Member Info for Penguins

Ocelot,

I've posted this before, but it illustrates why AME might need a sales brochure to get a partner.

From AME Business strategy:-

'We reduce initial investments invested in high-risk exploration'
and
'We will continue to high-grade our portfolio and consider divestitures and joint ventures where the underlying values are not reflected in our financials'

Yes the Xodus report was dated June, perhaps agreed in haste?

The Xodus report quoted was done for AME, ie a sales brochure.

The success in the surrounding area is in a different reservoir, except for the E Sadak field (Mardin reservoir) which is operated by AME, but apart from a single flow rate (1300bopd, possibly initial), and an initial reserve (28mmbbls), UKOG have given no details. The first well is planned for Basur, where a initial short term swabbed rate (500bbls in 6 hours = 2000bopd) has been quoted. Resan Wells had good oil shows in the Mardin.

In the recent interview SS said Basur was about 3 times HH and Resan 10 times. The total mean recoverable net to UKOG in Basur and Resan was 18.7mmbbls.

If those relative amounts are right hat gives UKOG net recoverable resources of about 4.5mmbbls in Basur (high potential?) obviously more in Resan, but only oil shows noted.

.....and that's about all we've been told. Let's hope UKOG tell more before it's drilled, especially about E Sadak an analogue field.

Ocelot,

understanding what is behind the calculation is at least as important as the result, but there is no compulsion upon UKOG to do so so there is no point contacting anybody about the RNS.

But looking at past 'estimates' and predictions it is only fair to point out the record. Most predictions in UKOG RNS either don't happen to the original timescale or don't happen at all and no resources have ever been confirmed as reserves, even some disappearing as the licence is relinquished (Holmwood, Baxter's Copse and Markwell's Wood 5mmbbls total net resources).

Ocelot,

I'm sure you have heard of the saying garbage in - garbage out.

It's quite probable that the volumes that UKOG quote belong to that category of information, as the inference of a 'volumetric study' is that Xodus have only calculated the volumes from UKOG's mapping that they previously refused to use in the CPR because of shortcomings.

It seems a habit that UKOG (and other small cap oil companies) can't break of issuing extracts from reports with large 'resources' with no actual backup information as to the inputs and risk but nevertheless the upside case hightlighted (eg:- Reported high case net PEDL234 GIIP and estimated high case recoverable resources are 76 bcf and 54 bcf, respectively.)

But the chasm between promised outcomes and reality can even occur when there is significant data - as has happened at HH.

Adrianuk,

what is so promising about Loxley - an undrilled possible extension of the Godley Bridge-1 undeveloped gas discovery (but not GB-2 & 2z) 7 kilometres to the west of Loxley, in the same reservoir as Horse Hill.

Of course - the recoverable resources in PEDL234 aren't constrained by a successful well.

As for Turkey - even less is known = even more promising on the greener grass theory of exploration.

So in the event both these fail despite being 'promising' and 'interesting', and UKOG have sold HH.................0p?

Wizard,

you're being vague - say what you mean.

Bigger picture - they've got no cash?
Communications from the company - HH Kimmeridge forgotten, HH Portland suffering - even this wasn't encouraging 'designed to provide data necessary to understand whether the Portland reperforation programme has achieved the desired optimisation' - and btw although they have a desired result they didn't bother to communicated it.
Xodus - wasn't the last mention wrt to HH the connected oil going up in 2019 - lot's happened since to put in the model!
Planning Permission - still no cash to proceed with the development

Cynderlad & Wizard,

UKOG certainly hasn't mentioned that the Kimmeridge has produced any water - though there was a period after 23rd December when the Kimmeridge was flowed but there was no mention following the swap to Portland in January of what it produced after 23 December - but that's splitting hairs. But neither did the Portland up to March 2020, with about 6 bbls declared in April. UKOG have been vague about totals from each reservoir but the Kimmeridge has probably produced in the region of 60,000bbls, and the Portland prior to May 2020 about 40,000bbls - so though significant I wouldn't say that volume proves that the Kimmeridge won't produce water at some point,

Wizard - Not sure what you mean:- 'I think that the plans have changed & you need to look at the facts of HH & reconsider?'

If you mean that they aren't dual completing HH-1 because if they were going to they would have done it when they recompleted the well with a workover rig so they're off on an adventure in Turkey to distract attention - I agree.

Baits,

Surely you realise AIM regulation is practically non-existant, and nailing absence of information and proving the company 'knew' is much harder than deliberate lies.

Long ago SS discovered that silence wasn't punished, in fact it helped the SP (and fund raises?)as, for instance, the speculation about BB was that he was 'playing a blinder' hiding great news and burning the (non existent) shorters because things were going fabulously well and it was only bad news he had to release according to multiple posters here and tweets.

.......and the same filling of news voids with extreme positive speculation has continued regardless of the likelihood of being 'fooled' again and again, with UKOG leaving it as long as possible to inform of bad news. Covid hasn't helped but much of the fall has been self inflicted with little suggestion that a bad outcome was likely.

As I posted yesterday the RNS might have been forced out.

It could be said to warn about decline, water production and gas production issues - without actually saying any of these were a problem.

ART,

if UKOG intended to dual complete HH-1 any time soon they would have done it when they had the workover rig on site, rather than just installing a new completion in the Portland.

UKOG inform by omission. For instance:-
not using the word 'dry' before 'oil' produced from HH-1 you are expected to deduce that the oil is no longer dry.

That when HH-1z is no longer mentioned it's no surprise it isn't drilled rather than at any point UKOG actually putting it in an RNS.

Whilst the figures that UKOG release may show the Kimmeridge flowing better than the Portland, that's only part of the story. They are very coy about final rates after flowing for any length of time preferring to mention initial rates, averages or total production over a period where high initial rates may tail off dramatically but there's insufficient information to determine any hard number.
Though for the Portland the recent production over 135 days is a case in point. Averaging 208bopd, however if that started at their boast of more than 300bopd the inference is it ended closer to 100bopd.

Seedcorn,

As I'm posting - it was in the Loxley planning application, page 22 of 47:-.

'Flow tests and pressure data from the Broadford Bridge and Horse Hill Wells Sites have been sub-commercial'

As BB was only a Kimmeridge test, and the Portland at HH had already been declared commercial when the application document was signed off (19/4/19) was it must refer to the Kimmeridge.

Ocelot,

That's not what I meant, or said.. The economics will be of the estimate of costs for doing a dual completion and future costs vs the return for that well, not whether they have the funds to do it. It would of course 'compete' against other projects for the cash but this is currently their only source of income - unfortunately UKOG have never prioritised HH over blue sky ventures

Baits

They have tested the Kimmeridge for months since the short duration testing. Most of the RNS about this testing have only mentioned rates over short periods or volumes produced over longer periods without mentioning the number of days of production. The Kimmeridge was shut in during January 2020 when the Portland interference test between HH-1 and HH-2z was performed. Why UKOG have been so reluctant to release any substantive information about the Kimmeridge may just be because it doesn't match up to the previous rhetoric, and perhaps the same goes for the Portland. The only reason for not dual completing HH-1 must be the economics don't stack up of a more complex production set up with greater costs of installation plus more 'things' to go wrong requiring costlier workovers

LSE,

a pbu requires a stable situation with the well 'shut in'. The clue is in the words 'shut in', so no oil, water or gas produced. It does seem odd though that having done 2 things that would not affect the reservoir (new completion, deeper pump placement) and one thing that would not affect the reservoir pressure they choose to do a pbu rather than flow the well which would give them an actual answer to the well's capability to produce following the workover - or do they just want a nice short term rate to RNS?

scratch that bit about days in August and September - just seen I transposed the 3 aqnd 5 in the operating days so 135, not 153 - but still don't know how many days were operating in August and September........

Jimmy,

Your post reminded me there was something else I wanted to look at.

21,320bbls produced April, May, June, July (OGA records). UKOG say 28,060 6 months April to September therefore in August and September 6,740bbls produced. The question is how many of those 153 days were in August and September. There were workovers in April, May and June, Even if all 30 non-producing days (183 days Apr-Sept) were in August and September that's only 221bopd - and they weren't. Likely of at least 40 and up to 50 production days (possibly more as I don't remember reports of workovers) so an average of around 150bopd.

The 'timely' mention in the RNS about breakout of solution gas (and that water cut might increase - btw. what water cut, and decline!) may indicate that the reservoir pressure is also declining and perhaps the low production was a result of trying to maintain pressure - but that's after a relatively small oil volume produced (less than 100,000bbls) vs what many expected even one well to produce.

I wonder if the long pressure build up will be followed by a RNS with a short term flow rate for HH-1, they have form.

As for the Kimmeridge - the last mention of doing anything with the Kimmeridge at HH since the 'plan' to dual complete HH-1 was in the end April RNS - since then they had a workover rig at HH but only reconfigured the Portland completion.

What a ridiculous RNS - must have been compelled to issue it.

'this can be the result of various factors including the break-out of solution gas and increased water cut, translating directly into a production decline over time. It is also normal that individual conventional oil well production declines over time.'

So tell us how much oil has been produced, and hint about water and gas without any details. If the rate has declined from 300bopd then an average of nearly 208bopd is pretty disastrous - something near 100bopd at the end?

Ibug,

Thanks for putting the figures in one place.

Interesting the gas to oil ratio seems to have dropped – suggests they were applying a smaller choke / flow rate to maintain pressure. Hard to draw a conclusion about August but stronger flare could mean they opened up the choke but that would be deleterious to the gas / oil ratio – though as I’ve pointed out before the flare is a subjective opinion, It also may depend on air temperature and humidity.
0.0234 ksm3 gas per m3 of liquid June, 0.0188 ksm3 per m3 of liquid July.

Unfortunately the water to oil ratio increased although less oil was produced.

Now we await what the workover managed to do to productivity.

It’s unlikely that deeper perforations in the 35ft interval producing the lion’s share of production will improve the ratio of oil production to water production. Perhaps the hope is that deeper perforations in the ca 80ft of less productive Portland will result in a higher oil to water ratio – because it hasn’t produced much of either to date.

I see the purveyors of unseen tankers desperately saying not me guv when the real figures are now in the public domain. But worse than that is UKOG and their 30 June interim results

Did it slip their minds that HH-1 was also producing water? Are we to assume when they stop mentioning ‘dry oil’ it isn’t. That when they mention that prior to production starting they were flowing 300bopd continuously – oh and the new pump improved flow – but somehow that they were averaging lower and lower amounts – and btw there’s water and it’s getting worse....and even in the workover RNS, no mention.

Is it not price sensitive information?

RNS:- 'The Horse Hill-1 well (HH-1) continued producing at high rates of over 300 bopd almost continuously during the period. Post period a higher capacity and energy efficient linear rod pump was installed on HH-1, leading to increased production from the Portland interval.

No wonder they want to just RNS about Loxley and Turkey – though Loxley is a Portland test........hmmm even if successful.....

Let's 'discuss' Loxley. Always better to talk about something far in the future with hardly any information than the flagship Horse Hill Field - which strangely we hardly know any more about.

Loxley is about 7 km east of the 'discovery' well - Godley Bridge-1. That well was followed by Godley Bridge 2 and then 2z - nearby but unsuccessful because of difficulties with mapping / depth conversion. Alford further east and to the south of the Loxley location was also unsuccessful.

Godley Bridge was never developed because of mapping uncertainty.

In the 2018 CPR Xodus would not calculate anything for Loxley based on UKOG maps because of shortcomings. They have now produced the GIIP and recoverable resources in a 'volumetrics study', the mean recoverable net to UKOG being 34BCF - but not of CPR standard - pity they didn't publish the study.

So what's the risk of confirming the GIIP quoted, of confirming the recovery quoted and the deliverability being economic?

You quote a SP of 1.2p which equates (with the current shares) to about £150mm just for Loxley planning permission. Before the planning meeting there was a massive P&D here and on twitter which also included a 4 tanker 'sighting' on 23rd June which was seized upon, the price rose above 0.5p the next morning. On the day of the planning meeting (29th June) the highest buy price was about 0.4p, prior to the P&D the SP was above 0.2p.

Following the planning meeting the SP has dropped from 0.27 (close 29/06) due to the admission on 30/06 that the HH-2z water issue had re-emerged and an initial raise of £2.2mm for Turkey at 0.16p, lack of information about the HH-1 workover and HH-2z hasn't helped.

UKOG has since then announced the well won't be drilled until H2 2021, though UKOG has rarely managed to keep to planned timings - so plenty of time to jump on the Loxley bandwagon.

Why would the SP rise to 1.2p just on receipt of planning permission - in December? January?

Monday - July HH-1 production figures, and maybe a RNS about the workover?

........and HH-1 was drilled by Angus.

16 May 2014:- 'UKOG (AIM: UKOG) today announces that Angus Energy Limited ("Angus Energy") as operator of the Horse Hill Prospect'

Wizard,

I've explained what is wrong with your assertion 'Now the transport permission is signed off it will be possible to put together cash flow projections base on production that can be exported which up to this point has not been able to take place.'

Perhaps you should contact UKOG and point out that in your opinion they aren't producing cash flow forecasts based on expected production, which would be a serious omission for any company.

If you're referring to my 'the reason a CPR wasn't produced was obviously the failure of HH-2z'

This is from Full Year Results 31 March 2020 RNS:- 'It is our view that it would be prudent to wait to commission a Competent Person's Report to fully capture Proven and Probable Reserves once we have established long-term production at Horse Hill from HH-2z'

That would suggest that if HH-2z did not establish long term production they wouldn't commission a CPR. Therefore any reference to OP or Covid (this statement was 31 March, OP ca $26, lockdown regs 26 March) seems an excuse vs the above clear statement.

or was it that 'I'm taking what UKOG say as the truth' (seriously deluded perhaps, but no reason to contact UKOG), or was it:- 'HH Portland was 'robustly commercial' at 140bopd?'

So a bit more enhancement as to what 'exactly' should I be contacting UKOG about?

Wizard,

My concern is your post:- 'Now the transport permission is signed off it will be possible to put together cash flow projections base on production that can be exported which up to this point has not been able to take place.'

I'm taking what UKOG say as the truth - that there was nothing stopping them in terms of permission from producing oil and exporting it, and they were going to produce a CPR in the Autumn again because permissions would not prevent it. I also pointed out that cash flow projections will have assumptions - you are implying that UKOG are 'flying blind' with no cash flow forecasts because permission weren't fully in place.

Whilst covid and consequent OP drop has provided an excuse the reason a CPR wasn't produced was obviously the failure of HH-2z.

HH Portland was 'robustly commercial' at 140bopd? Surely if rates were well above that, and given the much lower predicted OPEX than September 2018, and that any CPR valuation will have an OP forecast not necessarily fixed on current prices , UKOG should produce a CPR if they expect a positive result.

'that HH-1 Portland is robustly commercial at even the lowest observed sustainable daily rate of 140 bopd and at oil prices below $60 per barrel.'

Wizard,

Planning permission for HH-1 & HH-2z:- There shall be no more than a total of 20 HGV movements (10 in and 10 out) to or from the site in any one day

RNS Statement by UKOG following planning permission for HH development:-

'What Does the Consent Mean to UKOG and Horse Hill?

Critically, this consent means that the field's immediate oil production from HH-1 and HH-2/2z will no longer be limited to existing extended well test planning consents. The ability to produce over the field's economic lifespan also enables the transfer of current and future assigned recoverable resource volumes into the category of Reserves, which, by definition, conveys with more certainty that a known volume of petroleum can be produced commercially over a given time.

The commercial certainty associated with the allocation of Reserves at Horse Hill is therefore a critical step necessary to help facilitate the potential use of debt-based funding for field development and other Company working capital requirements. It is planned to commission a new Competent Persons Report to establish the Company's net Reserves following completion of HH-2z production testing in the Autumn.'

'Now the transport permission is signed off it will be possible to put together cash flow projections base on production that can be exported which up to this point has not been able to take place.'

A cash flow forecast is by it's very nature based on assumptions - UKOG could have put together a cash flow forecast at any time based on expected production and the above permissions. The value of UKOG is based on 2 things reserves and production.

They seem unwilling to get a CPR done which they were saying was planned for Autumn 2019 in above RNS (suggesting no 'permission' related issues with doing one) so no reserves for Horse Hill, and they haven't told the market what the sustained or even expectation of sustained production before the workover.

As for HH-2z they have had 4 months now to decide what to do with it. The choices were 'stimulation to return it into long-term production, sidetracking the well to a different subsurface location and possibly converting it into a future water re-injection well to implement pressure support and further reduce future operating costs',

The choice of new subsurface location for either production or injection will be difficult in a poorly constrained fractured reservoir, and I'm wondering what stimulation would improve the oil to water ratio. There is an obligation to acquire 3D seismic, will that be acquired before any further subsurface work?

Ocelot,

that's only a good trait if it doesn't end badly, eg BB. Not sure what is tenacious about testing intermittently over 18 months, more likely lack of certainty in the results requiring more information about the reservoir than was available - and then not deepening the HH-2 pilot to get more information.