Member Info for Serif

Hi GP, I’m with you on that - what does a 50% CoS mean if a failure is solely down to management or the technical team? It’s the inherent uncertainty that comes with exploration and why in the end you need to play the odds and drill as many high CoS prospects as you can afford. This is a high risk/reward area.

@Copper3. MA promised a gas update at the latest before their Preliminary Results (usually appear first week November).

Hi Stas, think the development allowance is actually a reduction in tax liability. So if EOG made £5m in profit this financial year (perhaps possible in terms of total production with state of pound and OP?) then they would only be taxed on 8.75% of that. This would greatly offset the loss on Serenity in terms of not then paying out so much tax, but we wouldn’t physically get the money back.

Perhaps EOG will say something in their Final Results to give an idea of net cost of Serenity once accountants have estimated impact of allowances etc. Maybe it won’t be such a big hole in terms of lost cash, but we will still have to live with the dilution as I think buybacks take ages to arrange (see UJO) even if they wanted to go that way, which I doubt.

D2B. Need to be careful here - just because last drill took 20 days doesn't mean this one will. It’s a different site, there are any number of minor things that could slow a drill down without taking it outside the 30 days, they estimated 30 days this time but 28 last, etc.. Unless someone gets info from the drilling team we won’t know how to interpret why something is happening until an RNS appears. The helpful email from I3e seems to suggest they are a way off yet, can’t imagine they would be responding in this way otherwise. .

Reading GPs options, few seemed to add much value from sidetracking except the following:
3. The best outcome - and this is only a personal view - would be a down-dip sidetrack (to the south). This could prove very useful if a) the reservoir is found to be entirely oil-filled and the oil water contact hasn’t been reached at this location, or b) there’s seismic or other evidence to suggests that the reservoir thickens to the south, in which case it would be very useful to know how much of the thicker reservoir is oil-filled, and where the oil / water contact sits, if it hasn’t been found at the current location. This should significantly increase the OIP”
(Thanks to GP)

D2B - I don’t think even an Aim company would dare to talk about a success case without finding something! No environmental damage is a baseline they have to meet even to get permission in the first place. Perhaps a geologist here could comment on what value a sidetrack would be likely to help with in terms of appraisal?

No I didn’t know, so really useful, thank you. So I think they have everything they need in place to sidetrack - if they decide it’s necessary. As I understand it they will only sidetrack in a success case, but that depends on what they find. It presumably could still be a success but they decide not to sidetrack, which is why I was interested in what they had done in past wells.

Thanks D2B. Do you know if they did a sidetrack on the previous well, or is it just one of their regular contingencies?

Hi Stas, from my understanding based on contributions on other board they applied for this sidetrack a couple of weeks ago, but permission only came through today. It seems that the standard permit already allowed for one sidetrack, so I have no idea why there has been this second application.

Hi Stas, doubt anyone knows anything yet! But as according to the odds this drill is more likely to succeed than not, presumably they are preparing for success.

Next step on success is likely to be a further appraisal well further West to test full extent of what would then be a huge field. Presumably at c£4m to EOG which they should easily have when needed next year. Any development cost are further off and there will be various ways to fund these by then. There should be a significant SP rise on Serenity success both for the massively increased value of the asset and because the current drill anxiety will be removed.

@Selfish. He wasn’t clear on proprietary confectionary, but I believe the figure was to cover cost from well to refinery - but would have to search back through his video interviews to recheck. Pointless to do so since the figures will be affected by any subsequent increase in transport costs (ie drivers now demanding 2 yorkie bars per journey) and the economies of scale from greater production figures. In any case we will find out shortly in the Final Results how profitable its all been - very IMO!

@Adnatrob. And that figure is for total project breakeven, based on a model before we knew of Wressle’s over performance and increased reserves! I think MA had said the everyday production cost was nearer to $8/9 a barrel - again based on the old 500 bopd production figure.

Probably in line with current market expectations, although pound dollar rate will give our profits a nice extra boost. Way beyond our wildest dreams for Wressle 13 months ago!

Worth remembering that the EOG geologist team have also gone over this in great detail (and with probably a lot more data), so seems reasonable to go with their estimate of CoS, rather than try to second guess it.

Perhaps it’s the lack of clarity around when production might restart?

H2 is the first full period to reflect Wressle improved flow rates post squeeze. Need to be careful whether we are quoting figures in £s or $s, although thanks to our mini budget that has now become less important and works in EOGs favour! We should get Final Results in a couple of weeks (pres before Serenity result?) so we can then base calculations of revenue and costs on actual figures.

@Aimster. The ESG project is at no cost to EOG. Its a joint project between Gateway (an Irish company run by EOG Chairman) and Baker Hughes. They are using an old EOG well to conduct their research as we have years of relevant data from operations there which they are using. Baker Hughes are trying to prove up equipment and a methodology here to sell on to others. Should be just another revenue stream to EOG idc.

Similar sized buy just appeared from yesterday. Looks like momentum may finally be swinging back to the buyers - fingers crossed. Refreshing that the MMs seem to have abandoned delayed reporting today, makes the trading more transparent. They will probably switch back tomorrow, as seem free to do what they like without respecting any guidelines.

Yes the real value to EOG is in proving it up and then presumably selling it on for a very large profit. If we find a decent sized field there should be plenty of takers who are already involved in North Sea production, so the precise time to production may not really matter for us.