Member Info for Xmtman

One of the things that was apparent from the previous 2 campaigns was that a older low cost simpler rig will do North Basin - Guardian was an old rig but was favoured by Shell for North Sea work for many years. Reliable with good up time and suitable for the North of the falklands as thats very similar to Central North sea WRT conditions. For the south its a different ball game - different depths, different sea states so different rig requirements. (More expensive and in the case of Eirk Raude - more problematic). So unless there is a long term joined up plan already in place - why would you want to hamper yourself with a higher cost vessel that you dont need when there are older rigs that would do the job and are sitting idle that you could get on a longer term basis. Guardian went down there for close to a year for appraisals - which is about the min time I would expect a contract to be. That could drill the 3 holes and do all the completions and installation of hardware for 1st phase.

When the guardian went down all those years ago it had an inspection before it went. I suspect that any deal with a rig will be a longer term agreement with a mobilisation and transit rate agreed then an active dayrate plus a local standby rate agreed. As it wouldnt be economical to haul a rig down that far for just a few months work to drill the 1st few wells. Then drag it back north again to wherever it came from. It all depends on if they are planning using the rig for deploying the subsea Trees or plan to bring in a cheaper monohull construction vessel. Im sure there will be a lot of costed options being weighed up at the moment.

Quite often a letter of intent will be given with some financial agreement (cancellation Terms) to allow vendors with especially long lead product to get the ball rolling wrt sourcing of material. This may happen months before FID. In fact I am led to believe that Premier were doing that last time around and vendors were actively working before it got parked. Its not uncommon if a relatively tight timeline is to be met - and 18 months FID to 1st oil is a very tight timeline in field development terms.

Now that Prax have bought over Hurricane there is an interesting report on their Website - "Evaluation Of The Oil Reserves and Contingent Resources of the Lancaster Field". https://www.prax.com/information-for-holders-of-dcus/ . This suggests that the oil production vs water production economics will drive decisions on end date - and when the FPSO will come off the field. Albeit things may have changed (fiscal policy/windfall tax, etc ) since this report in March 2023 which may further influence end date.

Each contract will be a separate negotiation. For Hurricane it may have been a way of trying to keep the CAPEX down as Lancaster early production was almost an extended well test. With the information helping to decide the way forward. So perhaps Hurricane may have had to give a percentage to get the FPSO owner to commit to what might have been a short deployment. https://en.wikipedia.org/wiki/Lancaster_oilfield. I would suspect that as Sealion is less of a risk it will be an agreed day rate based on a clearer duration with no percentage.

Doing a bit of very rough back scheduling from end of 2026 First Oil date - they are going to need to get a wriggle on to get everything in place.

Vendors would have to start working based on some early letters of intent or FID is going to need to be sooner than later for order placement of all the hardware (Trees, manifolds and jumpers, controls system). Some of that has 12 - 18 months lead time.

All of that will need to be built, tested, then shipped.

Its a long way to ship by sea, so the kit will likely need a further inspection and potential test prior to deployment - so a local facility in the FI will be needed to allow local rework/checks to be carried out prior to deployment.

Such a facility currently doesnt exist. So that will need investment (cranage, pumps, test skids, flushing skids, etc, which although may be discussed and costed is unlikely to be moved forward until FID happens.

Looking at the date of accommodation requirements of end of Q2, 25 would give about 6 months for staff to get all that in place before start of hardware arrival if long lead orders placed at that time of FID.

As even after deployment and hook up there will need to be a period of commissioning of all the systems from subsea to FPSO before opening up the taps to get first oil.

So, I'm half expecting FID mid 2024 based on activities that need to happen to meet the end date.

Transocean Deepwater Atlas is contracted to Beacon till April 2025 - at $455k a day (from Transocean Website) - so thats a pricy vessel to trip down to Falklands. Especially when something like Paul B Lloyd jr, Henry Goodrich, Ocean Patriot, Ocean Endevour or similar could be had for close to half the price and would do North Basin

Transocean Deepwater Atlas is contracted to Beacon till April 2025 - at $455k a day (from Transocean Website) - so thats a pricy vessel to trip down to Falklands. Especially when something like Paul B Lloyd jr, Henry Goodrich, Ocean Patriot, Ocean Endevour or similar could be had for close to the price and would do North Basin

South Basin doesnt currently fit in with Navitas stated philosophy of buying into already appraised and pretty advanced field plans. Per their investor presentations they are looking at fields that are more proven that south basin is currently. But in the future or with a partner ??? https://navitaspet.com/wp-content/uploads/2024/01/Navitas-Investors-01052023-V2-1.pdf.

Navitas bought into North Basin - RKH still have the south basin licenses that they inherited from FOGL which run to end of 2024 but nothing proven from last drilling campaign.

Its logical for a rig share for North and South Basins - as was intent of Eirik Raude. But it could drive higher rig costs for North Basin operator unless a deal could be done. North basin doesnt need a DP rig just old School anchored rig. So where is the gain for them with a DP higher cost vessel. Share of mob and transit costs would be a positive but day rate would kill it unless there was a hidden benefit for North Basin operator. As far as the South Basin goes Navitas/Beacon are in the same depths with Shenandoah field in the Gulf of Mexico so there are certainly recent transferrable skills and tech.

Eirik Raude was planned to be shared working in North and South Basins, it was south basin that needed the High spec Rig - so that deeper water and different sea states drove selection - ending up with an over spec and as it turns out less reliable rig for the North. https://www.oedigital.com/component/k2/item/8129-erik-raude-readies-for-falklands-campaign

It will be interesting to know if any rig sharing with South basin comes into play this time around to help convince a rig owner to take a rig and support network down there for the duration. As with a staged development - as noted in the RNS some weeks ago only 5 wells pre first oil - is only about 5 months rig usage - whats it going to do after that. Go drill the other 6 for phase one ? . Do some more exploration or go drill some in the South basin (as that will affect selection criteria) - as they have said phase 2 will be 4 years post first oil - and thats 12 wells so only about another years drilling . A rig operator is unlikely to have a rig sitting waiting between phases so it will be interesting to see where the rig is mobilising from.

Ocean Guardian was a very reliable rig while it was down there - Eirik Raude on the other hand was less so during its trip south.

Guideline dayrates can be found on fleet status reports from Transocean website

https://www.deepwater.com/documents/FleetStatusReport/FSR%20-%20Oct.%2018%2C%202023%20FINAL.pdf

Figures are lower than $500k per day but thats base rig hire - add on services and its a rough number. Overall its likely to cost around $15 million per well as a ball park figure to drill and complete each production well - for a remote location that may rise due to lack of nearby infrastructure. Also risk of downtime increases as getting spares on location will take longer.

Single biggest spend prior to first oil will be the rig - base rig rate will be probably close to $500k per day plus running costs. Last time with the Ocean Guardian there were mob costs plus transit rates - before the full onstation hire rate kicked in -(this was debated to death on the BB's back in the day). So a lot depends on where the rig is coming from and what its signed up to do and how long its staying. As if its going to be there for some time it may need have a 5 year survey done early as it needs to keep its cert in date. Thats not likely to be able to be done locally. Then you have installation vessel cost - possibly $150k a day, supply boats, personnel and logistics of getting all the subsea hardware down to the Falklands. Crew change costs - last campaign it was 1 month work cycles - so plane charter for getting 100 plus moved there and back every month. Then on island crew and company men accommodation, plus another biggie helicopter charter for crew transfers. Last time there were a couple of choppers mobilised down there and support crews. Add in stage payments for all the subsea equipment, then dependent on FPSO you have all costs related to that. So there will be a big spreadsheet in place with all costs and timings all to be revalidated prior to FID.

If a rig is to be on station end of 2025 then the subsea hardware - manifold , jumpers , trees and controls will need to be ordered around 18 months min before that point to allow build, test, and ship the hardware. In rough terms it will take about 30 days to drill a well and install the subsea hardware. Then all of that will need to be hooked linked up via a manifold ready for production. Odds are there will be 2 vessels in the field - the rig doing the drilling and an installation vessel (at a lower day rate) doing most of the installation leaving the rig to move to next well. Its a well established process. Its just a matter of pushing the go button.

South Falkland Basin is different from North . Deeper Water , typically different sea states. The Hardware suitable for North Basin and the Technology to be deployed may not be the same - typically the deeper the water the more costly the development. In the 1100 to 2000 metre water depths mentioned in BOR presentations - you are typically looking at full Dynamic positioned vessels - North Basin can use lower cost tethered rigs and FPSO's if available. Also a gas development would typically use 7" bore subsea equipment whereas oil would use 5" Bores. (lighter, smaller, cheaper) South basin would need guidelineless technology (Gulf of Mexico Tech) North Basin can use guidelines (North Sea Tech). So resources could be shared but it would likely drive cost into North Basin development. So sharing opportunities may be limited by resource selection. Where costs may be reduced is shared logistics onshore. Warehousing, charter flights accommodation, spares, supply boat hire.

From latest RNS its now only 5 wells before 1st Oil but the cost to move a rig down to Falklands is going to be considerable. Rig owners are not going to do it for free. If one gets mobilised its not going to go for 5 its likely going to be there for the duration. It was a big trip for the Ocean Guardian to get all the way down there so not going to take one there just for a little bit of drilling 5 wells = circa 5 months . The Guardian was an older rig but as North Basin conditions are similar to North Sea some of the older semis stacked but not yet scrapped could fit the bill and at a lower rate than some of the more expensive rigs - Eirik Raude was bigger but not better and Premier pulled the contract as it had so much downtime. Odds are because of logistics a rig will need to have its 5 years survey/recertification done before it treks all the way down there, so that may have to be baked into the lead time.

Another pertinent question asked and responded to. FI is not included in UK next zero agreements. https://questions-statements.parliament.uk/written-questions/detail/2023-12-01/4833/

UK gov leaving it to local decision makers - hence why FI are recruiting.

https://questions-statements.parliament.uk/written-questions/detail/2023-11-30/4769