HPHT Appraisal area

12th Jun '09 by emptyend

20 comments 8425 reads

I've set this thread up for discussion of the HPHT appraisal area on 16-1, as I'm certain there will be stacks [;-)] to discuss over the next year or so. This header is intended as a summary - please email me with any suggested corrections, clarifications or additions and I'll edit it.....and we can then move on to discuss substance and interpretation as new information emerges!

The main focal point in this area is the belief that the oligocene section above the volcanics is a fan deposit of very substantial size and which is mainly black oil and condensate. This should (one hopes) be confirmed in September following reprocessing of seismic data and integrating it with the well data in the area. [EDIT: it still hasn't been completely confirmed as at November, but the "mood music" remains consistently bullish on the interpretation - see post 5 below, which notes that the IMS talks about the interpretation work "reinforcing" early views]

There will be an appraisal well drilled in Q2 2010, which is currently being planned by an HPHT world expert, specifically hired-in for the purpose. There are at least three faults in the structure, indicated by the "backslash"-type lines (see slide 12 of the AGM presentation http://www.socointernational.co.uk/?entityType=Document&id=74 ). The bit to be drilled by an appraisal well in Q2 2010 is the bit to the far left of the structure shown on slide 12, which is the bit that was previously drilled and tested in early July last year (DST2) and which recovered oil to the surface. This section, above the volcanics, had 50m of net pay [another 40m of net pay had been covered by DST1 and there was a further 30m of net oligocene pay below DST1 that wasn't tested at all] .....so the expectation is, very clearly, that drilling this well into the 50m of net pay above the volcanics is going to give around 100mn bbls recoverable oil/condensate just within that fault block - and then there are thought to be two other fault blocks and a big fan left to be tested.....which would be substantially derisked by the first well (coupled with the currently-ongoing seismic reinterpretation) [EDIT - compare the depth of the well being drilled for 100mn bbls in Q2. with the depth of the fan further to the north-east......most of the 20km fan is about three times as deep as the…

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marben100

12th Jun '09

ISTR Ed telling us at last year's AGM that the next wells drilled in the "E" structure would be high-angle. Presumably this would be so as to reduce the pressure gradient in the wellbore? I guess it also means that the drilling plan is more complex, so good to hear at this year's AGM that an HTHP expert is being engaged. Perhaps SW10 can give us the benefit of his knowledge and/or advise whether I''ve got this wrong?

emptyend

Hi Marben,

The fan interpretation post-dates the last AGM, so it is entirely possible that Ed was talking about the much HPHT area under the volcanics.....which they aren't yet planning to redrill.

rgds

SW10Chap

In reply to marben100 (post #1)

the next wells drilled in the "E" structure would be high-angle. Presumably this would be so as to reduce the pressure gradient in the wellbore?

The pressure gradient is the pressure gradient - it's simply a function of depth and the well direction won't have any effect on it. in other words, the pressure at 10,000ft in a vertically-drilled well will be the same as the pressure at 15,000ft in a deviated well - where the True Vertical Depth (TVD) is 10,000ft. Remember, wells 'depths' are always measured along the hole.

The aim of the high-angle will to be intersect as much of the zone of interest as possible: in the optimum case you're actually drilling a 'tunnel' through the zone of interest rather than a hole which cuts through it at (say) a right-angle.

I guess it also means that the drilling plan is more complex

Horizontal wells are always more complex; there's more risk of getting stuck, you're having to deal with greater proportion of the well being in contact with the HPHT zones, progress can be slower, depth control can be adversely affected, getting wireline data is altogether more entertaining and SW10's Law can be relied upon to play it's part!

SW10

Just to put a bit of valuation flesh on the bones here, I'm currently reading through JPMorgan's initiation note.

JPM (ie Caz) have a potential upside total of 1574p of NAV from TGD - but they ONLY include the upper oligocene play and the fan....nothing at all for the deeper gas and the basement at this point. And they have a total explo and appraisal upside (covering basically all the drilling programme identified in the AGM presentation) of 2811p.....which implies that, if everything went exactly according to plan (which of course it won't, though it might "miss" on the high side as well as on the low!), the end 2010 NAV could, on current price assumptions (!!.....$70 for 2010, $80 beyond that) be in the £37-38 region [other biggish contributions coming from Nganzi and the TGT development drilling, which should derisk the reserves upside].

...which means that the outcome of the seismic reprocessing - and the results from the planned well in Q2 next year - are pivotal to value!

The point I am making here is that it will be extremely interesting to see how the land lies once the seismic reprocessing results are in. If the CoS of the fan structure and/or the deeper gas play rise as a result of this analysis (which IMO they may very well do!) then we can expect to see more near-term interest in the shares [notwithstanding the fact that the Marine XI wells are limited to combined upside of around 350p per share]

6th Nov '09

Just for the record on this topic, I should note here that yesterday's IMS makes it plain that the fan being drilled in Q1/Q2 next year is NOT a high pressure high temperature situation!:

interpretation of the reprocessed seismic over TGD is not as far advanced. However, early conclusions appear to reinforce the previous interpretation of the lacustrine nature of the reservoir deposition....

A pore pressure study over TGD has confirmed that pressures in the shallower of the two reservoirs penetrated in the discovery well, whilst sufficient to maintain porosity and permeability, are not as high as those originally anticipated. The pressure environment in this supra-volcanic reservoir is considerably less than that encountered below the volcanics. Therefore, the TGD appraisal well can be drilled in a more controlled and cost efficient manner than the discovery well. Preparations are underway to tender for a two rig programme first for a drilling campaign with one rig devoted to the CNV field and TGT development wells and a second rig for drilling the TGD-2X, an appraisal well which will only test the upper reservoir. Drilling is anticipated to commence in the first/second quarter of 2010

....and, to remind people by requoting from the post immediately above in relation to JPMC's assessment of the upside:

JPM (ie Caz) have a potential upside total of 1574p of NAV from TGD - but they ONLY include the upper oligocene play and the fan....nothing at all for the deeper gas and the basement at this point.

...which is an interpretation that I would be certain that management took great pains to ensure that they got correct (and, unlike most other analysts, JPMC seem to have actually listened to what they were being told)

kenobi

yes, the last AGM I attended (which wasn't this years but the one before),

Afterwards Ed was saying that it would be straight forward to drill the shallow targets with a standard drill to make some progress, surprising that it's taken this long to get back to it really, but there has been a bit of economic uncertainty this last year or so !

K

I'd just like to clarify an apparent inconsistency:

From the thread header:

There will be an appraisal well drilled in Q2 2010, which is currently being planned by an HPHT world expert, specifically hired-in for the purpose.

...but (#5 above):

So, has it turned out to be unnecessary to hire an HPHT expert to plan the drilling?

Regards,

Mark

Hi Mark,

No - I don't think so at all. Even if the well doesn't meet the definition of HPHT (which is over 10,000psi and 300 degrees Farenheit, according to the DTI) is is plainly relatively highly-pressured. And remember that just because the sub-volcanic section isn't being redrilled with the first well, I wouldn't rule it out sometime next summer.

Now that (after TGD-1X) they know a lot more about the geology than they did with the first well, I fully support a belt and braces approach to all future wells. In the scheme of the cost structure, getting the best help will be money well spent!

Thanks ee,

That makes sense. As you say, I'm sure the costs are negligible by comparison with rig rates.

I remember that, in the post-2008 AGM pub chat, a concern was raised by some investors that Soco would be at a disadvantage in exploring/developing the TGD field, because it would have difficulty accessing the level of expertise that oil majors could command for this sort of difficult drilling. That issue made it more attractive (from investors' POV) for there to be an early sale, thus relieving Soco of that problem.

In a sense, it is good that we have had a decline in oil prices from the 2008 peak, leading to a much less tight market for the best expertise, rigs/crews etc. As the majors are more reluctant to spend, it frees up resources that Soco can put to good use.

This means that Soco has the time to REALLY discover what is in TGD... which may lead to a better sale price in the end.

In a sense, it is good that we have had a decline in oil prices from the 2008 peak, leading to a much less tight market for the best expertise, rigs/crews etc. As the majors are more reluctant to spend, it frees up resources that Soco can put to good use. This means that Soco has the time to REALLY discover what is in TGD... which may lead to a better sale price in the end

Well I certainly HOPE that will prove to be the case. Shareholders who have held thoughout have paid their opportunity costs and lost time, as well as value, in holding from the peaks.......so it would seem a reasonable quid pro quo if the sale price were to end up nearer £40 a share than £20. Obviously there is quite a bit of work to be done successfully before that point is reached, but the jury is still out on whether those who held on in anticipation of "the final solution" were wise in doing so - even though, ex-post, it is completely clear that those who sold out in mid 2008 (or earlier) are well ahead of the game at this point.

1st Sep '10

I've reopened this thread for discussion, following today's RNS announcing TD and testing at TGD-2X.

The reason for this is that there is so much relevant information, specific to the TGD asset, in the header.

There are a couple of interesting comments in the analysts' flash notes today:

JPM say:

According to management, sand quality compares favorably with that seen on logs in
earlier wells. The sand packages are also deeper, so encouraging for the
fan channel interpretation, although a successful test result is needed to prove this

And Numis say:

If TGD-2X is successful appraised, material further upside is
planned to be tested at TGD in Q2/Q32011 through the TGD-FAN-1X and TGD-3X
exploration wells. TGD-FAN-1X targeting a 90km2 max closure stratigraphic trap and
TGD-3X a 19km2 structural trap (both very large and very material structures).

Now.......I have a theory about how this might develop - but it isn't going to be helpful to shareholders to make it public. All I will say is that when the RNS says: "After the completion of testing there will be a further release with results and mapping a way forward"....... I am expecting that to provide some interesting surprises.

Crossing fingers....

lowersharpnose

I have a theory about how this might develop - but it isn't going to be helpful to shareholders to make it public.

Me too, Should know by mid/end Nov, assuming results out this month.

johnnylite

Just a thought on the net pay...

From the header above we have ' This section, above the volcanics, had 50m of net pay ..'. based on the first well and side track.

In this RNS we have: ' Approximately 40 metres will be tested after a 7" liner is set and cemented.' But also 'drilling shows and early log interpretation indicate two main reservoir sand intervals'.

So does this imply that there is a second zone that is not being tested that we don't know the size of. Otherwise, the net pay is a lot thinner than expected because the presentation from last week showed they were targeting an area with thicker pay zones than the first well.

Or am I missing something?

JL

So does this imply that there is a second zone that is not being tested that we don't know the size of. Otherwise, the net pay is a lot thinner than expected because the presentation from last week showed they were targeting an area with thicker pay zones than the first well.

Or am I missing something?

Very difficult to be certain. It seems to me that they may have TD'd without going as deep as they originally expected to (4669m versus close to 4800m?). That may have implications which are either positive or negative - but only those who have seen the logs will know.......

....if, for example, the bottom 20m in the hole was showing extremely high potential to flow, then perhaps they would have concluded that they may as well stop, test and then drill a step out to prove the fan....especially if there was some danger of losing the hole due to liquids-induced instabilities? ;-)

OTOH, if they had run out of potential pay because the seismic was in error then the opposite conclusion might be appropriate.

Its all a guess at this point.

jonnyt

In my view we know precious little more than we did two years ago.

What we do know is that the main requirement of this well is to get the well flowing to the surface to be able to hold on to the acreage. No flow likely equals no acreage and the potential loss of 500m plus barrels net to Soco.

My best guess would be they hit a 40m metre zone that looked good, carried on drilling and hit a separate pressure regime hydrocarbon zone. At this point they immediately introduce more risk and the most viable option to meet the wells requirement is to case and protect what you have. Leave the full potential to the appraisals. This may also make PPTEP less likely to join the party ;o)

Its my view that Soco may have a conditional offer for Vietnam already on the table and that the way forward may well be an asset sale rather sooner than some may imagine.

JonnyT

I should have added that it's my interpretation that they may not have de-risked the fan with this well though if the lower zone was very highly pressurised they may have considerably de-risked the fan as it maybe the fault isn't sealing thus the zone is in communication with the fan.

In my view we know precious little more than we did two years ago.

What we do know is that the main requirement of this well is to get the well flowing to the surface to be able to hold on to the acreage. No flow likely equals no acreage and the potential loss of 500m plus barrels net to Soco.

Well it would be true to say that, at this precise point in time, we haven't seen much more proven. But, since the fan interpretation was only arrived at very late in 2008 (and was one reason that Sinochem's interest hasn't yet proceeded to a conclusion), I think the company view would be that they know a helluvalot more than they did in mid 2008. Flow is, of course, vital....but I'd be pretty sure they will get it.....because they have had prior experience of recovering oil to surface in this area......see the TGV-1X RNS from 2006:

Te Giac Vang 1X (TGV-1X), spudded on 2 May, reached a
total measured depth of 3,926 metres in the Upper Oligocene. The well was
deepened from its original prognosis due to the presence of encouraging
hydrocarbon shows continuing below the original target depth.....
The well was also drilled into the Oligocene; however, the location was downdip
on the flank of the structure. Despite being in a flank position, good oil shows
were encountered in several sands. After analysis of the logs, although the
sands were confirmed to be hydrocarbon bearing, it appeared that these lacked
sufficient permeability to produce at commercial rates and were therefore not
tested.......

The well also penetrated the source rock section at the top of the Oligocene
validating the geological interpretation and confirming the potential of the
deep Oligocene and Basement prospect underlying the shallower closures.

It is my understanding that, although these were not formally flow-tested, they still "flowed" despite not being "up to much" at that location.

My best guess would be they hit a 40m metre zone that looked good, carried on drilling and hit a separate pressure regime hydrocarbon zone. At this point they immediately introduce more risk and the most viable option to meet the wells requirement is to case and protect what you have. Leave the full potential to the appraisals. This may also make PPTEP less likely to join the party ;o)

Its my view that Soco may have a conditional offer for Vietnam already on the table and that the way forward may well be an asset sale rather sooner than some may imagine.

I should have added that it's my interpretation that they may not have de-risked the fan with this well though if the lower zone was very highly pressurised they may have considerably de-risked the fan as it maybe the fault isn't sealing thus the zone is in communication with the fan.

I think you have over-extended a fertile imagination. All of the drilling in this well was above the volcanics, specifically to avoid the higher-pressure environment below the volcanics that so complicated TGD-1X !! As it happens, the volcanics came in higher than was prognosed, which is why the well was terminated above its original TD. However, as JPM point out, the sands that have been found appear to be supportive of the fan interpretation and are of somewhat better quality than was found at TGD-1X....so probably pretty close to the pre-drill P50 estimates but not going to produce the P10 numbers we might have hoped for. But it remains "all to play for" re the fan.

Yes I'm aware of that.

As it happens, the volcanics came in higher than was prognosed, which is why the well was terminated above its original TD

Which may well be the case but I haven't seen this posted anywhere else, it certainly wasn't in the RNS.

I'd like to see clarification of the disperate zones which I'm sure we will get in due course. I guess the sands being less thick than prognosed will reduce potential upside but alternatively if they are better quality than expected one would expect them to have a better ultimate recovery rate than was previously modelled.

Also I'd like a comment about the fan interpretation especailly confirmation that the fault isn't a sealing fault as this seems key to the potential of the Fan.

Lets hope for a multi thousand barrel per day DST limited by equipment RNS in three weeks time.

Which may well be the case but I haven't seen this posted anywhere else

No - you wouldn't have done. I do my own research and post here first.

I guess the sands being less thick than prognosed will reduce potential upside but alternatively if they are better quality than expected one would expect them to have a better ultimate recovery rate than was previously modelled.

Also I'd like a comment about the fan interpretation especailly confirmation that the fault isn't a sealing fault as this seems key to the potential of the Fan.

We don't know exactly what the prognosis was. I don't think the fault is actually material to the fan potential at all. What it was material to was the potential for the P10 case at TGD-2X....at least that was my understanding from the Cagle interview some time back.

Lets see what the test results bring....

2nd Sep '10

Lets see what the test results bring...

Sound advice. Otherwise we're just making everything up...

HPHT Appraisal area

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