Member Info for SouthSeaBreeze

The calculation is that Sdx will be producing 4000 bond if all the drills come in as predicted based on an oil price of $75 or so, as I understand it. The oilprice is not $75 but $110 and likely to remain so for some time. Boed is not barrels of oil BUT barrels of oil equivalent. In other words, the calculation works at $75 per day but not with $110 per day as gas in Egypt and Morocco is not correlated to oil beyond a notional $75 per day. The calculations of boed should be therefore based on that number with an increment for the actual number of barrels of oil produced multiplied by the uplift beyond $75 to $110, as of now. That will give the monetary and projected value going forward.

There is a surreal disconnect with this share based on uncertainty. How can a Company be getting woeful gas prices when world prices for both gas and oil are historically sky-high? Who has the gas and who is/should be selling it? Is anyone thinking of piping gas to Europe or Alexandria to be liquefied to be sold on the spot market? If not, why not?

That is not really an answer, is it?

And why is that?

Who is going to vote this 3 option scheme down? CA and another 10% of the equity holders? If they do the whole thing founders.

What do you want: nothing or nothing? If it goes through, another buyout will be made by the new shareholders to expropriate the remaining 5% of the Company through EGM of the Company at a cent apiece.

All legal under the Companies Acts. Game over. So is it nothing or nothing? End of the scheme offers a way forward unless CA are also bondholders in which case it may not be voted down. Return on capital may be all CA is now looking for. I hope not.

The water cut is increasing. Probably although the published data is fuzzy. If the water cut were increasing significantly above the latest published numbers, then the Company would have an obligation to issue a speedy RNS. The fact that on the occasionof the kitchen-sinking, it warned stakeholders that they might be left with nothing does not derogate from this duty. So either it has and the Company does not understand its remit or it hasn't, and the Company hasn't. Maris is certainly establishing his credentials as a cautious individual or simply not ready to update with any meaningful information or indicate whether the CPR has been completed. The behaviour of the number 6 could be more idiosznchratic than is understood. An increase from 23% to 25% is worrying but there was a fall of 500bbls per day ( also worrying ): this makes the 25% figure contentious, as it could be 25% of the lower number whatever it was. Still increasing but a fortiori an uncertain variable. The massive increase of oil prices from 12 dollars ( sic ) to well above the 35 dollar break-even has totally altered the complexion of the crisis that loomed when the kitchen-sinkings occurred. These wells are producers and there seems little doubt that any new wells will be also. The company is making mountains of money from a sub-par situation. It has its capital costs paid up front. It has decommissioning money in escrow but eligible for reassignment. It has had months of data. It has the chance to make an offer for the Bonds in the Open market, or through its brokers to either retire them or renegotiate them. Indeed the appointment of new brokers may be for this purpose as much as for the raising of finance. So the picture need not be as gloomy as many suppose. These wells have produced together a load of money, and there is no reason to suppose that any new wells would not also do so. We are now approaching March when the weather in the Shetlands changes from days of hurricane force winds to progressively calm, almost mill-pond conditions. In other words, there is room to drill new wells, side-track the existing well, or resort to water/gas injection or even restart production of the shut-down well at some level as long as the water can be handled. Every barrel of oil is giving 30 dollars profit, and at an increased barrellage an increased profit. All that is necessary is clear, committed action. The OGA will not want any less, and nothiing has to date been heard from them. Nor is a takeover impossible, or a placing or rights issue. To me, there are an expanding number of options while doing nothing is not fatal for the moment until a clearer path forward becomes obvious. That is the more rosy view forward. I could be very wrong but do projects of this kind get sabotaged by dithering incompetence? A sorry indictment of Britain today if they do. Hurricane is still a strategic asset.

It seems to me that the point about demand is well-made. These are difficult times and as things are, SDX is a very solid company, hugely extending its production horizon. If I were in charge of it, I would be looking for cheap gas prospects which fall within oil-bearing trends. The discovery of oil would not only take advantage of any weakness in gas demand but also reap the benefit of high oil prices which will remain high as long as OPEC continues and because oil majors will delay drilling due to the move to renewables. Oil has every prospect of staying above 50 dollars whatever happens. A good company. Patience required.

Nothing has changed regarding the water cut except that it is getting worse. The pumps have for now dealt with the disturbance that caused the shut-down. The new committee is doing nothing more than was being done by Dr. Trice before the last melt-down in the share price. In fact, that has been on a downward slide ever since the water-cut became an issue, probably over a year ago now. Then there are the litany of other issues that have presented themselves in its wake, all ofwhich

... obviously because the well are pumping at different rates so the highest rates are adjusted. Since we have been given no discrete data on what the water cut performances are on each well at varying rates, those maximum water cut numbers are largely meaningless except to the extent they indicate the water cut has been going up. If we turn to the daily water composition on ESPs then there has been a jump of 4%. You might say well that is OK because the Company has said that it can easily handle current water cuts. OK that means the Company can handle 28% average water cut. The answer here is in fact no because somewhere you find the daily amount of water the AM can handle per barrels. It is certainly not the highest single well number which as I said are almost meaningless but I think you will find from my previous posts actually 26%. Viewed against this number an increase from 17% to 21% over a month is alarming but not yet calamitous. More alarming if ESPs are being used. OK but surely the 26% relates to full production at 20000bpod. Does it? who said so! The inference is that the water cut numbers are logically not totally meaningless but significantly unclear as to any meaning that can be understood from them. Why?

Apologies ... this post has to be read by my previously posted comment as my PC decided to press post message without my consent!

An improvement on the previous RNS. The water cut is still the major practical present concern. As I have said before, communications on the water cut have been factually blurred. Well 6 was 8% and is now 11% and well 7 was around 11%, then 25% and then 46%. Assuming the highest figures prevail, adding 11% and 46% and dividing by 2 gives an average of 28.5% water cut. In fact the actual water composition per barrel was 17% and is 21%. So why the difference one should say? Wellrather

Chinese proverb: ' Man who cannot decide when to buy does not have a life. Man who cannot decide when to sell, may not be alive. Better to live on mutton and mòuntain air.'

If the share price is 6.5 and increases 30% it will now be 8.45, a move of 1.95 points. If the share price is on the other hand 8.45 and decreases 30%. It falls not to 6.5 but 6, a move of 2.45 or half a point more than the increase. I would be interested if anybody has any observations on this. Is there some calculus that can be used to make the comparison in any case, and how does it affect price moves up or down. Do moves up in equivalent circumstances increase faster as the new cost is lower than on the way down?

I agree completely with your final paragraph. I hadn't remembered that Beverley Smith was already a non-exec director. It is relevant to know how she arrived on the BoD, especially due to her close connections to Centrica and Spirit.

I remember one non-exec director left the BoD citing the reason that governance fell short of that necessary for a company intending to move to a full listing. Perhaps she was appointed at that time. At whose behest? Perhaps she had been pals with the exiting non-exec. We don't know but certainly there could be some mild Kultur Kampf on the BoD which led to Trice fighting a rear-guard action for control. People usually know abòut these things long before they happen. Trice's position later became impossible due to the oil crash, Covid 19 and worse than expected interference. I am hoping the last is the least serious component.

Whatever happens we shall probably find out soon enough. I don't think there is going to be a quick fix: They will still have to go through the hoops with gathering data and testing.

I am sure however that FFD will be their intended target somehow, notwithstanding the uncertainty and current problems.

Fully accepted. I think you will get your money back and if you do so, then very likely it will be and some. It is going to take a while though and really all I have written before is still my point of view. I am hoping for it to improve as much as anybody. It was the goose that laid the golden egg but sadly not now: I think the Trice concept will eventually be proved to make HUR a major producer.

You have my sympathy and your attitude to Dr. Trice may be right for you. I am not at all sure it is actually right in fact. From my perspective, Trice is the only person who consistently presented a coherent image of what is going on. We do not know the nature of the latest disturbance or what it is. There is an OGA aspect to this because HUR indicated its plan to bring production to 20000 bod, pumping for 6 years, gathering data etc. The 20000 bod without mishap was implicitly the number necessary to trigger the next stage of FFD. No 20000 bod - no FFD.

Trice has been completely unphased by water-cut, willing to continue to gather data etc. Then came the oil price crash with coronavirus. Next we hear that disturbance is worse at elevated levels. Then it is all change at HUR. My view is that the changes at HUR were in progress before the s##t hit the fan. My take is therefore that Trice was already planning to go, that he was very certain that the water cut would pump itself out. In other words it was not a significant problem and with oil prices of oil at 50 to 60 bod, HUR could sit tight and measure the data, drill its commitment well and progress GWA with Spirit. He never said it because he could not. The later external development accelerated his demise and changes at the top. This can be considered positive because the changes envisage at some stage a move to the full exchange from AIM. It is serious no doubt but the disturbance means HUR cannot as of now hit 20000 bod as well as presenting a financial challenge. I personally do not doubt Trice's bona fides. Quite the reverse. A string of bad luck has brought this about but with good sense and coherent, staged action it can be resolved very happily. This is about running a major company and not making a quick buck. It is still a more than viable business that can get back on a positive path. I should hang in there and be patient.

The day the share price fell from 12.20 to 6.57 was May 22, the day Hur issued an update that the oil target could not be met and 7 was closed etc. Since then, it has been hovering around that price. My view is that if some very promising announcement is made, it could go up to 12 again but is likely to be prey to selling, short or otherwise unless the news means a qualitative advance on expectations and reduced risk. Very nice for those who have bought a load of shares now and sell on the news. This is the best that can be expected at the moment. I think it is a little unlikely but at some point sentiment will shift incrementally if not immediately. I would say it is not only investors but also the market that has been shaken by what has been going wrong for this share.

So there's the risk!

Handsome is handsome does!

Money moves where the money is! And I am not sure a lifetime is enough to learn that one or find out where that might be.

Still speculative in my view.

Sorry to sound depressing but I do not think this share will make a sudden move upwards notwithstanding changes at the top.

HUR is extremely fortunate that oil prices are over $40, given the oil price wars and coronavirus. On those fronts I am firmly agnostic.

True surprise draws have boosted the Brent price but Brent is following WTI and Canadian Oil prices. I suspect that many of the draws are cosmetic and speculators seeking to boost the oil price so there could be volatility at these levels with a gradual upward trend in price towards the end of the year. However this is not going to benefit HUR much unless it gets the amount of oil pumped by it up to at least 16500 bod or 17000 bod. This may not be impossible but it has not been done on one well except briefly and ESPs are only due to be in commission in the second half of 2020. But when? July, August?

This has not been tested so Trice or no Trice, they cannot do it without testing. This is new territory. They could reopen the 7 well and pump a combined rate of 17000 bod. And simply get on with drilling well 8 from their free cash.

Economically, that makes most sense to me so long as they have the data and confidence not to land up in more trouble with well 8. Again here they need to get on with it because the summer does not last to November in the Shetlands. And to drill in the autumn/winter you need your windsheeter on and jackstays fastened. Otherwise it will be you taking off instead of the share price.

One thing is certain, decisions of this kind are not for the Brexit Committee. One of the heartening things about Trice's leadership so maligned on here, is that he and his people made coherent logical decisions in time to fit in with other projected activities. It worked beautifully.

All the occlusion that is being indulged regarding Lancaster, GWA, Lincoln and Spirit plus the internal politics augurs badly. Trice is only person who consistently voiced a steady measured attitude. It will be seen if the committee established to oversee the way forward can do as well. I do not rejoice in Trice going nor regard him as simply a Lab Rat. It was his conception that brought the Company to this stage, and his presence that maintained morale. I only hope that those who replace him can grasp the nettle, continue his work without upheaval and show the way forward.

In the absence of this, I am afraid this is a highly speculative share. In any case, I remain firmly agnostic as to any significant price movements for several months whatever emerges in due course.

This is what Dr. Trice said concerning the shut in of well 7, announced on May 22 in an HUR update.

"The results of the recent testing of the Lancaster EPS wells at elevated combined production rates are disappointing and the degree of interference encountered is unexpected. Whilst the wells show high productivity individually, their proximity and associated interference behaviour requires further data acquisition before the Company can be confident about optimum long-term well rates. This latest development reinforces that. This data acquisition process continues, and further updates will be provided once we have determined our target plateau production rate with the existing well configuration."

Having listened again to the very positive web cast of April 27th. What can have happened that was so different from less than a month before?

10 days after these laconic remarks Dr. Trice had resigned with a high-flying interim CEO appointed plus all kinds of internal changes made? Can this be done in 10 days? Do headhunters act that quick?

It is somewhat strange to me.

I do not think that there is the slightest doubt that there is perched water. It is definitely not from the aquifer. The historical situation is that there was around 12% water from well 7 which has steadily mounted first to 25% and then 46%. The Well 6 had next to no perched water, then 6% and now 8%. Assuming these numbers have not increased, they have been at these levels for perhaps 6 months while pumping a combined rate of 16500 bod. Essentially, they have as they indicated been playing around with the bod rates on each well and combined to see if they can pump up to 20000bod. They have pumped 17000 to 17500. Chaffe mentioned 18000 to 18500bod. For how long and in what combination and with what water cut is unsure. Really, they should have made public the bod rates for each well, duration of pumping, well shut in for any reason, water cut in each case, and in case of any shut in, increase in water cut on restart, when and if water cut subsides to 46% or 8%, well disturbance on shut in other than from water cut and same from restart at the various rates. This should have been tabulated so that conclusions could be drawn. It hasn't been. The best next clue we have is from the webcast of April 27 on the website, and prior updates, subsequent updates and the prior capital markets day recording. Dr. Trice's exposition from both recordings is the starting. It seems that interference between the wells does not translate as necessarily perched water or more perched water. It could but it does not have to. It could be some other factor. Some have suggested that the perched water is coming from a different place and that OWC is above the heel of the Wells and not below it. Possible. There are though implications from all the hypothesis; that the section being pumped from is smaller and likely to have a lesser life with as shown increased interference. This radically challenges HUR's self-sustaining model and FFD until the problem is resolved or a new well drilled and shown to have none of the above problems. Dr. Trice gave no indication of having these worries so they could have been a means for others on the Bod to oust him and Stobie or for him to go. All the situation is far from positive, especially in this economic climate. So I would advise: consider the facts because enterprises, such as this do not fall to rock-bottom prices for nothing. This is a highly risky investment until some proper understanding is come to, and appropriate action taken. And this does not take into account either Spirit, Lincoln Crestal or the remainder of the GWA.

Here is something on tax losses from Laserdisc on ADVFN which makes interesting reading: " page 115 2019 accounts The Group has ring-fenced trading losses of $487.9 million at 31 December 2019 and other allowances and supplementary charge losses of $761.0 million, which have no expiry date and would be available for offset against future trading profits. All of these losses have been recognised as a deferred tax asset of $54.3 million as at 31 December 2019. The deferred tax assets relate to different types of tax loss, each being calculated at a different rate, the highest being that applicable to UK ring-fence profits of 30%. It is estimated that a reduction in the long-term oil price used in the taxable profits forecast by $15 per barrel (to $40 per barrel) would decrease the deferred tax asset recognised by $26 million, and a reduction to $35 per barrel or below would reduce the deferred tax asset to nil. In addition to the above, the Group has pre-trading expenditure of $122.2 million which is carried forward at 31 December 2019 and tax relief will be available should FDP approval be obtained on the remaining licences."

Someone else has rather sensibly remarked that the losses may have been eaten up during the year to date. I am not at all knowledgeable about Petroleum Taxes. I know that there used to be Petroleum Revenue Tax of about 30% perhaps where it was payable partly upfront and partly at the end of the year so if it or a comparable regime exists, perhaps accrued losses are being set off against that? At any event these losses are dependent so Laserdisc says on $40 bod oil prices in order to avoid dwindling to nothing. To me, £54m seems rather low given the enormous capital expenditure involved which surely qualifies as capital allowances, now I think under the same regime as income tax losses. Does anyone know about this? Or the rosy statement about the Convertible Bonds purportedly from Edison? Would be invaluable to know for sure.

The all-time low is 6.57 when corona virus hit according to the chart I have so it is not a screaming buy if the bad news turns out to be bad news, real bad news. What happens if well 7 is shut in indefinitely, for example?