From 9th June onwards
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From 9th June onwards
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Ed started by giving us the time of day in Viet Nam, and said the Maersk Convincer Jack-up rig was jacking up at that moment.
Thailand; was not expected to stay around for long, I took that as meaning they hope to sell Bualuang soon.
TGT; The results of their new seismic was mentioned, it has shown the oilfield can be expanded to the east. Also, he said that none of the TGT wells had been drilled into basement.
Work continues to set the initial platform this summer on TGT. Once completed, development drilling from the platform will start immediately with the target being to begin production in summer 2011.
TGD; was described as a 30 sq. km mountain. Estimated reserves in the fault block previously drilled by TGD1 and the side track, which was shown as the far left of the fan, were shown on 3 levels;
P90 = 50mmbl.
P50 = 100mmbl.
P10 = 200mmbl.
The original TGD1-ST was drilled into basement. There were 3 distinct and different pressure zones including one in a fractured layer in the volcanics.
The new TGD2X drilling is into the next fault block. It os no longer at 30% to Soco because a partner has withdrawn after an accident elsewhere; so Soco is now on a sole risk basis. I got the feeling that negotiations are still underway because my understanding does not add up. Our share of the proceeds if successful is now 58%. After the meeting I asked him who was bearing the other 42%, he said the government (presumably of Viet Nam). There is also a clause effecting the Thai share, whereby if they do not participate they have an option to buy back into the well after it has been drilled, on payment of six times the cost of the well. He said it is worth taking on the risk of failure. Perhaps someone else understood this better than I did. One bit of good news, the rig, presumably the jack–up is available after Christmas should further drilling be needed.
CNV; The first well in Phase II has indicated good water injection results. A meaningful response to the injection programme in expected around end Q3.
Congo; The source rock is pre salt, all the production has been above the salt.
Central Congo; Very old seismic indicated one structure that is 50 kms long.
Nganzi; They have 3 big and one smaller structures to drill, the first to spud in just over a months time. The wells are to be inland and a fair distance from the sea, but the distance to the export terminal is only 60 kms. He said the oil majors are not successful at having good relations with the locals, but Soco is very good in this area, they are building a hospital for example. The land rig is en-route now.
The farm – in question was discussed. He said that some of the Soco people are very bullish on Nganzi, so they will not grant a farm – in unless it is very advantageous to our company, and the AGM statement says “We will announce within several weeks whether or not we will invite a partner to join us in this venture. However, in any event we will act as operator and retain a majority and significant participating interest in the project.” They are negotiating with 2 potential partners. The possible addition to reserves is c. 600mmbls.
USA: Anadarko was mentioned and one new aspect of BP’s problem; America is now seen as a change in the perception of political risk, and some oil majors are thinking of diversifying elsewhere.
Financial risk for Soco; RDS talked about the care they take to minimize it. The option was mentioned. Soco has $245 million in cash and equivalent.
Accuracy of the above, probably 80% due to my horrible handwriting and poor hearing, but I do intend to add to my Soco holdings after the AGM. Also, I probably misunderstood some points above so please be free to correct me if you think I am mistaken anywhere.
MadDutch.
Log,
Please be reassured that your fears are unfounded.
You may unpack your trunk, unless it is still attached to your nose.
MD
;-)
Hi MadDutch,
I was the other guy in the gents! It never feels right to do introductions under such circumstances. I seem to recall that Ed said that his operations guy was also going to retire in the event of TGD failure, and scoop elephant dung for a living. Ed didn't seem to think any of this would come to pass.
Griff
yes Griffin, it was a funny, fun exchange; I approve of a CEO with a good sense of humour.
But did I get anything wrong in my summing up?
I owe my friends here a lot for all their help and generous giving of their time. It is good to be in a position to give something useful back, provided it is correct!
Regrettably I wasn't there, of course, but (having attended the post-match "debrief") I know there are plenty of others who took detailed notes and I know there are other interesting bits and pieces to report. Hope that folks get the time to post them later.
I can confirm from prior investigations that the TGD well is indeed being sole risked and would give SIA 58% of the upside (of the whole TGD structure) unless PTTEP back in again. The well cost is estimated at $45mn.
ee
I can confirm from prior investigations that the TGD well is indeed being sole risked and would give SIA 58% of the upside (of the whole TGD structure) unless PTTEP back in again. The well cost is estimated at $45mn.
Yes, it was made clear at the meeting that Soco are sole risking this one. I'm sure ES said (perhaps in the informal discussions afterwards) that it would cost PTTEP £300m to back in again and that therefore they wouldn't do so.
Impvesta
would cost PTTEP £300m to back in again and that therefore they wouldn't do so
I'd guess it was probably dollars. $300mn is about 7x the estimated well cost. Presumably they would need to back in after the first well only, and so wouldn't then know what the step-out down the fan would produce.....so if the $300mn figure is right then they could be looking at $300mn to buy back in for a net 29mn bbls (taking the P50 case on the upcoming well).....which isn't going to be an easy call for whomever decided not to participate.
If they don't back in then SOCO would also be entitled to their share of the back costs on TGD-1X, when it comes to cost recovery - and those were considerable!......
ee
Total voting rights confirmed in RNS:
Following a sub-division in the share capital of the Company on a 4 for 1 basis, SOCO's issued capital now consists of 331,227,888 ordinary shares of £0.05 each with voting rights. SOCO currently holds 110,000 ordinary shares of £0.05 each in Treasury. Therefore, the total number of voting rights in SOCO is 331,117,888.
Yes, it was made clear at the meeting that Soco are sole risking this one. I'm sure ES said (perhaps in the informal discussions afterwards) that it would cost PTTEP £300m to back in again and that therefore they wouldn't do so.
Impvesta
>> the figures I recall were $48M for the well, and 350 M to buy back in, I think Ed's comments were they would never do it, they would have to find the money, and might not believe in the fan interpretation. But I would guess if the upside is big enough they would find a way. Perhaps this is why they are playing down the fan potential and not wanting to drill another hole until the production licence is issued (around year end), so that they don't drill other holes in TGD , only to find that the Thai's want to buy back in on the back on continued good results,
Re Nganzi drilling order, this was discussed later in the pub but (looking back on some of my recent notes) the drilling order looks likely to be:
1. B - "Nganga" (P50 -200mn bbls)
2. A - (P50 - 200mn bbls).... in the event of success with B..... or D in the event that B fails
3. D - (P50 - 200mn bbls) ....unless already drilled
4. C - (P50 - 65mn bbls) ....final well in all cases
....so if B fails then A probably won't get drilled at all.
Can anyone remember drilling time estimates/depths? I know someone had a note of the depths.
FWIW my guess would be that the farm-in candidates still standing are ENI and TOTAL - and one of the conditions will be to build the pipeline in the event of success. We'll see if they commit or not - I don't mind either way.
ee
I have mingled comments from Qs after the presentation and from the directors after the meeting with stuff from the presentation. Unless otherwise noted, everything was from Ed Storey unless mentioned otherwise. Anything in [square brackets] is my comment rather than cropping up at the meeting.
The presentation closely followed the prelims one. I have noted the few minor differences.
ES started by saying the rig was jacking up to spud TGD - "the train has left the station"
Thailand - don't expect this to be around for long. Several expressions of interest. Non-core for Soco.
Vietnam - CNV & TGT
CNV - 1st water injector well "reasonably good response"
ES was asked about gas price "miserable". They have an expert opinion and could go to arbitration. However they are currently hoping to instead agree an allocation of the liquids which are being knocked out of the gas on-shore - could be 2kb/day - in whc=ich case they won't care about the gas price.
TGT - will be drilling 4 development wells this year starting end July and 4 early next year. On scehdule. The explo /appraisal drilling was done on time migrated seismic - this shows as the blue line on slide 6. They encountered some significant anolmolies when drilling and have now completed the pre Stack Depth Migrated Seismic, eith the dark green showing 2P and the light green showing 3P. This has much more over to the east - the second of the development wells will be a step out investigating this. [The prelims presentation had the words "potential NET additional recoverable reserves 25-75mmbbls" on slide 15 - these are ommitted from the equivalent slide 14 on the AGM presentation.]
If TGD is very successful, they will want to modify the TGT development to have a central processing facility to extract liquids off-shore. I asked Roger Cagle afterwards if this would mean a delay to TGT development - he said no - it would be a nice problem to have as the FPSO planned wouldn't be sufficient, but this was not an immediate problem and wouldnt affect TGT production schedule.
Vietnam - TGD
Slide 8 now has handy lines showing where 50, 100 and 200 mmbbls fill to :) 50 is P90 :))
ES is pleases to be drilling this sole risk - would have to ask PTTEP why they chose not to participate, but he commented that they were mired in litigation following Timor sea well problems and after change of management could be rethinking things.
Well will cost $45m. Of this $10m is for "every redundancy feature you can imagine" - they are going to get this one right!
Success with the well means that the fan (shown on next slide) is massively derisked. from TGD to TGT is 35km :)
If it comes in as commercial the next step is to go through the Vietnamese procedures - create a reserves assessment report and submit it to enable Soco to hold the acreage, probably by end year. The acreage held will be right up to TGT and with no depth limits, so although Soco have no intention of drilling the basement (expected to be high pressure gas) in theory they could later - "leave that for someone else".
ES was asked if it came in "like a dream" would they immediately drill the fan - answer NO, they would want to know the acreage was held first, would be looking to drill fan May/June next year.
ES was asked what flow rate he was hoping for - RC stepped in and said that flow rate was less important than accumulation size and sustainable production rate: "we don't need 11k". ES added brightly "but we have had a few of those!.".
When asked if TGT would be P&Ad or suspended if successful, ES said definitely P&A'd. It costs nearly as much to suspend and re-enter later as it does to drill a new well. And the new well can be drilled in the best spot. And the risks are lower - the PTTEP Timor sea well problem was when trying to re-enter a suspended well, the GoM problems occurred when preparing to supend the well.
Central Africa
Block V still waiting for presidential decree - it will arrive some day
Block 7 - will take even longer - but in "the last great undeveloped sedimentary basin in the world"
Nganzi
Very interesting conversations at board about whether to farm out and who would want as partners - approached 3 companies. 2 still talking. After the meeting Ed said "expect to hear something in the next couple of weeks. [I interpreted this as a farm-out being more likely than not.]
3 large (200mmbls) and one medium(65) structure. They have now named them after local villages.
The first to be drilled in Mid July will be B - Nganga (?sp) which he has been told means Fortune teller!.2300m deep
The second one D is Nyanya (?sp). these two prospects are "kind of independant", D is further towards the centre of the basin. 1400m deep
All the equipment is on its way. Rig bokked for 2 firm with 1 + 1 options.
Big advantage of Nganzi is (unlike blocks 5 & 7) it is 60k from an export terminal with capacity
Post Gulf of Mexico issues
arose through questions, not part of presentation
Soco follows industry best practice on insurance - something complicated about changing the dates of their insurance to come into line with Vietname partners - didnt follow this.
"peverse change in political risk" - we didnt like the N Sea before because of political risk, perhaps now "we won't have to explain so much why we are in Central Africa"
conclusion
finances very sound - that's why there aren't any slides on them!
In next few months could significantly expand the companies reserves - "rare position - it's exciting"
db
FWIW my guess would be that the farm-in candidates still standing are ENI and TOTAL
Perenco could be an outside candidate - currently the only oil producer in DRC as I understand it, ~28 kbpd from their own figures.
Great note db, thanks :-)
After the meeting Ed said "expect to hear something in the next couple of weeks. [I interpreted this as a farm-out being more likely than not.]
Obviously I wasn't there and couldn't read the nuances. However, if they DON'T farm-out then they would certainly RNS it anyway - because the entire street has been assuming they will farm down to 40-45%....and it would substantially change the upside.
When I have made enquiries recently on this topic, it is clear that there are very many "moving parts" - and I infer from many peoples' impression of yesterday (and the de minimus presentation and tight-lippedness, even from Ed) that they are in "full deal-doing mode" on several fronts simultaneously!
Obviously this includes selling Bualuang - and it certainly includes the extraction of promises re development support for anyone who farms in to Nganzi. But I would also surmise that there may well be other forms of deal under discussion - and I STILL wouldn't completely rule out a much bigger deal than just a Bualuang sale & Nganzi farm-in.
Time will tell - but I am 100% certain that this is going to be the most interesting few months ever for most of us who have invested in SIA and the E&P sector in the last 10 years or so (apart from those very few who may have had farm bets on Rockhopper, Gulf Keystone etc ;-))
ee
comments were made that the potential partners had to bring something strategic, not just money, they would all be asked to pay a premium. So something strategic, like, Infrastructure, (there is a pipeline with spare capacity about 65km away from memory), or companies who might strategically be interested in buying out the assets in the future.
I am guessing one of the 3 was the company pumping oil or owning the pipeline, whether they have dropped out for some reason, who can say,
cheers K,
Hi,
Nice to see all the usual faces again, and meet a few new ones, Sorry to have missed Darren, and was hoping to see LSN too, maybe next year.
Most of what was said has been reported well here, possibly all, but there are a few things that struck me,
which I haven't seen so I might have missed them, please forgive me if I'm repeating things.
TGT, 7 wells drilled, average flow rate 11,000 bpd,
(interesting they project a production of 50,000 bpd when in production, but I don't know if that's on day one or eventual target ?)
The siesmic has been reworked using some fancy technology (time migrated or something ?)
anyway long and short of it is that the new data suggests that the field is further to the east than was thought,
so the holes are probably not in the optimum place. More importantly it explains some anomolies they found,
and suggests it could be quiet a lot bigger. See slide 6 of the presentation.
Particularly TGT4X which was on a small formation now looks to be at one end of a much larger formation.
I don't know what the current estimates for TGT reserves are but if this new interpretation is correct, there could be a big upgrade here. I did try to push Ed on this when talking afterwards, but he misunderstood and put up the TGD slide showing the fan, more of which later.
looking at my notes I have recorded that we would have 50000 bpd by next summer so I guess that's an initial production target.
there are 2 platforms discussed, the second to the south, was dependent on what TGD comes up with.
re Ngazi,
I have the same 4 targets,
A 200MB 1250M deep
B 200MB 2300M deep drilling to start july
C 65M didn't get depth
D 200MB 1400M deep
curious they should start on the deeper of the wells,
comments were that we have structure, and souce in a proven basin,
but that there is the question of the source rock,
Were as, in previous years there had been a lot of talk of deep E and e south,
and a billion barrels of oil equivelent, but mostly gas. The feeling now is to leave that to
the next guy as upside, and get on with the fan which is thought to be oil.
Given the gas price is poor, this seems to make sense. Ed emphasised that the licence means they own
the hydro carbons, and if there is enough gas and lng solution is a possibility, and they could be taken away
and sold, rather than sold/given away in the local market. I wouldn't put much value on the gas at the moment.
This next bit is contraversial, I'm not saying that they won't sell Vietnam, everything is always for sale for the right
price, but I very much got the feeling that we're in Vietnam for a long time, measured in years.
They don't want to further develop TGD until they have their licence, and I guess this removes the Thai option to buy back in. So it looks like no further drilling until next year. (Ed did emphasis that if TGD fails, there would be time for another attempt before the licence expires). obviously we would all be disappointed if TGD failed.
Whether their thinking has anything to do with keeping a bigger proportion of TGD I don't know.
I certainly see no reason why they should be offered an option to buy back in after more of the structure has been
explored so it does make some sense.
From this point of view selling vietnam would be more likely if TGD failed and they just bought TGT online,
as it would be more of a known quantity.
I am however reminded of the selling of yemen, where they couldn't sell for full value unitl they had production
history, but we'll see on this one,
thanks again to everyone, I would be interested in any comments especially on these views at the end, which are just my guesses
cheers K
oh one last thing I said I would return to,
Ed wouldn't be pushed on an estimate for the fan structure either,
as I gently proded him on this, Roger came over and said it was time to go,
though he went on to take a couple of other questions.
I very much get the impression they don't want to talk TGD up too much,
probably because they're not sure about the fan interpretation, but if it''s say
500M-1BN barrels of oil, why shout about it, and have the thai partners buying back into it ?
anyway we can but hope !
K
TGT, 7 wells drilled, average flow rate 11,000 bpd,
(interesting they project a production of 50,000 bpd when in production, but I don't know if that's on day one or eventual target ?)
50k is the phase 1 production target. Ultimate plateau production with full development is expected to be c 120,000bopd I think. I don't think SOCO will be around for that though! ;-)
Re your thoughts at the end, I think it highly likely that SOCO will be "in play" before the end of this year. Whether anything actually happens before drilling the step-out on TGD and/or first production on TGT may well depend on how good or bad the various drilling results are.
rgds
ee