Member Info for Penguins

Matt

There were plenty of mentions of HH-2z in the 31 March RNS.

These were:-
‘Production has now commenced from the Portland oil pool via Horse Hill-1 (HH-1) along with continued test production from HH-2z.’
‘around 96,000 barrels (bbl) of Brent-quality crude oil have been produced to date from the Portland and Kimmeridge oil pools via HH-1 and HH-2z’
‘The HH-2z well clean-up and EWT have been resumed following this successful intervention’

There were a couple more similar mentions.

The next partly operational RNS on 28 April, only mentioned HH-2z once: ‘HH-1 in stable oil production, HH-2z EWT ongoing’

The 4 June RNS had exactly the same mention and nothing else.

So what is/has been happening as these suggest nothing untoward happening, certainly by 28 April.

Is there a problem at all? – UKOG barely mentioning HH-2z in the 2 last semi-operational RNS (there were quite a few in the 31 March RNS) seems suspicious, and there is the impression that not many oil tankers are leaving the site does not meet the expectations of 5 a day predicted by many (not me!)

Although no reports of a 10 day shut-down the work to enable flows from both wells was nevertheless done by 31 March Maybe a temporary fix and the remainder of the work done while the HH-1 pump was replaced.

If there is a problem is it mechanical or reservoir related.

Mechanical – could be an issue with the ESP which would require a workover rig or CT Unit (yes - I hoped there was a completion that would allow a crane could do it, but apparently not). Seems ESP might not be reliable or unsuitable in certain situations – perhaps if it’s failed it might explain why dual completion with ESPs in HH-1 seems put on hold. Of course this couldn’t be the further interventions planned to help fine-tune and optimise flow from the well as mentioned in the 9 March RNS. It also seems improbable that the ewt would be stopped for what sound like minor interventions

Any reservoir issue will require a workover rig or CT Unit.

You’re right, UKOG need to update the market as to what’s happening at HH – including HH-1.

Troll,

Follow the money..Big money.

but the consensus of opinion is that the Big money has, or is, selling Big time and being soaked up by the Little money.

Mattcarter replied to me about the placing:-

'Do you think that an II or Pro will buy in without research, that their management will just let their analysts do whatever they like without being able to put some hard arguments in favour of buying the stock.'

Forgive me for thinking that maybe that advice wasn't to hold on to the shares.

Tymers as you posted you only post to irritate I usually ignore your posts but his one caught my eye:-

'UKOG has everything in place to grow rapidly...…..1p in a couple of weeks'

UKOG may have a few millions left but there was no mention of drilling just paying off the loan, taking out a new one to buy second hand equipment, doing prep work for Loxley and IOW planning and not mentioned but also needed for salaries and paying for all the studies and consultants needed to decide what to do.

There may be plans for lots of wells (one so far of HH 6 producers and 1 injector planned) and building the HH development site but even $30 a barrel asset level profit needs a lot of barrels to generate enough cash for a well (about the amount produced during nearly 2 years of testing), and RBL is a decent CPR away, which we've been told will be commissioned after the HH-2z ewt is finished, which some posters claim hasn't even started because there aren't that many oil tankers seen leaving the site.

Matt,

You're right OIP is meaningless without anything else - but putting a 2P reserves figure that would need 150% recovery from the so far published OIP in the Portland for the whole structure, or even higher from the maximum connected oil for 2 wells is a bit extreme.

Flows ultimately equal reserves, if you had 1mmbbls but flow was 200bopd with decline (25 - 30 years production) I'd not base a valuation on reserves. When the oil comes out and at what price and how much CAPEX it costs to get it is where NPV calculations come into play.

I have occasionally offered an opinion based on estimates of possible Portland recoverable oil offered by SS in an interview in 2018 based on $70 oil and ca $21 OPEX, though other numbers offered were reliant on 3 Portland producers and 2 injectors. I've also challenged 3,500 x 365 x OP = loadsamoney.

At the moment given the lack of information following the HH-2/2z drilling I don't think it's really possible to make an educated guess. There is a geological report that was part of the submission to the EA that has recoveries of 8.6% or 10% of connected oil from the Portland without injection (same report where if injection achieved the unachievable 100% voidage replacement recovery could be 45%) so if those figures are still true, which is unlikely and the connected oil figures of 11 to 14mmbbls still hold then that gives for 2 wells between 1.9 and 2.8mmbbls. This isn't a guess, just based on probably out of date, but not revised since, figures. Taking the average of out of date NPV figures for the Portland (£16.5/barrel, $70 OP, unknown NPV discount) and leaving as is for a $60 OP then that comes out at £31.35mm to £46.2mm. Discount that by any number you like for fair value as a 'sale' price given it's all out of date figures with OP risk, production risk and of course in a sale a buyer would want a lot of profit - but would 2P reserves of less than 3mmbbls light any fires under the SP - though I suspect UKOG would want 2C figures reflecting another Portland well and an injector. What will a Kimmeridge CPR say - who knows, maybe 2C 4mmbbls but it will depend on what the ewt has shown rather than a plucked out of the air 1mmbbls per well.

As UKOG are shy of updating these old numbers I've not wasted time going back to the source material (though I'm pretty sure my memory serves me correctly) but at worst these figures are ballpark out of date, but strangely also 'current'.

How's the P&D going, guessing the MMs (who are ably disguising the big sells) and placees/Tellurian are loving it. Make sure you get out before the P&D crew do as you bought in very recently. It would be nice to have a SP rise based on substance in a RNS. Still waiting for Canaccord 10% TR1? I'm waiting for any TR1 following about 20% of the shares being placed and in the market a week ago.

mald,

'a large part of which was to buy v rent equipment at the HH site.'

If only that were true. Only £275,000 is being paid now, in cash - with £275,000 in shares. The remaining £1.1mm is to be paid later in cash and / or shares. The biggest part was to, erm, pay off a debt of £1.750mm + 10% premium that could be repaid in cash or shares. It's also worth noting that the placing a month earlier was in part for:-

'Outright purchase of key surface facilities (e.g. stock tanks, oil and gas separator, flow lines, choke manifolds, export pumps etc.) currently expected to further reduce opex by up to $4/bbl compared to current rental costs.

The saving then was presumably based on the over 300bopd average we were told was flowing from Horse Hill, in the latest placing RNS it was 'current production rates.

Mattcarter,

fascinated that Portland 2P reserves could exceed by 50% the previous OIP. Without an injector the 2P reserves could be very small - unfortunately since the drilling and workover of HH-2z which made a series of discoveries about the reservoir UKOG hasn't indicated anything regarding connected oil or recoveries.

As for contingent resources of the Kimmeridge 100mmbbls is laughable for the HH site, and they certainly won't be predicting contingent resources for anything else. At UKOGs projected recovery of 1mmbbls per well that's 100 wells. You really do need to understand your P, C and OIP.

R,

I would go investigate bubble point and it's effect on gas production vs oil production before getting too excited about the flare going well.

Wizard,

28 April RNS actually, not Final results

R,

wrong

Roganjt,

you are mistaken.

The nominal price of UKOG shares is 0.01p ( ie what UKOG create shares for) so 3 billion shares.

or maybe you would like to explain how since the GM with authority to issue £300,000 worth of shares they issued 2.1 billion shares + 637,500,000 shares in 2 placings that were placed for £5,475,000

What does that make you?

Should be:-

,,,,,documents added until July 2019 and permission granted in September 2019.

Not 'July 2018.'

Brighteyes,
Research?
2 years waiting for SCC permission?

The planning application for HH-1 ewt and drilling and testing of HH-1z and HH-2z was submitted in November 2016. Further documents were added up until August 2017 presumably addressing planners recommendations for further information, and planning permission granted in December 2017.
The planning application for the HH development was submitted in December 2018, documents added until July 2018 and permission granted in September 2019.
UKOG has never offered the excuse of OGA limits - which not only would be based on what UKOG requested but have also been increased as required - as a reason for any published flow rates.
Yes, the well could only flow one level at a time, but only 2 levels have been tested for any length of time during the 18 months of testing. In October 2018 a few months into testing the Portland was declared commercial and an initial flow rate for the Portland horizontal predicted of 720 to 1080bopd, and an initial stable 362bopd for the vertical Portland, yet they are still messing around with the HH-1 Portland completion during production and no news about HH-2z apart from initial rates 3 months ago during initial clean up following the intervention to block the water ingress. There has been no recent statement re stable rates from HH-1 (targeted or actual) or test rates from HH-2z although there are opinions it's shut in for furhter intervention work, although the only intervention mentioned was to fine tune and optimise in the 9 March RNS - surely not a reason to stop testing.

The recent placing raised cash at 0.2p per share, this was mainly for paying off the CLN, an intervention in HH-1 not previously mentioned of re-reperforation, a bigger pump already installed and other changes to the Portland completion (the expected intervention was dual completion with ESP) to materially increase production - though it would have been better if they had stated an increase from x bopd to y bopd - or even just what the increased rate was expected to be. It was also for future work on Loxley and IOW. £275,000 was possibly for the second hand site equipment initial payment, although the previous placing was also for that purpose, the remainder (£275,000) to be paid in shares. The balance of the £1.65mm agreed for the site equipment (which was only costing $4 a barrel OPEX anyway) would be paid by shares and / or cash.

If you want to understand why a lot of lth are cynical about UKOG plans and RNS read the January 2019 2020 strategy and drilling plans. Remembering this was late January how's this for a fail:-

'.......by the drilling and production testing of two horizontal wells, HH-1z and HH-2, both planned to start in spring 2019.'

Matt,

Wytch Farm is to the north of the Isle of Wight- Purbeck Disturbance, UKOG’s PEDL is to the south and there are significant differences in the geological evolution of the areas to the north and south of the Disturbance, and as you point out the reservoir targets are completely different.

The offshore IOW blocks were not offered in the last offshore licensing round and the only remaining licences are in the north of Bournemouth Bay and surrounding the eastern Isle of Purbeck.
Arreton-2 was unsuccessfully DST’d and Xodus in the 2018 CPR accepted UKOG’s explanation that the failure was due to the test not the reservoir. Arreton-3 is going to be deviated to be close to Arreton-2, presumably because it was near the culmination of the prospect. There are poorly controlled relatively larg(ish) mapped closures that really need more seismic data currently giving reasonable contingent resources, but they all depend on Arreton-3 success.

Wizard,

Sorry, poorly wtitten first few words – meant to be a question and regarding why no CPR - so far – leading to my next sentence about cunning plans. I do expect (hope for?) a CPR sometime this year

But what will the reserves be?

The SS interview with estimates of Portland connected oil, recoveries and NPVs was in 2018. Since then a lot of testing and then information from HH-2/z will have completely revised the reservoir model after finding a fracture swarm with water, finding that production was primarily from the sweet spot and finding separation of some sort between HH-1 and HH-2z with the outcome that both wells are producing (or maybe trying to!) from the Portland - all new bits of information. Those SS numbers from 2018 were based on 3 horizontal producers and 2 optimally placed injectors providing full pressure support. Soon after that the planning application for HH development had revised that to 2 horizontal producers and one injector, probably because the estimated connected oil per well had been increased and 3 times the connected oil exceeded the OIP.

Small steps first though. According to RNS HH-1 has been on production since the end of March, admittedly with stops for messing around with the pump, and HH-2z ewt has supposedly been running since at least the end of April – news of either stating stable x bopd fom HH-1 and stable y bopd from HH-2z would be a good start, rather than an average and 'flow' from Horse Hill.

Matt,

Why no CPR, Is it remotely likely UKOG has a cunning plan when they seem to stumble from one problem to the next, almost every long term plan either late or discarded, never to be mentioned again or kicked into the long grass.

The worry is not that they are no longer communicating their expected outcomes even couched in every caveat available, but they don't have sufficiently concrete answers, after nearly 2 years of testing, even for that. Is every new bit of information contradicting rather than confirming the current model so they have to constantly play catch up, with actions driven by 'firefighting' rather than considered progress, it certainly looks like it from the outside.

After the 9 March flow figures which included the range of instantaneous flows rather than just a maximum I posted:- 'Perhaps knowing a CPR will be produced in the not too distant future (hopefully) based primarily on the HH-2z well UKOG are aware any information about flows from HH-2z in RNS will be compared to what the CPR has in it about the well.'

Perhaps that's why silence, rather than cherry picked flow rates, is the new normal.

At least with placings and even CLNs the company continues. If that source of cash is stopped and RBL doesn't happen then it could be a disaster.

Wizard,

The Weald has billions of barrels of OIP, and HH has 2 wells that have actually flowed oil, is the attraction of the IOW that it isn't the Weald or HH, even though not one of the wells on the IOW has been successful and UKOG has the only PEDL on the island.

Mullins58 Posted in: UKOG
Posts: 6,912 Price: 0.205 No Opinion
Brent Crude $42,30 06 Jun 2020 09:11
https://www.bloomberg.com/energy

I suppose you're highlighting that finally UKOG does track the oil price - if only when it goes down,

06 June OP $42.30 UKOG SP 0.205p
11 June OP $38.79 UKOG SP 0.185p

thanks

Morefondle,

But it is a waste tanker! How perceptive of you.

Apparently they can be used for a full load of crude but more than 25% crude oil means the waste is still 'hazardous' and presumably needing 1267 plates. Maybe they put the plates on with less just to be sure? Then again none / one / two / three / four tankers on odd days certainly isn't a consistent flow of oil from a field supposedly in production and ewt.

To be charitable with a workover just completed on HH-1 it is quite possible there has been waste produced.

I see there's some nonsense about horizontal pumps on twitter.

You can push liquids up from the reservoir, you can't suck them up. A rod pump, as the name suggests, has rods going down the well to a mechanical pump at reservoir level, and and an electric submersible pump is sited at reservoir level. 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). The applications listed as:-

Lean amine recirculation
Crude oil and natural gas liquids (NGL) pipelines
CO2 and water injection
Mine dewatering
Salt dome leaching
Salt water disposal
High-pressure wash for refineries
Boiler feed
Geothermal injection
Industrial high-pressure facilities

In oil refineries, NGL pipelines etc.

Maybe while Gatwick is quiet they've put in an offer for the pipeline so they can convert it to take a tanker load every now and then so OPEX can be reduced further (it helps if you forget about the CAPEX) - thought I'd better put that in before someone suggested it as a sensible idea.

Matt,

(a) Change-over of production from Portland to Kimmeridge
(b) Dual completion of HH1 to flow Portland and Kimmeridge using existing pump, which I believe is possible.
(c) Perforation of HH1 Portland (BGS data supports that this may have happened, but I dont have enough reference material to make a direct comparison with other activities on site in the past.
(d) Deck chair exercise, which I think is very unlikely.
(e) B and C above

a) take too long, packer/s would need removing / moving. Don't think the Kimmeridge completion could be left in the well. Not sure it's definitive but in the 28/1 RNS:- 'Plans to install a dual completion' - suggests after change to Portland production Kimmeridge completion removed.
b) take too long and not actually feasible with a single pump as control of each layer's flow rate required
c) probably not possible - though not impossible - in the time from pump off to pump back on - but not if all the other planned interventions were carried out, just too many trips in and out of the well and preparing new configurations - BGS high seismicity occurred before and about the time the LRP was removed and perforating would need all equipment out of the well - rods, completion, packer/s?, downhole pump.
d) Obviously they were doing something, but the time from pump off to back on the next day just seems too short for any major work - might have been some 'tweaking' or looking at something when production was stopped for site rearrangement. My first though was re-logging the Portland for the upcoming perforation (HG Wells do logging) - but that would need the pump removed as well.

With UKOG maybe anything is possible, and I'll probably be proved wrong at 7 am tomorrow - but I think a,b - no; c very unlikely.

Sting,

I'm sure you're excited but surely you mean 17,682,890.

Wow, another £30k - I really do wish you good luck - I'd guess your average is about 0.5/0.6p?

Matt,

You replied to me this morning:- 'You stated that an II couldn't dump shares.'

Perhaps I should have been more expansive and added a bit of punctuation - but it gave the flavour of what I meant. You'll be all day on this site if you're into correcting grammar.

So to expand on my statement:-
'If any ii are left with significant shareholding it's because they' .........can't dump without the price dropping below the recent placing price, rather than won't dump if the opportunity arises to make even a small profit.

I suppose it was too general saying 'any' maybe I should have made an exclusion for Canaccord just in case they added this time. But regardless no one will know the reason why 'any' ii might need to TR1.

Today may be the first signs that the pi appetite for shares over 0.2p is weakening if there's shares being dumped in huge quantities - maybe the placees are having to take turns? Whether the 266.5mm shares sold today are from the 0.2p placing nobody knows but Tellurian, as I'm sure you would agree, seem to be prepared to sell at almost any price, although selling their shares at increasingly lower prices has, so far, has been a wise move, but as they are decidedly lackadaisical in telling UKOG when they pass thresholds we wouldn't know if they had any left to sell.

Anyway (excluding Canaccord of course) where are all these shares being sold coming from, about 3.25 billion shares traded in 5 days (Thursday to today) so probably around 1.6 billion sold.

Jimmytwoshoes,

I see you've flagged the claim on twitter that the BGS seismogram for 9 May shows the perforating gun being used between about 9:50 and 11:55 UCT (10:50 to 12:55 BST).

But there are tweets saying, and showing, that the pump and rods were still being removed early afternoon and there was this tweet from pboo at 18:30 :- 'Pump rods and the pump must be out as they have now got the Wireline Unit on the well.
Could be moving the plugs so that they can re perforate the Portland as the RNS.'

As there was quite a lot of work that UKOG was proposing and the pump was back on the well this afternoon I'm surprised they've managed all of it in a little over 24 hours.

........a full re-perforation of the well's Portland section...….The work will also reconfigure the well's production tubing set-up and deepen the downhole pump...…..

Morefondle,

we know what you think - you just happen to be wrong, If you think UKOG is so great and the market has got it wrong for nearly 2 years since testing started maybe an explanation rather than just criticising other posters that you don't agree with - but seem to have the measure of the company.

Matt,

I didn't see many facts in your post, just conjecture, except Canaccord had 5.41% though the value was about £920,000, and of course the trading volumes which speak louder than any words.

Here's my conjecture:

Maybe some of this placing is in sticky hands (though how sticky is always the question) we shall see soon enough if anyone has over 3% (ca.325mm), or if Canaccord increase their holding - though the HH-1 pump/perforating workovers might have unnerved them if they have the expertise you credit them with, though the April placing was at a 20% discount to an artificially low bid price which might have encouraged them, the latest was 17% below the mid.

The only research was probably that pi soak up shares at every bargain low and most make a profit selling their converted or placed shares, why should this low be different regardless of the next direction of the SP - and they might be lucky and UKOG pull a rabbit out of the hat and the SP rises, or unlucky and they don't.

A gamble like any 'investment' that may or may not come off but making even a few percent before you've paid for stock isn't to be sneezed at.

Matt,

Heavily researched ii / Pro investors.

How. Even UKOG with all the information don't appear to know what they are doing next until the last moment and haven't released any information that you could base anything but a guess as to what flow rates or reserves are likely to emerge. HH-1 after reperforation hopefully more than whatever it was producing before - though we don't know what that was, and HH-2z a complete unknown.

Looking further into the future Further drilling at HH is dependant on either more borrowing or the current wells generating enough cash to fund the UKOG operation and have millions left over, assuming more wells at HH are economically justified. It may be drilling at Loxley or even IOW is prioritised (the grass is greener principle of oil exploration).

The level - both price and volume - of share trading indicates a lot of the placing has made it's way onto the market already, Tellurian might be selling but well over 1 billion shares have been sold assuming half are sells since the announcement.

If any ii are left with significant shareholding it's because they can't not won't dump them.

Mirasol,

Whilst I suspect that the HH site will never need this permission 16 tankers 6 days a week equates to about 3000bopd. This was for the first 4 months only - and a maximum. You would hope they used their understanding of the reservoirs at that time to come to that figure - is there anything that's happened since to think it will be better (or even as good) than that.

This was based on production from 2 Portland horizontals, with an injector for the Portland and 4 Kimmeridge horizontals and an extension of the site for the production facilities and the gas to wire. So far only one Portland horizontal has been drilled of the planned development, the latest average flow from HH was 'over 300bopd' some claim all from HH-1 Portland.

But will the current set up be in place for some time now UKOG have bought the surface equipment used for the current production.

But we don't know what the current production is - rumours that 2 tankers a day are leaving the site daily seem an exaggeration, and was production being held back...…...during production from HH-1 - but it seems the reservoir might have been an issue. Hopefully reperforation will solve whatever UKOG think the problem is.

HH-1 Portland initial rates RNS'd just before the AGM, if not......….?

Tymers, not sure SCC will see anything beyond business rates:- 'HHDL is committed to paying 6% of gross revenues to the local community (including business rates to SCC)'. The locals might be swayed though

Matt,

The perforating business is interesting. They re-perforated the Portland in September 2018, The sequence of events this time round was:-

over 300bopd 'flow' from HH announced on April 28 but equivocal (as has been pointed out production should have been the word used if it was only from HH-1) as to whether it was from both wells.

Then late May a new linear rod pump was fitted and presumably run for a few days.

The company then announces that HH-1 will be reperforated with a new completion when, if it was needed, why not do this when the new pump was fitted? Did the new pump not solve a problem?

Is it a case of moving the deck chairs around while the placing shares get shifted. Demand for shares has been incredible - but:-

UKOG has 2 wells where the current flow isn't known but even enthusiasts are claiming one of them is shut in

There has been no recent guidance on future rates, since any 'numbers' were mentioned there has been a change in the reservoir model, a new sidetrack, Portland core and a lot of ewt data.

No recent guidance on when the total 6 well plus injector development envisaged at HH will commence

No recent guidance on what is happening with the Kimmeridge, including when the dual completion in HH-1 will happen - though if a new Portland completion and LRP is installed no time soon.

But they are happy to RNS that they will spend money preparing for another 2 well sites which will be dependant on getting planning permission not only passed, which is probably 'nailed on for Loxley/Dunsfold, but if conditions are applied then these also have to be agreed - the HH development PP from last September still has outstanding conditions to be approved. At that rate of progress UKOG will have spent all the placing cash before they can start work on these ventures that will need a lot more cash to proceed.

Anyway I hope this helps with your investment decision based on the current situation - although I thought it only hinged on a Canaccord 10% TR1.

PS An initial, 24hour, rate like spring and swallows, does not a long term flow rate indicate.

Jimmy,

that got me thinking.

Is this kit any good for the planned development of 6 producing wells with supposedly far more throughput. If there's success elsewhere they could move it on for testing but that's probably going to be a while yet, but when will the planned development commence? - the reason for renting is the ability to shed equipment when it's no longer needed. Is this admitting that this is 'the development'.

Hope9,

I expect lots of 'investors' bought the 40 million shares bit by bit for about 0.21p during the day that someone sold at 0.20125p (spread was 0.21 to 0.22 also the lowest trade of the day apart from a few very low value trades at 0.2p) listed at 16:44. So were they placing shares for a tiny profit (less than 1% - but before they've even bought them), maybe Tellurian happy to get anything, or maybe PW Well Services forward selling.

Plenty of candidates.