Member Info for Slift

Eco year end Results:
https://polaris.brighterir.com/public/eco_atlantic_oil_gas_plc/news/regulatory_news/story/wv8qdqx

Information regarding Guyana in here. All useful information.

GLA.

Hi Tornadotony,

I have just read the RNS for Pensana. And yes, it's a very good update with the drill results (and with more results to come shortly).
The recent results confirm the robustness of the location for REOs.

Going forwards, as more and more drill results confirm the potential and evaluate the resource estimates, I do see upside.
The next stage of making an investment decision to extract and refine the REOs will produce more upside.
But I think most of the RNS' to come regarding the drill results is to be as expected.
Share price is up 1700% since first test results from the site in Sept 2018, so little room for further upside IMO. Thoough I may be completely wrong.

Good luck to you.

CaptainSwag,
Someone on my wavelength.

"if i have my rose tinted glasses on i have always assumed/hoped the water cut will get worse as it starts emptying out and will eventually run dry(ish). but i am no oilie."
My understanding is:
Scenario 1: For conventional wells (e.g. oil reservoir with an aquifer):-
Yes, water cut will increase very slowly overtime as oil reserves are removed. The current productivity indexes are 205 stb/d/psi and 190 stb/d/psi for well 6 and 7z respectively. Overtime, as oil (and water) is removed from the well, the pressure decreases in the well (to the point where Hurricane may have to inject water into the well, to increase the pressure). As more and more water is injected, the water cut will increase.

Scenario 2: For Hurricane's case, assuming perched water:
As oil is extracted, water (from the perched water reserve) fills the "space" created by the extraction of oil due to the pressure difference between oil reserve and the perched water reserve. Therefore, water cut increases much quicker. At some point, the pressure between oil reserve and perched water reserve is likely to reach equilibrium (stopping water moving into the oil reserve). Following this, as production continues, more and more water is removed from the oil reserve --> therefore reducing the water cut quickly to "normal levels"
"normal levels" being scenario 1 above.

Slift.

CaptainSwag,

Yes, the 60-65% is assuming that well 7z was producing 6400 bopd at the time.
Going forwards, at 15k production and 3k bopd, it's likely that water cut drops back down a little (due to less pressure drawing from water source), to maybe 45-50% (as you have calculated) or below.

I think the next RNS will provide us with the info, whether 7z is likely to be a write off or not. I'd be concerned if 7z water cut was above 60-70% with 7z production being less than 5k.

The reason for the increase in water production is still unknown. With multiple theories about:
- Coning
- Water trapped in nearby fractured pocket
- Aquifer
- Well 6 interfering with water near 7z
- etc.

For now, it's good that production is still managable until 57% watercut overall (at 15k bopd).

Slift.

Hi Mrprt/Paul,

Same planet as you buddy.
All the information for my calculations are from RNS' dated 2nd September --> 8th July.

Read my posts from initial post. I've shown how the figures come about, including the equation and calculation.
Total water cut was 29.3%, and well 7z had a water cut of 60-65% before they shut the well down in May.

Slift.

*15k is the optimised minimum.

PlantedBHA is posting with random numbers.

There's a reason behind production being 15k.
At 15k oil production, the allowable water cut is 57%.
If water cut increases above 57%, the oil production would fall. Not linearly either, but more fall off a cliff as cut increases.
15k is the minimum (but also cautious) that can be produced. The board is cautious at this figure because of rising water cuts.

The maximum production possible is 30k (assuming ESPs allow). But that would require a maximum water cut of 14.3%.

Slift.

eddyates,

Agree, but my gamble is based on assessed risks.
- Water cut estimates
- Manageable production
- Background behind HUR
- Financial risks
- etc.

I know the risks to this investment (as I've pointed out in the past few days) to which Ammu believes that it's "deramps".

As always, you should only invest with money you're willing to lose.

ALL IMO. Slift.

Ammu,

I'm also invested here. It's not subtle deramps.
I just like to weigh the risks to my investments, rather than take a gamble (which you're probably doing).

For the time being, as watercut is manageable, more positives than negatives. I'll be looking forward to the next RNS with the "stabilised water cut" following ESP, and I know what figure I (and you) need to look out for.

You're welcome.

CaptainSwag,

Thanks for checking! Clearly can't count up the days :')
Yes, 29.3% for period April 22nd --> May 17th
Which would make water cut from well 7 still at 63.6%.

Going forwards, 15k oil production (using above cut and your predicted figures of 12k oil from 6 and 3k oil from 7z):
well 6 at 13484 (12000 oil and water at 1484)
well 7 at 8219 (3000 oil and water at 5219)

Average water cut would be circa. 31%.

As i've said before, at 15k production, watercut is manageable until 57%.

But the questions at this point is:
- What is the watercut after ESP installation?

Slift.

CaptainSwag,

The first bracket is for April 1st --> April 22nd.
In the RNS, company has clearly stated that during this period, the water cut was 26%.
RNS: https://ir.q4europe.com/Solutions/Hurricane2018tf/3942/newsArticle.aspx?storyid=14677347

Refer to my initial post, where i've used company data for each period.

Slift.

Wrong.
I get 30.8% when solved for x.

And as you say, yes it's mostly from 7z. 7z produced 60-65% water cut.
30.8% is the combined.

"can you point out where in any company stuff released it has shown a water cut of 60%??
your maths does not show me that"
It's a mass balance CaptainSwag. Mass balance done against Q2 figures in latest RNS.
All maths is based around company data (from production each period).

The 60% watercut comes from assuming that well 6 produced 10.3k bopd for April 22nd --> May 17th.
10.3k bopd is what well 6 was producing following shut in of well 7z (Assuming that the company didn't immediately ramp up well 6 as soon as well 7z was shut in, so assumed 10.3k bopd from well 6 there).

Slift.

"if you can show me how combining well 7 that has had a max of 30% and well 6 that has a max of 11% can mathematically be averaged at 31% - I would love to know"
As i stated before, well 7z had a water cut of 60-65% (not 30%) when it was shut in by management on May 17th.
The combined watercut on may 17th (6 and 7z) was 30.8%.

Slift.

CaptainSwag,

"slift - your assumption is based on a false figure though"
False? Here's my calculations for mass balance around Q2 results.

barrels/day * watercut * number of days.
The equation below is for watercut:
(April 1st - April 22nd) + (April 22nd - May 17th) + (May 17th - June 5th) + (June 5th-June 30th) = (Q2)
(18500*0.26*20) + (16700*x*25) + (10300*0.08*19) + (12,000*0.11*25) = (14300*0.21*91)
Solve for x.

"i always use company information for my calculations. the increase from 8% to 11% after ESP introduction was in rns."
RNS states:
"Since the Company's last update on 8 June 2020, the 205/21a-6 well on the Lancaster field has produced at an average rate of c. 12,000 bopd. The increase in oil production from the 205/21a-6 well implemented on 5 June 2020 has, as expected, been accompanied by an increase in produced water. Prior to commissioning of the Electric Submersible Pumps ("ESPs"), the volume of water production from the 205/21a-6 well represented a water cut of c.11% compared to 8% immediately prior to 5 June."

Note: "prior to ESPs --> water cut of 11% and prior to 5th June --> water cut of 8%"
ESPs were commissioned 3rd July.

Slift.

"how did you get 31% water cut?"
Mass balance around Q1 results. The 31% watercut was what 6 and 7z (combined) was operating at before 7z was forced to be shut-in by management.

"well 6 was at 8% for natural flow of 12000. then went to 11% after ESP enabled more oil to be flowed"
11% at flow of 12000 bopd.
We don't know water cut after ESP enabled.

"lets say well 6 produces 13484 b of liquid (12000 oil + 8% water 1484 )
then if well 6 produces 4286 b of liquid (3000 oil and 30% water 1286)
gives 2770 b of water out of 17770 liquid eg just under 16%
There is no way it is anywhere near 31%"
Are you saying that the water cut is below Q2 average now at 16%? Q2 average water production was 21% (as per latest RNS).

Slift.

Assuming 31% watercut and 15k bopd. Utilisation of the FPSO would be 62%.
Ways of maximising efficiency reduces as watercut increases.

"Like you, I think Sheila will get close to 20k bbls per day."
At 20k bopd, 42% is the maximum watercut Aoka Mizu can handle.
Any higher than 42% water cut and production of oil would be forced to be reduced as a result.

Slift.

Hi CaptainSwag,

"yes it is currently manageable and can accommodate more."
Water production increased with the reintroduction of well 7z with the ESPs?

"yes it is currently manageable and can accommodate more."
At 15k oil production, it's manageable until 57% combined water cut.
Assuming the current water cut levels (combined) are at 31%, yes it is manageable

At 20k oil production, the manageable water cut is 42%.

ALL IMO.

I calculated revenue to end of June is approx $95-100m

Where do you find an extra 135m for the rest of the year at 15k barrels and $43?
and where do you find an extra 198m for the rest of the year at 19k barrels and $43?

Ofcourse oil production is important. But there's several questions arising from the water cut:
- has water production reduced?
- Is current water cut manageable? I.e can it be handled by FPSO's water handling facility?
- What has ESPs done to water cut?

Q1 Results:
14900 bopd average
17% watercut

Breaking the above down:
Jan:
Well 6 production of 12.5k bopd average
Water cut approx 7.5%

Feb:
Unknown
But using mass balance around Q1, february combined 6 and 7z production of 12,000 bopd average.
As above, february combined watercut at 16.9%

March:
Well 6 at 12k bopd + Well 7z at 8k bopd average
Water cut 6k bwpd - "predominantly from well 7z"
Combined water cut at 23%
Again, using mass balance we can estimate well 6 at 7.5-10% and well 7z at 50-60%

Q2 Results:
14300 bopd average
21% watercut

Breaking above Q2 down:
April 1 -21st:
18.5k bopd combined
Watercut at 26% combined
Capital markets day confirm that "current (April 27)" water cuts of 46% from well 7z, and 7% in well 6.

April 22nd - May 17th:
Unknown
Again using mass balance, 16700 bopd average from 6 and 7z
As above, combined water cut 30.8%

May 17th - June 5th:
10.3k bopd from well 6
Watercut at 8% from well 6

June 5th - End of June:
12k bopd from well 6
watercut 11%

Several things to note here:-
- The combined water cut before well 7z was shut down was 30.8%
- The 7z water production is currently 60-65% (in line with rates prior to shutdown)
- The question is, has ESPs reduced this water cut? Until the next operational update, we don't know.

Slift.

Hi Akhtar,

"Problem is What is the impact on production? do they need to invest more for declining wells, I have not read too much into the work in Ghana but think there is a problem."

I agree that there is an uncertainty with this, which is why the forward guidance and strategy going forwards (to be implemented by BOD and CEO) is important.

Last year, there was a faster decline in reserves in Enyenra field, where Tullow had to suspend 2 wells due to mechanical issues. This field was also downgraded by 30% in reserves (at the independent audit of reserves and resources, which was also a write down absorbed by Tullow in 2019).
Furthermore, Jubilee was impacted by reduced gas offtake and export to Ghana National Gas Company due to low demand. The water cut in some of the wells has also increased. Constrained water injection also contributed to the reduction in production.

Tullow have previously said that production for 2020 will be between 70-80k.
At the end of 2019, they had also said that production for 2021-2023 is expected to average around 70k.

Since then in 2020, a water injection well at Jubilee has since online in Q1 and following repairs to the water injection system, the system is operating at full design capacity. Tullow has also put together a taskforce that will improve the reliability of the water injection system (to reduce decline in production as a result of fail rates of the water injection system). The gas offtake has also been increased (and increase in flaring was approved by the Ghana ministry of energy) which has allowed production of circa. 90k bopd.

There are also indications that Tullow will focus on Ghana and improving production going forwards (as noted in the Shareholders' circular for the Uganda sale).

So it all just depends on what Tullow's strategy is going forwards. This will likely be provided by the new CEO at the half year results.

Slift.