Member Info for Penguins

Fluid?

They've just submitted a planning application consisting of hundreds of pages, is that really just a preliminary to another application that would change the detailed tanker movements already proposed and given to the local residents. Thie planning application was submited after they tested the KL3 and had started testing the KL4 - which would have given them data in regard to KL3 and KL4 connectivity, if that had shown the application to be significantly wrong wouldn't they have delayed submission and if they are showing only KL3 horizontals this is probably for a reason.

They also will have analysed thoroughly the 2016 test results.

But every time UKOG release information that illustrates anything at odds with certain posters opinions it's ignored and some story made up - do these posters really know better than UKOG what is planned?

The tanker movements show a clear decline in production, with 25% decline after 4 months a 33% decline over the following 2 years and 50% decline over the next 5. If they didn't think that was likely would they have submitted a planning application showing it?

Let's see what the next operational RNS has to say about KL3 / KL4.

I presume this is an extract from the article you looked at:

Assume there are 25 metric tons of crude oil. If there are 2,205 lb. per metric ton, 25 metric tons is equivalent to 55,125 lb. (25 x 2,205 = 55,125). The density of California crude oil is 7.59 pounds per gallon.

Do I need to explain further.....

Suggest you reread your research.

172 barrels is the amount in 25 tons.

There are just under 7 bbls in a ton (depending on the sg of the oil).

Interesting that they only show horizontals in the KL3 with HH-3 (Portland) and HH-4 (Kimmeridge) in the Collendean Farm terrace.

Although it's only diagrammatic it must be along the lines of their current thinking.

Whilst the UKOG vs Angs rivalry is somewhat dumb - they also need (like UKOG) planning permission for production which UKOG have now at least applied for (Angus haven't) and OGA approval for production - currently Angus only has temporary OGA (FDPA) approval to test the Kimmeridge until October 2019.

PS the production licence you refer to on its own just gives Angus (and the same applies to the PEDL that UKOG has) the right to ask for permission to produce from the OGA and apply for planning permission.

Good news?

It's usual to want to share costs in exploration, SS has paid to pay 90% of the costs.

Arreton 2 didn't flow so it really is an unknown. I suppose he's hoping underbalanced drilling will help but if it doesn't another extended well test with long periods of silence will loom.

Also shows the only companies interested in these 'assets' are in the club already. Where's the big boys so keen to get in on the action? If the price is so good why have Solo accepted it, after all we are constantly told the majors are hovering and a half a mill is small change to them.

Heid,

UKOG only 47% of HH - numbers are 100%.

Also the HH site was said to be only 3 Kimmeridge wells - maybe the statement about 6 Kimmeridge wells = £100mm was for other sites not HH.

Wizard

One reason is that a vertical well 'sees' through 360 degrees - and as long as there's no nearby obstructions (faults, shaling out) then it will 'see' much more rock volume than a well sandwiched in 88feet of limestone between the shales whose ability to flow oil is unknown.

Mention of FOTH reminded me to do a search on his latest well thought out rebuttals to my posts on twitter.

Here's a good tweet (I notice his tweet threatening me has gone - but I made sure that in true FOTH style I screen grabbed it, just in case I really got fed up with his mutterings) :-

(I've **** some words because unlike twitter LSE is fairly prudish but I think you'll get the gist).

#UKOG Here's a question for smart a**s penguins and starbright on LSE .

How many Barells of oil will #Horsehill produce over 7 months commingled testing of Kimmeridge Horizons KL3 and KL4 ?

Come on smart a***s. How many millions of $$ revenue will that make in sales?'

******************************************************************

Actually it's quite simple - it doesn't matter.

Like counting tankers when the chokes or pumps could be set to achieve high or low vlumes, neither of which will represent production flows, the only thing that really matters now is a CPR with independent, fully justified and detailed production estimates, reserves and NPVs.

Income from the flow tests will offset costs to the owners of HHDL which is great but it's not likely to be enough to pay for the site reconstruction and up to 11(?) wells/sidetracks - again there's conflicting numbers been RNS'd vs interview of Kimmeridge wells - 3 or 6, and 1 or 2 Portland injectors?

Also what happens to Tellurian's share in production testing rather than ewt - clarification, clarification, clarification.....

Jptop,

Firstly the rates are not exceptional. Many wells exceed 10,000bopd, just not onshore UK because the reservoirs are generally poor and not very deep, the fields are (often only just) commercial because the OPEX is cheap..

What sort of pipe do you think they are using as pboo (Wealdoilers) said in July:- Production pipe has gone from 2 7/8" to 3 1/2"

As for pressure it's not proportional to diameter of the pipe and if any pipe couldn't stand the pressure from the column height it couldn't be used.

I'd also recommend reading a few RNS as UKOG say horizontals may increase production by 2 to 3 times, not 5 (note that posters always use at least 3 times).

As for revenue the basis for the figure thrown out by SS is poorly understood but if you want to use it fair enough, it just doesn't seem to be supported by the NPV lifetime value of a Kimmeridge well which is the same or less than the yearly number he quoted.

45% is the up to recovery (ie maximum) using 2 injectors, 30% may represent a P50 recovery.

18 October RNS

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.

Wizard,

I suggest you listen to the bit you asked me to listen to yesterday - '2 minutes 50 seconds through to 4 minutes'.

SS does not, in that sequence say 15 to 20 million - read StarBright's transcript which is much closer to what SS said than yours. To save you having to look back a few posts here's his version:-

"...rates for both the Portland and Kimmeridge horizontal wells of 750-1000bopd (which could be conservative), that generates gross sales revenue of £20m/year. [-] And we're looking at drilling multiple wells, for the Portland 3 horizontals and for the Kimmeridge, up to six."

and yesterday I posted this

'This is where he said 15 to 20mm:-

What he says (without the ums etc) is, from about 08:10:-

'the npv per barrel we see in the Kimmeridge is about the same as the Portland so for each Kimmeridge well we’re looking at about 15 to 20million quids worth of value for each well.'

Yes he said 15 to 20 million quids worth but it was an NPV over the whole life of a well.

What SB and I are discussing is that the £20million revenue a year does not fit with the other figures provided.

SB,

I can't listen to it again - but it's in the early bit that Wizard was pointing out yesterday:-

'please listen to at least from about 2 minutes 50 seconds through to 4 minutes where you will hear SS say a sidetrack to give a optimized Portland & Kimmeridge well will produce 750 -1000 BOPD which may be conservative from a single well & we plan to drill 3 in the Portland & 6 in the Kimmeridge with revinue of £15 - £20 million each a year.'

Except SS doesn't say revenue of 15 to 20 million a year and the above isn't verbatim - SS just says 20million quid in that bit.

SB,

Those numbers fit what SS said.

The one number that doesn't fit is the £20mm revenue for both Kimmeridge and Portland (assuming it is per well although that wasn't explicitly stated) a year, and is it just the first year or every year?

It doesn't seem to fit with an NPV of £15 to £20mm per Kimmeridge well unless OPEX, tax and CAPEX eat heavily into revenue in the early years.

It's also odd that the NPV value per barrel is about the same for both Portland and Kimmeridge - with more production in the near term (even if not in the first year) I'd expect the NPV for a Portland barrel to be higher - maybe the injection costs offset that.

What's needed now are the CPRs.

***********************************************************

Just looking at the Nano Cap Fund and it looks like they were trading them between Jan 31 and July 31 2018.

Jan 31 accounts had zero UKOG.

July 31 showed purchase of £2,505,798, sales of £2,467,797 and still holding £589,000.

Only around for a short time (I know - thank God),

I think the £100mm NPV is just for the Kimmeridge per new producing site, the Portland is specific to HH.

As for value the brutal truth is no company will pay the NPV. The problem is that they have to shell out the cash in some form or other at the start so there's immediately a big cost in their calculation of NPV, and of course they want to make a profit on a purchase - not pay a 100mm (or whatever) and get 100million back.

So any incoming company will look to pay much less than the NPV. You may say - what about the rest of the acreage - that's worth loads, all those £100mm sites popping up - but there's 2 things. One is there's risk those sites may not perform so any cost drilling them is lost and secondly there's plenty of open acreage for another company to apply for and if they have deep pockets they can easily outbid UKG, Angs etc..

The question is why the corporate presentation (rather than worry about NPV) - if it's really for corporate reasons there's a few positives but there are also negative possibilities.

Another reason for quoting NPV is it highlights that there is an expectation of depletion (without going into detail) as the figure would be considerably higher if some of the more enthusiastic calculations were true.

I think SS is treading very carefully - giving as upbeat assessment whilst acknowledging previously released numbers in RNS.

Wizard,

taking guesses, estimates and target production figures (and where did 658 bopd come from for the KL4?) and then multiplying them by 5 when SS/UKOG have suggested a horizontal will produce 2 to 3 times the deviated well's production (so everybody uses 3!) means that you won't come up with a meaningful figure.

You say stable rate - UKOG say sustained which is subtley different. Sustained I'd expect a figure for how long for as indeed UKOG did for the initial KL3 flows (2 different rates sustained during 24 hours).

Wizard,

because - as I say - something doesn't add up.

These are not my figures - Rodders is saying 1000 bopd per well all year, (SS gives a 750 to 1000bopd per Portland and Kimmeridge horizontal but doesn't specify how long for) and if SS's figure for revenue is for only one well then the total revenue at $70 oil and 1.28 USD to GBP gets to the magical £20mm mentioned in the first part of the SS interview (he says £15mm to £20mm npv later)

So either there is no decline and the EUR per Kimmeridge well is much more than UKOG have said as for various reasons it doesn't make sense to produce 36% of the expected production in one year........... or the £20million revenue isn't per well (SS doesn't actually say it's for one well but it could be taken as for one well.

Funny,

when something unequivocal is said by SS you don't want to agree with you change the basis of your argument.

Are you really claiming that although SS actually said this was an NPV value 'he made a mistake'.

As it also fits in with the fact (fact not to be confused with something made up to suit what you want to believe) that he also said in the interview (and it's in black and white in the presentation) that they expect to produce 1mmbbls per Kimmeridge well (and that isn't per year either), I'm sticking with my understanding of what was said.

In case your math isn't too hot that is 1 million (the expected, by UKOG, production over the lifetime of a Kimmeridge well) times £15 to £20 (which is the back calculated NPV(?) value of a produced barrel of Kimmeridge oil which he said was similar to the NPV(?) of a Portland barrel of produced oil of £15 to £18) which equals miraculously £15mm to 20mm.

As for 1000 bopd per Kimmeridge well throughout even the first year, that's more than a third of the 1mmbbls (365,000bbls). Hmmm something doesn't quite add up - or has SS got that wrong as well as you'd prefer it to be more?

Rodders, Starbright etc.

Now maybe we're listening to different bits of the interview.

What he says (without the ums etc) is, from about 08:10:-

'the npv per barrel we see in the Kimmeridge is about the same as the Portland so for each Kimmeridge well we’re looking at about 15 to 20million quids worth of value for each well.

NPV(?) for the Portland he said was £15 to £18 so maybe for the Kimm they are thinking £15 to £20 - but definitely npv value for each well...…..seems pretty clear to me.

Wizard:-

I know it's a gas discovery - and that's why I'm pretty sure Tellurian won't be interested in it.

Godley Bridge wells are in PEDL235 and the discovery well was in 1982. UKOG have remapped it and stretched the closure into PEL234 with the PEDL234 culmination to the north of Alfold 1 (map in presentation, Alfold 1 was dry). Flow rates in GB-1 were/are presumably non-commercial or else something would have been done with it previously (IGas CPR:- The Godley Bridge-1 well tested gas with 5-30 ppm H2S at rates of 1.44 MMscf/d from the uppermost zone of the Portland Sandstone).

Rodders,

The £15mm to £20mm is a lifetime NPV(?) value per Kimmeridge well at $70 oil (based on a similar (unspecified) NPV(?) per produced barrel to the Portland NPV(?) of £15 to £20).

So not what each Kimmeridge well produces per year. NPVs may be front laoded in terms of value but they'd have to use a massive discount rate to acheive it all in the first year.

That's what SS said.

Does that answer a question?

And yes if three (could be 6 but that may depend on the performance with both layers producing from the same pot)
Kimm wells produce at 1000bopd all year then thats a hefty wedge - but will they?

Wizard,

I would expect Tellurian to sell. I can't see them having any interest In UK O & G production, they are a LNG company - they picked up HH by reversing into Magellan - and despite their Vice Chairman being ex BG Board I would expect a sale pdq once testing is finished and they are exposed to 35% of costs (although, of course, they will be covered by the produced oil).

Rodders - I think you need to understand that your calculation is based on a series of guesses and hopes. Don't confuse what is hoped for by SS (even in RNS) and what might be in a CPR that has to be fully justified.

Too many 'ifs' and changes in programme without explanation (why KL3 test first when days before it was going to be KL4 - HH-2 drilled early 2019 (Oct 2018 RNS) now mid 2019.... Uncertainty does not help.

Maybe the CPR and SS's interview figures will be the same, maybe more(!), Xodus keep on getting dragged into the periphery, but until we start seeing some numbers that are not just highlights - initial rates, oil pool 'seen' + max possible recovery, averages, targeted (great word) optimised flows, up to figures etc. we are all flying blind. Non Commercial or Commercial is not a binary answer of zero or billions, commercial could describe anything in between, and at the moment needs to be a fairly hefty number to get the SP into the realms imagined by some on this board.

Most bandied about figure in the last RNS was the volume of oil flowed (10 times I made it) an interesting number but not useful in understanding what may happen in production - I'm not sure but did SS bring in FOTH to write it, they even mentioned number of tankers.

My view may be pessimistic (who knows - oh, of course you do) but AIM companies can over promise and underperform, but at least I don't spend all day on this board wondering why the SP isn't what I want it to be when there's posters like DHC, Willow etc saying how everything is great. and don't listen to any other view.