The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
Origin’s Russian gas links under scrutiny
Angela Macdonald-Smith
Senior resources writer
Feb 28, 2022 – 7.02pm
The Russian links of Origin Energy’s partner in its controversial Northern Territory gas exploration play have come under scrutiny after Russia’s invasion of Ukraine, triggering calls from interest groups for the exploration permits to be scrapped and for a ban on any government funding for the work.
The parent company of Origin’s junior partner in its Beetaloo Basin venture, Falcon Oil & Gas, is partly owned by Lamesa Group, a company controlled by an ally of Russia’s President Putin, Viktor Vekselberg.
Origin’s drilling in the remote Northern Territory is in partnership with a company partly owned by a Russian oligarch. Peter Eve
Mr Vekselberg was already subject to international sanctions over Russia’s invasion of Crimea in 2018.
The Australasian Centre for Corporate Responsibility noted that Mr Vekselberg’s representative, Maxim Mayorets, sits on the Falcon board.
It highlighted Falcon’s Russian links alongside those of Queensland Alumina Ltd, a joint venture between Rio Tinto and Russia’s Rusal International, which is partly owned by separate companies connected with Russian oligarch Oleg Deripaska and with Mr Vekselberg.
“Following Russia’s invasion of Ukraine, Australian companies, including Origin Energy and Rio Tinto, must immediately review their relationships with companies owned or part owned by oligarchs aligned with Russian President Vladimir Putin,” ACCR director Dan Gocher said.
Anti-corruption NGO Publish What You Pay also called for federal Resources Minister Keith Pitt to rule out any public money going to Falcon through the government’s Beetaloo grant programs – part of its gas-fired recovery strategy – and to consider revoking the exploration permits.
An Origin spokeswoman said the company would “continue to monitor the situation closely”, noting that the Origin/Falcon venture has not applied for or received any government funding for its Beetaloo activities.
Oleg Deripaska, billionaire and president of United Co. Rusal.
Russian oligarchs speak out against Putin’s invasion
“Origin will follow any rules dictated by the Australian government, and other governments as appropriate, with respect to sanctions,” she said.
“Origin is the majority owner and operator of the Beetaloo Joint Venture with significant operational control over any activities undertaken in the Beetaloo Basin. Origin is carrying 100 per cent of the costs for current exploration activities, with no funding being provided by its joint venture partner.”
The comments came as British oil major BP said it would exit its 19.75 per cent shareholding in Russian oil company Rosneft and take a “material” charge
Poods - I recall Philip explaining to me years ago that one has to officially report share ownership to he or Anne - then he is required to carry you on as a large shareholder if you exceed that threshold. You could probably call him and get a clarification on this - If you do call you might tell him you are 'checking for a friend' - Personally I wouldn't want to be on that list - likely carries some restrictions somewhere/somehow. You as an individual are not required to report your shares until you get over a certain percentage of ownership in the company (XX% ??) With Falcon's 1 billion shares you would likely be shielded from that requirement - 50 million shares might be a problem :^)
If you find out any further info regarding this please post - I would be curious to know the details or if I am even correct with what I posted.
I don't have any take on the Oilgarchy Sanctions - Will be interesting to see what takes place. IMO, if anything, I think these sanctions will force Origin to divest themselves of Falcon - how that comes about is yet to be seen. Will Falcon be sold to the highest bidder - What about the 2022 drilling program. Hmmmm!
Australian companies must urgently review ties with Russian oligarchs
28th February 2022
The Australasian Centre for Corporate Responsibility? (ACCR) is calling on Australian companies to immediately review their relationships with companies linked to the oligarchs aligned with Russian President Vladimir Putin.
Origin Energy (ASX:ORG) (77.5%) is in a joint venture with Falcon Oil & Gas Ltd (22.5%) in the Beetaloo Basin.
Russian oligarch Viktor Vekelsberg owns approximately 16% of Falcon Oil & Gas Ltd through subsidiary company Lamesa Group Holding SA.
Vekelsberg representative Maxim Mayorets sits on the board of Falcon Oil & Gas.
The Beetaloo Basin has been prioritised in the Federal government’s “gas-fired recovery”, including federal grants for exploration.
Queensland Alumina Ltd is a joint venture between Rio Tinto (ASX:RIO) (80%) and Rusal International PJSC (20%).
Russian oligarch Oleg Deripaska owns approximately 44.5% of En+ Group International PJSC which in turn owns 56.9% of Rusal International PJSC.
Russian oligarch Viktor Vekelsberg owns approximately 32.3% of Rusal International PJSC through subsidiary companies SUAL Partners Ltd (21.6%) and Zonoville Investments Ltd (10.7%).
Dan Gocher, Director of Climate & Environment at the Australasian Centre for Corporate Responsibility (ACCR) said:
“Following Russia’s invasion of Ukraine, Australian companies, including Origin Energy and Rio Tinto, must immediately review their relationships with companies owned or part owned by oligarchs aligned with Russian President Vladimir Putin.
“The world has spoken, and the strategy now is to isolate Russia completely. UK-listed petroleum giant BP has announced the sale of its stake in Russian oil company Rosneft, for example. Australian companies must fall in line with this strategy.
“Origin and Rio Tinto’s ongoing cooperation with oligarch-owned companies legitimises Putin’s regime.
“Furthermore, some of the profits from Australian alumina and oil and gas projects will end up in the hands of the people responsible for propping up Putin’s murderous regime.
“The federal government must also ensure that the Origin-Falcon joint venture has not or will not receive any government grants. Grants relating to the ‘gas-fired recovery’ are of particular concern.”
Background
Top five shareholders in Falcon Oil & Gas Ltd as at 25 February 2022:
Holder Common Stock Equivalent Held (actual) Percent of Common Shares Outstanding (%) Market Value (AU$M)
Lamesa Group Holding SA 157,083,634 16.00 28.2
Nicolas Mathys 40,000,000 4.07 7.2
Lupus Alpha Asset Management GmbH 4,882,500 0.50 0.9
Philip O’Quigley CEO & Executive Director 3,513,696 0.36 0.6
Capital Bank - GRAWE Gruppe AG 1,300,000 0.13 0.2
https://www.accr.org.au/news/australian-companies-must-urgently-review-ties-with-russian-oligarchs/
Newtofo: Origin has the right to negotiate farm-downs on the Beetaloo but not necessarily the right to farm-down Falcon's 22.5% interest. One might see a situation where Origin does a farm-down with say Inpex, Santos or Total for part or all of their Beetaloo acreage but then Falcon would still retain their 22.5% interest in that farm-down acreage. This would be a fantastic situation for Falcon as it would immediately benefit the Beetaloo by giving further credence by attracting serious players and of course that could result in a higher interest of other potential suitors to Falcon's acreage. If Falcon were to stay around long enough to see some of this acreage developed then of course their acreage value goes from $1000/acre to $4000 - $12000/acre at no cost to Falcon - In my opinion, we do not want Falcon to participate in any farm-down which is not required - Philip appears to have done us a huge favor by allowing Falcon the option to continue sit back in the cat-birds seat while our Beetaloo assets appreciate in value - he may be earning his stock options after all!
Marshmill: The 2H and 3H well's laterals were drilled longer than 600 and 660 meters. Santos/Tamboran drilled the 2H and 3H wells landing in the Middle Velkerri B shale for about 1000 meters each (their lateral length). For some unstated reason they only elected to frack 600 meters in one well and 660 meters in another - IMO about 40% of the rock formation in those laterals didn't appear worthy of spending the $$$ to frack. Furthermore, IMO, some of the remaining 60+% they did frack was probably less than 100-% ideal - possibly this was the reason for the lower normalized rate than we expected? Too early in the game to be saying but possibly EP161 might not be the sweet spot (core) of the Beetaloo. Where might that be??
Following is part of the press release for the 3H well.
“We are pleased to report that our latest well in EP 161, T3H, operated by our joint venture partner Santos
QNT Pty Ltd (“Santos”), was successfully drilled to a total measured depth of 4,857 metres, with the
horizontal section once again intersecting over 1,000 metres of Mid-Velkerri ‘B’ shale.
Oleo: Done Because....? Origin flowed the Amungee well for 57 days and then issued a declaration of discovery. My thoughts were that the flow rate likely stabilized to the extent that they could call the Amungee well a success and then claimed a discovery as required by the Northern Territory. Was I saying the well was completed and finished - certainly not as we have since seen by the continued work being done on the well. I'm not sure if this answers your 'Done Because......?" but that was the purpose of my comments on that Amungee's 57 day test.
Longknife: Does not mean the flow rate will drop off after 14 days. Usually an initial flow rate can be provided once the well sufficiently cleans itself up - I always think of 30 days for the initial but I'm sure that's not cut in stone - Oleo or someone with more experience can provide a better explanation. I do know that what is more important and meaningful is a 60 or 90 day rate - that number more to you and me but more importantly the 30, 60 , 90 day rates provide the engineers with valuable information on how to predict the decline curve for the well. Some companies wait even longer than 90 days to provide a more accurate decline factor for the well. The Amungee well was flow tested for 57 days before it was shut-in. Falcon/Origin probably saw the flow rate numbers holding steady for a period of time and called it done.
I wouldn't go to the bank with a 14 day rate and it looks like Santos will not either - they have announced they will continue to flow test the 2H and 3H wells for an extended period of time.
WillowGrove: 30 days is not the magic number. 30 days is considered an initial flow rate - what really is important is the 60 or 90 day rate - by then the engineers can get a better idea of how the well is going to hold up.
Schlemiel: Let's let the short term traders move on down the road - many will be back soon enough.
Looks like the Santos/Tamboran wells were mediocre at best - Can't say I'm not disappointed. I was hoping for something in the neighborhood of 10 - 12 mmcf/d with these wells being deeper. Instead it appears they got less which IMO is not what Mr. Sheffield or Mr Santos was expecting. I am not qualified to express any opinion worth repeating so we need to wait for the experts to weigh-in. I think we can safely say that Origin/Falcon were looking for a comingled rate of 10+mmcf/d - that would have gone a long way to proving up their acreage between the Amungee and these two Santos wells. At this point I think the biggest takeaway is that possibly this Santos/Tamboran play may not be in the 'core/prime' area of the Beetaloo - that's still to be seen. I would think the JV saw some writing on the wall when the logs showed only 60% of the lateral worthy of fracking. If one makes that assumption then its not a long jump to assume that possibly some of that remaining 60% might have been a little marginal - once again just a guess on my part - may be the reason for the lessor flowrate.
So right now I'm pretty happy sitting on my side of the fence. The good news is that this is all coming to head this year. If Origin can replicate the Amungee well with two 2000 meter wells flowing a comingled rate of +/- 16 - 20 mmcf/d then we are in great shape - just keep those fingers crossed!
Newtofo: At the annual meeting, after the drilling of the Amungee well, I asked POQ and Gabor why the Velkerri B was picked over the Velkerri C shale since both had the same basic characteristics and approximate thickness - it was originally thought the two shales were a toss-up over which to target (Dr Close?). The answer I got had something to do with intermediate rock structures in the C shale that weren't as conducive to fracking, therefore they targeted the B shale. Just a WAG but possibly Santos has run into a similar situation and elected not to spend the time or money to frack areas which likely wouldn't be productive or take a frack. If that is the case, I would think seismic might offer up some clues in the future - I missed that PE class so that assumption is a WAG! Could be a multitude of things - maybe Santos will offer an answer to your question in in a future report - good catch and thanks for bringing it to the board's attention.
Chipdale: Basically, you are correct. The surface boundaries of the permit extend down through the formations to be drilled. Interestingly, here in the states there can be arrangements where a company leases a drill site on a neighbor's property so that when the well is drilled the bit lands in the target formation close to the permit boundry line. I say close because there are restrictions as to how close a company can produce oil/gas to their boundry line. This prevents a company from drilling right on the boundry and producing the neighbor's oil/gas. Likewise, if a company is drilling towards a boundry line then the well bore is stopped when it approaches the boundry - you can't drill right up to the edge of your property and produce the neighbor's oil. This is probably more than you care to know but it's all about maximizing recovery while protecting adjoining acreage's reserves.
Even if you are not dealing with permit boundaries, spacing between wells is extremely important. Too close and you can frack into one of your other well bores or unnecessarily bleed off pressures from an adjoining well bore reducing the amount of oil/gas recovered from a lateral. If your spacing gets too far apart on your laterals, then you leave oil/gas in the ground - this is where a petroleum reservoir engineer earns his keep!
Newtofo: I wouldn't fret too much over the Santos/Leaseholder situation - I have heard Santos intends to be in a position to drill wells this next dry season. There will be 'arrangements' negotiated to move the project forward. If I was going to fret over the situation it would be more about what Santos has to give up in the process. Any workout between Santos and the Leaseholder could likely set a precedent for negotiations in the Beetaloo Basin going forward.
Here in the states oil companies sometimes pay a crazy amount of money to non-mineral landholders. Upfront access fees, fancy fences/gates, paved roads for ranchers, yearly damage checks - all in the name of keeping peace with the non-mineral landholder. In a way it makes sense to work with these people - damages are a way of life and a good source of income for those who have no mineral interest - Santos needs to take care of this leaseholder but keep it reasonable. I've said on this board in the past that Origin/Falcon needs to pay damages for roads/pads/tank batteries, pipeline right of way, etc. Being a good 'neighbor' can go a long way when people start punching holes and building roads, pads etc., here, there and everywhere during the development phase.
Newtofo: I wouldn't be too concerned with regard to Tamboran's share price. If you will recall, the day before Origin announced the Amungee discovery (with all the excitement it generated) Origin/Falcon stock was flat to down. I found out later that Origin had some really tight controls they held over their employees/contractors and Origin was monitoring their stock trading very closely. If Origin could contain the Amungee discovery information then I expect Santos could do the same - these oil companies operated under these standards all the time - they can't afford to have information leak out prior to their release of public information - the Halliburton's/Schlumberger employees are likewise used to operating under these 'tight hole' restrictions.
LongKnife: If you are referring to the dampened stock price I think that could be a couple of things. There might still be some pressure on the stock from year end tax planning, but I think the real dampening is a result of people not fully understanding the court ruling - as most on this board know, it has absolutely nothing to do with Falcon - now or in the future - it is a non-event for Origin/Falcon. I'm as optimistic/bullish on this stock as I have been in a long, long time. All we need at this point is a 'blow-out' (not literally :^) initial flow test followed up with a really nice EPT in 30 - 60 days. Fingers Crossed!
Nami: IMO the 'end of the year' is just for guidance. I don't think even TBN can tell you exactly when the wells will clean up sufficiently to run the initial flow test Timing could be this next Tuesday as you say but it might be the following Tuesday, Wednesday, etc.. Being some of the first fracked wells in the Beetaloo the exact timing is a bit of an unknown. With that said we should know in short order - I for one, based on the vertical well bore flow rate and Sheffield's interest in these wells and the Amungee revised flow rate, believe that we are going to see strong flow test rate(s). What I don't know is if they will be reporting a comingled flow rate or rate for each well. I am hoping for a combined flow rate of about 10MMCF/d or better - GLA
Curious: Did the You-Tube playback work properly for you? I have tried to watch it twice but the voice and slides do not match up. From the higher pitched voice quality, it sounds like the voice portion is playing back faster than a normal playback which then gets farther off being synced with the slides as the video is progresses- this makes it hard to follow. I watched the event live and know enough to follow the video but it likely would be pretty confusing for anyone who trying to familiarize themselves with Falcon and the Beetaloo presentation.
From Scott Sheffield's mouth to gods ears! He sees the huge potential in LNG prices in Japan (Asia market). This is coming from the largest shale producer in the Permian Basin and who's son Bryan is now a new Tamboran stockholder.
"Sheffield also said he is concerned with the possibility of oil pricing following what is happening with LNG prices in Europe and Japan. “That’s equivalent to $200 oil,”
Pioneer CEO Scott Sheffield told CNBC this week that he sees oil prices headed north of $100 in 2022. Sheffield in an interview with Brian Sullivan said he was surprised by President Joe Biden’s release of oil from the Strategic Petroleum Reserve into the market, saying it was a “Band-Aid” approach and similar attempts won’t have much of an impact because demand will create a tight market by the end of 2022 and into 2023. “Oil is moving back to Brent $75 (Tuesday) morning and will probably be back up to $80 or $85 here in the next few weeks as demand comes back,” Sheffield said. Sheffield also said he is concerned with the possibility of oil pricing following what is happening with LNG prices in Europe and Japan. “That’s equivalent to $200 oil,” Sheffield said. “And so right now oil is cheap.” Sheffield said during the interview that “most people estimate a 4 million barrel a day increase in demand and that by the end of 2022, “we’ll be back … to 100 to 101 million barrels a day.” He also quoted Amin Nasser, chief executive officer of Saudi Aramco, about OPEC and OPEC+ being out of supply and extra capacity in 2022.
Darnit: Don't be so sure that a potential raise in not in Falcon's future. Once we get a declaration of commerciality the share price of Falcon will better approach 'fair value'. At that point it makes sense do a raise for the EP76 well if that well makes sense to help prove up our value.