Member Info for ps200306

In a sensible world, PVR should be making out like bandits now with oil touching $90/bbl. By my naive reckoning -- costs per bbl of $26, 40% PVR ownership (assuming they had to give half to a farminee), 10% NPV10 discount -- they would be worth $3/share. It takes some screw-up to get the SP down to tuppence ha'penny as they have managed to do.

Manyana: "... why bother with an appraisal well to look for oil. Whereas Ryan will not politically prevent a major gas field as a replacement for Corrib when it drys up and because gas is now the flavour of the month to feed all those power stations ESB are talking about building ... So, if it is "only one fifth of Corrib" you intimated the gas was irrelevant so the only way to make it relevant is to find more and to do that will involve an appraisal well, possibly drilling lower than KES were allowed to do down only to 4,000 feet whereas Providence now has unfettered access over Kinsale since KES have given up and go down to any depth via an appraisal well."

The appraisal well is not "looking for oil". The oil has already been discovered. There is a difference between an appraisal well and an exploration well. Appraisal is about figuring out how to commercially exploit what you have already found. PVR have already chosen the site where they are going to drill -- the K site for which they have already done a seabed survey. It is up dip from the 48/24-10z well that they drilled in 2012. It will penetrate the same sands (we hope, as a major point of the appraisal is to demonstrate their areal extent and connectedness). It's more than possible that the gas bearing upper sands extend into the Kinsale OPL/1 area of the Barryroe east panel, very likely even. But PVR don't have a license to drill that, nor to appraise it. They do not have free rein just because KEL have left the scene.

Remember, a year ago we were talking about an Early Field Development Scheme where appraisal wells would go straight into production. PVR does not have time for pfaffing around. They are not poking random holes in the ground to see if they yield gas or oil, even less so can they declare that it's a gas field just because that's more likely to win a public popularity contest. Investors want to see the already discovered resources being exploited. Those include both gas and oil, with the latter constituting the vast majority of the field value. Under last year's plan, the gas was not even going to be piped ashore. It was going to be burned in situ to power operations. And I will bet you that even that was just a sop because producers are no longer allowed to just throw away the gas by flaring.

Again, to reiterate: the intervals that PVR have actually tested are in the basal Wealden, and show that the lower levels contain gassy oil, while the upper levels contain oily gas. You don't get one without the other so you have to handle both. The oil is waxy and needs special handling and you are going to have to pay for that infrastructure anyway AND it constitutes the lion's share of the field value. So PVR needs Sleepy to issue a license for OIL extraction even if they can promise him lots of gas along with it.

How many of those steps each need approvals that Sleepy Ryan's department will take a year or more to approve? How many need money that PVR haven't got? Have to laugh, thinking of the RNS last April *AFTER* the SpotOn deal fell through, telling us confidently that: "work to progress the funding solution is well advanced and is expected to be concluded before the end of the third quarter, in time to progress a 2022 drilling programme". Even in a GOOD scenario that has now slipped by four years. Some people were shocked back in 2020 when Linn announced that drilling wouldn't be until 2022/23. Turns out that was insanely optimistic. Even 2026 sounds optimistic, given PVR have shown absolutely zero ability to attract finance for so many years.

Manyana, I though it couldn't get more bizarre than when you said a seabed survey was going to find oil. But now merely typing a document is going to discover gas? Makes you wonder why they paid for an independent audit of resources when they could've just declared Barryroe to be a giant gas field.

The strategic review isn't going to be positive because it's just going to reiterate that one of PVR's key objectives is: "considering and developing an appropriate funding strategy"... as if that wasn't the only thing that mattered. I'm sure there'll be other blather in it, but that's what it will boil down to. There might be something about a cheaper approach to early field development, or maybe just about drilling an appraisal well and worry about field development later. Doesn't matter how cheap it gets if the funding is still out of reach.

Malcy mostly parrots the RNS as usual, but adds: "There is nothing to disagree with in putting these two businesses together, both sides have good quality assets and combining them would provide a platform despite being on different continents. A rough 60:40 split would give both existing shareholders a realistic stake and dependent on management a platform for growth."

I still don't get it. SOU's assets would seem to be worth a lot more than 60:40 compared to ANGS. I also don't see how an all-share deal for another cash strapped company advances the prospects for Phase 2 funding. ANGS has the prospect of shorter term cash flow from Saltfleetby, but like SOU it has a large loan note to pay off, and raised a piddly 750k to keep the lights on just before Christmas with a 10% equity dilution. Just not seeing the benefits either short term or long term, and folks on the ANGS forum don't seem too impressed with SOU either.

Exactly what I was thinking. If SOU was about to be a five-bagger on Phase 2 funding announcement at end of Feb, as some here hypothesised, why dilute by 38% right now? Something doesn't add up.

Pretty weird alright. Only thing the two companies would seem to have in common is that their share price fell about 95% in the last few years.

Manyana: "No debt and money in the bank and if they want to raise more to survive they can always issue more shares and warrants."

Sure, keep on milking that cash cow and dish the share options out like confetti at a wedding. It's not going to drill any production wells though. If that were tenable they would have just done an equity raise to pay for drilling. €2 million is about equal to the operating costs for 2020, which had been slashed by more than half from the previous year. So they have enough to keep going until mid year maybe. Obviously none of the 9p warrants are going to be exercised before May.

In traditional PVR fashion they announced the last fund raise at the same time as the "good news" of the SpotOn farmout, while making it clear that the money was needed to keep PVR as a going concern. What "good news" are they going to come up with now? We've had Sequa, APEC, and SpotOn like a succession of ugly sisters at the prince's ball. Maybe the shoe will fit next time ... or maybe this fairy story doesn't feature a Cinderella.

Manyana, no I haven't forgotten about the money message. Nor have I forgotten that Ireland became a founding member at COP26 of a new "Beyond Oil and Gas Alliance" aimed at ending worldwide production. And while the government has ruled out buying back existing licences, our idiot minister Eamon Ryan "stressed that the chances of the existing licences resulting in any oil or gas discoveries was very slim". It's pretty clear that he aims to make it even slimmer by dragging his heels to the maximum extent possible. As he says, "existing authorisations remain subject to technical, financial and environmental assessments as appropriate". I also doubt there is any chance that a license will ever be issued for the option area of the Barryroe east panel, which might have yielded some of the gas that Ireland sorely needs.

Meanwhile there is a bevvy of interests arrayed against the development of even the existing licences. Friends of the Earth have said that "Ireland should go further and ensure none of the existing licences progressed to development". While they don't get to set policy, you can bet your ass they will sue the government if they ever give Providence a drilling permit. They might not succeed, but they will certainly drag things out. This will be a major deterrent for potential funders who will be in no doubt as to what they are up against.

No, Ireland is determined to saw its own legs off and consign itself to an energy poor future. It will continue to ignore Eirgrid's adequacy assessments and let business customers fend for themselves. It will pursue the boondoggle of increasing wind power while the grid totters on a precipice. It will build the Celtic interconnector to France for ten times what the equivalent gas-fired capacity would cost, and then pay more for the privilege of using it than the gas would have cost. That's if the capacity is even available, bearing in mind the interconnector doesn't itself add a single electron of generating capacity -- it's just a cable -- and France faces its own supply shortfalls.

But I'm sure the Brits will happily keep exporting gas from Moffat (not), and we'll embarrass ourselves by keeping Moneypoint burning coal well beyond its planned obsolescence. We'll pretend the public is going spend €125 billion on heat pumps and EVs (which we won't have the capacity to charge). By the time the green utopia is shown up for the economic disaster that it undoubtedly is, Barryroe (and Providence) will be a long way in the rear view mirror and the chance will be missed. I would love to predict otherwise, but the Green insanity has its claws deeply buried in the legislature and the public psyche at this point.

And meanwhile ... Providence still doesn't have any money.

The Lease Undertaking is grinding its way through the bureaucracy, presumably without further input from PVR. The technical strategy is supposed to have been developed already, with supposedly a short delay to end of this month -- just eleven more working days. All of this, along with point 4 about a key role in the energy transition, is just word salad to convince you that "stuff is happening". I know "management speak" when I see it -- been hearing it most of my life. That last overly convoluted and wordy RNS hinged on just one thing: "considering and developing an appropriate funding strategy". And even that could be further trimmed down to: FIND MONEY!

The thing standing in the way of Barryroe development currently is the lack of funds, not government. Without funds the licences will eventually lapse. The government need only twiddle its thumbs, and let the slowly grinding wheels of bureaucracy act as a further deterrent to potential funders. All this twaddle about suing the government is completely moot.

Simpering article in today's Irish Times about how Ireland's grid got to its parlous state:

"Like most major crises, there is not one single explanation for how it happened but rather a series of events that tend to reinforce and amplify each other. In Ireland’s case, specific factors around supply, demand and an ageing fleet of conventional power stations provided a coincidence of crises that brought us to where we are today. However, this predicament isn’t just about “bad luck”; at its core was a blindness to the need to build conventional power plants that allowed us to sleepwalk into a tight spot."

It goes on to contradict itself and say that actually, yeah, it's pretty simple:

"... renewables do not replace the need for fossil fuel power stations, which are required when weather-driven generation is low across Ireland and northwest Europe. This came into sharp focus in 2021 as, it was a relatively “low” wind year. Despite continued growth in wind power in 2021, wind energy provided about 30 per cent of our electricity over the year (compared with nearly 40 per cent the previous year). At the same time, the economy emerged from the Covid-19 pandemic restrictions, which allowed electricity demand to rebound quickly."

In other words, the greenies had been yakking on about 2020 being the proof that we could easily reduce emissions, when all it proved was that emissions will go down if you slaughter the economy. It also highlights the crazy fact that available wind power can vary by more than a third, even when averaged over an entire year. And finally, it shows -- unsurprisingly -- that when you disincentivise the conventional energy sector, investors won't be rushing in to finance conventional energy.

From the Biz Post: "No new data centres are to be connected to the national grid, according to EirGrid. Data centres will only be considered for other parts of the country on a case-by-case basis amid concerns of blackout and brownouts due to increased pressure on the country’s electricity supply, the operator added."

I wonder if this includes data centres that already have planning permission? Amazon has its entire EU-WEST region of AWS here, already spread across numerous huge data centres around Dublin. It has two more planned for its existing site in Clonshaugh, and two more under construction in Drogheda (set to consume 48 MW of power each). While I would say it's no huge loss -- the Drogheda centres are a billion dollar investment, but only represent 400 temporary construction jobs and 50 permanent ones -- it's not a good look to the international business community that we can't supply power for new tech companies.

"Are we likely to receive any news here prior to the Phase 2 update at end of Feb? Any thoughts?"

Phase 1 FID is supposed to imminent. I'd expect some news on that at least.

Even the optimistic figure of $2.9 bn over 16 years equates to just €160m per year. That's 0.15% of Irish government spending in 2020. The $2.9 bn is also strongly back-loaded as the biggest tax take is after all costs have been defrayed and the profit to total costs ratio exceeds 4.5 : 1. A tax take of $400m in 2040 would be heavily discounted to turn it into an NPV. It's not to be sniffed at, but it just isn't a very great deal of money in the grand scheme.

Exchequer revenue from offshore oil and gas will be negligible. UK revenue from 1.6 million bpd in the North Sea was 650 million GBP. Barryroe has been projected to achieve 0.1 mbpd. Pro rata that's about $40m/year, all other things being equal. All other things *aren't* equal because the Irish tax regime is more favourable and Providence would get to offset a lot of investment costs before paying any tax. The price of oil is set by global markets -- the benefit from indigenous resources is security of supply, not lower costs. One third of all Irish excise duties come from oil, around 2.5 billion annually. Those are retail taxes that don't depend in the slightest on where the oil comes from, and is a couple of orders of magnitude higher than any tax revenue that would accrue from oil production. In short, nobody's going to give a rat's ass about Barryroe production taxes in the grand scheme of things. Annual revenue would be on the order of ONE DAY of Northern Ireland's subvention.

Still don't understand this fascination with Sinn Fein, let alone searching the tea leaves in a parody agony aunt column of a regional newspaper. The next election is 2025. Sinn Fein are a far left wing, business unfriendly organisation stuffed with aging militants and young green wokesters. They will likely do well from a protest vote over house prices that they can do nothing about (at least, not without wrecking the economy). They certainly won't improve the prospects for Irish offshore oil.

WTI and Brent both back in the 80s today.

Got nothing to say. Next news, end of February. I put hand to keyboard a couple of times when the rampers were saying "this is going to fly when X happens" ... and then thought better of it. You can't really argue with predictions that were devoid of reasoned argument to begin with. SOU is still a good prospect for those who got in at really low valuations. Phase 2 still has to get over the hump of financing, and I expect it will drag on longer than predicted. Everything does with SOU. After all Phase 1 FID was supposed to be 2020 and it's now 2022, but one assumes it's now within touching distance. I still think they're going to run into some bond rescheduling issues at end of 2023, but unlikely to be fatal. If Phase 2 were to start construction in 2022 I would consider it an achievement. 2022 will be all about how much of the farm they have to give away to attract Phase 2 financing.