Member Info for ZYX098

Hiram,

LTT is correct.

The Operating Rate for the Rig will be around $1 Million per day, and that cash cannot begin to be recouped until 1st Oil.

So it's the planned arrival of the FPSO date that essentially drives when the Rig needs to be mobilised.

WR.T. the Islanders possibly being a bit skeptical about the benefits, I can see that being the case as they've been promised jam by PMO for many years, and that hasn't materialised.

Also, they won't have the comfort of the optics of a large Production facility being built - there will only be a relatively small space being taken up for the construction of the shore base.

FWIW, I think that the FIG election is being delayed until December would point to them signing off on SL prior to dissolution and therefore allowing FID to be announced in November.

As I've said before, the "Bar Talk" is that Navitas / RKH will have all their ducks lined up for FID by late September / early October and then they will be waiting on the FIG.

Thanks for the analysis Gents - interesting reading!

Also illustrates why drilling a Well on Isobel early and then not being able to do anything with it for around a decade actually decreases the NPV.

Hi Tim,

While I like the slight bump up to my BP shares, in reality it will have no effect on anything to do with the FI.

Hi PaulD,

I agree - I don't think FID is costed into the share price yet.

I feel assigning 20% risk for SL is reasonable.

Yes, the field would be relatively simple to develop if it were on the UKCS.

However, it's the only example I can think of of being a new field development in an area that's logistically very remote and that has no oil industry infrastructure at all in place.

Equally they are planning to develop using horizontal Wells (which is the correct choice) in an area where none have been drilled before. Indeed, the only previous attempt at a deviated Well in the area was an abject failure.

So there is plenty of opportunity for cost overruns to occur.

But there is also plenty of opportunity for cost saving by way of improved drilling & completions times (application of lessons learned) once they get a few Wells under their belt.

In addition, we know that there are many other structures in the NFB that have yet to be fully appraised and which should substantially add to the SL reserves.

Plus (as Noml/MM has pointed out), there is considerable additional potential in the NFB to the North of SL that has yet to be licensed by the FIG.

However, unless they go for another dilutive raise, RKH just don't have the finances available for any substantial exploration / appraisal program until the waterfall of cash from SL starts flowing in and they can start paying down their debts.

For that reason, despite the fanciful thoughts of some others, I simply don't see any substantial exploration/appraisal program being drilled until around 2031/32.

As I've said before, after FID I might sell some of my RKH shares to recoup my original investment, but I'll be hanging onto the rest for years to come.

Hi 36800,

It appears that Navitas are also acutely aware of the potential for causing a housing crisis.

They absolutely want to avoid having bad relations with the Islanders, which is why they are planning to build their own 'Hotel' to accommodate the staff needed for the project.

This would also cover the additional requirements for personnel to stay overnight during crew changes for those doing 28/28 on the Rig and FPSO.

NN,

Ref your 22:13 post on the 3rd.

All kinds of biscuits gratefully accepted...

Yes, we can both have opinions.

Mine are based on 30+ years of experience in the oil industry, not on Chat GPT.

Try asking Chat GPT some questions on your area of expertise, and you’ll quickly find that it’s not all it’s cracked up to be.

You are also failing to differentiate between facts and opinions.

It’s a fact that nothing in the oil industry is 100% guaranteed - even SL - which is why the FIG are insisting on having the funds for decommissioning in place prior to signing off on the development.

It’s also a fact that any Isobel development wouldn’t be via tie-backs to the SL FPSOs. The distance is simply too great.

Remember, the Isobel crude is also waxy.

Think of it as a jar of honey. Put it on the window sill on a hot day (equivalent of being at reservoir temperature) and its liquid. Put that same jar of honey in the fridge (i.e. Sea bed temperature) and it will solidify.

The Capex and Opex of putting heat tracing on the flowlines over that distance would be prohibitive, as would be the cost of installing water injection and gas injection flow lines & manifolds.

In any case, the capacity of the SL FPSOs to take significant additional production will (hopefully!) be limited for many years to come.

Incidentally, it ultimately also puts a limit on the availability of FPSO’s that can quickly and relatively cheaply be made available for the NFB, as there aren’t that many offshore fields with waxy crude that produce to an FPSO.

It’s also a fact that RKH simply don’t have the funds for an Exploration program until at least 1 year after SL production commences, so there will be no “early drilling” or “dedicated campaign post-FID”.

The additional cash that they are raising now will be need to be kept in reserve to cover any cost overruns on SL and the need to have a Well in their back pocket in case of any issues encountered during drilling. They cannot afford to commit that excess cash to an additional Well beforehand. In the event of no cost over-run, then it would go towards their share of an early FID for Phase 2.

Also - in case you were not aware - Permeability cannot be directly measured by the logs, it can only be inferred.

Therefore any Well on Isobel would need to be flow tested, and they are not going to go to the considerable expense of mobilising a Well Test kit suitable for waxy crude down to the FI for one Well.

Pauld – agreed, Noml/MM really knows his/her stuff and the analysis gives me some comfort that ultimately there is likely to be sufficient reserves in the Isobel / Elaine area to justify development.

However, don’t forget that Navitas/RKH do have some basic log information from the sensors in the BHA.

Also, as I mentioned previously, the Well didn’t start flowing until they were 24m into the formation, thus indicating that the permeability in the top 30

Hi Nomlk,

Yes, and thanks for your great insights into the Geology.

Could you post the link to the BGS paper again please? It's been removed from your original post.

Given the complexities that you have noted in the Geology of the area, it looks like we would need 6 - 8 Wells to get a good understanding of the Isobel Geology?

Have you any thoughts on the reason for the higher pressure? A back-of-the-envelope calculation gives a completely unrealistic depth for the OWC if it's just due to the height of the oil column, so it must be something else.

Could uplift be a possible reason? Or could compression of the formation allow such an increase if the formation strength allowed it (unlikely, I know)?

Going little sideways, I don't recall a mention of a gas cap being seen on any of the SL Wells? If that's the case, where would they put the gas injection Well?

Sam,

You must be new here?

Read the RNS again - it's not to get funding for the Hydrogen project.

It's so they can continue pushing the fantasy that they can get someone to come up with the £1 Billion it would take to develop their project.

Also read yesterdays RNS - it's the same trick they've pulled before. Generating additional shares for the EBT to make sure that they can get a resolution to pass.

Their Dorset project is currently nothing more than an empty farmers field - which they may not even have signed a lease on.

A project which is in a formation that is not conducive for leaching out salt cavities (as shown on their OWN presentation!!!!), in an area which has no realistic avenue to obtain the H2 it would need to store, and no demand in the area for any H2 it could store.

Remember, the Govt's own documentation clearly, unambiguously, states that the Govt will only support projects by means of a price cap & floor mechanism on supply.

Despite the continual claims by the likes of TH2, there is NO upfront funding from the Govt. for any of the potential H2 projects.

In the meantime, UKOG have been served notice by West Sussex County Council to P&A BB-1 and restore the site by January 2026.

That's going to cost around £1.3 Million - which is cash they simply don't have.

Since UKOG have no income, they'd have to raise that cash (and the additional funds to keep SS and his cronies in their salary) by means of another share issue.

I don't think Surrey County Council will be that far behind in issuing a notice to restore the HH site - they will no doubt have been made aware of WSCC's actions and that UKOG do not have the c. £2.5 Million it would take for HH.

It shouldn't take you too long to work out how many shares that would need to be issued......

The whole reason for this Companies existence for the last few years is so Sanderson and the rest of the BoD can keep siphoning off the cash reserves into their bank accounts.

It won't make any difference as UKOG have yet again loaded the dice, but I'll be voting No - that's speaking as an LTH who is currently down 99.98% on my original holding.

NN,

As I've explained before, another Well won't be drilled on Isobel anytime soon.

1. It's not mentioned anywhere on any timeline by Navitas (or RKH).

2. RKH don't have the spare cash to fund a Well on Isobel until after 1st Oil and the waterfall of cash starts coming in.

3. Navitas is 100% focused on getting SL across the line - as they should be. Their priority after that is Phase 2. They simply don't have the spare capacity to work up and prepare a program on Isobel for submission to the FIG. Neither do the FIG have the spare capacity to evaluate and approve such a program.

4. Isobel - should it warrant it - would need a stand alone development. It's too far to be tied back to the SL FPSOs. That alone puts any potential development a decade away.

I know you think that this is being negative.

You an hope all you want, but it's simply being realistic.

TinCan,

Actually, the contract announcements to look out for are the Service Company and the OCTG (Casing & Tubing), as they both need long lead times (12-15 Months) to manufacture the required equipment.

Bar talk (to be taken with the proverbial pinch of salt etc etc) is that Navitas are very close to signing both, if they haven't already done so.

As far as the Rig goes, they've been in negotiations with 2 - 3 Drilling Contractors for several months. They may be close to a deal with one of them, and would likely want to be able to announce prior to (or in conjunction with) FID. In reality, a Rig contract doesn't actually need to be signed until early next year.

The timing for mobilising the Rig seems to have slipped into Q1 2027, but that's a reflection of the date of 1st Oil slipping slightly more than anything else.

Given the length of time the Rig will be down there, it's almost certainly going to require some level of refurbishments / upgrades. Also, they need to have their DNV or ABS 5 yearly certification done before they'd mobilse.

That usually requires a short period in dry dock to allow full inspection of the hull, but they may be able get permission to use ROV's if the hull isn't too old.

MM,

Given how little data they got from the original Isobel Well, another Well on the structure would (under UK Regs) actually be classified as an Exploration Well.

Mirasol is correct - there are many examples of "massive" discoveries that never played out, or were much smaller than initially advertised.

Have a look at Trove on YT, they have a couple of posts on the top ten that failed.

https://www.youtube.com/@TROVE-1stSubsurface

There is no doubt that the NFB has incredible potential, but many more Wells (I think around 20) would be needed to refine the potential of the other structures before their reserves could be moved into the "probable, undeveloped" category.

Nikb,

We know it's Baker for the Trees and therefore likely the Wellheads too.

I think there was a rumour posted on here a few days ago that the Subsea work (flowlines etc) was Subsea 7?

OilTraded,

Thanks! With respect to the long lead items, they could probably get sufficient Casing and Tubing from stockists. However the Trees and Completions equipment would need to be ordered, as they are specifically manufactured to order and the lead times for those are in the region of 12 - 15 months ex-works.

Sadly the days when the Service Companies used to carry significant spare inventory are long gone.

Part 2:

The Isobel reservoir is the F3 sand package.

This is not being developed in SL as it lacks permeability.

Remember, Porosity is how many and how big the holes are and essentially drives how much oil (or Gas) is present. Permeability is how well those holes are connected and drives what production rates can be achieved.

We also know the F3 sand package wasn’t fully developed at the Jayne, Rachel and Zebedee Wells.

Isobel is a lot further South, so is it reasonable to presume that this lack of permeability is still present?

We have the evidence of the Isobel Well itself to show that this is probably the case.

PMO drilled 24m into the reservoir before it flowed – so the top 30% of the sand (prognosis was the sand would be 80m thick) clearly has no real permeability, otherwise it would have flowed earlier.

The Companies also have access to data that we don’t – from the sensors in the BHA. At the very least, they would have Gamma Ray and Resistivity, and probably Sonic and Density/Neutron as well.

As I said earlier, the four Companies have all looked at the available data and effectively said “meh”.

There are many examples of structures nominally containing large quantities of Oil or Gas, but if there’s little permeability, they won’t produce. Afren found this out the hard way in Kurdistan and it bankrupted the Company.

ChatGPT ‘experts’ will point to fraccing.

Yes, it has been used in thousands of fields across the World and millions of multi-stage Fracs have been performed in horizontal producers.

However, the oil in the NFB is very waxy.

Fraccing (in itself an expensive operation) involves pumping thousands of cubic meters of water (plus assorted chemicals & proppant) into the formation.

Such a volume of water would have the effect of substantially cooling down the reservoir in the vicinity of the Well, leading the oil to solidify and so blocking production.

Could the water be heated prior to pumping? Theoretically yes, but the technical and logistical challenges of doing this offshore would be enormous and extremely costly.

So after developing SL North & Central, I think that they will concentrate on near field developments that can be tied back to the SL FPSOs and help maintain plateau production rates before venturing further south.

BTW, Isobel cannot be tied back into the SL FPSOs, as it’s too far away. Remember, it’s a waxy crude, so trying to ensure that the oil remains liquid over anything more than around 10km in subsea flowlines would not realistically be feasible.

One poster claimed in another thread that I’m always being negative – which I found somewhat surprising considering my posting history on RKH.

It’s obvious that, in reality, that poster is miffed that I don’t agree with their ultra-optimistic claims on Isobel.

Now, I run drilling rigs for a living, so I’ve picked up a lot of Geology. But I’m not a trained Geologist.

However, we have at least two real Geologists (Nikb & Cammbo) on here and I welcome their comments on my thoughts.

So, why am I not gung-ho on Isobel (Part 1)?

So far four Companies (Premier, Harbour, Navitas and RKH) have all looked at the available data and effectively said “meh”.

On the Navitas/RKH websites / presentations, only the Northern and Central potential development plans are mentioned – nothing about Isobel.

In the recent NSAI report that RKH had produced about the reserves, there was nothing about the Southern area.

So that would indicate that Isobel is nowhere near the front of their thoughts when it comes to future work programs in the FI.

Financially, any partnership is as strong as its weakest link, and in this case that’s RKH.

We all know RKH are not cash rich, so they simply are not in a position to freely spend on anything other than the development.

As I outlined in an earlier post, I think they’ll go for FID on Phase 2 much sooner that 1st Oil, so RKH will need funds for that.

Otherwise we are looking at a gap of at least 12 months in the drilling program (which would cost $10’s Millions to demobilise the Rig & equipment and to subsequently remobilise) and a delay in adding the additional production.

In any case, RKH simply don’t have the funds required for anything other than potentially a single ‘ad-hoc’ exploration/appraisal well if there are issues on one of the Development Wells – this is the ‘back pocket’ Well I’ve posted about before.

Any ad hoc Well would be used to help firm up the nearby development possibilities (Hector(s), Casper(s), Ninky(s), Zebedee, Beverly(s), Chatham(s), Jayne(s) etc) which can directly be tied back to the SL FPSOs relatively quickly and cheaply.

There would be no point in drilling a Well on Isobel at this stage, as any potential development – which would have to be stand alone - is clearly at least a decade away.

Far better (from an NPV perspective) to confirm what is available to develop quicker and more cost-effectively.

Given what we know about other structures, it is clear that a substantial Exploration / Appraisal program (as many as 20 Wells) will be needed to define the true potential of the SL license prospects.

However, RKH simply won’t have the cash available to commit to financing their share of a program like this until at least a year after 1st oil – which would actually put that particular program commencing in early 2031 (at least a year after the end of drilling on SL Phase 2) once they’ve got all the long lead it

NN,

What on Earth are you going on about?

Did you even read my post?

I was saying why I think they’ll announce the FID for Phase 2 sooner rather than later!

Exactly where haven’t I been “correct on the commercial aspects”? Can you point me to the posts? I’ve never even forecasted a potential share price!

I try and keep the “jargon” to a minimum in my posts, but 30+ years in the industry means it will slip through occasionally. In any case, some things can only be described using “jargon” which would not be familiar to anyone without oil industry experience.

But if there’s anything that isn’t clear in what I’m saying, all you have to do is ask me to clarify and I’ll happily try and do so.

I was one of the first on this board to put Navitas / RKH being ready for the FID in the September / October time frame, and also explained why the Banks due diligence would take time (Thread “Bank due diligence” at 17:46 on 8th June) – which you have obviously taken on board, so you’re welcome.

As for “being in the negative camp”, like I said, this post was about how I think they’ll go to FID on Phase 2 sooner rather than later.

I also don’t see how my comment that “putting FID at 90% is being conservative” (post at 22:11hrs on the 27th July in the “Sealion FID now 90%” thread, since you obviously missed it) or earlier the same day in the FIG News thread, posting that “I am 99.9% confident that the financing will be forthcoming” puts me in the negative camp.

Or even earlier when I said “I’d argue that the NFB is already a new oil province”.

It’s obvious the real reason I’m upsetting you is because I’m not buying into your ramping efforts on Isobel with respect to the timing of an additional Well, or how it could be developed, or the time frame in which it may be developed.

I’ve been around more than long enough to know that definitive statements such as “when Field X comes on production” and “Field X is bigger than Field Y” before a Field has been appraised (and especially when the only Well so far didn’t even go through the whole payzone, they didn't get a full suite of E-Logging done and it wasn’t tested) aren’t worth the paper they are written on.

The examples of Hurricane and Afren (Kurdistan bankrupted the Company) spring to mind…

BTW, I also added 17k RHK shares to my holding last week – including selling all my Shell shares to make room in my ISA. Is that being negative?

I might sell some shares after FID is announced to recoup my original investment, but otherwise I’ve no intention of selling the remainder for several years.

Hi OS,

Oh, no - not for me! Chance would be a fine thing!

No, I was wondering when any Institutional Investors (Israeli or otherwise) would have to issue a TR-1.

My thought is that if any II had to issue a TR-1, it would be evidence that the big boys are coming and could well give an additional boost to the RKH share price.

Just thinking about it, having several of the high ups from Navitas going down to the FI just for the advertised meeting doesn't seem to make much sense, as they could easily have appeared by Teams etc link.

We know that Navitas have been trying to farm down their share in SL - which would need approval from the FIG - so could they have gone down to present that?

Alternatively, JHI are next door to SL and clearly don't have the funds themselves to drill any Wells, so they'd be an obvious target for Navitas to farm into. That would also need approval from the FIG, so could that be a reason for the visit?

Or both of the above?

They won't want a gap in the drilling program after phase 1, as the costs of keeping a Rig idle (and the loss of experienced personnel moving on) would mount very quickly if they did.

After 1st Oil there will be several more months work to complete the drilling of the phase 1 Wells, but that is not enough of a gap to be able to order the long lead consumables (Trees, Wellheads, flowlines, Casing, Tubing, Completion accessories) and get them down to the FI.

Current lead times are 12 - 15 months, plus, say, another 2 months to consolidate and freight down to the FI. They'll also want some leeway to cater for the drilling going much better than predicted, so allow another 3 months for that.

Presuming 1st oil is Q1 2028, that would mean ordering the LLI's Q3/4 2026.

Now, the Phase 2 Wells will all be 'cookie cutters' of Phase 1, so apart from finalising the bottom hole locations and directional plans (these can be changed very late on, if required, but are needed up front to work out how much Casing / Tubing etc is to be ordered), there isn't actually that much engineering work required.

Not my area of expertise, but I would be fairly confident that the same logic applies for the Trees and flowlines.

If they've got any sense, they'll have put options in their contracts with the major service suppliers to give them the option of ordering phase 2 materials & equipment at the same T's & C's as phase 1. They'll probably have to negotiate 'regret costs' in the (unlikely) event that SL turns into a real Dog and Phase 2 can't be justified.

Unfortunately the commonly used metrics w.r.t. price escalation don't really mean much in the oil industry (at least on the drilling side), so they'll have to do a market check to see what price changes (potentially down as well as up) would be applicable to the original contract costs.

In that respect, it is hugely advantageous for both Navitas and the Contractor to not have to go through the full ITT process again, as it would be very time consuming and costly for both parties. So it is in both their interests to negotiate reasonable price changes.

For Navitas, the cost of changing out an already established Service Company in the FI would be very expensive (plus the loss of people with SL experience) would also have to be taken into account and could justify agreeing to relatively large price increases.

Unfortunately the Navitas Legal Dept don't have a good reputation at the moment, so hopefully they will have learned by then and both parties can reach an agreement relatively quickly.

So taking all that into account, I can easily see the announcement of FID for Phase 2 being in late Q2 / early Q3 next year, but with good indications that they will go ahead coming somewhere in March - May.

Which raises the interesting point that, at that stage, Navitas should have the cash flow from Shenandoah to use for funding (or at least fund raising), but RKH won't.

With respect to the placing, if any Investor gets into TR-1 notification territory, when do they actually have to give notice?

Now - since they'd know if they have reached a limit?

Or when they get the proverbial share certificate?

How do the Warrants factor into this? If the warrants took them into TR-1 notification territory, presumably they'd only have to notify on exercising those warrants?