Stocks I like in O&G

[thebuffoon]

My comments weren't aimed at anyone in particular Nigel.

I'm sure we all know about the oil price collapse, and its logical to assume that funding will not be as easy as it was when everybody was discussing peak oil, and the OP was going to the moon, but HUR have raised £70m recently. That's not small potatoes, why would those investors stump up so much?

Did you invest at 11p in the spring? You'd be sitting pretty now if you had. Just one example of how this board could thrive. An open mind and a willingness to think a little deeper or perhaps outside ones current box.

Buffy

[emptyend]

Hello Buffy,

Interesting post. Just a small addition or to in relation to your mention of me and SOCO:
1. There were plenty of sceptics back in 1999/2000 and no shortage of critics.
2. When you say I've "ridden it all the way down", it should be noted that nearly 20% of its peak value has been distributed to shareholders over the last 3 years or so - and the pattern of distributions fitted very well with my personal needs at the time! It should also be noted that the central error was a failure to foresee the extent of the fall in the oil price* (along with almost everyone else) and that many other companies would have been effectively wiped out. So - sure - it was a big error - but not one that was the result of an especially poor company-specific decision (though of course it has underperformed the sector this year so far, with the oil price recovery)

cheers
ee

*I'd put that event in the same probability category as Brexit and Trump winning....and I got both those right (and made a bit of money backing them )

[emptyend]

but HUR have raised £70m recently. That's not small potatoes, why would those investors stump up so much?

I'd observe, here, that investors don't always get it right! Indeed some good prospects struggle for funding whilst others seem to get funding surprisingly easily...BUT (and this is the important point!) there is no great correlation between the ability to get funding and the success of the project!

It would be invidious of me to point to too many specific examples but I'm sure we can all cast our mind back a few years and remember examples of "great white hopes" funding projects in places like Syria, Sudan, Ukraine, Kenya, Iraq, Greenland, Barents Sea, Alaska etc ......

In hindsight one can see that billions have been wasted on uneconomic holes in the ground (though often due to politics and war as much as geology). Equally one can remember (for example) that Cairn bought into their Indian fields as a $4mn cast-off from Shell and that Cove https://en.wikipedia.org/wiki/Cove_Energy_plcturned a shell company into £1.2bn after four equity raises totalling £182mn in 18 months.

Which category is HUR in? I don't know. It'll depend on the geology, well drilling and the oil price but (having watched SOCO drill expensive wells on basement prospects and have only limited success) I'd personally be quite wary of basement prospects. It is extremely easy to miss the part of the reservoir that is sufficiently-fractured to yield commercial and enduring flow-rates. It was once put to me that it is a bit like trying to hit a motorway in 3D, when that motorway is surrounded by tiny sideroads.......it is easy to hit oil in the "sideroads" - but the project only works economically if you hit the "motorway".

rgds
ee

[thebuffoon]

Hi ee,

Sorry, I really should have said 'remained invested'. I just meant to illustrate that people see things differently, and accordingly have different strategies. As you say, you have received a decent income, and staying in Soco certainly wasn't going to destroy 90% of the value of your portfoilio, as happened to two colleagues who switched to small non O&G companies and listened to some less than seasoned investors on ADVFN.

I wonder how many listened to you when you repeatedly warned in advance about the impending banking crisis.

I must confess, when I made a seriously large sum of money in O&G I lost perspective on my abilities as an investor, and it took me some time, and a healthy reduction in the value of my portfoilio to realise that the rising tide did most of the work. That, and a stupidly high amount of leverage. How else could I start with a pot that wouldn't have bought a bottom of the range Ford Escort and at its peak was enough to buy a couple of Bugatti Veyrons? I got my come uppance of course. At it's nadir I was 82% down.

I've done well since then by thinking about myself as an investor, and what suits my personality. By ditching the overconfidence, and listening to anyone and everyone who expresses a sincere opinion and, by far the most valuable, keeping a totally open mind, I have recovered well.

I'd love this board to become what the TMF O&G board used to be. I realise the halcyon days won't be repeated for quite some time, but we are certainly in an environment where the oil price is much more likely to be to the upside, and may well positively surprise.

Hurricane anyone?

Buffy

[Rhomboid1]

It's great to see this board open up into wider debate, With respect to Hurricane I'm attracted by the path trodden from way back pre IPO, Robert Trice had a view on geology WoS and bit by bit his view is being validated by the drill bit and the successive rounds of fundraising, Kerogen being the latest and most critical.

The only real remaining questions for me kind of cancel each other out Q1 What will be the long term reservoir performance? Q2 What ultimately is the size of resource of the Greater Lancaster Area?

My money is on funding being available to get to early production, as referenced by Hurricane , and the other issues being resolved in very positive fashion. I have 15% of my portfolio here to give an idea of risk weighting FWIW.

Cheers all

[thebuffoon]

Thanks for that Rhomboid. I am considering taking a position, and have been thinking about an exit strategy.

I held on for a little too long with Soco. I'm sure there's money to be made with HUR.; I just need to do a little more reading.

Buffy

[HURfan]

I first invested in Dragon back in 2003 and remained until the end thus I thought another Dragon type stock could be found every few years. I found GKP at 11p but foolishly bought more on the way up being convinced they would be taken out by one of the big boys so did not sell and watched it run down to 5p.

Along the way I listened to others and diversified [unwisely as it turned out] into XEL and SIA amongst others thereby reducing my Dragon holding. However I found Hurricane two years ago, researched and believed the good Dr T, but bought in too soon. Bought more, reducing my average to 20p and now have a substantial holding. Dr T has used the words "significantly higher" recently and I believe he has cracked it with the greater Lancaster area holding in excess of 500,000 barrels perhaps one billion plus. I'm confident HUR will come good and am pleased we have the might of Kerogen backing us. They would not have put more money in unless they were confident. Funding should therefore not be an issue here and we have the probability of being taken out once the CPR is made known. It may be a newish technology but it has been proven elsewhere.

HURfan

[JonnyT]

Buffy, whilst I'm very positive on SOU over the next year or two I'll likely take some off the table post stimulation results if the market reacts kindly as I'm confident there will be good opportunities to buy back cheaper over the following 2 to 3 months of zero activity.

[petroleum1]

I'd personally be quite wary of basement prospects. It is extremely easy to miss the part of the reservoir that is sufficiently-fractured to yield commercial and enduring flow-rates. It was once put to me that it is a bit like trying to hit a motorway in 3D, when that motorway is surrounded by tiny sideroads.......it is easy to hit oil in the "sideroads" - but the project only works economically if you hit the "motorway".

For the above reason I steered away from SOCO some 10 years away when they were operating in Vietnam. However nowadays fracking has advanced a long way. It may not have been useful for deep reservoir in Vietnam but it could be useful in HUR shallow reservoir in the North Sea.

No position in HUR or SOCO
Rgds

[JonnyT]

That's a new one on me, I've never heard of anyone fracking basement rocks. Low permeability sandstones and shales yes but basement rocks?

Surely given the oils already in natural fractures and has flowed 17,000 bopd this would also be pointless?

[petroleum1]

JonnyT
Surely some of these fractures are cemented over a long period of time. You can see these cemented fracture in middle east large reservoirs. Does the outcrop show this? But then the outcrop does not reflect 100% what actually is in the reservoir. Do not forget the environmental effect in an offshore situation.

[petroleum1]

JonnyT
I have always thought that fracking takes place when the overburden pressure becomes higher than the tensile stress of the rock irrespective of whether it is shale, sandstone or limestone. This tensile stress can be measured in the lab on a sample of basement rock.

[JonnyT]

Whilst that is true, I'm still unaware of any case where fracking of basement rock has been deliberately carried out to enhance hydrocarbon flow.

[Rhomboid1]

Further news from Hurricane yesterday;

http://www.investegate.co.uk/hurricane- ... 29546012P/

https://www.hurricaneenergy.com/Operati ... tProspect/

""The Halifax prospect is an extremely exciting opportunity for the Company and a logical target after this year's drilling success at Lancaster. Our exploration objective is to demonstrate that Halifax is analogous to Lancaster in that the reservoir is highly fractured and that a significant hydrocarbon column is present outside of structural closure. If we are successful in this aim, then we believe it will be a significant step in establishing the true extent of the Greater Lancaster Area. This would not only be tremendous news for the Company but also for the UK's oil and gas Industry."

I'm of the belief that what is emerging here is a Giant field, obviously challenges remain and some are very complex but the size of the prize potentially on offer makes a compelling (IMHO)case for me retaining my overweight position.

Other views welcome of course..

[HURfan]

I have to say that recently all items of news from Hurricane have been overwhelming. The weather has been kind WOS during the past week, so I expect the Lincoln drill to be completed by the end of this week. I believe the company factored in up to an additional 15 days for this drill.

It very much looks like the good Dr T may have hit the jackpot again with the licence to drill at Halifax which could turn out bigger than Lancaster.

It's like waiting for Christmas again: I haven't been so excited for years. I am already much overweight here.

[Carcosa]

In the last round of funding for Hurricane (20 October) Crystal Amber Fund were awarded three year warrants to subscribe for up to 23.3 million shares at 20p per share. They valued these warrants in their annual report (Page 42) at £1.56m or ~7p/share. Hurricane currently represents around ~35% of their total NAV (and trades 5% below NAV). It therefore occurs to me that there is potential for an investor who wants to be invested in Hurricane, but is risk averse, buying a dividend paying shares in Crystal Amber (CRS) may be an option???

Carcosa

[Rhomboid1]

Hi Carcosa

I've looked at CA before , they have an esoteric list of major holdings;

http://crystalamber.com/about/majorholdings

I can see attraction in many of them but it is very much as you suggest a matter of risk tolerance but it'd be a better alternative to some I'm sure

Cheers