Member Info for Penguins

Bladehater,

It's in the accounts but,

HHDL owe UKOG about £9mm - but they wouldn't demand repayment of the loan effectively from themselves would they?

What's your thinking?

I suspect this clause may be preventing UKOG being too punitive when considering non-payment of cashcalls (page 170 of the re-admission document) and invoking the clause regarding additional shares being issued:-

'Investment Agreement dated 15 September 2014

..……. the loans made will accrue interest at a rate equal to the Bank of England base rate from time to time, be repayable on the date falling 30 business days’ after HHDL’s financial year end following such loan being made and all repayments are to be made on a pro rata basis between shareholders'

HHDL owes Alba £2,261,0029 (HHDL 9 months to 30 September 2018 Accounts) - and Dor was owed £1.27mm, but that will have reduced with their sale of shares.

May be a bit of negotiation going on.

Troll hunter,

Perhaps you need reminding the 10 billion barrels was an estimate of OIP for all the Jurassic shale/limestone layers, not the Portland which is the reservoir that HH-2z has been drilled in, and HH-1 will be producing from for the forseeble future - ie until UKOG finalise any plan, should one emerge, for production from both KL and Portland from HH-1.

The Kimmeridge was only part of the 10 billion barrels, and how much of that OIP was in the fractures, which seems to be the mechanism for production, isn't known - for some reason UKOG haven't mentioned that 'learning' from the cores at Broadford Bridge.

Why, if there is so much oil that can be recovered according to you from the Kimmeridge (by the way even Nutech, not renowned for holding back stated normally 3 to 5% recovery from a fracked reservoir), are they not pressing ahead with 'contacting' as much of those billions of barrels of oil as possible by drilling horizontals into the Kimmeridge as they surely learnt so much from Broadford Bridge and testing the Kimmeridgemat HH for many months already.

Oh yes - I remember now - risk mitigation.

But the focus is now on the routine fix for the issue with the Portland in HH-2z, and the long awaited CPR for the Portland with hopefully RNS after RNS of good news(at last).

It's quite a coincidence that the Alba share of the HH locences has dropped exactly 2%.

The 11.765% was what their 18.1% share of HHDL gave them of the licence. To achieve exactly 2% less share of the licence based on a formula related to just the UKOG shareholding would be quite an achievement.

PCS

Normally water is injected to provide a sweep of the oil towards the producing well, this is not a trivial thing to accomplish and the existence of compartmentalisation and water filled fractures without a comprehensive understanding of the reservoir could make it difficult to plan.

The provision of a water injector was based on the information from HH-1 where it was expected that at some time in the future the high water saturation would result in water production, although Xodus did not pin down the reason why the well did not produce water during the test.

The company stated in the latest RNS that they thought the water ingress was from multiple fractures at the toe of the horizontal.

Where does 15% water cut come from? As UKOG halted the clean up on evidence of water ingress there won't be much data for even UKOG to make a reliable calculation of water cut if the fix fails or is only partially successful. Anywhere from 0% if the fix is completely successful to approaching 100% if the water in the fracture is at a significantly higher pressure than the reservoir.

It is not a fact that a horizontal well will produce 3 times the flow of a vertical well - there are too many variables for that to be a fact. Even UKOG gave a rule of thumb of 2 to 3 times amongst a variety of estimates that latterly was 'significantly more than the vertical'.

PCS,

You've wasted another paragraph and post being, well, pedantic - to add to your over 300 posts you've managed to fit in over the last 30 day, I suppose that is only an average of 10 a day, every day.

Not baiting you, not being pedantic, if you refer to me in a post I'll respond, it's called discussion. If you can't take it suggest you stop trying to dish it out.

Retired Geology teacher, well I suppose it's a step up from being 'Ruth'. But no.

PCS,

Boasting about your 'life' on a bulletin board about a penny share oilco, and gloating about something that is yet to be done is, in either case, a bit odd.

If it takes a paragraph to redefine what 'continue with a fix throughout February' means then if it's that important to you, well done, you got that one right, gold star etc.

But I never said they wouldn't commence the actual fix in February, nor they couldn't finish it in February, just they couldn't start it until they had the equipment (workover rig or CT unit) to do it - whilst others were claiming every time a crane turned up the 'fix' had begun.

Just out of interest this is the relevant parts of the exchange on 4 Feb you have returned to:-

PCS:- 'We have seen a crane on site working the well last week and UKOG have reported that they will continue with the fix throughout February'

My response: 2) They will only be able to start their 'routine' intervention (though they say they don't exactly know what they are intervening until the tool is run) once they have run the tool the length of the horizontal which will require tubing conveyancing - so not really throughout February

PCS:- 'On point 2. Go read the RNS. "the planned routine intervention to shut-off water ingress into the HH2z horizontal is now scheduled for February". Yes that's right February, not March, not April, February. You don't like positives, you don't like UKOG.'

My response:- 'Firstly I didn't say March, but you say they will be fixing it throughout February which isn't true.'

It's taken you a couple of weeks to come up with your 'explanation'.

Bridgedogg,

I'm satisfied that during testing, plus the costs of running UKOG and doing stuff in the other subsidiaries (planning applications etc) there is an underlying cost of about £1mm a month. The 3 months following the end March 2019 appeared (with SS stating they has 'less than £8mm left at end June, though no details) to have gross outgoings of about £1.1mm per month - these one off costs do seem to keep on cropping up. (The gross outgoings per month in the 6 month accounts up to end March were about £1.285mm.)

There was also the £2mm raised in early December which looked like a cheeky top up to keep a cash cushion until HH-2z started producing in late December.

But comparing this:-

'Once the fix is complete (from existing funds) expenses will be minimal and I would anticipate that 3 tankers a day would produce cash flow for the company assuming we come out of the fix with cash in the bank.'

with this (from GM RNS):

'Therefore, the Board seeks approval to increase its authority to allot and issue shares so that it can act swiftly to establish Production via an ability to fund the Company's Horse Hill FDP and to ensure that the Second Deferred Payment can be satisfied.'

Doesn't really sound like they are hopeful that 'existing funds', and by inference cashflow, will be sufficient to satisfy the immediately upcoming work of course if they could get a named ii for a placing rather than a CLN this would not be such an issue

We shall see, as production is now planned to commence by bringing HH-1 into Production during Spring 2020 and this revised authority expires at the next AGM I assume this is the 'swift' bit.

The planning application may have put the myth to bed that any time soon UKOG will firstly pay off this CLN with cash, or stop having to use sharecoin.

Restricting export to 3 tankers a day until the full site is up and running suggests that at best test production might cover ongoing costs, but how long before even 3 tankers a day are seen? Fix confirmed as having worked, rather than attempted, by Monday seems highly unlikely. Maybe they will have decided what fix to attempt, and start deploying the necessary equipment down hole, as long as it is on site. Assuming it is simple (eg a cement job) as well as routine a short wait then they will need to test the well before demobilising all the kit, just in case the fix fails. Maybe a few days of test production, and then, assuming all is OK dismantling and trucking away the CT unit and all the other kit.

3 tankers a day 6 days a week, we shall see, that.s about £750,000 a month. UKOG consolidated cash accounts suggested gross cash outflow during the tests in the 6 months up to March 2019, plus all the other costs of running UKOG and it's subsidiaries, of at least £1mm a month. While Horndean helps with the petty cash there could be the need for a little 'top up' before the full site refurb and extra well/s paid for (hopefully) by a RBL.

Last plan was that HH-1 will be put into long term production 'soon'. HH-2z would be ewt 'd until Q3 when HH-2z would be put on long term production and perhaps another well would be drilled. That would seem to be the time that they might embark on the site reorganisation. By then they should have a CPR for the Portland so maybe at last they could start financing operations using RBL - of course depending what exactly,the CPR says, the complications of compartmentalisation and water conduits will add to the complexity, and perhaps uncertainty in any model used to create a CPR.

Ooops,

Should have been 1087 bfpd, not bopd:-

There also seems to be confusion about what up to 60% oil saturation means. That was the best percentage seen, what rate the well was flowing at when that occurred isn't known, but almost certainly wasn't when the initial rate of up to 1087bfpd was recorded - nor is the oil cut when that rate was recorded though this would have been in the initial stages when completion and drilling fluids were being returned to surface.

Blade,

Whilst there was always the expectation of water being produced at some point in the future as reading the 2018 Xodus CPR it was more based on the high water saturation detected throughout the Portland rather than water bearing fractures, although there was uncertainty as to why no water was produced during testing.

The seriousness of encountering water bearing fractures is perhaps indicated by the fact that the clean up operation was stopped when only evidence of water ingress was detected so foregoing the expected oil sales from HH-2z ewt, and embarking on an expensive looking intervention.

There also seems to be confusion about what up to 60% oil saturation means. That was the best percentage seen, what rate the well was flowing at when that occurred isn't known, but almost certainly wasn't when the initial rate of up to 1087bopd was recorded - nor is the oil cut when that rate was recorded though this would have been in the initial stages when completion and drilling fluids were being returned to surface.

Hopefully the intervention will work but the knowledge of the existence, rather than the possibility, of water bearing fractures coupled with the compartmentalisation of the reservoir will be an interesting addition to the CPR.

PCS

you do like your little lists, so do I like them:-

1. I did scan read the whitepaper (- scan, where's your highly positive take, with extracts)
2. The trolls immediately jumped on the negativity bandwagon (- I'm not a troll but in case you are inferring I am one - no I took the main findings relevant to UKOG and copy and pasted them - and added a comment - do you deny those extracts were in the paper?)
3. The trolls have zero inside knowledge on what data UKOG already have available to them ( - no, nor do you but if they want to run a PLT that's an indication they don't have all the facts, then the clean up was halted before proper flow data was obtained, and UKOG keep telling us they need to run the ewt to 'understand' the reservoir
4. The trolls have zero information concerning length of coiled tubing that is onsite. Speculative punt on it not being long enough is a massive deramp. (- No the tubing on the back of that truck was not coiled tubing - my comment about it not being 3,500 ft long was just reinforcing the point)
5. The trolls are not subject matter experts, Google addicts and trying to push results from the Information Super Highway does not count as Subject Matter Expert fact! (- I may not be an expert - but nor are you, at least I read and explain my conclusions)
6. Backwardsman still thinks 3 * 220 = 300 - that's up to BWM to answer, or not.

At some point a coiled tubing unit or workover rig will appear, but until either one or the other is on sit (maybe today - but not the truck FOTH claimed was the coiled tubing unit) I am sceptical the 'fix', rather than preparation for it, is in progress - and I see running the PLT tool, which according to UKOG is required to decide what to do, as the final preparation.

As for 3500bopd, if I remember correctly that is a figure based on the maximum (note 'maximum') number of tankers (16) a day (6 days a week) that might leave the site during the first 3 months. That's not to say they wouldn't reach that number if all 6 horizontals were in place and performing as expected, but a maximum isn't the same as an expected volume. Sometimes it's better not to expect the maximum when O&G projects are being considered.

They also produced an Environmental Impact Assessment in case they exceeded 500 tonnes per day ('could briefly') - but again it wasn't a certainty - 'Based on information acquired to date, once operational the Site could briefly produce in excess of 500 tonnes of petroleum per day for commercial purposes, the threshold at which the proposal becomes a “Schedule 1 development”10 which means it is “Environmental Impact Assessment (EIA) development”11 and must be supported by an Environmental Statement (ES).

I would be very careful just accepting the analysis from twitter. I don't doubt their usefulness with regard to monitoring the site, but analysis can be a bit flaky.

To start with It doesn't look like that drum has 3,500 ft (measured depth to the end of the horizontal from the surface) of tubing .

I think googling coiled tubing might also dispel that theory.

Let's see what happens next, which hole and what they are doing - or at least what they appear to be doing until UKOG get round to telling us what they are up to.

Are they preparing HH-2z for intervention, though maybe they are working on HH-1 to prepare for 'production' rather than testing, maybe even the dual completion previously mentioned.

Speculation always seems to be biased to the positive, that's fine, I can understand that - except it raises expectations to a level that are rarely met

It also seems that twitter is experiencing the law of diminishing returns with regard to being able to manipulate the SP short term.

PCS,

I think you are getting ridiculous now. The paper was a review of chemical and mechanical 'fixes' for water ingress. I suggest you take up any issues you have with their findings with the authors.

PCS,

If you've written a whitepaper on water fix, then share the link.

No, but I have just read the paper about chemical 'fixes' that oilybloke provided a link to the abstract - and taken a few relevant extracts from it.

Suggest you read it:

https://www.mdpi.com/2305-7084/3/2/51/htm

As for this:- Otherwise, shut up. ZERO credibility trying to talk down a whitepaper that's been through peer review by experts in the field.

I'm quoting the paper.

Oilybloke,

did you read the article. The 2 methods cited, Gel and Polymer, don't really seem applicable to HH-2z - we shall see.

To start with this was early on in the article:-

'The results of chemical solutions can be achieved in a couple of months to years, depending on the nature of the reservoir and the properties of the injected chemicals.'

So not instant.

'Gel treatments can completely seal off layers; therefore, they are considered aggressive and risky conformance control operation'

Gel sounds like it could totally mess up the reservoir.

'Another common technique for water shutoff operations is the usage of the polymer flooding method to increase the viscosity of the water. This technique is applied to increase the viscosity of the drive fluid (water) which helps in mobilizing and displacing the oil in the reservoir matrix rock. '

So 'Polymer' in the example in the article is used as an additive to water used in water flooding (injection) from the injector well.

It also seems a high level of understanding of the reservoir and it's production mechanism is required:-

'The most important part in any water shutoff operation is the accurate diagnosis of the problem. It is essential to know the water entry point, the heterogeneity of the reservoir rocks, dominant production mechanisms, and the schematics of the wellbore'

and they don't have the data to understand the reservoir along the horizontal either.

Argus,

Since end June up to end January about 32,000bbls has been produced (397*215 = ca 85,355 – 54,000 on 28 June). So revenue from HH over these 7months is about £1.65mm (OP av ca. $65, Exch av ca.$1.27/£1) = approx £236,000 per month

Since end November (27th) there has been up to end January 6511bbls produced (85355-78844) using the same figures that’s a gross £325550 in 2 months or £163,000 per month.

So far in February with tanker 407 yesterday that makes 10 tankers, and OP in Feb has been around $56 = about £93,000 – if the rest of Feb continues with one tanker a day = 14*215*56/1.3 = £130,000 – so not £400,000 – but for February, assuming they don’t stop for rig or coiled tubing unit arrival, about £220,000.

From the 31 March 2019 consolodated cashflow account UKOG gross outgoings were nearly £1.3mm a month, the next 3 months it was about £1.1mm.

For details see my post of 12 Feb, 21:03 where my estimate was that UKOG had at best £2.5mm left end of January. Which is why I won’t be surprised if there is a cash raise before the end of February – and not at 2p (or even a 10% discount to 2p).

‘Therefore, the Board seeks approval to increase its authority to allot and issue shares so that it can act swiftly to establish Production via an ability to fund the Company's Horse Hill FDP and to ensure that the Second Deferred Payment can be satisfied.’

Of course the £10,000 net a month they were getting from Horndean (accounts end September to end March) might delay it a day or two.

You may mess around with tanker volume, number of tankers on Jan 31st, average OP, exchange rate or claim that the £1.3mm and £1.1mm were periods with extraordinary costs – but UKOG certainly aren’t any where near covering costs with oil sales.

Ooops,

Should be 300,0000,000 shares available for a placing.......

Too late to post.....

Argus,

on second thoughts my calculation based on a 2p SP still had 300,000 shares which were available for a placing. So plenty of spare if there's no placing if all non board members exercised all their shares and the company decided that they needed to add to the SIP shares.

FOTH,

perhaps you should read my post - specifically this line:-

'Both coiled tubing units and a drilling rig can push as well as pull.'

You could have saved yourself a lot of googling.

Argus,

I appreciate what you are saying, but a lot of the options you mention are held by board members, given that the AGM is only 2 months away it's likely that they will be unable to exercise them while the current operations continue, we are constantly reminded about the almost continuous closed period.

As for the SIP that is a company decision to award them, maybe a bit of restraint could be applied.

But 3 billion........ surely a billion would have tied them over with plenty to spare.

But I don't understand your assertion that being able to issue 3 billion shares over the next 2 months is evidence of an expectation of great success.

Welsh,

imagine having a length of steel tubing on the end of a wire suspended from a crane and then lower it over a cliff.

The crane is working against gravity.

Now lay that steel tubing on the ground...…..even if you put in a slightly larger tube and had fairly stiff wire the crane could drag it out of the tube but couldn't push it through the tube.

Both coiled tubing units and a drilling rig can push as well as pull.

So accessing any distance along the horizontal part of HH-2z can't be done with just a crane.

Argus,

I presume you were inferring that 3,000,000,000 shares would be worth 5p each so £150,000,000.

But it's an interesting point you raise.

If UKOG were as confident in a significant rise in the SP as you are then why ditch the remaining 650,000,000 shares available to be allocated from the 2019 AGM and ask permission to have 3billion shares available to issue in the next few months.

At the 2p a lot of posters assume the price will be very soon then that would comfortably cover the remaining £1mm for Tellurian (50,000,000) and YA would be rejoicing because they could convert what was left of the £3.15mm at 1.3664p (say £3mm if it was the end of next week) about 220,000,000 - leaving plenty to place at 2p+ - 300,000,000 = £6+mm if needed.

Obviously UKOG aren't that confident - and they should know more about what's happening and about to happen so presumably assume there's a risk it won't turn out as you expect.