Hurricane Energy (HUR)

[dspp]

The knee in the wireline pressure data (or MWD) indicated OWC / ODT / FWC depending on resolution and definition. Provided they drilled below the contact which appears to be the case.

(Given the known DST / EWT that has already taken place and which gives a heads-up as to produceability what's your view ? Mine is smiling )

(fractured reservoirs are a £$$%^ in producing terms I agree - been there and know the issues - but they don't hugely affect OWC / FWC measurement in gross terms; and I have seen nothing to indicate that they do not have depth/pressure data)

regards, dspp

[Nimrod103]

The knee in the wireline pressure data (or MWD) indicated OWC / ODT / FWC depending on resolution and definition. Provided they drilled below the contact which appears to be the case.

(Given the known DST / EWT that has already taken place and which gives a heads-up as to produceability what's your view ? Mine is smiling )

(fractured reservoirs are a £$$%^ in producing terms I agree - been there and know the issues - but they don't hugely affect OWC / FWC measurement in gross terms; and I have seen nothing to indicate that they do not have depth/pressure data)

regards, dspp

I don't quite understand what you have written. Have they got MDT pressures in any of their wells? And I meant recovery factor not producibility. Fractured reservoirs often flow well to begin with.

[dspp]

They have not given details about what they ran in the well. Until they do give details we have to take their reported OWC at face value. At least I am.

In other wells they had RFT/MDT data. See https://www.hurricaneenergy.com/~/media ... er2013.pdf .

(Yes I know that early production rates from fractured reservoirs can be misleading.)

regards, dspp

[PeterGray]

Nimrod,

Agreed, the big issue remains recovery - flow, recovery rates etc. They have managed to get realistic flow rates on Lancaster, and the EPS will produce a lot more data on that once it happens. The absence of a successful DST doesn't stop them identifying oil at Halifax, but it does leave wide open the question of recoverability from the field - which is no doubt why they are already talking about reentering - they need to know.

Clearly there is a lot of oil there. And I suspect someone will ultimately extract a fair amount, but I'm not that surprised by the limited price response to the Halifax news. HUR have had loads of OIP for sometime. This would appear to increase it a fair bit, but the big issue - actual producability is yet to be answered - it doesn't matter how much OIP they can show till they solve that one.

And to be fair to HUR management they are clearly perfectly aware of that - far more so than many posting on ADVFN etc - the EPS is a critical next step. But realistically, if the field is as big as they suggest, in fractured basement, even that is only going to give a clear picture of part of the field. It will take years of appraisal and development to get a clear picture on what can actually be recovered.

Peter

[dspp]

I think the other factors affecting price are -

a) CA selling on rises because they are choosing to keep the % of their portfolio exposed to HUR within whatever limit (they choose internally)
b) the large & low priced options that CA and Kerogen have
c) the impending finance requirement for an EPS (say £450m vs mkt cap of say £600m in rough numbers from memory)

- all of which must come to pass before an EPS is plugged in and producing in 18m-24m, at which point HUR ought to become cash-generative and also generating reservoir data. So it is about 2-3 years before OIP can be booked as economically recoverable reserves.

regards, dspp

[adoubleuk]

dspp,

It's absolutely ages since I've logged in here. Normally I correspond on LSE: you may recognise my pseudo from there. But someone else there recommended a post here, so here I am!

And happy to read your stuff, from a fellow oilfield professional.

Love the way you describe the bit in the RNS regarding the DST as a 'non-explanation'. Absolutely right. I've been keeping away from that for the last 24 hours, but am going to shamelessly 'lift' the phrase, and put it on lse, but giving you credit.

I think I may drop in here more often, now. Good to hear another voice not exactly 'crying in the wilderness' but trying to make himself heard against the white noise coming from self-proclaimed 'experts' who in fact know nothing.

May the Force be with you

[dspp]

hi aduk,
There are quite a few oilfield types, and serious oilpatch investors, who are still about here. All welcome. As are all energy sector investors of whatever persuasion - there are many paths to heaven. Anyway I've just flown back in from your part of the world to mine so must get back to work.
regards,
dspp

[Nimrod103]

They have not given details about what they ran in the well. Until they do give details we have to take their reported OWC at face value. At least I am.

In other wells they had RFT/MDT data. See https://www.hurricaneenergy.com/~/media ... er2013.pdf .

(Yes I know that early production rates from fractured reservoirs can be misleading.)

regards, dspp

I read the CPR a couple of years back, it left too many uncertainties inadequately evaluated, and Hurricane have not presented answers to them, in my view. There is no MDT pressure data, so contacts are based on limited DST and MDT oil sampling. But the main issue, in my view, relates to porosity - how much oil is really in place, and how much can be economically recovered. The CPR STOIIP calculation is very model driven. Assume a slightly different model, and the STOIIP could be markedly different.
A caveat to my view is that I tend to be very cautious in looking at E&P companies, because in my view, the difference between commerciality and non commerciality can depend on details of the data which only the management and their friends usually have access to. It puts independent investors at a distinct disadvantage.

[dspp]

Nimrod,
In general I too am extremely cautious on E&P minnows. It wasn't until the last well came in that I took a position on this one & that is my first exploration punt for many many years. I will read back through notes etc to look for pressure data, though the next iteration of the CPR (due v soon) should feature that. It is hard to get away from models in E&P, and fractured reservoirs are no exception to that, so they either have to be accepted at some point or a box of opportunities put away.
regards,
dspp

[Nimrod103]

Nimrod,
In general I too am extremely cautious on E&P minnows. It wasn't until the last well came in that I took a position on this one & that is my first exploration punt for many many years. I will read back through notes etc to look for pressure data, though the next iteration of the CPR (due v soon) should feature that. It is hard to get away from models in E&P, and fractured reservoirs are no exception to that, so they either have to be accepted at some point or a box of opportunities put away.
regards,
dspp

Will Lancaster perform better and more predictably than Taq Taq?

[PeterGray]

Who can say, but they seem to be tackling the issue the right way, with an EPS.

[Nimrod103]

Who can say, but they seem to be tackling the issue the right way, with an EPS.

What will an EPS tell you about the STOOIP and recovery factor?

[PeterGray]

It will tell you how the sections of Lancaster penetrated by the two wells involved behave over a multi year period. And give them a much clearer idea of how the reservoir in that area behaves. It should also help them improve their modelling.

Surely, significant uncertainty about STOOIP and most importantly recovery over the rest of the GLA will remain, I wouldn't argue otherwise, but the EPS will provide a lot of data, and cash flow if successful, which will give a much sounder basis for making predictions about the rest of the area.

There isn't really any other sensible way to approach trying to exploit the resource that I can see.

Peter

[Nimrod103]

It will tell you how the sections of Lancaster penetrated by the two wells involved behave over a multi year period. And give them a much clearer idea of how the reservoir in that area behaves. It should also help them improve their modelling.

Surely, significant uncertainty about STOOIP and most importantly recovery over the rest of the GLA will remain, I wouldn't argue otherwise, but the EPS will provide a lot of data, and cash flow if successful, which will give a much sounder basis for making predictions about the rest of the area.

There isn't really any other sensible way to approach trying to exploit the resource that I can see.

Peter

I agree that if the EPT wells cone gas and/or water, it will tell you it was time to go home. But if they don't, I don't see how the short production history
will give an indication of the reserve on which to build a full development case.
Provided the EPT makes money, it would probably be worthwhile just to keep it running and take the profit. But it depends entirely on the costs of a rig/offshore loading, which is beyond my area of expertise, but I would have thought would be expensive per barrel.

[dspp]

Nimrod,

Can I ask what is your area of expertise ? May I also ask if you have seen inside the data room ....... ?

You are clearly asking some very pointed questions which deserve to be asked, and I am well aware that I do not have all the data required to answer them, nor the company at this point.

Regards,
dspp

[Nimrod103]

Nimrod,

Can I ask what is your area of expertise ? May I also ask if you have seen inside the data room ....... ?

You are clearly asking some very pointed questions which deserve to be asked, and I am well aware that I do not have all the data required to answer them, nor the company at this point.

Regards,
dspp

I'm a geoscientist. I have not seen inside any data room, but I have read the CPR thoroughly and can understand the issues discussed therein.
The problem I have is with understanding fractured reservoirs, which have a set of inherent risks of their own relating to how the range in STOOIP is calculated. If this field were onshore or in shallow calm water like offshore Vietnam (like SOCO's fractured granite fields) a development could proceed incrementally, and risks minimized, and I would be rushing in to invest. But in the wild West of Shetland, I am worried that a full field development will be committed to when there are definite risks. I could be wrong and too pessimistic, but I just wanted to counteract some of what I see as hubris.

[dspp]

OK thank you. I have been an operator / PT / etc and seen fractured reservoirs up close from that perspective.

I see some upside in the fact that it is shallow water and so not super-expensive for a staged FFD. But also that some derisking can be done via an EPS. Not total derisking but some. One can see a series of EPSs using the same floater to move from field-centre to field-centre taking out the risk 2-years at a time. A slower build-out than some are hoping for but at least always cash-flow positive after the first one is running. Getting the financial positioning of the first one right is key to value maximisation for HUR in my opinion.

regards, dspp

[dspp]

A sensible balanced article (with nothing new in it)

http://www.yourindustrynews.com/hurrica ... 41163.html

regards, dspp

[dspp]

HUR RNS CA continue selling

http://www.lse.co.uk/share-regulatory-n ... in_Company

now down to 12%

[thebuffoon]

What's more relevant is the percentage their holding is relative to their portfolio.

A placing would take care of their problem if they didn't participate.

Buffy