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Thanks Keith,
I think it’s also interesting that in both of the September 2021 presentations it’s estimated that each well would cost $3.3M.
Last week’s placing RNS showed that the wells are now being drilled for under £2M (<$2.5M) i.e. that’s about 25% cheaper than previously estimated.
Considering all the industry supply chain issues and rampant inflation over the last 12-18 months, this does suggest that Paul and Lonny are doing a terrific job at finding cost savings and/or making the drilling more efficient.
We’ve always known that PRD’s drilling costs at Guercif were pretty low (certainly compared to Chariot) which was one of the (many) reasons the investment case for Predator was so compelling. But it does appear that the capex metrics (and so, ultimately, the IRR) are getting even better – that’s quite some achievement from our management team IMO.
Valaris 123 is simply the rig that was contracted by KIST to undertake work on the Q10-A field. See the most recent update for info of the work that was undertaken:
https://www.londonstockexchange.com/news-article/KIST/benriach-operational-update/15799913
The fact that it's now moved off position tells us that the work programme has been completed (hopefully successfully) so we can expect an update on the current flow rates imminently (I'm actually somewhat surprised we've not heard something already tbh).
FWIW, I bought a few more today. Significantly oversold (daily RSI 21) on the charts so hopefully this will turn out to be a decent medium-term entry price. I don't expect AA will be in any way happy with the current share price considering he own ~15% of the company.
Keith, you’ve got me thinking there and I’ll bow to your (far!) superior knowledge of all this. I’ve listened to Paul’s comments a few more times and I’m pretty convinced that the completion casing had not been ordered by the 1st Feb which is clearly the main time-limiting long lead item.
So maybe delivery times have improved as you suggest? Or maybe Lonny’s found some casing in-country via his many contacts?
It’s a bit of mystery. But my reading of Paul’s comments from Friday is that he’s definitely aiming for spud in early May* which is only 6 weeks away so hopefully all will be revealed soon.
*Aimster – we’ll have to agree to disagree on the spud date. Paul's comments state that the ‘projected start date’ for ‘drilling’ is the ‘first week of May’ i.e. it’s a ‘projected’ start date, not a ‘project’ start date. I’m expecting pad construction in April – yes, it’s Ramadan but this shouldn’t stop work being done (just maybe slow it down a bit) and it ends on 21st April anyway, so I don’t expect this to be an issue.
From Friday's RNS:
PG: "As a result we believe that bringing forward the DRILLING of MOU-3, with a projected start date in the first week of May, is a sensible course of action." [my emphasis]
Keith, I briefly touched on this last week and my reading of Paul’s comments from the IMC presentation was that the completion casing had not been ordered at that time (1st Feb).
So my current thinking is that his plan is to ‘borrow’ the completion casing that was ear-marked for MOU-2 to bring forward MOU-3 instead.
Assuming the casing was ordered sometime in February, and assuming that delivery times are still as he stated (I can’t see things in the current climate having improved, though happy to be pleasantly surprised if it does arrive earlier, of course), that means we can expect delivery by the end of May at the earliest and most likely into June.
My feeling on MOU-2 is along the same lines as Trifle. Either the lab has already provided a possible solution but they can’t perhaps be 100% sure it’ll work in the field i.e. there’s a chance of not getting through the slump to the reservoirs? Or perhaps the new mud system is proving difficult to procure in a timely manner?
Either way, I think Paul and Lonny have come to the conclusion that drilling MOU-3 and avoiding the issue of the slump altogether is the quickest, most cost-effective and highest CoS option for achieving at least two wells that will offer commercially viable flow rates. Two wells might be enough to prove to the Moroccan industrial market (and ONHYM) that the CNG development is commercially viable.
They can then return to MOU-2 safe in the knowledge that if the drill bit does get stuck again, the market won’t punish the share price as the CNG development model has already been proven. Or perhaps an even safer option might be to drill another producer from scratch and only return to MOU-2 once cash-flows are starting to come through next year? (As I mentioned at the weekend, I suspect PRD may be long gone by that stage anyway as we’ll have been bought out).
So I’m pretty much with Matt on the schedule:
Drill MOU-3 (May)
Test MOU-1 and -3 (May/June)
Press the ‘Go’ button on a commercial CNG development (June) [assuming timely ONHYM / regulatory approvals etc]
Then once the new casing arrives (late May or June) either complete MOU-2 OR drill a new producer (away from the slump) and then test that also (June/July).
Allowing for a bit of of slippage, which is inevitable, I’m penciling in 3 producers up and ready and able to prove the potential for 150-250mmcfgpd by August.
Best laid plans and all that, of course…
Hi Vegas
I’ll admit I was initially also thinking pretty much along those lines and such an outcome would itself be an excellent result for shareholders.
It was simply the issue of the time-frame based on the Friday’s RNS that has made me re-think the potential M&A process. If my interpretation is correct, Paul’s now planning a full asset sale before the end of this year which would probably preclude PRD itself achieving first gas via CNG based on previously stated timescales.
For example, looking at slide 5 from the Sept 22 Proactive presentation, drilling of MOU-2 was at that time scheduled for Oct/Nov 22 which, on a success case, would have allowed first gas by Q4 23, the implication being that it would take approx 10-12 months from drilling the well (and confirming volumes and flow rates) to achieving first gas sales.
https://wp-predatoroilandgas-2020.s3.eu-west-2.amazonaws.com/media/2022/09/Proactive-Presentation-Final-8-September-2022-LATEST.pdf
With everything that’s going on with the industry supply chains at the moment I can’t imagine that this process has subsequently improved and perhaps may even take longer? So assuming we can drill MOU-3 in early May as currently planned it may well be that we’re now looking late Q1 or Q2 2024 for first gas from CNG?
Therefore, the RNS comment about ‘a sales process in 2023’ made me think that we may sell the whole Moroccan subsidiary to a company who will then itself (not PRD) deliver both the CNG development in the short-term (early 2024) and also the gas-to-power option via the GME pipeline over the medium and long-term.
I’d admit that, if this were to happen, it’d be shame not to be involved in drilling MOU-NE. But, from Paul’s discussions, it appears that the parties who have currently expressed an interested in the oil would want 3D seismic on the Jurassic before drilling - this may take a couple of years and I’m not sure Paul is prepared to wait that long. So he may simply be happy to sell it in its entirety? Though, as you say, the potential for some stub equity (+/- ratchets) would be very appealing.
(Talking of which, it’s likely that we’ll have the MOU-NE CPR published before the end of May too, so another thing to look forward to!)
As I mentioned previously, I may simply be misinterpreting the RNS comment about the ‘sales process’ this year as this could still conceivably be just a partial sale / farm-out. In which case everything you suggest would still be part of the excellent ‘optionality’ inherent in PRD’s assets.
Cheers
BRV
2/2 (cont...)
So is the data, after further analysis, now so convincing that a large, deep-pocketed potential purchaser of Guercif has simply suggested to Paul that it’d be happy to complete a full subsidiary corporate transaction as soon as possible (i.e. this year) at a very attractive price for proven, probable and possible reserves? Hence the to decision to expedite MOU-3 drilling (despite the additional dilution) as the final key to unlocking such a deal?
I’m speculating here of course (and apologies to all if this is all a bit long-winded!) but I’m now really starting to think that matters will progress much more quickly, and to a more definitive conclusion, than we’re all expecting. Which is why I think GRH suggested:
“This is the biggest race to the finish any will ever see…”
Morning MEM,
I agree with a lot in your post re multi-Tcf potential and turning a corner in 3-5 months’ time, though if anything I reckon PRD will be perceived very differently by the markets by the end of May once MOU-3 has been successfully drilled and the scale of the reservoir is proven... and that’s only 10 weeks away!
(We’d already be there of course had the slump zone in MOU-2 not proven impossible to drill through… frustrating, but it is what it is.)
But, as for your thoughts that it’ll be the end of 2024 before we maximise full value, I’m not so sure and I think the timetable for monetisation has been brought forward considerably.
We know from the RNS 24/11/22 that there was a:
“Strategic objective to demonstrate a potential gas field production profile of between 150 to 250 mm cfgpd… in response to INDUSTRY INTEREST in respect of the Guercif gas opportunity based on [the] latest operation update”
Paul then discussed possible corporate activity during the Q&A section of the IMC presentation:
“I think we would have loved to have pushed for an asset sale this year but the reality is that we might have to take a step back and do a gradual process, as mentioned before, taking a shareholding interest in the subsidiary and moving the gas along and proving up more volume which is one of the intentions of MOU-A down the road before the asset sale. The danger here… is that if we pursue everything too quickly we might be leaving too much value on the table. So there’s a balance here that we have to look at.”
(Basically, he was talking about optimising the ‘creaming curve’ that GRH has mentioned many times.)
Without data on the scale of the other prospects in the licence (in the Proactive presentation last Sept, Paul mentioned that ONHYM doesn’t like this data to be released too far in advance of drilling etc) it’s difficult to know exactly what we’ve got. But, from what the many informed posters on here are saying, there’s a good chance that the whole Guercif graben (750km2) is full of gas (and oil) hence the potential for multi-Tcf (>20Tcf?) as you, and others, suggest.
But I keep thinking back to the highlighted point in Friday’s RNS:
“Accelerating the potential for monetisation through a SALES PROCESS in 2023”
If Paul was still just thinking of a partial sale this year, surely the above would have read something like:
“Accelerating the potential for a farm-out in 2023”
So my reading is that the ‘sales process’ means a full asset sale which, if correct, suggests that something has clearly changed over the last 6 weeks since the IMC presentation. Perhaps we’ve been given a clue in Friday’s RNS:
“The learning curve has IMPROVED SUBSTANTIALLY following the information gathered from the suspended well MOU-2”
1/2 (cont...)
Hi Jimmy
I think Paul is referring to the CPR that was released with the prospectus in Feb 2020 (as per affc21's post):
https://wp-predatoroilandgas-2020.s3.eu-west-2.amazonaws.com/media/2020/02/Predator-Prospectus.pdf
The Moroccan CPR is from p172 onwards and table 7.2 on p198 provides data on prospective resources for the ‘Guercif Tertiary’ which match with the volumes given in yesterday’s RNS for the ‘prospective shallow target’ to be drilled in MOU-3. My reading is that this is what was previously known as the ‘MOU-2 prospect’ and is now called the ‘TBG-4 prospect’.
There’s also some additional information in the RNS of 25/4/19:
https://polaris.brighterir.com/public/predator_oil_and_gas/news/rns/story/xq4397w
Hope this is what you’re looking for?
Cheers
BRV
The comparison between per Bcf values for CNG and Gas-to-power are nicely summarised in slide 4 of the Sept 22 Proactive Presentation (chart, top right hand corner):
https://wp-predatoroilandgas-2020.s3.eu-west-2.amazonaws.com/media/2022/09/Proactive-Presentation-Final-8-September-2022-LATEST.pdf
As GRH states, it works out at $8 per Bcf for CNG.
Note also that this calculated using a 'conservative undiscounted net back [of] $8/mcf'. As per slide 6, Paul's stated aim is to sell at $16/mcf which, at 10-50 mmcfgpd, offers significantly higher (<50% higher) net backs (even when taking into account extra opex costs due to the RUS/UKR war).
No wonder Paul is so focused on the high value CNG option.
And the Transocean Barents rig has left Norway and is not far off Shetland as of this morning:
https://www.marinetraffic.com/en/ais/details/ships/shipid:714042/mmsi:538004907/imo:8768854/vessel:TRANSOCEAN_BARENTS
So one campaign looks to be nearing completion and hopefully we'll have an update on Q10-A flow rates soon, whilst another is about to begin at Benriach (targeting 160Bcf net to KIST, at a post-tax cost of only £2.4M).
We could certainly do with some positive newsflow here after a quiet few months, hopefully that'll put a floor under the sp.
The other issue I’ve been mulling over is the availability of completion casing as discussed by Paul during the IMC presentation in Feb: (see 45m40s onwards re the drilling of MOU-A (what is now presumably called MOU-3))
https://youtu.be/7xbTMWdGHtQ
In particular:
“… the casing that we need to test that particular well [MOU-A], if it were drilled, would take 16 to 18 weeks to deliver… there is an issue of completing it based on the long-lead items”, and
“… the worst-case long-lead item is the completion casing.”
So, with a 4-5 month delivery time for casing to be able to complete an extra well, it’s likely that Paul and Lonny had a choice to make between either completing the drilling of MOU-2 (subject to mud analysis and availability – we’re still waiting on details of both, so there may be some delays as you say) or starting afresh with MOU-3 which avoids any potential issues with the slump altogether. They’ve gone for the latter which we can only presume is because, in their opinion, this offers the quickest and most cost-effective option for completing and testing to commercial rates at least 2 wells.
Therefore, my updated timetable is that we’ll drill MOU-3 and then test both it and MOU-1 in May/June. Hopefully some extra casing has already been ordered and will arrive around June/July which, together with the new mud system, will then allow for a couple of days of drilling to complete MOU-2, and then test that too.
So by June we should have confirmation of two commercially viable wells and by July/Aug that will increase to three. With the potential to test ALL zones (which I now suspect is back on the table considering the number of targets in MOU-3 (i.e. the Moulouya fan AND what was previously described as ‘MOU-2’, now the ‘TGB-4 prospect’) we should be able to demonstrate the 150-250 mmcfgpd potential required for gas-to-power via the GME pipeline which the RNS of 24th Nov stated was a ‘strategic objective’ due to ‘industry interest’. Hence the sub-heading in today’s RNS of “Accelerating the potential for monetisation through a sales process in 2023”
My thoughts are that testing of MOU-1 will now be delayed until MOU-3 is drilled and completed so that we can test both wells together.
This makes good economic sense as there’ll be considerable cost savings – Paul’s previously commented on the fact that mobilising a crew from overseas to simply test one well is a very expensive option.
But with MOU-3 likely to be completed by mid/end of May this would really only delay the testing by 4-6 weeks. (We know there are a few administrative hurdles in Morocco to overcome first before testing could start anyway so it was always likely to be April at the earliest before anything happened on that front.)
Keith mentioned the other day that he’s expecting ~25mmcfgpd flow rate from MOU-1 and it’s likely to be similar, if not higher from MOU-3.
So I’m pretty sure any wait will be worth it…
All IMO of course.
Mk111,
My feelings exactly and I've added more this morning.
This stood out for me: “Accelerating the potential for monetisation through a sales process in 2023”
In the IMC presentation, Paul suggested the option for a small, partial sale of shares this year and a full sale at a later date. My reading is that he's now thinking of a full sale within the next 9 months. So perhaps the decision to raise funds and prioritise MOU-3 drilling has been made after discussions with potential purchasers of PRD's Moroccan subsidiary?
So there's minimal dilution to fund a cheap drill (<$2.5M) targeting huge volumes of gas (>1.8Tcf gross. worth approx $3.6Bn) with a potential for a full sale of the asset THIS YEAR. Personally, I'm happy with the plan.
Good find, thanks Pete.
Looks like the rig is still over in Norway though, so I'm not sure about the dates in the article?
https://www.marinetraffic.com/en/ais/details/ships/shipid:714042/mmsi:538004907/imo:8768854/vessel:TRANSOCEAN_BARENTS
As a reminder, AA bought 150k shares in the open market at 326p in Feb 2022 and owns around 17% of the company.
So we're currently able to buy in cheaper than he did last year, hence why I'm happy to buy a few now. I didn't think we'd see these prices again after hitting 650p last August but sometimes 'Mr Market' offers up such opportunities.
FWIW, I've been adding a few over the last couple of days.... "buy when you don't want to buy" etc. (let's hope I'm not 'catching a falling knife'!)
There's a bit of a newsflow vacuum at present, at least until the Q10-A workovers are completed. But Q2 should provide news on optimised flow-rates from Q10-A; Benraich spud; M&A (hopefully outside UK/EU) or cash return to shareholders +/- elimination of debt. And hopefully AA will have a chat with Malcy to update us all on his plans going forward.
On a medium-term view (2-3yrs) I'm trusting AA and his team to make KIST a success.
I've been adding a few TXP to my Dad's SIPP, and might add a few more if it drops a bit over the coming month or so in anticipation of Cas coming online mid-year.
One of Malcy's top tips for 2023 (kiss of death there, then, lol!)
Matt... good memory! Paul mentioned 2600/2700 psi during the Proactive presentation in Sept, from 14m10s onwards:
https://youtu.be/e25SVlLdo3s
Interesting comments from HBR in its FY announcement this morning:
"However, the UK Energy Profits Levy, which applies irrespective of actual or realised commodity prices, has disproportionately impacted the UK-focused independent oil and gas companies that are critical for domestic energy security. For Harbour, the UK's largest oil and gas producer, it has all but wiped out our profit for the year. This has driven us to reduce our UK investment and staffing levels. Given the fiscal instability and outlook for investment in the country, it has also reinforced our strategic goal to grow and diversify internationally."
Hopefully, the govt starts to take notice that the WFT is costing UK jobs and reduces UK investment and energy security.