Ugandan drilling

8th May '09 by emptyend

113 comments 17318 reads

NO TA ON THIS THREAD PLEASE

Some of you will be familiar with a post I recently made elsewhere on this topic. Global and Tower (TRP) are partners on a drilling campaign in Uganda, the first well of which is due to spud in the next 10 days. The terms of the agreement between Tower and Global are given in this link: http://www.investegate.co.uk/Article.aspx?id=200812220700085588K

and the rig deal is confirmed here:

http://www.investegate.co.uk/Article.aspx?id=200904080700093265Q

Some sources elsewhere have claimed that the rig is indeed already on site as planned, but I have no way of confirming that. [Edit: 14/5/09 - the comparison of TRP with GBP below is now even more in favour of GBP, as the shares are today at 12p compared to TRP at 5.875p.

Edit(2): 29/5/09 The well spudded last night. This morning the comparison is STILL even more massively in favour of GBP, as the shares stand at 13.25p compared to TRP at 7.625p. Volumes in TRP in London are running at about 5 times the volume (by value) of trades in GBP, indicating that (even including Aussie trading) the market remains over-focussed on TRP, despite the fact that the upside for each company is more or less identical - but the potential returns for shareholders are MUCH greater in GBP. Reworking the figures below for yourself will show you exactly what I mean!]

In sum, therefore, Global have the right to earn a 50% onterest in the EA5 Uganda block by paying for the first two wells (on the Iti and Sambia prospects, both of which are estimated at c. 100mn bbls in size). And they have an option to stop after only the first well and still retain a 25% interest.

The market appears to believe (due to the focus on Tower in publicity over the drilling) that Tower (TRP) is the only way to play the Ugandan drilling, but it is clear that one gets a very much bigger bang for one's buck by buying GBP instead. I lay out the reasons for this below:

Tower: have over 657mn shares out, currently at 5.75p mid = market cap £37.8mn
Global: have nearly 175mn shares out, currently at 13.25p mid = market cap £23.2mn

Less cash after 1 well:
TRP (guess) GBP 1.2mn ....so EV= £36.6mn
GBP AUD 26.27mn* = GBP 13.21mn (@1.988)...... so EV= £10.0mn

nb.....GBP cash figures…

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repobear

11th Jun '09

Well both are down around 20% today nearly two weeks iinto drilling a well expected to take up to three weeks. Is there a leak?

emptyend

Doubt it - I saw PK yesterday at the SIA AGM. He'd just flown back. Saying nothing - though others apparently learned there had been some very minor delays and some sort of announcement was likely by the weekend. Judging from 24 hours ago I'd say it was neutral and hadn't TD'd. Of course that is an ideal circumstance for rumour-mongers to spread fear amongst leveraged TRP holders operating with stop-losses - which IMO is why the move only started after London opened (GBP was flat in Australia).

FWIW

rgds

djpreston

In reply to emptyend (post #55)

RNS out:

PRICE MOVEMENT AND UPDATE ON ITI-1 DRILLING OPERATIONS

Global Petroleum Limited ("Global" or "the Company") notes the movement in both the price of the Company's shares and those of Tower Resources plc ("Tower").

Global draws its shareholders' attention to Tower's announcement that the Iti-1 well, Tower's first exploration well in Uganda Licence EA5, in which Global is earning up to a 50% interest, has reached total depth of 592 meters in basement. Electric logging operations, including wireline formation pressure and fluid sampling are underway and the outcome of the well cannot be determined until interpretation of this information has been completed. An announcement will be made as soon as clear results have been obtained.

http://www.investegate.co.uk/Article.aspx?id=200906111133217462T

The Iti-1 well, Tower's first exploration well in Uganda Licence EA5 has reached total depth of 592 meters in basement. Electric logging operations, including wireline formation pressure and fluid sampling are underway and the outcome of the well cannot be determined until the interpretation of this information has been completed. An announcement will be made as soon as clear results have been obtained.

Sounds as if it is going to be a "glass part full" result?

ee,

Judging by the volume of trades and the sell off I wouldn't be quite so optimistic.

45m traded. It looks like the market views this is a glass almost empty result.

rgds,

In reply to emptyend (post #57)

Does sound that sort of way and the market seems to be reacting accordingly. However, I wouldnt necessarily agree. It seems as if there has simply ben pressure form the LSE to announce....

Interesting time - be brave or bail??

robs12

IMHO if it was a duster then they would already know (there would be no need for logs or samples to clarify), and announcement would have had to say as much (especially given all the 'action' this morning!). If there was a rapidly growing slick flowing down the Nile then I think the statement would have had a more positive feel (especially given all etc...), so I suspect we have a noman's land announcement. There is something, but ....

In reply to repobear (post #58)

Basment high coming in 50m above prognosis is certainly a disappointment - but too early to say much more than that IMO (despite high vols traded in TRP).

Ive been chatting to some I know in the market. The general concensus is:

"If it was positive fluids then why not say so?"

Then again I have had some saying "Well, its obv not great but they wouldnt bother logging etc if it was a straight duster".

Others have said "Dunno, it could be good news just their hands have been forced too early".

salty64

I'm holding on as well. They didn't go as far as they said they intended to but the result was very quick and the release was due to the leak or scam. I suppose that the result would have been published as expected in the anticipated timescale?

SW10Chap

You don't really know anything for sure until you've run the wireline logs - I can't think of anyone who would decide not to run wireline logs based on what they may have seen from cuttings. They may make that decision if they've got some high-tech LWD, which I doubt.

Ive been chatting to some I know in the market.

Sorry to say that some of them seem to be talking, er, blocks :-)

I would even take the opposing view and say that a fluid sampling programme is unlikely to be entered into on a whim - it presents additional risks to the hole, costs money and can be a PITA. They would have a reason for doing it - although worst case is that it may be just to get some data on the water for Sw calculations...

Sw<1.0

Hi SW My reply was meant to be funny, as in illustrating that no one has a f err a clue but are being slightly negative on balance (as reflected in the price). I'd guess that Global want the max data to see if what they've got merits committing to the second well but it is intriguing that they've gone to the risk and expense of running logs etc. D

Hi Darron,

You say noone has a clue but the fact that the share price started dropping before the RNS suggests otherwise.

As ee points out basement coming in at 60m higher than expected is most likely a disappointment. GBP will want as much information as possible before commiting to a second well and the extra costs involved here won't be that significant in comparison.

If the share prices of both TRP and GBP had suddenly jumped 20%+ and an RNS had been released saying target depth was reached etc etc I suspect a lot of people here might be getting pretty excited. As SW10 says we don't know that much for sure but what we have learnt today from the share price action and the RNS isn't that positive, IMHO.

No position.

loglorry

Anybody out there got any idea how long it should take to process the data? My gut feeling is that it is a duster. It feels like wishful thinking to think the market is wrong about it. That said, a lot of the damage to the share price has been done.

Interesting to see that Tower seems to have suffered worse on the news.

Log

SW10Chap is your man for that question, but I'd be surprised if its not clear by Monday whether they will be doing further tests.

Rather like many well results, I suspect it could be a technical discovery but uncommercial. Given the availability of other targets though, that wouldn't necessarily be bad news (especially at current share price levels!).....and, as others have pointed out, running a logging suite isn't something one would rush to do if there had been no sign of hydrocarbons.

Put another way, I'm very happy to wait and see.......

In reply to emptyend (post #68)

as others have pointed out, running a logging suite isn't something one would rush to do if there had been no sign of hydrocarbons.

Just to be clear - and I can see I didn't word it very well - the wireline logs would (pretty much) invariably be run, irrespective of any anticipated outcome. It's the fluid sampling programme that's unlikely to be entered into on a whim, although as I said, it may be just to get some data on the water for Sw calculations.

In reply to loglorry (post #67)

Anybody out there got any idea how long it should take to process the data?

A half-decent wireline engineer and/or site PE (petroleum engineer) will know what the score is real-time and anyway the data should be beamed back to base within an hour or two of the logging runs (depending on the sophistication of the comms equipment!). There won't be much processing needed for an announcement, although obviously a great deal more work will be done after that.

SW10

In reply to SW10Chap (post #69)

Actually it was ME that didn't word my comment well. I wasn't specifically referring to your post - I was picking up comments from elsewhere re the fluid sampling. Unless they move on to do a DST [which I guess they'd be able to say tomorrow?], it will be quite important to see what is said about the Sambia prospect etc - and whether GBP take up their option to drill it. I imagine that might be the sort of thing they'd take a weekend over in order to give the right spin on the message.

poobear

12th Jun '09

Here is the one released to the ASX overnight by gbp.

The tone seems different to me and reports a normal TD result and wireline logging underway.

No panic in that announcement.

"UPDATE ON ITI-1 DRILLING OPERATIONS
Global Petroleum Limited (“Global” or “the Company”) advises that the Iti-1 well, the first
exploration well in Uganda Licence EA5 in which Global is earning up to a 50% interest, has
reached total depth of 592 meters in basement. Electric logging operations, including
wireline formation pressure and fluid sampling, are underway and the outcome of the well
cannot be determined until interpretation of this information has been completed. An
announcement will be made as soon as clear results have been obtained."

http://www.asx.com.au/asx/research/companyInfo.do?by=asxCode&asxCode=gbp

Looks an absolutely normal announcement to me for this stage of the well.

Here is what seems to be some comment on hotcopper :-

From hot copper:
The basement has been found to be shallower than expected. This can go either way as something is slowing the sound speed down on the seismics to give the interpretation that the basement is further away.

=> possible hydrocarbons present, although water, and less dense sedimentaries can give this effect as well.

The resistivity logs are not enough to tell if it is a commercial volume of hydrocarbon there. I assume to the column to be quite wet with a high background resistivity. The company is correct to say too early too tell and fluid sampling needs to be undertaken.

Anyone claiming it to be a duster or a gusher is bull**itting.

It is too early too tell, and I doubt there is a leak from such an isolated drill site. What was seen in the UK last night was a bear raid plain and simple

Yes, the Global RNS is much more positive and does refer to it earning up to a, " 50% interest," which does imply there is a 50% profit of something but as yet they have to find out what that profit is.

I think the GBP statement reads exactly the way I'd expect it to. The 50% point merely makes it clear what the story is, so that people don't continue to rush to assume that any success will be 75% TRP's.

AFAICS it is a neutral holding statement. Notwithstanding the comments on HotCopper, I'd think the balance of probability is that the basement being 50m above expectations is likely to indicate a smaller than expected structure - but that doesn't necessarily indicate "bad" news.

The main question (on the downside) for GBP holders is whether there are implications for the next well at Sambia....in other words whether GBP walk away at this point. Of course if they were to come out later with a statement that they are DSTing Iti, then I think one can jump to assume that Sambia will be drilled and GBP will move up to 50% - though they question will then become "when will Sambia be drilled?".

Too early to begin to answer any of these questions yet though.......maybe later?

Ugandan drilling

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Emptyend

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