Hurricane Energy (HUR)

[Tinderboy]

Something needs to fall on their heads, perhaps a plan would be a start?


What is your evidence that they don't have a plan - they have after all been pretty clear on the overal plan for several years.

They may not yet have put forward a plan to deal with the failure of Warwick to produce as hoped, or with, as yet unproven, issues with WC. But it's clearly far too soon for either of those. Both will/would require significant detailed analysis of their data - some of which they may not yet have in the case of the EPS - and the planning. The worst thing they could do is rushout a half thought out "plan" to satisfy provide short term support to the SP, but fail to properly tackle the issues in a way that maximises future shareholder value.

PeterGray

The current plan seems to be on hold at the moment - Thats clearly obvious.
The Warwick experience to date has brought more questions than answers to the table, this is still a loose end.
Retrospectively thinking a plan (B) (worst case) would have been a good idea, we now have a drill rig that may or may not utilised at a very high cost.
like may others im disappointed at the recent fall in the HUR SP, im sure the BOD are as well, perhaps a few re-assuring interviews would go a long way, maybe its not their stye....

[Nimrod103]

Nimrod,

I tend to agree with your reasoning for flowing the 6 well, but I'm not sure I agree that if water appears it's game over. That's certainly one possiblity, but if the company is correct in viewing the water in 7z as being perched, why should 6 not start producing perched water too as it produces from a wider area? That could/would impact negatively on estimates of potential resources as dspp has suggested, but it would not necessarily mean game over, there's considerable potential resource there, that could still reduce and yet leave a commercial development. Of course if both wells start producing water in large quantities and the final conclusion is that it's direct from the aquifer that would be bad news indeed. That is not where we are at the moment.

Just to clarify. I find the perched water hypothesis unconvincing, and I think it is more likely they are pulling water from the field wide aquifer. I take this view because I think the oil in place is lower than they predict, and the vertical permeability is much higher than they have assumed. Field economics will be constrained by how much water they can handle before the whole thing becomes non-viable.

[dspp]

Nimrod,

I tend to agree with your reasoning for flowing the 6 well, but I'm not sure I agree that if water appears it's game over. That's certainly one possiblity, but if the company is correct in viewing the water in 7z as being perched, why should 6 not start producing perched water too as it produces from a wider area? That could/would impact negatively on estimates of potential resources as dspp has suggested, but it would not necessarily mean game over, there's considerable potential resource there, that could still reduce and yet leave a commercial development. Of course if both wells start producing water in large quantities and the final conclusion is that it's direct from the aquifer that would be bad news indeed. That is not where we are at the moment.

Just to clarify. I find the perched water hypothesis unconvincing, and I think it is more likely they are pulling water from the field wide aquifer. I take this view because I think the oil in place is lower than they predict, and the vertical permeability is much higher than they have assumed. Field economics will be constrained by how much water they can handle before the whole thing becomes non-viable.

Nimrod,

I don't think I will be winning any drawing awards on the strength of this.

Since the very beginning of this discussion in 2016 you have put forwards this most valid concern about where is the real OWC. I alluded to it in my set of slides a few weeks ago with a comment about the jellyfish model. In this vein below I have extended the slide I put up yesterday to add further complexity that follows logically from the hypothesised charge pathway, and which one would expect to occur if there are indeed laterally extensive areas of perched water. When one further adds into the mix the observed reduction in effective fracture connectivity/permeability with depth then what one could have is a whole set of OWCs corresponding to either stranded oil (in the sense that it never got to flow upwards to join the main oil volume), or perched water (in the sense that it never got to be expelled downwards to join the main water aquifer). In a porous reservoir this all shows up in the oil/water saturation curve, but in Rona the rock is to all intents and purposes utterly impermeable. For both communication and storage all there is is poroperm in the fractures at all the various scales. Anyway the outcome could be that HUR's initial hypothesis of a deep OWC at c. 1600m is correct but irrelevant. Alternatively that 1600m contact that they inferred from pressure data is misleading and represents stranded oil (that I think would fit your longstanding concern). I grant you that there will be all sorts of weird pressure profiles going on inside the rather complex jellyfish that I have sketched out below, but I don't think the data is sufficient to be sure that one can discount this on the basis of the pressure data.

So far HUR are holding to their view that your more pessimistic model is wrong. They are doing so because they are stating that the temperature and pressure data, and lack of rate-dependency all show otherwise. Since they are not revealing the data itself we are left with the unpalatable choice of believing or not-believing their interpretation. I do hope that they would have the cojones to promptly admit they are wrong if indeed evidence builds otherwise. I also hope that the properly and dispassionately set out the evidence at the CMD, and do not filter the observed results to favour their preferred version. Similarly I hope that there are people present with the understanding and motivation and who are given the opportunity to critically challenge and question things, though given that they will be sell-side analysts that is perhaps too much to hope for.

Regarding whether to be testing the 6 or the 7z well at this point, without knowing the details of the test programme to date, the results obtained, and the decision points passed, I don't think either of us can do more than hold our personal opinions on the matter. You may well be more right than I am.

I am rather busy in my day job and so have not had time to wade through back reports. Can anyone give me the depths of the horizontals in the 6-well and the 7z-well ? (And, out of interest what are the casing shoe depths and the ESP setting depths and whether this is SL or barefoot. I know someone (?aduk?) gave me the last once but I really can't find that in a hurry and it would be good to annotate these sketches properly.)

regards, dspp

[dspp]

Volume of latest AM offtake with many thanks to Amaja et al in the shipwatching community:


Leading to updated cumulative oil:


Random comments:
1. Those who dismiss the implications of water production in fractured reservoirs have probably never had responsibility for dealing with it.
2. The updated sketch of perched water in my 18 01 20 post is in fact the more optimistic version that HUR are proposing. If you want the pessimistic version then read Nimrod's posts carefully. Both cases are considerably worse than either as proposed by HUR or as set out in the CPR back at that time.
3. The shareprice is where it is because of MrMarket's opinion regarding the data, which in turn is because of the outcomes in the last 12-months from the LinWar wells and the Lancaster production, and the implications of all that.
4. I have received no responses regarding depth of horizontals in Lancaster producers. Hurricoms have been unable to propose public domain references except for one slide in a presentation that does not have the depths.
5. Possibly of no relevance : I still hold with no movement.

regards, dspp

[Biffadog]

dspp,

Keep up the good work.....there's a good chap.

Biffadog.

[FabianBjornseth]

1. Those who dismiss the implications of water production in fractured reservoirs have probably never had responsibility for dealing with it.

To take it a step further - if someone believes the water cut development in 7Z and the 2019 exploration results have not significantly altered the probability of success of the EPS, they should be ecstatic about the recent share price movement (and appreciate the mean forum posters discussing possible red flags). If the PoS is unchanged, the market has clearly overreacted, and there's a great opportunity to capitalize on that.

[ammonite]

dspp
"Those who dismiss the implications of water production in fractured reservoirs have probably never had responsibility for dealing with it."

It would help those judging the validity of your efforts if you could tell us the extent of your own experience in fractured basement.

[dspp]

dspp
"Those who dismiss the implications of water production in fractured reservoirs have probably never had responsibility for dealing with it."

It would help those judging the validity of your efforts if you could tell us the extent of your own experience in fractured basement.

1. In this context I don't mind too much what others judge about me. What matters to me is whether my thoughts are exploring the reasonable pathways in a reasonable manner, in the eyes of a reasonable peer. They may also be right, or not, but that is for mother nature to reveal in due course.

2. Water does not know it is in basement or carbonate or clastic. In the Rona res eng subsurface what it knows is that it is in a very low (negligible) porosity environment, with some permeable (connected) fracture pathways, and some poroperm. Modelling flow in fracture networks is not easy. Controlling it is also not easy. Lessons that can be learnt from any other reservoir that are fractured and with low/negligible (absolute or relative) porosity and with water influx are relevant.

3. Similarly in the Rona economics the water does not care whether it came in sideways or upwards, through basement or through whatever. What matters is how much of it and how much it costs to deal with. By building more wells. Building more facilities. Getting lower recovery %. Etc. Lessons that can be learnt from any other reservoir that are fractured and with low/negligible porosity and water influx are relevant. So too are lessons from high porosity reservoirs, (at least once the water is into the wellbore, because from then on it is a well/facility problem and cost).

4. It really wouldn't matter if I'd never encountered an oilfield before, provided that I could learn from the experiences of others. But I've worked on examples of the above in a variety of relevant roles. And discussed many others with friends/colleagues over the years. Plus run companies, i.e. board member with responsibilities to external shareholders. So I have some understanding of both technical and non-technical aspects that are in-play here, and I continue to learn - every day is a school day.

5. My late-2019 analysis reduces the Lancaster volumes by a third to account for HUR's own explanation of perched water in fractures producing through one well. It is not an explanation I had seen used in practice before, but I am prepared to give them the benefit of the doubt as they have access to the raw data, and aspects of what they said are plausible. If you were to prefer the explanation (and longstanding concern) of (say) Nimrod hereabouts (who I suspect has been somewhat closer to the relevant action & people than I have ....) which is that the field-wide OWC is significantly higher than HUR suggest, then it would probably be more appropriate to dial in a two thirds reduction. All this affects volumetrics, RF%, development cost, opex, complexity, risk, reserves, economics, partner attractiveness, shovel-ready-timescale or not. Literally the whole shebang. It is exactly why the EPS was designed and is necessary.

6. An EPS succeeds if it yields sufficient data to allow a suitable FDP to be implemented, or equally if it allows an FDP to be discarded as being unsuitable. The latter outcome is not failure - for sure it would be unfortunate, but it would be far better than mistakenly committing to a full scale development and then coming an expensive cropper.

7. There are a great many other additional factors that affect shareprice.

8. I can see that other commentators have different skills, experiences, competences, concerns, and motivations. We are all humans.

9. The CMD will be interesting. At least it ought to be.

regards, dspp

[pijoe1212]

i am currently find i am being questioned about being dspp and/ or being nimrod. i am neither. this is a statement of fact.

i have reached my views about the Hurricane investment case seperatly. i have published those views on shareprohets.

i have back tested my views on the investment case over many months (on Geo matters with a prior CPR author (at director level)) and with several (3 number) CEO's of oil companys who would have no interest (far from it!) in Hur failing, and also a hedge fund manager who does not know why a compressor train is great for LNG but can not be used to increase oil production rates (lol..many ..lol!) but understands the markets far better than the rest of us (imv).

i remain of the view that the company needs to convert the expectation that water is perched rather than underlying to a statement of fact. unless and until this can occur (and frankly i can not see this being soon as flow&time is required) the concern will remain. as i have articulated previously the value of the company is a measure of two parts - the NPV of the EPS (know and committed production) and the opportunity value of the further resource. the value of the EPS (committed 6 yr @ $60 oil) exceeds the current EV - even at the current share price. there remains an "opportunity" value on the 2C in the current share price.

if the "watery" well is watering out - either by perched water or aquifer draw- or in fact whatever, that puts a question against the EPS NPV and more importantly any 2C valuation on the resource. do not forget 2C can be "bought" (valued) on Aim at cents / bl. then i see the [expletive deleted] hitting the fan - it has not yet IMV on that outcome.

i do not believe the company has been anything other than truthful - it has stated its opinions and view. unfortunately to holders that does not make it a fact on the water source.

i wish all well
pete

[pijoe1212]

i am currently find i am being questioned about being dspp and/ or being nimrod. i am neither. this is a statement of fact.

i have reached my views about the Hurricane investment case seperatly. i have published those views on shareprohets.

i have back tested my views on the investment case over many months (on Geo matters with a prior CPR author (at director level)) and with several (3 number) CEO's of oil companys who would have no interest (far from it!) in Hur failing, and also a hedge fund manager who does not know why a compressor train is great for LNG but can not be used to increase oil production rates (lol..many ..lol!) but understands the markets far better than the rest of us (imv).

i remain of the view that the company needs to convert the expectation that water is perched rather than underlying to a statement of fact. unless and until this can occur (and frankly i can not see this being soon as flow&time is required) the concern will remain. as i have articulated previously the value of the company is a measure of two parts - the NPV of the EPS (know and committed production) and the opportunity value of the further resource. the value of the EPS (committed 6 yr @ $60 oil) exceeds the current EV - even at the current share price. there remains an "opportunity" value on the 2C in the current share price.

if the "watery" well is watering out - either by perched water or aquifer draw- or in fact whatever, that puts a question against the EPS NPV and more importantly any 2C valuation on the resource. do not forget 2C can be "bought" (valued) on Aim at cents / bl. then i see the Manure hitting the fan - it has not yet IMV on that outcome.

i do not believe the company has been anything other than truthful - it has stated its opinions and view. unfortunately to holders that does not make it a fact on the water source.

i wish all well
pete

a sentence was deleted - my fault- IT ludite. after "do not forget 2C can be "bought" (valued) on Aim at cents / bl" read - also "i can see hur 2C being viewed likewise - then i see the Manure hitting the fan - it is not yet on that outcome"

[thehaggistrap]

Stonking RNS released by HUR this morning.
Of course some risk remains (as does massive potential reward).
However I remain entirely confident in the boards integrity, honesty and ability to deliver.

I don't expect humble pie - however some of the previous posts appear unnecessarily pessimistic?

[dspp]

For those who haven't seen it yet:

https://ir.q4europe.com/Solutions/Hurri ... d=14585604

RNS Number : 2315B Hurricane Energy PLC 29 January 2020

Trading and Operational Update

Hurricane Energy plc, the UK based oil and gas company focused on hydrocarbon resources in naturally fractured basement reservoirs, provides its first quarterly production update, and a trading and operational update ahead of its results for the year ended 31 December 2019, due to be announced on 19 March 2020. This information is unaudited and subject to further review.

Highlights

· Continued strong production performance from the Lancaster Early Production System ("Lancaster EPS")

o Well productivity above pre-start up expectations

o Facility availability above 90%

· Commencing Lancaster EPS quarterly production reporting

o Q3 2019: 15,400 barrels of oil per day - significantly above guidance of 9,000 barrels of oil per day on good facilities availability

o Q4 2019: 11,800 barrels of oil per day - exceeding updated guidance of 11,000 barrels of oil per day despite ongoing commissioning activities and commencement of individual well tests

· FY2019 Production and oil sales

o Production: 3.0 million barrels of oil (average of 12,900 barrels of oil per day from introduction of hydrocarbons on 11 May 2019)

o Oil sales: 2.9 million barrels of oil across seven cargoes

· Financials for the year ended 31 December 2019

o Revenue: $170 million

o Year-end unrestricted cash: $157 million

o Year-end net payables balance: $25 million

· 2020 update

o Eighth lifting successfully completed on 22 January 2020

o Individual well flow test on 205/21a-6 well ("6 Well") due to complete before month-end, following which two well production is expected to resume at 20,000 barrels of oil per day (subject to facilities availability)

o Additional Lancaster production well being considered


Lancaster EPS Production Update

Having completed two full calendar quarters of production, Hurricane now plans to provide quarterly production reports going forward. Updates will be made in the first month of each calendar quarter. The first such update is provided below. ........... etc

(dspp)

[PeterGray]

This clearly doesn't answer all concerns about wc - and it may well still prove to be the case that the full results of the EPS suggest lower recoverables and/or more cost than some earlier hopes. However, I think it's impossible not to conclude that significant water influx has not occurred from the 6 well during the last month's single well test. I do not see that as being compatible with what's been said, so I assume it has remained largely dry. The results of the next month's combined flow testing will be interesting, while we wait for the fuller analysis at the CMD. It should be possible from tanker movements to see if they achieve something close to the 20k bopd being flagged. I wouldn't expect another RNS before either the CMD or they have other news on 2020 drilling plans to release.

[dspp]

This clearly doesn't answer all concerns about wc - and it may well still prove to be the case that the full results of the EPS suggest lower recoverables and/or more cost than some earlier hopes. However, I think it's impossible not to conclude that significant water influx has not occurred from the 6 well during the last month's single well test. I do not see that as being compatible with what's been said, so I assume it has remained largely dry. The results of the next month's combined flow testing will be interesting, while we wait for the fuller analysis at the CMD. It should be possible from tanker movements to see if they achieve something close to the 20k bopd being flagged. I wouldn't expect another RNS before either the CMD or they have other news on 2020 drilling plans to release.

You're darn right they don't directly address the concerns. It feels rather like getting a snog from an ex - you're not quite sure what might come next, but at least you know you are still on the Xmas card list.

regards, dspp

[thehaggistrap]

This clearly doesn't answer all concerns about wc - and it may well still prove to be the case that the full results of the EPS suggest lower recoverables and/or more cost than some earlier hopes. However, I think it's impossible not to conclude that significant water influx has not occurred from the 6 well during the last month's single well test. I do not see that as being compatible with what's been said, so I assume it has remained largely dry. The results of the next month's combined flow testing will be interesting, while we wait for the fuller analysis at the CMD. It should be possible from tanker movements to see if they achieve something close to the 20k bopd being flagged. I wouldn't expect another RNS before either the CMD or they have other news on 2020 drilling plans to release.

You're darn right they don't directly address the concerns. It feels rather like getting a snog from an ex - you're not quite sure what might come next, but at least you know you are still on the Xmas card list.

regards, dspp

Indeed : they need data from the 7Z well (scheduled to flow from end of January as per longer term plan) to answer the "concerns" you ask.

Patience.

[PeterGray]

This clearly doesn't answer all concerns about wc - and it may well still prove to be the case that the full results of the EPS suggest lower recoverables and/or more cost than some earlier hopes. However, I think it's impossible not to conclude that significant water influx has not occurred from the 6 well during the last month's single well test. I do not see that as being compatible with what's been said, so I assume it has remained largely dry. The results of the next month's combined flow testing will be interesting, while we wait for the fuller analysis at the CMD. It should be possible from tanker movements to see if they achieve something close to the 20k bopd being flagged. I wouldn't expect another RNS before either the CMD or they have other news on 2020 drilling plans to release.

You're darn right they don't directly address the concerns. It feels rather like getting a snog from an ex - you're not quite sure what might come next, but at least you know you are still on the Xmas card list.

regards, dspp

Being a little hard, aren't you dspp!

What else were they going to say. I think we can be pretty sure from what they've said that the 6 well hasn't started producing significant water, and they haven't been flowing the 7z for the last month so there's not much else they can say other than effectively restating what they said in Dec. We were always going to have to wait for the CMD for a clearer view, but this RNS does have value in that it makes clear that the company still sees nothing to challenge their model. Sure that may change once they start flowing both wells, but that's what the EPS is for.

[AndersonSW]

You're darn right they don't directly address the concerns. It feels rather like getting a snog from an ex - you're not quite sure what might come next, but at least you know you are still on the Xmas card list.

regards, dspp

I think it‘s more akin to a letter from an ex reminding you yet again that’s it over - but you just won’t listen because you don’t want to hear it.

[FabianBjornseth]

My bold:

Hurricane’s 2020 work programme has been amended as a result of the terms of the P1368 licence extension, which will include the drilling of one or more appraisal wells on Lincoln, and the terms of the 205/26b-14 (Lincoln Crestal) well suspension approval.

Maybe I'm reading too much into this, but the previous RNS discussed the tie-back of a Lincoln well to Aoka Mizu, while here we have a more vague outlook. It will be interesting to see the joint venture's next move. So far we only know the test rates 205/26b-14, and that the PI was 1/10th of the Lancaster horizontals (but still quite good and likely commercial).

[dspp]

Something that occurred to me last night, but I did not have a chance to check until just now, is that RNS did not include:
- a repeated 'confidence' that the source of the water is perched vs aquifer;
- a repeated statement that it is not rate dependent;
- a repeated statement that the evidence signature (temperature, pressure response, etc) supports perched vs aquifer;

Maybe I'm being too much of a kremlinologist, but it does seem odd to me that they wouldn't have taken the opportunity to restate those points, if the evidence continues to support them. Maybe the evidence no longer tends to support those points.

When I have a moment I will review the RNS (and the impending next release of OGA data) to see if any more can be gleaned. I'm a bit busy though.

regards, dspp

[tournesol]

DSPP

"Something that occurred to me last night, but I did not have a chance to check until just now, is that RNS did not include:
- a repeated 'confidence' that the source of the water is perched vs aquifer;
- a repeated statement that it is not rate dependent;
- a repeated statement that the evidence signature (temperature, pressure response, etc) supports perched vs aquifer;

Maybe I'm being too much of a kremlinologist, but it does seem odd to me that they wouldn't have taken the opportunity to restate those points, if the evidence continues to support them. Maybe the evidence no longer tends to support those points."


But they have already said all the stuff you mention and said it quite recently. And they have also said that if anything happens which falls outside the guidance they have previously given, they will report it without delay. If they said it all again people would be saying "the lady doth protest too much".

I think you are being much far too much of a kremlinologist. Trice et al are not hiding in a secret bunker, conspiring and plotting to undo their enemies. They are exceptionally open and forthright. Compare/contrast the material they have published in scientific and technical journals, in presentations and on their website with the equivalent material put out by any of their peer group. There is no comparison. Other companies are Trappist by comparison.

If there was an identified problem with acquifer water being co-mingled with production, management would have said so. That would fall far outside prior guidance and be price sensitive and they would have a legal obligation to update the market.

Hur is my largest position by a significant margin. At 50% down I'm bleeding but I'm holding.