Granby Oil & Gas Share Discussion Threads

[lowersharpnose] 03/3/2008 17:38

1. IIRC All debt will be paid back by the end of year one.

3. See 1.

lsn

[rapier686] 03/3/2008 17:20

2. "Next years gas price on the forward curve is 18p/therm"

Do you have a reference for that?
My information is the futures strip is approximately
S08 52.5
W08 66.0
S09 54.3
W09 65.7
S10 53.3
W10 63.3
S11 53.4
W11 63.2
S12 53.4
which would put 09 prices slightly ahead of 08.

4. 30mmcfd is 10Bcf/yr. Ample deliverability to get 20-30Bcf out in 4 years.
Note that Tracs's estimate was for a 2000' horizontal section. Ours is half that length but is providing adequate deliverability and being higher in the structure would I imagine enhance recovery.

[normannumpty] 03/3/2008 17:00

Des:

"they expect the five year production profile to remain the same"...where does it say this? If the pressure is lower they will recover less gas, therefore either the production rate will be less or the production length will be less or both.

The Tracs evaluation from the website suggests the p50 estimated pressure was 3100psi, with a low case of 2200psi. Seems they hit the low case and if you read the report it suggests that the p90 reserve case (based on 2200psi) was about 21bcf recoverable.

Assuming a new 21bcf figure and a capex of £60mm thats a large per therm capex, I think it equates to 30p/therm-ish. Plus opex, plus tarrif, plus they have to pay back the debt before they get any significant cashflow.....questions:

1: Is there enough to do that before the field is depleted/uneconomic.
2: Next years gas price on the forward curve is 18p/therm, is that a cause for concern?
3: Will they get a return on their own investment, that can only happen after the financier has had his paid back with interest I presume.
4:The Tracs report mentioned potential flow rates of 50-80mm scfd, they got 30mm, is this indicative the of production rate, and therefore a proxy for payback rate?

Lots of questions but no answers forthcoming.
Norm

[chopsy] 03/3/2008 16:35

HyperAl could you add the long term chart to the header please. TIA.

[deswalker] 03/3/2008 15:45

I was happy with the RNS. The pressure reading was in the lower end of the expected range but, if I'm reading it right, they expect the five year production profile to remain the same and so the NPV will remain the same (£13 mill after including the extra rig costs). With UK gas prices probably staying firm for a while yet (supply concerns) things are looking good for first production IMO.

Clearly some people disagree with me and are selling their shares.

[stevemarkus] 03/3/2008 15:23

Any idea why the latest drop ? The most recent RNS looked encouraging and didn't provoke a drop when issued, and I can't find any other news. Is this to do with a partner perhaps ?

[rapier686] 01/3/2008 12:57

Des, I agree the question needed to be asked because there's plenty who would provide a net present something-else and call it an NPV.

It's just the reaction was like if you asked a craftsman if he could just bodge something up for half the price : "I only know one way of doing the job - and that's properly!"

And for all that others may take a different view he's absolutely right, in a very real sense it isn't a value if there's deductions to come.

"Can't help feeling that the GOIL team have been working hard the last couple of years but without any luck"

Indeed and it must have been frustrating. They reminded us though that they only give a circa 20% COS to these wells so such a run is not entirely unexpected. And their luck did finally turn on the 5th throw with Kerloch.

[chelseapaul] 29/2/2008 20:55

Des,
Many thanks for your reply, i still have some niggles with the last RNS.

[rapier686] 29/2/2008 14:15

The question was specifically asked and the response was "of course it's after tax, or it wouldn't be an net present value". And it's also after the £3.5m overrun.

However as you say it's at a low discount rate and calculated at the forward gas curve rather than any lower figure. It's certainly not the kind of figure you'd expect completely reflected in the share price. And it was pre discovering the lower pressure.

"What does everyone else have ?"

An unhealthy reliance on other people's calculations :-)

Well I think it's apparent that those 4 suffice to justify the share price and the prospects, give plenty of upside - some quite large and carried through drilling. Truth time coming up on 5 of them over the next year. Detailed calculation is not required.

Cash needs keeping an eye on but there's plenty for now and Globe is free carried though the first well.

[deswalker] 29/2/2008 10:31

I should add that my £9.64 mill for Tristan is obviously much lower than the company's NPV(5) of £14.7 mill. A 5% discount rate is a bit low IMO and I'm also unsure about tax. When I was away I recall lowersharpnose saying that this NPV was post tax even though the Jan presentation doesn't mention this. Can he or anyone else who was at the meeting clarify the situation ?

[deswalker] 29/2/2008 08:56

chelsea,

I've got ...

cash + ASX:OEL shares = £11.12 mill (as of 31/3/08)
Tristan = £9.64 mill
Monkwell ($9 per boe risked at 80%) = £4.26 mill
Kerloch ($8 per boe risked at 70%) = £7.68 mill

Total = £32.70 mill

Shares in issues = 36.4 mill

Per share = 89.84p

What does everyone else have ?

Des

[chelseapaul] 29/2/2008 08:43

Sorry Des, but whats your estimate on cash?

[deswalker] 29/2/2008 08:40

Hi Rapier,

Thks for reminding me about this - it does make very interesting reading. I think it's fair to say that there maybe some reduction in reserves as a result of this pressure data. However it is comforting to see that it was already anticipated and that in spite of allowing for such issues Tracs still gave a P50 number of 14.7bcf and a P90 number of 11.8bcf net to GOIL.

I still interpret "Whilst the estimated bottom hole pressure of approximately 2,300psi (pounds per square inch) is at the lower end of modelled outcomes, the projected production volume and profile are both within the target range" as referring to whole life of the field and not just to the test. They wouldn't have used the word "projected" in that case as the test has already been completed.

All in all I've lowered my recoverable reserves by 10% and so my Tristan NAV goes from 30p per share to 27p per share. Cash + Tristan + Monkwell + Kerloch are now back to 90p per share.

Des

[rapier686] 29/2/2008 08:30

Not if the different horizons are in communication with each other - which they must be to drain it with one well. There will a pressure gradient but since the resevoir contains gas which isn't particularly dense (even at 2300psi) it'll be low : 0.075psi/ft : 15% of the gradient if filled with water. Only adds up to around 10psi variation over the whole resevoir.

[dreggspicker] 29/2/2008 08:14

Is it not possible the pressure can be different in different horizons of the formation, as the vent has been put in a higher location than first planned ?

[rapier686] 28/2/2008 23:24

A very interesting new section has materialised on Granby's website since I last looked:

Including a Tracs report on Tristan from Nov 07. A very big thanks to Granby for making these reports available to us.

I'm just reading it now, but Tracs did expect some pressure decline from the initial 3679psi through depletion of Tristan Main taking some of the aquifer support. Their mid estimate of current pressure was 3025psi and their estimate covered a range of 2145-3679psi. The reservoir was believed to be full to the spill point, so the loss of pressure probably does mean loss of gas in place.

I presume the statement "projected production volume and profile are both within the target range" refers to the volume and profile of the production tests rather than being a statement about reserves, which I guess have probably dropped as a result of how the reservoir pressure turned out.

[deswalker] 28/2/2008 14:32

bobby,

I doubt their target range is as wide as the difference between P and 2P reserves. Remember there are some very good points in the RNS besides the pressure measurements so I'm guessing they're still looking for the 2P number.

I emailed the company only last night as I was concerned about the previous couple of days trading but the RNS appeared instead of a reply. I was more concerned about further delays/problems with the rig or problems with the test so the news this morning was most welcome. Regarding additional costs, the RNS dated 28 Jan implies that the rig would be on site until end Feb and that the additional £3.5 mill was to cover these costs. It appears that everything has gone to schedule since then with the rig getting ready to leave so I don't see any further costs.

I notice from DNX's update that the Scolty well encountered problems and will now be drilled later in the year, probably after the Monkwell appraisal. I still think there's a chance that these might form a joint development in due course so if Monkwell comes in good then there might be an opportunity for GOIL to farm into 20% of Scolty on decent terms to keep things simple ? Just a guess ...

On the whole I'm very satisfied with this morning's news.

Des

[bobby 2] 28/2/2008 13:41

Des, true but there was a big range on their latest tracs report
low 11.8bcf best 14.7bcf high 18.0bcf,
so presumably not the 18, but closer to the 11.8

[deswalker] 28/2/2008 12:20

Aren't concerns about recoverables put at ease by the comment ...

the projected production volume and profile are both within the target range

[normannumpty] 28/2/2008 11:42

Indeed Bobby.

The pressure is most worrying. The original well, as I recall, had a pressure of 3500-3600 psi. If it's now 2300 psi it begs a couple of questions:
1: Did they expect that the reservoir had suffered depletion over the 20 years since the well was drilled? If not, then I would be very concerned now, if they did, then what did they expect?, and how does the new pressure impact receoverable reserves?

Pressure is a key factor in recoverability. at 3600psi the Gas expands by approx 200times at 2300psi its only approx 100 times. This means a lot less recovery. Given that costs appear to be over budget (I notice no comment on costs in the release), and that they likely have to repay the financier before they get any cashflow, this may not bode well for the economics of the project IMHO. I think we need a more fullsome explanation from GOIL that addresses these key issues.

[bobby 2] 28/2/2008 11:36

another clue seems to be the quote from David Grassick - they are delighted to have completed the test, not "we are delighted with the results of the test"

[bobby 2] 28/2/2008 11:30

it looked like a good result at first sight, but now i am not so sure!
"bottom hole pressure at lower end of expectations" must mean less producable volumes - yet no mention of downgrade in reserves! This has taken a lot longer and cost a lot more than expected - what is the impact on the value of the company - i suspect the large seller knows more than us!!!

[sranmal] 28/2/2008 11:14

Excellent results indeed.

Discovery well 49/29b-5 encountered a 80ft vertical gas column and tested at 16.7 mmcfpd. Development well 49/29b-11 completed with a 796 ft horizontal leg and tested at 30 mmcfpd with a calculated AOF of 48 mmcfpd.