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Not that I would have been a star commentator but I couldn't get through to ask any questions - anyone else have a problem? Anyway, right now not much to ask as we are in a wait and see mode on the nitrogen lift. With all the good indications seen in drilling the Kyalla horizontal I am very hopeful that we soon see a breakthrough of gas. Until then we wait!
Poods - just catching up on the board - so sorry to hear about your wife. Puts things in perspective.
Also wanted to say that I agree with most of this post. As much as I hate to criticize the fracking experts on this board I think I will stick with Origin. I’m sure they have engaged the top experience in this field. Many don’t appreciate the uncertainties when drilling any well much less a new never been fracked formation as the Kyalla. Hopefully the engineers will find a solution and all turns out well.
I believe we are in good hands with Origin. Yes they operate like the typical large oil company vs. the smaller and more agile independent but I know here in the states that more likely means things are being done properly - with the additional cost of course. :;:^(
I know for a fact that POQ is pushing as hard as he can to speed things up - Maybe we see the nitrogen injection this month or early January - we’ll see.
Take Care - Wet
Longknife: From what we have heard there is a potential water issue - that's about all we have been told. One way or the other Falcon/Origin will soon be issuing a release clarifying what is going on. Stay tuned.
AnimalSpirit: My take - which is just my opinion - The EMP is required to obtaining the permit to drill a well. That permit gives the right but not the requirement to drill a well. IMO, Origin is just getting their ducks in a row in case the Kyalla 117 #1 kicks off with good positive results. If the well performs well then those two additional permits will be required. I believe Origin has already filed an EMP for the Velkerri flank well - that may or may not be used.
Origin was extremely pleased with what they encountered in the horizontal drilling - all indications looked good - Origin still has high hopes for the current Kyalla well but they need to solve the current problem before they commit to two more Kyalla wells. As we approach the dry season Origin may be forced into a position to move the rig and drill the Velkerri flank well - With that said Origin would not be giving up on the Kyalla formation.
I suspect before long we will hear more details on the Kyalla 117#1 well - its been 2-3 weeks since the last update - if the well is still just making water then I would expect it to temporally shut in while the engineers try to find a solution.
Longknife - The wet season will likely not end until March. The rig will be moved in April when road conditions permit and the next well is scheduled to be drilled May 2021. The question now is whether the rig is moved back onto the pad or to the Vellkeri flank location. With an April 'move' date, Origin has a while to figure out the Kyalla #117 well before committing to their next move. Technically speaking, the 90 day flow test of the Kyalla #117 might not be completed until April if Origin struggles with the potential issue and cannot begin the 90 day flow test until after the first of the year. Hopefully that is not the case but I can assure you that Origin is not giving up on the Kyalla without giving it its all - they've spent too much money to just shrug their shoulders, pack their bags and move to the next location. Even if the Kyalla continues with its water issue (if that is the issue) Origin will likely revisit that formation in the future.
I don't know when that quote was written but it is a little incorrect - as ITguy mentioned the April/May timeframe is for the next well - where-ever that may be.
John and Oleo: Yes - I do know I am right on this - pretty much comes from the horses mouth - not any undisclosed information here - just basic facts. Philip has a legal obligation to release material information - Falcon is a 22.5% partner in the Beetaloo - be assured Origin and Falcon are in weekly if not daily communication. I don't think I am speaking out of class to say that Origin has no final say on this - if it is material to Origin then it certainly will be such for Falcon and both companies shareholders will see a news release. If news is not material to Origin but is for Falcon then Origin wouldn't stop a legally mandated Falcon release - realistically, if this was the case, Origin wouldn't fight Falcon on this - for Origin it would not be a material event for their shareholders.
I'm sure Falcon seeks Origin's approval in these matters but when push comes to shove Falcon follows the law.
Back to the flare - no that would not be a material event for Falcon or Origin in itself as that would be pretty unquantifiable (color, appearance?) but the 24 hour initial flow test will be important to both companies.
GLA
Oleo: As I understand it, if info is material to Falcon shareholders then Falcon is permitted (and mandated by law) to release that data. You can have information released by Falcon that would not be released by Origin. Just because Falcon has farmed the Kyalla well out does not release it from the fact they still own 22.5% of the project. Is a flare (size color etc.) material - I doubt it, but after the initial 24 hour test is performed it will be released to the shareholders. We will know in good time what the Kyalla offers. If Origin shuts the well in to study data and ascertain how to fix a potential issue then we will know about that also - right now obviously we know nothing.
Newtofo: I'll join you and Poods :^) and any others at a pub in Dublin to cuss and discuss POQ, Falcon, Origin, etc. As far as the golf course - you may not find me there unless I get to drive a cart and pop a few.
I would be stunned if any type of deal is addressed at the AGM - too soon for that. If I was to ask questions they would pertain to when Origin is going to buy us out, how would that deal be structured and what does Falcon see happening over the next 2-3 years - yes, I firmly believe we are in this project until 2022/2023 if we are going to see any type of decent return on our investment and I have to host a Texas golf tournament :^) IMO, those would be unanswered questions that would go nowhere at this point in time though I still believe a stock buyout by Origin makes the most sense to me - so says my crystal ball Namu.
Poods: Don't hold your breath waiting to see my proxy votes ,which match or exceed your often touted total, in the opposition column. Likely not a surprise to you or many others but I will be voting with the company on this one.
OrsonM: My sentiments exactly - Thanks for pointing this out to the board.
We have every early indication that the Kyalla #117 holds huge potential. Hopefully the Kyalla kicks off in the next couple of weeks. If the well is not flowing gas in two or three weeks then there might be a water problem - if that is the case Origin has the experience and knowledge to address and fix that problem. The well would likely be shut in while the engineers scratch their heads to find the best solution - 500 bbl/day of water is a lot of water to dispose of which nowadays can get rather expensive - especially in the middle of the Beetaloo. All I am saying here is that if the well does get temporarily shut in don't panic - it doesn't mean Origin is abandoning the Kyalla - they are just trying to ascertain a solution.
I am optimistic that all this will all be resolved - this is the first time the Kyalla has been horizontally drilled and fracked - lets leave it up to the professionals to get all this sorted out. With the wet season underway nothing is going to happen fast as far as moving a rig, etc. - looking at April next year - Origin has lots of time to figure this out if in fact it is a problem - for all we know right now there may not be one!
OrsonM: My sentiments exactly - Thanks for pointing this out to the board.
We have every early indication that the Kyalla #117 holds huge potential. Hopefully the Kyalla kicks off in the next couple of weeks. If the well is not flowing gas in two or three weeks then there might be a water problem - if that is the case Origin has the experience and knowledge to address and fix that problem. The well would likely be shut in while the engineers scratch their heads to find the best solution - 500 bbl/day of water is a lot of water to dispose of which nowadays can get rather expensive - especially in the middle of the Beetaloo. All I am saying here is that if the well does get temporarily shut in don't panic - it doesn't mean Origin is abandoning the Kyalla - they are just trying to ascertain a solution.
I am optimistic that all this will all be resolved - this is the first time the Kyalla has been horizontally drilled and fracked - lets leave it up to the professionals to get all this sorted out. With the wet season underway nothing is going to happen fast as far as moving a rig, etc. - looking at April next year - Origin has lots of time to figure this out if in fact it is a problem - for all we know right now there may not be one!
BO: Its been said the Kyalla well is comparable to the Marcellus Shale wells. Some of those wells require recovery of up to 35% - 40% of the frack fluid before they 'kick off'. Last I heard the Kyalla had recovered about 15% - 20% of the frack fluid. The well initially flowed back frack fluid through the casing before the production tubing was installed into the well. I take that to mean that the well was likely over-pressured by the fracking of the well and as this pressure bled off the production tubing was required for the well to continue to unload fluid. IMO its too early to tell what the final results will be. I remain optimistic at this point but then I should have been a geologist!!
How long should we expect before we know? - That is still a bit of an unknown - it could be tomorrow, next week or # weeks. Falcon will make that announcement when the 24 hour flow test results are known.
Somewhere in the permits there is probably an estimate of how much frack fluid would be required. If it were say 100,000 bbl and we have recovered 20,000 bbl to date then to get to the 35% recovery number we still have about 15,000 bbl to recover at 500 bbl/day - you do the math. In the meantime we wait. This is all just a WAG on my part - I never received my petroleum engineering diploma :^) Maybe Nano can jump on to the thread and give us his take.
RichGreenWood: "Origin could be keeping this tight for several reason, including competitive reasons and wanting to be consistent with their practice of when and what they disclose in press releases." This well's initial 24 hr flow test is not a material event for Origin (the 90 day is material IMO)- Origin could choose to ignore it. On the other hand this test could be considered a material event for Falcon - if so I believe Falcon would legally be required to release this news to its stockholders. Philip did promise us these these initial test results. But then he also promised us so many news releases at every stage of the Kyalla that we would tire of receiving them - Hmmmm! - How did that promise work out. I really don't understand why this information would not be released by now. Possibly Origin has decided not to release an 'official' 24 hour test (why I don't know) and just proceed monitoring the 24 hour production flows leading to the 90 day test? If that's the case is would be nice if POQ would at least tell us what is taking place - Frustrating!
RGW - " There are lots of U.S. E&P companies that do not announce well results, period. Many smaller companies tend to want to press release everything." True but there is lots of industry interest in this well. There is no need to keep this well tight as there are no competitor wells offsetting our Kyalla acreage nor is Origin actively trying to acquire surrounding acreage. Puzzling Guys! Origin will release the 90 day flow test results in their own good time - Falcon is not in charge of this show.
Longknife: I guess to get more to my point - I don't know why we are seeing what is in my perception a delay in the initial 24 hour flow test. POQ promised us a 24 hour initial flow test - IMO that should happen within a couple of weeks after fracking but it hasn't yet been released so for whatever reason I am wrong. As Newtofo/OrsonM mentioned Origin is looking to release the 90 day flow test sometime after the first of the year.
As to my equipment comment I am almost certain that would not be the case - Origin has seen this coming for months and the this type of test is standard procedure. I should not have even mentioned equipment as that's highly unlikely - I am almost positive the 24 hour test will be run shortly if not already.
As to the timing on the test the well needs to clean itself up and unload the frack fluid. Once that happens the 24 hour test will be run - that gives Origin a base line and potential of the well. After that test is completed then the well will be flowed for a 90 day period (nothing magical about 90 days as the Amungee test was 57 days). Origin will monitor the pressure/volume/fluids over this period to gauge how sustainable these metrics hold up. How stable and level these measurements are over the extended test gives the engineers an idea of the Kyalla's longer term potential.
OTD2000: I take the 'first results' comment to be referring to the 90 day official extended flow test - which is the important one. The 'end' of October would be for the initial 24 hour flow test that reflects potential but not the wells sustainable flow/pressure going forward. Typically a fracked well takes a bit to clean itself up - I'm thinking a week or two would be sufficient but that is a guess on my part. If the initial 24 hour flow-test is not scheduled till the end of the year that would mean Origin is waiting for equipment to be put in place but I doubt Origin would be caught off guard on not having things in place for a simple test. I has told the 24 hour test would be performed at the end of October - If Origin keeps to its delayed news releases we may not hear for another week or so.
We need Empire or Tamboran to give Origin some news release lessons - the silence and lack of communication is not what POQ promised us before the Kyalla was drilled. IMO there is no reason to keep this well, out in the middle of nowhere, so tight - inquiring minds want to know :^) With all that said Origin has its reasons for what they do - we will know in due time.
jfhealy: What do you see as conflicting in the FOG update? I'm hearing that we should get an initial flow report by the end of this month. If Falcon reported on Oct. 2nd that early stage gas flow rates are expected in the coming weeks then that would that not fit what we have been told? Not questioning what you said - just trying to clarify what your conflict/concern might be.
Darnit: Fun conversation guys while we wait for the initial test results. As to your comment "the price of FOG would be more dramatically lifted than Origin's share price" that, in fact, would be the case if a stock purchase was done with the current Origin stock. With a new issue Falcon holders simply get 22.5% (plus the adjustments for unspent carry, setting up new company, etc.) of the new company and any successful wells would accrue to all stock in the new company. In my simple mind this removes the hurdles associated with how to value Falcon's portion - it would treat Origin and Falcon interest the same - fair in my book. To repeat, it also would make a much more attractive situation for Origin to 'buy out ' Falcon than trying to acquire our interest for cash. IMO Origin is not going to want Falcon to sell their undivided interest to a third party - it would really complicate things going forward when it comes to developing acreage - another reason IMO that Origin would try to make this work to Falcon's advantage.
All just my pondering - Thanks for indulging me!
Shalamar: "However, I do not believe this could happen before the final 2 or 3 wells (depending ) are completed as to sell sooner could seriously undervalue our shares / share swap."
I think you are missing the whole point of what I am suggesting - if a new Origin E&P company were established and Origin/Falcon's interest in the Beetaloo was spun off into it then it wouldn't make any difference when the final wells of the carry were drilled (other than making an adjustment in shares for Origin's unspent carry). The stock value at the time of the initial transaction would be whatever value the market assigned to the existing assets (drilled and undrilled). As the final wells are drilled then the market would value that production/proven acreage into the stock price of the new company. IMO, Origin needs to set up a new E&P company for this to work properly for the stockholders of Origin and Falcon - there needs to be a clean slate which in my opinion would benefit both Origin and Falcon.
The more I think about this the better I like the idea of a stock acquisition for Falcon - there is no need for expensive appraisal reports and haggling over how to assign values to unproven acreage (i.e Amungee Velkerri B). It lets those of us willing to hang around the huge upside potential - for those wanting to exit can do so at their own timing. I will be watching for actions by Origin/Falcon that fit into this scenario.
Stebol: This is all just a guess on my part. Origin has basically sold off all of its E&P other than the Beetaloo. Origin's base business is energy production and utility sales (electricity). If Origin was to spin off the Beetaloo assets into a new entity then I'm thinking Falcon would be assigned an approximate 22.5% of the new entity's stock. Any new development debt would follow this new entity. Likewise any revenue (block sales/farmouts) would benefit the new stock. I'm sure this is an oversimplification of the structure but IMO it cleans up the undivided interest mess and would also clean up Origin books by splitting out the Oil & Gas E&P from their utility business. I would love to participate in something like this if it were available. You wouldn't have the overhang/burden of Origin's current business model - it would be strictly an E&P play in a World Class Discovery on steroids.
If the Beetaloo was spun intact into a new company then there would be no evaluation issues for current Falcon holders - one would just get their prorated share of 22.5% based on their current stock ownership of Falcon. In my mind it would not make any difference as to when a deal of this nature was done - any exceptional flow test such as the Kyalla #117 or the upcoming stage 3 wells would translate into an increase in value to both Origin's current 77.5% and Falcon's 22.5%. There would have to be some type of adjustment for unspent carry due Falcon but that would be adjusted into the final percentage allocation of the new company.
Newtofo: Certainly not a tax person but I'm thinking there would be no taxable gains on an exchange of this type. Taxes would be computed on any realized gain/loss over the initial evaluation of the new Origin stock when it was sold. Like I said I'm sure it's not that simple but I would think it could follow that general model.
This is all just conjecture on my part but it does seem to be a nice solution for Origin/Falcon shareholders.
Speaking of pondering the possibilities I want to revisit Falcon's 'undivided interest' in the Beetaloo. I have always viewed this ownership as a messy situation for both Falcon and Origin. The most logical way out of this situation would be for Origin to buy out Falcon's interest - putting the concession back together and then moving development forward.
Now ponder this - What if Origin was to make a stock offer for Falcon's 22.5%. Origin could then potentially spinout the Beetaloo into a new E&P company or less desirably keep it under the existing energy company. They could then sell off or farm out blocks of acreage to fund the Beetaloo's continued appraisal/development. The beauty of this is those wanting out of Falcon could sell their newly acquired Origin stock and continue to hold interest in the drilling/development of this World Class field. I'm not a tax-expert but taxes might possibly be deferred? I have always heard that Falcon could be a $10 stock if only it could continue in the development of these assets. A stock buyout by Origin would give those willing to hang around longer a great way to realize the huge potential of this field.
Origin/Falcon's concession is so big it will take multiple large companies many years to develop the acreage. As Origin proves up acreage it could sell off blocks limiting debt burden - allowing its stock value to appreciate at a quicker pace.
A setup like this would allow Origin to put the Beetaloo interest back together and fund large portions of their own E&P while letting Falcon shareholder's participate more in the upside of this tremendous asset - a WIN WIN in my book. Above my paygrade but I would assume Origin would offer Falcon a sweeter deal in a stock offer than a cash offer. The Permian Basin has just seen two big stock acquisitions this month ( Pioneer acquired Parker & Parsley $4.5B; Conoco acquired Concho $9.5B). Maybe Origin acquires Falcon for $?B :^)
Just some crazy thoughts while trying to practice patience while awaiting the Kyalla news.
Thoughts??