Reserves Downgrade (or Reallocation?)1 Sep 2020 14:54
Hurricane haven't really provided much information on this downgrade.
My opinion is that majority of the " material downgrade" of reserves will be reallocated into 2C resources, with a minority of reallocated 2C resources being wiped due to a shallower (than 1597 m TVDSS) OWC.
In line with the SPE guidelines, reserves shall only be allocated based on the production lifetime of the "project" (in this case the EPS).
Whilst it's not possible to estimate the new reserves without the forward plan and guidance, it's possible to estimate the downgrade due to the past production inefficiencies.
For the EPS system, the reserves allocated to date are based on production per day. For example:
For Low case: 16k bopd production for 2 years, then 11.2k for the remaining 4 years --> 1P reserves of 28.1 mmboe
For Base case: 17k bopd for the 6 year period of EPS --> 2P reserves of 37.3 mmboe
For High case: 18k bopd for 3 years, then 27k bopd for the remaining 3 years --> 3P reserves of 49.3 mmboe
Now, using past production performances, the EPS has produced c. 6300k barrels of oil up until 2nd August. In the same period, for the above reserves allocation, the EPS should have produced:
Low case: 9712k --> shortfall of 3.4 mmboe
Base case: 10319k --> shortfall of 3.9 mmboe
High case: 10926k --> shortfall of 4.5 mmboe
Or in otherwords, we can expect the above shortfalls to be realloacted as resources from the initial reserves estimate as they are not produced.
From now until the end of life of EPS (4 years from 2021), the reserves depend on forward activity and production guidance in line with what production improvements Hurricane are able to deliver.
In the forward guidance, if the production guidance for future years are less than previously announced in the CPR (see above), then we can expect further partial reallocation of the remaining reserves. Likewise, if the production guidance picks up above the previously announced values in the CPR, then we can expect the downgrade to be minimised as the shortfall in production will be recovered.
ALL IMO.
Slift.
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