Member Info for Penguins

Bridgedogg,

Why would the OGA abandon any of the regulatory controls just because the PEDL has moved into a phase where they are expected to have had an approved FDP.

I don't seem to remember Angus being able to do as it wanted in the Kimmeridge (though to some extent it seems they thought they could) although they actually did have an FDP for the Portland and an old style Production Licence (PL235).

From the EWT guidance document on the OGA site: 'Under the model clauses of a licence, the consent of the OGA is required to undertake extended well tests'

It will be a while but don't be surprised if UKOG want to EWT that they will have to ask for permission from the OGA.

Mirasol,

There is a large difference between the Portland resources calculated in the IGas CPR and the estimate of gas in place times possible recovery that UKOG calculate for Godley Bridge, Xodus wouldn't even calculate resources in the 2018 CPR because they considered the UKOG map unreliable.

IGAS have 8BCF and UKOG have between 33 and 44BCF depending on recovery (November 2018 Corporate Presentation0 .

Both companies would want to prove up the reserves in their acreage and if their mapping continues to differ to the extent they appear to from these 2 estimates then joint drilling for the Portland seems unlikely, and I suspect both companies would also want to prove the Kimmeridge can be produced commercially in their acreage.

Wizard,

UKOG have always had a licence that allowed development of an oil field. It's called a PEDL (Petroleum Exploration and Development Licence) and in any phase of the licence including the initial phase. For whatever reason the OGA appear to have moved it into the production phase which means nothing in terms of the regulatory hurdles that UKOG will have to go through to go from an exploration well site to a production well site.

IGAS also have a PEDL and I believe that the wellsite for Godley Bridge still exists and GB-1 suspended so I don't suppose they would be far behind in getting PP, though as a known fracker they may have difficulties convincing the locals that thier intentions are entirely conventional, in that way UKOG may have less issues.

Hilarious,

UKOG haven't just been awarded a production licence, they already had one, a PEDL. A FDP can be submitted during any phase of a PEDL.

Nothing's changed except that there is now a deadline for submitting a FDP. As the OGA seem to be amenable to endless extensions I suspect that deadline won't be enforced.

Not sure what FOTH is getting so excited about.

Argus,

I always wonder what the current price ought to be if I went through your posts and compounded your posts on percentage increase of the share price

Quincet

strangely I posted a response to jptops post, then you post a response to my post ..............so I reply to you in very much the same tone as your post - so who has a beef with who?

Perhaps it didn't start well with your first post:- 'The above is my opinion only, always seek independent advice, and do me one favour, ignore the diatribe from Seadoc and Penguins; they are biased and clearly lack the fundamental skills and experience to comment on such matters. Proverbial arm chair self proclaimed experts with no pedigree or accountability.'

Anyway unlike many I apologise if I get something wrong so I apologise that I missed your $18 was £18. You are still using 30% times OIP which might have worked with 3 wells but with 2 wells seems excessive (SS probably using contacted oil for the 3 wells then planned). Anyway we both agree the current SP is covered by the Portland value alone using different interpretations of UKOG figures and we both have extra for the Kimmeridge - so why would I have a CfD still open?

I've been posting here 4 years (not 3 days) - if I was going to bet against UKOG I've had plenty of opportunity to do so at amounts from 9p to 1.2p (though according to seadoc it's difficult to get a taker for the bet)

Anyway it's always good to have a publicly spirited uninvested poster on here.

Hi Quincet,

yea well a financial consultant who used the highest NPV quoted by SS, £18 per barrel, when the range was £15 to £18, the up to rate of recovery (45%) of what was the wrong total OIP, when actually the 'up to' was anyway a rate of recovery of contacted oil (RNS 18/10/18:-'oil recoveries of up to 45% of connected Oil' even that required successful pressure support') which is quoted as 7 to 11mmbls per well (RNS 5/10/18 - although this may increase) - and then claims to think the value calculated is reasonable is not exactly showing any financial prudence, maybe the winners are those that gamble with other peoples money and keep a percentage of the gains, but none of the losses.

As for bunkum as I said he had 6 months to realise something was majorly wrong - carrying on regardless (or not giving up easily) probably cost UKOG millions.

and it is not a losers attitude to question what's going on, just sensible.

..............and where am I implying 'that the retail PIs invested in UKOG are all idiots?

If it was this:- 'still they are produced by experts so should be discounted'...……... it was in reply to jptops:- 'Im sure we will have experts calming the kim rock formation is different 100 miles down the road'

apparently you are on the experts side:- The geology will be similar but clearly it will have its differences

I see you're getting desperate, I'm surprised your final sentence didn't include swampies, shorters and MMs - I suppose you do actually realise that shorting UKOG isn't possible

Hi team,

Great, I wonder if we'll get any more information than the initial rates from the comingled ewt?

and exactly what problems has SS solved with apparent ease?

They were 6 months at BB without 'solving' the problem. As they had core and acid they could have very quickly (pre matrix acidizing the sidetrack) determined it wasn't a good idea.

Apart from that he has turned up and more or less just turned on the taps (to coin a phrase) at HH. There has been no indication anything special has been done at HH to initiate flow (look at the RNSs for the testing in 2016).

I'd wait for good sustained flows, firstly from HH-1 then from the horizontals before crowing how right SS has got it.

and then the same from any other site...….

as for the Kim being different a 100 miles down the road, how about 10 kilometres away at Brockham?

There are also correlations across the Weald showing the Kimmeridge shales and limestones vary in thickness - still they are produced by experts so should be discounted.

This is what UKOG said in the latest comment about BB:-

Post well analysis concluded that the acidisation process, used to clean perforations and the near wellbore, likely released fine grained clay particles from the rocks, which then either blocked or significantly reduced the flow potential of the Kimmeridge’s natural fractures. Consequently, we believe that the tests did not access the true flow potential of the oil saturated Kimmeridge...……………..

So 'most likely' and 'we believe'.

Not quite a definitive statement along the lines of 'we are certain of what caused the problem' but still a good probable reason, I still wonder why they haven't prioritised the BB redrill over the Godley Bridge (Loxley) appraisal.

There has been a lot of speculation that it wasn't the reservoir per se but a similar problem to that at BB that is the issue at Brockham. Andrew Hollis (Angus's Technical Director) has been a Petroleum Engineer in a past role (from his Angus profile - 'After 25 years in petroleum and reservoir engineering for British Gas') and if his view is that it's the reservoir and not the method of completion that is the problem it would be foolish to disagree with him. If there had been a glimmer of hope that the Kimmeridge would flow decent volumes would they not have gone the extra mile and tested it?

There's also much discussion about vertical and deviated (or slanting) wells having a bearing. It's difficult to determine how deviated through the Kimmeridge the Brockham well is but not impossible (I've never found a definitive statement from Angus on the subject and a diagram showing drop off from the highly deviated kick off point of BR-X4Z to a vertical well was rubbished by Alan2017). Whilst it kicked off at a high angle (about 70 degrees to the vertical) the well plan was to drop the angle off so it's likely that the deviation drops off through the Kimmeridge and indeed just comparing the measured depth from the Top Kimmeridge to Base of the KL4 (118m MD) vs True Vertical Depth (100m TVD) the calculated angle is about 30 degrees. These thicknesses are derived from slide 8 of the BR-X4Z Drilling Results presentation (measured depths) and page 9 of the Brockham FDP Addendum (TVD) - released through freedom of information (search 'what do they know'). From the top of the KL4 to the base of the KL3 is virtually the same (nearly 80m TVD vs just over 80m MD) so the well through the limestones is becoming nearly vertical.

As Horse Hill was deviated at about 45 degrees through the Kimmeridge (slide 24 of the November 2018 UKOG Corporate Presentation) its pointless citing that as a reason for failure, and isn't a horizontal well an exceptionally highly deviated well so let's hope not.

Quincet

I think many posters have refuted seadoc's valuations in fact there were several last night, in fact as you point out my valuations are arrived at in a similar way to yours, but I was specifically posting yesterday about the cash position which is not a valuation of the company - but you chose to bring up a valuation of HH.

But strangely while you claim that I am: 'trying desperately to hide the overall NPV of HH by not combining Portland with Kimmeridge values' your post at 8:24 this morning didn't mention any values for the Kimmeridge but my response to that post did:- 'I also accept UKOGS figure of 1mmbbls recovery from each Kimmeridge well which adds at least £30mm to the valuation.'

Although I didn't 'combine' them (I suppose you mean add) at least I mentioned the Kimmeridge value, funny way of desperately hiding it.

If you have an argument with seadoc's assertions I'd address your complaints to him, don't try and justify including me in your conversation by claiming something that is checkable and not actually correct.

I stand by my posts as realistic based on the information available at the time they are written, there may be a range of realistic valuations. I don't say you are wrong - just I disagree with yours as you disagree with mine.

Correction:- should be 'derived from the operators directional survey'.

Mirasol.

the odd thing is that the UKOGL (UK Onshore Geophysical Library) has a deviation survey for Alford-1 which looks pretty detailed and is captioned as derived from the operators deviation survey. The doubt about the subsurface location may come from the comment that the TD location hasn't been compared with an operators location as none was available.

https://ukogl.org.uk/map/php/well_deviation_survey.php?wellId=559

The deviation survey as calculated has a TD to the north west of the surface location.

If you ignore Alford the most worrying statement for a structurally defined 'field' you're about to appraise with a well to the east is:- 'The structure does not close at the depth of the contact to the north east'.

As for quincet - someone who registers the same day as he appears to try and rubbish someone else's posts - but incidentally changes the subject (valuation vs cash position), copies stuff from twitter without checking - and claims to be a financial advisor....is bound to wholly reliable and have absolutely no agenda.

As for saying guessing the change dropping from two to one injector and 3 to 2 producers is crazy, but not as odd as saying someone using an out of date projection based on different development plan 'is probably as good as you'll get for some time', but I suppose it's a bigger figure so it must be more accurate.

UKOG seems to (like many AIM oilers - and possibly most AIM companies) obfuscate as to what's really happening / likely to happen. But without a CPR (cough) they can even think of (or even justify) locating an horizontal in the subsurface. I suppose as long as it's not called a CPR they don't consider they have to publish it, but why not make it a CPR as the Portland has no regional implications. I suspect to approve it the OGA would require a strong case for the subsurface location.

Wizard,

I've never said I have any O&G experience so please take my posts as an enthusiastic amateur who has been studying UKOG for over 4 years...................and if you think I'm posting anything on here that could identify who I am you must be kidding.

another nice day - maybe you should get out more and enjoy it.

Quincet,

You are taking the proverbial.

You still (like Rodders used to) fail to understand a reduction in wells and pressure support even with more contacted oil (which is what UKOG said might increase in the 17 May RNS) is not going to result in the same recovery as the plan laid out previously.

Simplistically with an injector in each block one well was receiving support from one injector and 2 wells were sharing the support from the other injector. Now 2 wells are sharing the support, or probably one well is unsupported and the other has the full support of the one injector. So not only is there one less production well but the pressure support has halved.

I don't understand why UKOG has essentially sacrificed Portland production for Kimmeridge production as each Portland well was said to be recovering just over 3mmbbls in the 3 production, 2 injector well plan, possibly because to do otherwise may damage the story of national significance (which is starting to look a bit of an exaggeration).

Mirasol,
The map that UKOG have made is very different to al previous maps - have a look at the 2018 CPR, Xodus don't calculate even resources from UKOG 's map and state this:-
'The dataset available, therefore, gives significant uncertainty in the assessment of in place volumes, the
main issues are:
> The Alfold-1 well reportedly penetrates the reservoir at a shallower depth than the discovery well but is calculated to have no gas pay only some likely residual oil shows
> As mapped Alfold-1 is on structure and above the contact
> The precise location of Alfold-1 and its penetration of the Portland is unknown
> The structure does not close at the depth of the contact to the north east'

So risky appraisal.

Quincet,

You seem to be looking at a valuation of UKOG and not, which is what was being discussed their cash position.

As former financial consultant I look forward to your comments on the cash position rather than a former financial consultant's view of exploration and appraisal risk.

But you immediately fall into the trap of viewing a recovery which is quoted as a maximum for the Portland (RNS 18/10/18) as a reasonable number to use:- 'oil recoveries of up to 45% of connected Oil in Place could be attained if a successful full voidage replacement pressure support scheme is incorporated into the field's development.'

ie 'up to' and dependant on a successful injection programme.

The development scheme envisaged in the same RNS- up to 3 production wells and up to 2 pressure support wells.

But you are already wrong about CPR OIP as the 2018 CPR has 31.4mmbbls.

The current plan is to have 2 horizontals and on injector so 45% (a maximum) looks very unlikely, and the field is split in 2 by a fault with the plan shown as a production well in each fault block, so one injector is unlikely to pressure support both wells.

These are all unknowns and help from a full CPR isn't coming any time soon. But SS has previously stated the Portland based on the above development plan was worth £150mm to £10mm based on an unstated NPV and $70 oil, so he was proposing abut 30% recovery (10mmbbls of 31.4 mmbbls).

So the question is really what will 2 wells with only a single pressure support well recover, two thirds or less than this SS figure. My view is maybe with more contacted oil per well about 2/3rds, so about 7 mmbbls, and at a mid NPV number of £16.50 and 50% to UKOG about £60mm, which is about what I've said all along, not much different from yours. I also accept UKOGS figure of 1mmbbls recovery from each Kimmeridge well which adds at least £30mm to the valuation.

The strangest thing is you've either copied Rodders tweet from last night which had the wrong (or should I say old OIP) and the same NPV?

A financial cosultant not even doing his or hers sums.

Pboo,

thanks for throwing me a fish...……….

In the accounts the important figure is this:-

Net change in cash and cash equivalents (5,145) - ie a negative, in thousands so £5.145 million, and that's over 6 months.

Net - includes the sales revenue.

I estimated that £8.2mm would be left - that's after oil sales, apparently SS said less than £8mm according to 21ATS, so maybe the current net burn rate is higher than £800,000.

As for revenue.
You'll note that the last figure mentioned for KL3 / KL4 production (presumably heavily choked back!) was 351bopd on 14 January 2019 (in 16 Jan RNS). During the last month (16 Jan RNS to 18 Feb RNS) about 4000bbls was produced (25,000 minus 21,000bbls Kimmeridge production), but how many days were flowing isn't known. Assuming only 15 gives an average of about 270 bopd. Which with a steady decline from 350 suggests a final rate of about....well let's be kind, about the same as the Portland.

So I wouldn't get too excited about Kimmeridge ewt generating multiples of the Portland ewt revenue even if it managed to maintain 350 bopd after initial higher rates, that's about half as much again.

So 3 months net cash burn from testing and G&A about £2.4mm. Drilling HH-2 through Kimmeridge and coring and logging then drill HH-2z core maybe, log and completion say 50% of £5mm to UKOG. So £8mm minus £4.9mm = £3.1mm left in 3 months time as long as HH-1z isn't drilled.

Zoom,

who cares,

UKOG originally said drilling (regardless of with what) would commence late 2018 / early 2019, then possibly Q1 and certainly both wells would be drilled and completed during Q2.

So whether they started 'drilling' or 'augering' on 28th June is neither here nor there - though even UKOG stated yesterday:- 'At this point in time we expect drilling to start in summer (Q3) of this calendar year. ' So no this isn't the drilling rig they've been waiting for.

Argus

I agree seadoc seems to include debt that won't be repaid any time soon and maybe other off balance sheet stuff I don'tunderstand.

Simplistically the accounts show the net position over 6 months to be about £5mm expenditure.

So running the company/ies costs about £800,000 per month which includes the offset of the HH test production.

So the £10.7mm cash which includes the £3.5mm is now probably about £8.3mm (3 months x £800,000).

HH-2 is now going to probably nearly double in cost with a full logging programme and coring through the Kimmeridge in addition to the horizontal drilling (and possibly coring) so the cash pile will be reduced over the next quarter even if only HH-2 is drilled by about £5mm+ (say about £2.5mm = 50% of well cost + £2.4mm net running cost) leaving less cash in the kitty than the £3.5mm for new ventures.

Anyway too nice a day to spend time discussing UKOG, see you later.

Pboo,

It's quite clear what the change of plan is that they are referring to:

'we now plan'......

So what do we now plan:-

...... 'that the Kimmeridge development, commencing with HH-1z, will likely follow the start of full scale Portland production from Horse Hill'

So the new plan is that ' the Kimmeridge development starting with HH-1z'

So the development of the Kimmeridge (HH-1z) will start - when?

'will likely follow the start of full scale Portland production from Horse Hill'

So is full scale production the same as production testing? Obviously you think it does, and the 'will likely' covers the possibility they will revert to a different plan. But to achieve full scale production may need a full scale production site?

No mention of the hole being deepened as the new plan in that sentence though.

Pboo,

The reason I am allowing the possibility (ie not definitely happening) that they will drill the 2 Portland producers before drilling the Kimmeridge sidetrack from HH-1 is because of this phrase: 'we have assessed that, for risk mitigation purposes, we now plan that the Kimmeridge development, commencing with HH-1z, will likely follow the start of full scale Portland production from Horse Hill'.

As HH-1z ws always going to follow HH-2/2z why use language that suggests a change in plan 'we now plan', and 'full scale production' rather than 'production testing' previously used for what would be happening in the Portland when HH-1z was being drilled?

Yes current planning is for 2 wells, a sidetrack of HH-1 and new well HH-2/2z, OGA approval is awaited for HH-2/2z. But full scale production, rather than an ewt is also subject to further planning as would drilling a second Portland well before drilling HH-1z.

UKOG also use the old phrase from the previous plan about continuous production through 'drilling and production testing of the new horizontal wells' so that contradicts the previous 'full production, so to me there's ambiguity in the RNS.

There is obvious uncertainty as to the placement of the Kimmeridge horizontal, that decision will follow further testing and the logging and coring of HH-2. How long will analysis of that data take, how much more testing is required, perhaps longer than the drilling of HH-2z which could mean the rig hanging around waiting for a decision.

Keep an open mind, it saves being surprised by the twists and turns of AIM.

Captain,

You're right that they haven't released any information about the last month of the Kimmeridge testing except by inference the volume produced.

The 16 Jan 2019 RNS had the most recent mention of the KL3/4 ewt, no details of the subsequent testing to mid Feb were released, no doubt it was so good they didn't want to tell anybody (or so posters might have you believe):- 'Following the installation of a new downhole pump and an optimised surface hydraulic pump unit, stable commingled production resumed on 7th January at an increased initial rate of 525 bopd. The sustained daily rate over the subsequent week averaged 303 bopd. A de-waxing treatment applied on 14th January led to an increase in hourly rate to 351 bopd. Commingled production continues.'

They haven't released any information for the period from then to the end of KL3/4 testing apart from gross production up to the end of Kimmeridge testing - about 4000bbls difference between the 2 RNS.

Pboo,

I'm allowing the possibility that both Portland producers might be drilled before the Kimmeridge - as the half year report states 'we now plan that the Kimmeridge development, commencing with HH-1z, will likely follow the start of full scale Portland production from Horse Hill.'