UK Oil & Gas - the Horse Hill rampers issue another misleading update - placings ahoy!

Comments

1. ---

   Simon Hodges

   9 March 2016, 04:07

   The average well flow in Iran is around 1700 bopd. If they genuinely felt this conventional well had 1500 bopd of production long term then you’d think given that all of them have no cash flow and only token production bought from real oil companies – that they’d want to get that well into production ASAP. They only had planning permission to flow test the well for a limited period and not to actually put it into production.

   http://irpages2.equitystory.com/websites/rns_news/English/1100/news-tool—-rns—-eqs-group.html?

   Strange then that it seems they don’t want to capitalize on this 1500 bopd gusher, preferring instead to press on with necessary permissions (and subsequent protest and planning delays) to return to the well and drill a horizontal sidetrack before conducting long term tests.

   “Following the final flow test in the overlying Portland, HHDL now plan to move full speed ahead to obtain the necessary permissions to return to the well, drill a horizontal sidetrack and conduct long term production tests.”

   http://irpages2.equitystory.com/websites/rns_news/English/1100/news-tool—-rns—-eqs-group.html?article=24050529&company=ukog

   Moving full speed ahead to obtain the necessary permissions to put the well in production would have seemed to more obvious route here. Obtaining the necessary planning permissions for a horizontally side tracked, fraccing type well – will hardly be consistent with the notion of HHDL moving ‘full speed ahead’.

   The delays only ensure more placings to come and hence the need to ramp this well to the max. I find the fact that they appear reluctant to put this conventional vertical well into production says a lot about what their real expectations are as to decline rates and what kind of stimulation may have been used in flow tests to date.

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   wildrides

   9 March 2016, 04:23

   “Crude has flowed to the surface via rod pumping “ ………oo errr Vicar . I suppose it beats having a “permeability superhighway” like they have over at 88E . Some how the knowledge that they are all “pumping their rods” over near Gatwick just feels right . Thomas thinks they need stimulation . Nesh Southeners .

3. ---

   wildrides

   9 March 2016, 04:30

   What bearing does Iran have on Horse Hill ? I know we are supposed to have Climate Change but I did not know continental drift had broken the land speed record ?

4. ---

   Simon Hodges

   9 March 2016, 04:49

   HHDL claimed oil resources at Horse Hill that put it on a par with the whole of Iran. The media consequently linked Horse Hill and Iran

   http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/11577265/Horse-Hill-gusher-is-a-test-case-for-new-onshore-oil-regulator.html

5. ---

   wildrides

   9 March 2016, 05:11

   Simon

   Aaaaaaaaaah …………… I see . How foolish of them . Far to much rod pumping among the HH management me thinks . Never pays to test ones own superhighway permeability …….. saps your strength .

6. ---

   Andrew Bell

   9 March 2016, 05:42

   With respect, we put out a similar announcement at RGM and I don’t think it’s at all misleading.

   It seems to me that the tone of the announcements made during this test period has been conservative, which it perhaps should be. Stephen Sanderson at UKOG has a genuinely deep understanding of the issues and wants to build a solid and reputable business. DL can be criticised for some things, but recruiting Stephen Sanderson was one of very best decisions he has made.

   I respectfully dissent from the suggestion that the flow rates declared overstated the case or lacked validity or stability; I gave, before I was bound as I am now by any collective responsibility for announcements, a personal opinion that some might have been rather cautious.

   I don’t think there was any indication of ‘sharp declines after day one’, and had there been a pattern of decline rather than stability, then the word stable could not have been put in the announcement.

   As for Brockham, you are quite simply wrong. The comparator is significant. The Brockham operators themselves described the results announced today to me as ‘fantastic’ and ‘gangbusters’, with better quality oil than they have, which is flowing freely out of a tight zone, with obvious implications both for flow rates and how much will be recoverable.

   And incidentally Brockham began its life flowing for quite a while at 150 bpd.

   But the big targets here are as you know the Kimmeridge – the lower two zones tested.

   The comparison you make here with the depletion rates of the Bakken of the US is invalid. That’s what happens with fracking shales. Production falls off quickly after say a year and new investment is required. This would be ‘not-fracking-not-shales’, so totally different. If one were talking of an expected pattern, it might be stable production for a couple of years, then gradual decline. But of course, we don’t know. That is what the extended flow tests for which planning permission is being sought are meant to give greater insight into.

   The planning regime in the UK is tough. With deference to Simon Hodges above, who may know much more than me, that is why a step by step sequence of planning permissions is required – a frustration to all onshore operators – so his criticisms seem unfair.

   Further information on the Portland flows will come. Then the independent studies on the Kimmeridge results will be in soon. People haven’t focussed on this passage from UKOG’s earlier announcement:

   “Further Reservoir Engineering Studies

   The Company has commissioned Xodus Group Ltd. to evaluate and interpret the reservoir engineering data collected in the Lower Kimmeridge limestone flow test as reported on February 16 and 17. The results will be reported once available.”

   That independent validation will be key. It will give insight into the potential and as last year the market may react to that. If new investors – probably needed – and oil industry players pay attention, it will be then.

   To my mind, a really significant question is: “what multiplier should be applied to the vertical flow results on the assumption of horizontal drilling?”

   In sum, I prefer my original view of 8pm yesterday to yours – which was that at every stage these flow results have astonished. We sold out a year ago. As soon as the very first of these results were out, we reinvested. we could hardly wait. The boundaries between what was known, what was probable, what might legitimately be hypothesised, and what was speculative were so changed – as were the target zones – that it was a quite different investment.

   Andrew

7. ---

   Simon Hodges

   9 March 2016, 07:01

   Andrew

   My point is to ask why they are horizontally sidetracking the well?

   “Horizontal wells are usually drilled to enhance oil production. In some situations the improvement may be dramatic – enabling development of a reservoir which would otherwise have been uneconomic. However, in cases where the improvement is likely to be less spectacular, horizontal drilling costs and benefits must be assessed carefully.”

   https://www.slb.com/~/media/Files/resources/mearr/wer16/rel_pub_mewer16_1.pdf

   With aggregate production from this conventional well being 1500 bopd which places it close to the Iranian average bopd then that is hardly uneconomic. Why not get permission to start this well producing now? They all need the revenue after all. Wells that are sidetracked are usually old abandoned wells or those which would be uneconomic to drill conventionally. According to the claims this well does not fit with the model as it is clearly productive or even astonishingly productive as you put it.

   When you write “If one were talking of an expected pattern, it might be stable production for a couple of years, then gradual decline.” That is precisely what Neil Ritson claimed about the conventionally drilled field in Goudron, but which showed average depletion rates of 85% within a year. Geology matters.

   Also the extended flow tests are destined to be carried out against the horizontal sidetracked well. The conventional well will never be put under extended testing and examination so we will never get to find out about depletion on that score.

8. ---

   Simon Hodges

   9 March 2016, 07:24

   Andrew

   I should also like to analyse these statements in your piece.

   “The planning regime in the UK is tough. With deference to Simon Hodges above, who may know much more than me, that is why a step by step sequence of planning permissions is required – a frustration to all onshore operators – so his criticisms seem unfair”

   My criticism is that given the frustrating planning regime in the UK, then wouldn’t it make far more sense just to get permission to produce the gusher now, rather than go through all the extra stages of getting permission to drill the horizontal sidetrack, then having to get permission to test that in turn – and then getting a third set of permissions to actually get it into production. Given there was always an easy out to produce now it seems that they don’t find permission seeking at all onerous and rather like it.

   So I would like to ask how your stating that the planning regime in the UK is tough – in any way renders my criticism as unfair as the tough planning regime is a fundamental axis of my argument?