed optimally to produce oil, not inject.

So they don't understand the reservoir but are planning further wells 'Technical work is ongoing to further characterise the Portland reservoir's delivery mechanisms and, in particular, the prevalence and role of the natural fracturing within the Portland section.'

57% uptime Q4 2020 means about 52 days with 7045bbls of oil produced = about 135bopd after optimisation.

I can't see Turkey cash arriving by H2 2021 for all this work because if successful it's going to be spent.....in Turkey, and if not successful they'll probably want to drill another well just to be sure.

I see we're back to 7-11 mmbbls connected oil.