Member Info for Slift

I'm still questioning this RNS.

The FPSO maintenance I can understand. But why would they provide details of the lancaster reserve downgrade before the technical review in September? This would have been a critical part of the technical review.
This is something that should really be questioned.

foresight,
I think OWC is still applicable to FB.
The OWC would be the water/oil divide between aquifer water and the fracture reserves (oil and perched water).

"But when you are pumping out along fractures in a matter of months then you draw up the water quickly into the fractures and therefore its not a conventional OWC as such"
Yes, the FB OWC will rise as more barrels are produced. E.g. the pressure differential in the network will draw up the aquifer water to displace the volume (in the network) extracted by Hurricane. (Think of it like slurping fanta using a straw).

"You could drill a lot of wells and not really understand the reservoir. Each well taps different fractures and each fracture could be open or closed and have different properties."
I think it's still economically possible to produce like this if Hurricane find a way to identify perched water pre-drill. Each well will tap into different fractures, but the fractures won't differ much fluid properties.
To me there only exists two challenges or disadvantages to FB:
1. Identifying perched water is an issue
2. Rising OWC, so wells longevity is reduced
But the reserves are still down there, and if Hurricane can drill multiple cheap wells consistently by minimising exposure to perched water, then still very economically viable.

Hi SpruceGoose,
"It's beginning to align with dspp's view"
I believe dspp was before I took an interest. Could you provide me with an idea of what dspp's view was?

hydrogen,
"Nothing a few horizontal wells shouldn't sort out as far as i'm aware."
This comes back to my discussion yesterday. HUR need to figure out a way to properly identify perched water sources then start digging cheap wells to produce from different fractures within the basement. Heck, two wells in the same fracture network (similar to 7z and 6 well) would also work to ensure that oil recovery is maximised with the rising OWC.

I mentioned before that the biggest risk that I feel here is the concept and the structure. It's the viability of ECONOMICALLY extracting oil (going forwards). I think the methodology to identify perched water sources plays a big part in this.

johnpwh,
"upwards dead end whose base is in the aquifer,"
Yes, but it doesn't have to be just an "upward", it can be upward than sideways. It just requires that pressure differential from the aquifer to the perched water. Without any connections to the main fracture network. Hope that makes sense.

"which to my mind means that there is an awful lot of granite and very few fissures containing the black stuff, so that production to date has already significantly depleted available oil?"
This depends on exactly how big the CONNECTED fracture network is. Also, depends on if there are huge storage spots within the fracture network (e.g. a large storage area similar to a tank that the fractures are connected to).
At this moment, it's very hard to say exactly how much oil reserves exist. But that graph on the presentations showing a decrease in gradient shows that there is more volume of fluids than expected (remember, this is including the aquifer and any other fluids that are exposed to the fracture network).

Hi johnpwh,

Personally, i've kind of written 7z off. Dr Ts conclusions regarding perched water behaviour is logical and explanatory. However, there are potential scenarios where the conclusions could be contested. E.g. if the perched water is connected to an aquifer. This would be a very rare scenario, but it's one of several scenarios.

Regarding the OWC, i don't think anyone would have falsified this. The OWC at the time of estimation was probably correct. However, as mentioned before, the company probably has a better understanding of what's occuring and why the OWC may rise with production and hence the estimate of RECOVERABLE reserves may potentially be lower.
It's just unfortunate circumstances for this company. But I'm more optimistic now that the company is being conservative and identifying this.

Slift.

Hi SpruceGoose2,
"Wasn't this what you were expecting anyway?"
Yup, I was expecting this, because the aquifer will rise.

People should not think of this concept as conventional oil. In conventional oil, the aquifer will not rise so you can estimate an OWC. In a FB, I believe this is much more difficult. Very hard to estimate reserves and the OWC. At the end of the life of the well, the OWC will be at the well.

Personally, I think this RNS regarding shallow OWC provides a very good conservative estimate of reserves, based on what I believe the model is.

Sure it's bad news but this news was going to come out regarding lancaster reserves sooner or later (either a shallow OWC or a downgrade in oil reserves). I wasn't expecting this before the September Tech Review.

Now that it has come, I believe that the Tech Review is much more derisked and provides a good opportunity for people to invest.

From what I understand, the OWC in Lancaster is probably not shallower than what was previously reported in CPR, but rather the OWC will rise with production over time (hence becomes shallower than first estimated as more and more barrels are removed).

So in essence, you have both the aquifer AND perched water having an impact on productivity going forwards. It's good that management have realised this now rather than later.

I'm always conservative and I like the way the current management is going (although I'm disliking the fact that they're providing little info every so often, should just be the whole lot at once).

Slift.

Very disappointed with the fact that the board had to restate the downgrade due to OWC..

Planned Preventative Maintenance of FPSO is more good news than not. 4 days of downtime is 87% uptime on a monthly at 17k. Not much less than the standard 90%.

Slift.

CaptainSwag,
Yes, it's too late at that point, because they could potentially be drilling into a water zone. They require drilling to analyse and identify the zones. The pre-drill model will not show oil/water fractures. That's the risk and that's where they will be drilling on "luck". They really need to identify the volume of trapped water along the whole network, or find a pre-drill method that will provide them a method to distinguish between oil and water within the drill area.

Whilst they may be able to isolate it, they'd only be able to "isolate" it on a short term, before the pressure difference starts to drive the perched water zone into the well reservoir.

On a very very long term basis (following FFD), if the number of trapped water fractures in the network is less than expected, than this will be very positive for HUR.

CaptainSwag,
"slift - using gas chromatography/gas ratios/ LWD data"
The LWD requires you to drill to analyse.

The GC analysis and gas ratios doesn't really work to analyse dead zones. They are stagnant zones. So even gas will be stagnant in these zones until there is a significant pressure drive to draw them out.
GC will however work for non-stagnant zones, within the fracture that is exposed to where the GC analysis is taken from. (If that makes sense). E.g. if a TRAPPED water fracture (that is not stagnant) is connected to the fractures surrounding the sample point.

IAmNotAnAnalyst,
"I don't understand why people think you're a paid ramper. If anything it just highlights to me those who are unwaveringly positive or have questionable motives."
I think it's because i've posted the risks too many times for discussion. If anything, i've highlighted them what they seem to oversee majority of the time. Most people on this board only want positivity and want to disregard the negativity. I suppose they treat investing as gambling at a casino. ALL IMO.

CaptainSwag,

These water fractures are trapped in dead zones within the fracture network. That's the risk as I understand, there is no way to fully distinguish between oil and water when water is trapped in dead zones.

"However with the EPS they now have a method for identifying water zones in any subsequent wells at lancaster - which can then be isolated . They will also be able to isolate any poorer fractures."
Interested in knowing what you mean by this. What kind of method is this to identify water zones in the fractures with the EPS?

"Since March 10, stockpiles in US crude has increased circa. 74m."

Just thought i'd add that it works out to be a total demand destruction in the US at just over 0.5m barrels/day on average thanks to OPEC+ supply cuts.
Recently, there has been a supply deficit since July. If this continues in the coming months, the demand destruction average may actually be negative and will start to draw on reserves prior to the COVID19 lockdown demand destruction.

Not quite the 9-30m/day destruction that analysts first predicted.

Hi Longish,

I'm not too sure, it likely won't be until after September's Interim results where Tullow publishes the value of cash in bank. Whilst you can work out approximate cash in bank using information provided by Tullow, I'm not sure if Moody's will be using this. Tullow hasn't really provided much of the financial figures in the trading update.
We also don't know adjusted EBITDAX for Moodys to calculate the gearing - This will be provided with Interim Results.

I'm likely holding much more stock than you, based on your previous posts.

I always analyse stocks from a bearish point of view. You need to know the risks and the positives to know the true value of the company.
Why don't you stop attacking me and go back to comparing HUR to the likes of other oil stocks that are multiples of HUR's Mcap? lol.

ItsallRigged,
I'm invested here.

"60% of the reservoir is water then that gives a bad return rate on future drills"
You are spot on there! That's exactly one of my worries. It doesn't even have to be 60% reservoir, but it seems like they have no way of properly detecting the water fractures. I understand that a lot of this depends on their fracture model, but as it stands, with their model in review - it's very hard for us investors to even have an idea of what the future would look like.
Future drills will be more "luck" based than not unless HUR come up with a strategy to minimise any exposure to these water fractures.
The cost of drilling on luck to find out that the well is similar to 7z with a water fracture nearby is a huge risk.

Honestly, I wish all the knowledgeable long term investors here the best for this company in the long term. But as it stands, the risk to reward ratio is very high for me (on a long term basis).

Hi IAmNotAnAnalyst,

Thanks for this. This is definitely a good read. They make a good argument for oil and most of it is accurate.
I'm also longterm bullish for oil. Short term, i'd like to see the prices depressed as much as possible sub $50 for as long as possible. As they say, coronavirus has allowed this to happen, and sooner or later, bankruptcies will follow.

However, HUR wouldn't be my bet on this long term if things didn't significantly improve with operations and if uncertainties surrounding the concept and aquifer/perched water isn't rectified.
I don't believe the water cut is a major issue for long term production, but it definitely doesn't provide much confidence for the concept.
As you say, on a short term basis the model reviews and stabilisation of water cut is key.

But when you look at the potential for oil prices and the oil sector for the future, it's long term that counts.

Slift.

Repost:
Since March 10, stockpiles in US crude has increased circa. 74m.
US total stockpiles of crude as at 31st July is 519m (excluding strategic reserves).

Good to see consecutive draws in crude, but still a long way to go before there is a shortage in supply of crude.

In March, when Moody's rated Tullow's credit facility they knew Tullow had:
- $1077m liquidity
- $288m cash in bank
They also said that Tullow had "weak liquidity" and that lenders will not approve RBL redetermination.

5 months on. Tullow has:
- VOLUNTARILY reduced liquidity twice ($211m each - $422m)
- Liquidity headroom at $500m
- Cash in bank at c. $255m
- c. $575m proceeds from Uganda before year end

One of Moody's requirement for a rating upside was:- restoration of a robust liquidity profile.

Tullow has so far passed this requirement, by a long way.
- Tullow now requires $211m liquidity headroom for 2021 (to voluntarily/contractually reduce yet again)
- Tullow has enough liquidity headroom and cash to fund 2021 financial commitments (assuming Uganda isn't delayed) at total $1092m (including cash).

"However some people see shorters as the villains of the corporate world and short bashing is always good if you are after brownie points."
I think it's great to have shorters. 3.1% shorts is good, places the share in a nice position for short squeezes.

Apparently it's okay for Pelham and AFFM to sell circa. 7% of shares into the market to reduce their stake, but Polygon's murky and dodgy for having a 1.3% short stake?
Some idiots on this board alright.

JAdam,
What I posted was only the risks from a previous post. The original post was pretty balanced.
I mean "the negativity is boring.." right? So why would I post? You can do your own research. You have access to the same materials as me. I'm refusing to post because I despise this board. That's all.

Greenmachine67,
I look at three things Greenmachine67. Positives, risks and value before investing. I've stopped posting anything useful anyway. Better stop reading my posts then.

Pecten11,
Do your own research. It really wasn't that hard to go find the image from one of the presentations. I honestly couldn't remember exactly which presentation it was, hence why i cba. Don't expect everything without some legwork yourself.