Member Info for ZYX098

When flowing, HH-1 average flow rate was 137 BOPD during the period.
Very good for an Onshore UK field (Wytch Farm excepted), but not enough to cover their costs & overheads.

No indication of pre vs, post W/O flow rates, so we don't know if the W/O was a success.

Admitted water influx is happening, but no indications of what the water cut actually is.

Will HH-2z just be used for water disposal, or also for pressure maintenance / water flood? Remember, it was optimally placed for oil production, not water injection.
Either way, it will take a lot of work (i.e. expense) to obtain new equipment and reconfigure the current surface equipment for water injection. Even more if the produced water needs to be treated prior to re-injection.

Why wasn't HH-1 recompleted with a dual completion to allow simultaneous production from the Kimmeridge, as stated to be the plan in previous RNS's?

The previous RNS's on Turkey indicated the first Well would be drilled in Q1 2021, but now H1 2021 will be given over to designing the first well to be drilled? Why the delay?

In any case, as Operator, the well design is AME's responsibility and they must have already had a basic well design in place to include in the original farm-out proposals.

Why has there been no mention of a revised CPR, needed for reserves based funding?

Turkey - even if successful - will not be nett positive to the cash flow until at least Q1 2022. Even then, there are all sorts of issues with repatriating any profit from Turkey to enable it to contribute to the planned HH work programme.

The only conclusion can be that there is yet another placing in the pipeline at some point.

So all in all a typical RNS from UKOG; "jam tomorrow, we promise!"
Contains just enough positive information to get the average PI excited, but not enough real details to work out exactly what is happening, while glossing over the bad news...

Ocelot - It's technically called KRoI - Kurdistan Region of Iraq.
Iraq essentially recognises Kurdistan as a self-governing region, but not as a separate Country.
This distinction is crucial as although in many respects Kurdistan does behave as a separate Country, all officially exported oil has to be sold through Iraq's SOMO.
This has caused many Operators problems over the years, as Baghdad and Erbil could not agree what % of the oil revenue should be returned to Erbil.
During the various disputes Iraq kept the proceeds, meaning that Operators were not being paid for their production for long periods.

Penguins - thanks for your input and pointing out the relevant RNS's.

I agree that edge water ingress is the most likely scenario, though wouldn't entirely rule out coning.
It depends on how good the permeability is (plenty of reservoirs produce with 5-10% porosity, because they have good permeability), how close to the OWC they perforated and how good the original cement job was.

The interference test appears to have been for only a couple of days, and there is no statement I can find where they actually give the results?

Just glancing through several of the RNS's, it is shameful how often they have failed to carry out work programmes in the proposed time frames. Even using Covid as an excuse is pretty poor to try and hide behind considering the rest of the oilfield has managed, albeit with difficulty.

It is also shameful how much they leave unsaid in their RNS's. While I would expect any Company to try and put as positive a spin as possible on any RNS, UKOG's are masters of saying just enough to keep the average PI happy without really giving any concrete information on what really matters - well productivity.

I can find no reference to what the actual daily steady state flow rate is from HH-1 or from HH-2z. Just vague references to 'flowed xxx bbls in yy hrs', which in one or two RNS's appear to suggest that there is a significant fall off in initial production after a shut in - not uncommon in other fields in Southern England.

Given their particular circumstances, it is simply not acceptable for UKOG to have not said anything about HH-1 water production (either confirmation or denial), or the results of the HH-2z water shut off work, or what they plan to do with HH-2z if the water shut off work was unsuccessful.

Equally it is absurd that they have yet to produce an updated CPR for Horse Hill, something that is crucial to their forward plans.

The foray into Turkey at this point is, in my opinion, a mistake. Yes, any discovery in Turkey can be monetised much more quickly than in the UK, but they already have all the permits/approvals required to go into full production mode on HH.

Their entire focus should have been, and continue to be, on HH and optimising their production so they can generate enough cash flow to cover their overheads - something which they clearly are not doing at the moment.

As it is, without a CPR, none of their planned work programmes in the UK can be done without further massive share dilution. Additionally, from the RNS's concerning Turkey, it is not actually clear if they need further funds to be able to drill the first Well.

With no CPR, then if the 1st well in Turkey is dry, I find it hard to see them surviving.

I had very high hopes for this Company when I invested several years ago. Since then, pathetically bad management combined with the normal uncertainties that can happen in the oilfield have seen my investment drop so much that it's not worth selling.

Cont'd...

If the gas cut really has increased, then it implies that they have pulled too much too quickly from the well and the formation pressure has gone below the bubble point, allowing gas to break out of solution.
This is BAD, as even if they rest the well and there is a bottom or edge water drive to replenish the reservoir pressure, it takes a long time for any gas cap to go back into solution. As in the case of water coning, it would limit future production rates.

We can continue to speculate until the Cows come home, but until more information is forthcoming from UKOG, it is just that - speculation.
Production problems on a field like this would not warrant an RNS for the likes of BP / Shell.
But if it’s your flagship (only!) asset, then the continued silence from UKOG is borderline criminal.

Penguins / Mirasol - been cogitating on this for a while, tying to work out what is happening.
If HH-1 is producing primarily from fractures (has this been confirmed?), then an extended PBU is not needed - the enhanced flow through the fracture network will mean the well reaches static bottom hole pressure much more quickly than a conventional reservoir.
In any case, I just don't buy into HH-1 having to be shut in for any length of time to learn new information on HH-1 itself - they have had more than enough PBU's already in that respect.
The only excuse at this stage for HH-1 to be shut in for a long PBU is if they are doing interference testing between the two wells and HH-2z is being flowed.
The sudden water production is obviously a concern – especially if it is also from HH-1 and not just HH-2z.
Do we know if they ran TDT and/or PLT logs during the HH-1 W/O?
I don't recall seeing any reference to an OWC in the Portland?
If that is the case, the implication is that it's either being produced from much deeper (Kimmeridge) via the fracture network (always a concern in this particular setting as per HH-2z), or for some reason the reservoir has flipped from being water wet to oil wet and the high water saturation (I recall the original in situ water saturations in the Portland were surprisingly high to give dry oil production) means that water is now differentially being produced.
I’m not sure how common the latter mechanism is here, but if it’s the first then it’s terminal for the well. I do have my doubts about the water production through fracture theory though, as if that happens then normally the produced OWR falls off a cliff and you get 90+% water production in a very short space of time – the OGA data does not indicate that this is the case.
If there is an OWC in the Portland, then they could have pulled too hard and the water has coned up during production to breakthrough to the well.
In this case, not producing for a while should allow the water cone to subside, but it will mean that future production rates have to be curtailed to stop it happening again.
If there is a strong edge water drive, then this could have broken through a high permeability streak in the formation. This would require a water shut off treatment, which may or may not be effective.
Recall that the viscosity of the oil is much higher than the water (particularly if the oil contains asphaltenes and/or wax, which HH does, otherwise a surface heater would not be required), so the Well will differentially flow water if given the opportunity.
I'm also not sure what to think about the increase in gas production implied by the OGA data. Any well that has been shut in will produce an initial spike of gas, but it would normally get lost in the background noise. Here, if it's done often enough (and because production appears to have been stop/started several times in a short period), that may not be the case.

(to be continued...)

Ocelot - it's very rare for a well to be shut in for more than a few days when doing a PBU and certainly not for months.

In addition, a PBU is only of use in evaluating the effectiveness of the W/O if they have actually performed some production testing first - which UKOG would have to have done to get the kill brine out of HH-1 as the final part of the W/O.

They might be trying to do some interference testing (i.e. producing HH-1 to see the effect on the bottom hole pressure in HH-2z and vice-versa). That needs consistent production at a steady rate for several days from the well being produced.

But whatever they are doing, the continued silence from UKOG (and not just on HH, but also Turkey) is deafening.

Gents,
We can throw numbers w.r.t. 1P / 2P / 3P Reserves, recovery factor, oil price, production costs etc around all day.
But they don't matter.
What matters to the banks is the CPR; that is still from 2018 and based on a few days flow in 2016.
UKOG have had more than enough information to produce an updated CPR for some time and so the question is why haven't they produced it?
It's needed for reserves based lending to free up capital to progress their other potential work programmes (Turkey, additional HH Wells, Arreton, Loxley etc) which need funds from the banks to be able to go ahead, so again, why haven't they?
They cannot continue with the 'slow death by a thousand share issues' as that resource must be pretty much dry by now.
In my opinion, if a new CPR is not forthcoming before the results of the 1st Well in Turkey are known and that Well is dry, then we can kiss UKOG goodbye.

Mirasol - good point, is there a particular section of the FCA that should be written to?

The kill brine would have been flowed out of the well immediately after the W/O, because a PBU cannot be performed on a well that's already dead.
Produced water is never a good sign (especially when - as in this case - the Operator has never really communicated that the Well is actually flowing water).
What he might be referring too as a 'good sign' is that the onsite separator systems are working efficiently, so the produced water meets the criteria for low hazardous waste.

I regularly see complaints about UKOG and Sanderson keeping the PI's in the dark as to what is going on.

Complaining on this board won't do any good.

Complaining directly to UKOG won't do any good.

But calling or writing to the NOMAD may produce some action, if enough people do it.

It is the NOMADs responsibility to ensure that the Company are promptly updating the market with information that may materially affect the share price - something which UKOG have conspicuously failed to do for a considerable period of time now.

The UKOG NOMAD is WH Ireland and the names and phone number of the contacts are given at the end of every RNS.

Complaints could be on any/all of the following;
A) Why has the market not been updated on the results of the HH-1z workover? The RNS on the 5th November stated it was shut in for a long term PBU to ascertain if the W/O had been successful. Long term PBU's do not last two months. If it's still shut in, it's for other reasons which should be communicated to the market. In addition, what were the flow test results immediately after the W/O? To obtain the data required on the effectiveness of the W/O requires a significant period of flow BEFORE shutting in the Well.
B) What is the Company's position w.r.t. the apparently increasing water cut on HH-1z? For investors, a vague reference to gas breaking out of solution and increased water cut in the 5th November 2020 RNS, while needing HM Govt data (which is reported several months in arrears) to deduce that there are problems with the Companies flagship asset is simply not acceptable.
C) What are the plans for HH-2? Does it remain shut in? Are there any plans for water shut off treatments? If so, when will they be performed and why wasn't any corrective action taken when the W/O Rig was there for the HH-1z W/O?
D) The current HH CPR is from 2018 and based on a short duration flow test in 2016. With over 50k bbls of production (plus several PBUs) since then, why hasn't this been updated yet? When is it planned to issue a revised CPR, therefore allowing the possibility of reserves based lending rather than bleeding investors to death with share issues?
E) The last Corporate presentation was in November 2018 which - amongst other things - said that four more production wells would be drilled at HH during 2020, Arreton-3 would be drilled by Q1 2020, production from horizontal wells in Arreton would commence in Q4 2020, a Broadford Bridge sidetrack would be drilled in Q3 2020, Godley Bridge would be drilled in Q2 2020. It is clearly hopelessly out of date and to all intents and purposes, none of the stated objectives have been met. When will this be updated?
F) The RNS's concerning UKOG's venture into Turkey are vague as to what the October 2020 £2.2 Million fund raising will actually cover. In particular whether or not it will cover the drilling of the first Well (the timing of which has still to be clarified beyond 'early 2021') and the seismic work ref

There are also issues building in the Gulf with Iran impounding a small Tanker (Hankuk Chemi) , plus an explosion on another tanker (BW Rhine) in mid December and a mine being found on yet another tanker (Pola) last week.
In addition, there is great concern about the condition of the FSO Safer, which is moored in the Red Sea off the Yemeni coast. It holds about 1 Million bbls of oil and if it did go down, could severely limit access to the Suez Canal and also stop the Saudi desalination plants on their West Coast.
And who knows what craziness could happen in Washington today....

And even if the EU negotiators accept it, the deal still has to be passed by all 27 member Countries...

Skwizz,
Norway is a long way from running out of reserves, and their production will still contribute to their sovereign fund for decades to come.
As for the UK establishing an equivalent of Norways fund, it was never a starter for two main reasons; firstly, all the cash from the early North Sea production (and taxes were up to 98% on some fields, like Forties) went to paying off the huge debt pile that the UK had run up in the 1970's.
Secondly, Norways production was at the same level (or greater) than the UK, but for a Country with barely 10% of the population. Due to this, their taxes from oil were a far greater % of GDP than the UK (in the UK, it never exceeded 5%). Indeed, the cash flow was so great it HAD to be siphoned off, as the economy simply couldn't adsorb it.
The Norwegian economy was so small that when they tried to insure the first of the Statfjord platforms prior to installation, it had to be insured in $US rather than Norwegian Krone, as if something had gone wrong and the platform was written off, the resulting payout would have crashed the currency..

GKB47 - You are correct, I did miss the CPR report of 2018.

Having read through it (or the Horse Hill part..), apart from the seismic and log information, it's based on a flow period of only 10 days in March 2016.

As such, it would be difficult for any finance institution to accept it - which is obviously why UKOG have had to issue shares to raise funds since then.

However, given the amount of flow and PBR data they have obtained in the 4+ years since, it should have been updated many months ago - especially since the quoted figures for recoverable reserves are not that brilliant and the issue of why the reservoir shows such high water saturations with dry oil being produced (at least, until recently..) needs to be addressed.

Mirasol - I've been lurking on this board for many, many Moons but haven't bothered to post before - and in reality I'm only doing so now because LSE recently changed their rules so you could only read posts if you had an account.

I presume it's a rhetorical question, because he's never going to invest?
If he had done, he would be like his Finance Director - around 90% down - and just might understand why shareholders are extremely unhappy.
And doesn't it speak volumes when the UKOG Finance Director says - in his capacity as FD of another Company - that it sends a clear sign of confidence to the market when the BoD buys it's own shares, something UKOG have conspicuously failed to do?

SS showed how much he cared about shareholders at the last AGM, when he was challenged to take at least some of his salary in shares and basically said no.

The lack of communication with share holders is appalling, bordering on the criminal.
IMHO, the Executive Directors and NOMAD are being derelict in their duty by not forcing them to communicate more clearly.

BTW, it is very impressive for a Company with a producing asset to still have a market capital which is less than the amount they have raised through share issues.

Any Company of UKOG's size and type has to first focus on getting production to at least cover their overheads, something which UKOG have failed to do despite having one of the best producing wells in the UK.

There are clearly issues with their main assets - the Kim and the Portland at Horse Hill - which should have been properly explained in an RNS long ago.

Once it was clear that there were issues with the Kim (which still haven't been adequately explained), their absolute priority should have been switched to getting a second well drilled into the Portland (and yes, they haven't adequately explained exactly what is going on with the Portland either).

Their second priority should have been getting the CPR for Horse Hill (even if only for the Portland), so that the constant diluting by share issue could have been replaced with asset based lending.

Instead of which they have burned time, resources and further diluted the shares by researching and buying into exploration in Turkey.
By doing so, it sends a clear message to the market that UKOG do not regard Horse Hill as a substantial asset, and indeed it may be worthless.

They will have to raise further funds to actually drill Turkey and if that first well comes up dry, UKOG are history.

In over 25 yrs in this business, I cannot think of a Company I've been involved in that has been run as poorly as UKOG.
Only ANGS comes close with their decision to appoint JTP - they clearly didn't do any real research or reference checking on that one.

It's virtue signalling of the worst kind. All it means is that they will go to the Chinese or Russians who will not attach any socio-economic or environmental conditions to the loan.

And not as economic as has been claimed.

https://ref.org.uk/ref-blog/365-wind-power-economics-rhetoric-and-reality

Quick back of the envelope calculation;
A single well producing 100 BOPD would require 3 x 1.5 MW wind turbines to produce the same energy equivalent (presuming the wind was in the correct speed range for 24hrs).
A 1.5 MW wind turbine has a central tower 58m high and the rotors are 82.5m in diameter.

Just a point; if the wedding venue is 350m from the drilling rig, then the top of the mast is less than 6 Deg above the horizon and the slice of the horizon it takes up is less than 1 Deg
That is when it's there, which is less than 10% of the length of the application.