Advance Energy Share Discussion Threads

[therealtonythetiger] 21/12/2020 16:26

About Buffalo Redevelopment Project

Carnarvon was awarded the WA-523-P permit in May 2016 for an initial six-year term which included the previously developed Buffalo field. The Field was discovered by BHP in 1996 and subsequently developed using four wells drilled from a small, unmanned wellhead platform installed in 25 metres water depth, tied back to
an FPSO.

Production commenced in December 1999 at production rates up to approximately 50,000stb/d and terminated in November 2004 after the production of 20.5MMstb of highly-undersaturated, light oil (53°API) from the Jurassic-age Elang Formation. All existing facilities and wells were decommissioned and removed prior to Carnarvon being awarded the permit.

Carnarvon initially focussed its technical work on reprocessing of the 3D seismic dataset using state-of-the-art full waveform inversion (FWI) technology. This work supports the interpretation of a significant attic oil accumulation remaining after the original development, based on sub-optimal positioning of early wells using
poorly processed seismic data. Reservoir modelling has been conducted using the latest structural interpretation and available well data, including an extensive history-matching effort to calibrate model/well performance to production rates and water-cut development (governed by strong aquifer drive) observed during the original production period.

Based on this work, independently audited volumetric estimates of contingent resources in the Buffalo oil field are 31.1 million barrels (2C) with low estimates of 15.3 million barrels (1C) and high estimates of 47.8 million
barrels (3C) - Refer to Carnarvon Petroleum’s ASX announcement on 28 August 2017.

[sweet karolina2] 21/12/2020 12:13

For those who still don't believe that readmission placings can't be done at a fraction of the share price at suspension, cast your minds back to What happened when CEB became ADL. Dave Whitby broke AIM rules and ramped CEB shares up to 1.2p, the readmission placing was done at 0.2p. Warrants at 0.2p were issued to existing shareholders, but very few were exercised, which is part of the reason ADL ran out of money without even starting to drill the promised well, earning itself its first going concern emphasis of matter in its first annual accounts produced just 6 months after readmission.

For those who think the BoD will just walk away from the deal at a 0.05p price, ask what alternative do they have. Failing to raise the minimum to do the deal is tantamount to announcing the new kings also have no clothes - just like the last lot and the lot before. It was obvious to me when the new BoD first arrived they had no clothes, but there have been enough mugpunters to support small keep the lights on placings to keep that fact hidden from casual observers.

What will happen to the share price if the suspension is lifted on cancellation of this deal because they could not raise the cash? How many more times can these guys get away with doing keep the lights on placings on the vague promise of being able to do some great deal? Given the past company track record of doing nothing but issuing new shares and delivering nothing how many chances is the market going to give this BoD before the lights get turned out for good?

I never fail to be amazed at how many mugpunters there are out their prepared to keep throwing good money after bad, but the supply is not inexhaustible. With tough economic times still to come I expect the pool of mugpunters to dry up fairly rapidly.

[therealtonythetiger] 21/12/2020 11:38

About Buffalo Redevelopment Project

Carnarvon was awarded the WA-523-P permit in May 2016 for an initial six-year term which included the previously developed Buffalo field. The Field was discovered by BHP in 1996 and subsequently developed using four wells drilled from a small, unmanned wellhead platform installed in 25 metres water depth, tied back to
an FPSO.

Production commenced in December 1999 at production rates up to approximately 50,000stb/d and terminated in November 2004 after the production of 20.5MMstb of highly-undersaturated, light oil (53°API) from the Jurassic-age Elang Formation. All existing facilities and wells were decommissioned and removed prior to Carnarvon being awarded the permit.

Carnarvon initially focussed its technical work on reprocessing of the 3D seismic dataset using state-of-the-art full waveform inversion (FWI) technology. This work supports the interpretation of a significant attic oil accumulation remaining after the original development, based on sub-optimal positioning of early wells using
poorly processed seismic data. Reservoir modelling has been conducted using the latest structural interpretation and available well data, including an extensive history-matching effort to calibrate model/well performance to production rates and water-cut development (governed by strong aquifer drive) observed during the original production period.

Based on this work, independently audited volumetric estimates of contingent resources in the Buffalo oil field are 31.1 million barrels (2C) with low estimates of 15.3 million barrels (1C) and high estimates of 47.8 million
barrels (3C) - Refer to Carnarvon Petroleum’s ASX announcement on 28 August 2017.

[sweet karolina2] 21/12/2020 11:19

So the mugpunters have finally done a little bit of most basic research - ie found the Carnarvon equivalent ASX announcement.

They still can't find the Chance Of Geological Success (COGS). That is something that would be in a CPR, but there is not a CPR, only internal workings with some meaningless claim that there has been some sort of independent audit.

It is no good just finding information on a company website, you need to be able to analyse it critically. You can be sure that real investors will not be satisfied with

"I am sure that ,with decades of experience they have carried out the necessary due diligence to ensure the value and economic viability of the deal."

Real investors will be looking to work out their on risk reward balance. There is just about enough info, albeit tainted by the optimism of the company looking to get someone else to pay for the bulk of the project.

Before we look at the risk reward for someone thinking about taking part in the ADV placing, it is worth looking from the perspective of Carnarvon. Whilst CVN is massive compared to ADV, it is a small cap ASX listed company that has a few projects, none of which are in production so it has no cash flow. Its prime project is Dorado in which it holds a minority stake and is not the operator. That project is in development and will suck up most of the cash CVN has. It is clear why CVN is looking to farm out B10. CVN has been looking for a partner ever since the jurisdictional aspects were settled. Their ideal partner would have been a larger more experienced company that could have found the $20m from its own cash flows and probably taken on the role of operator. That the best they could do was to link up with ADV speaks volumes about the project and the current state of the market - with many producers struggling does it really make sense to invest in a new project? Especially a relatively small one which has not even had a proper CPR done.

So what are the risks. From a CVN perspective if they could avoid paying anything, ie the partner comes up with the full $20m and then follows through with the development funding, they would have passed off all the risk leaving them with 50% of the project - nice deal and makes a lot of sense to CVN.

So what are the risks from an ADV new investor perspective.

The well may not get drilled at all - it happens, something goes wrong and all the money goes without a well being drilled. Cast your minds back to the ADL readmission where money was raised to drill a gas well in Indonesia, which never even got started before all the money disappeared.

The well might get drilled and find no oil - the COGS, which we do not have as there is no CPR, would put a figure on that. All we know is the system has produced oil in the past, but they are drilling a previously undrilled crest. COGS is high but not 100%.

The well most probably will find oil, however how many wells get plugged and abandoned because they are not commercial? All we have is optimistic guess work by the company trying to get someone else to take the risk. Coulter is a good example of the sort of thing that happens. The well was drilled, it found oil but the well was in the wrong place. The well might be in the right place, but flow rates just not good enough. The pressure is aquifer fed and the water cut might just be too high - these things happen all the time.

The well might achieve its aim and convert some of resource into 2P reserves - 1C resource becoming 2P resreves is reasonable. Will this be enough to generate sufficiently positive NPV to enable development funding to be obtained? The fact that CVN has put the onus on ADV to obtain the development funding does not bode well. Lots of promising projects fall at this hurdle.

Development funding could be obtained but then something else goes wrong - another oil price crash, escalating costs, technical difficulties who knows. The lenders will have covenants to protect themselves and enable the sale of the project to be forced so they get their money back - again this sort of thing happens.

The well does get into production but does not deliver the expected cash flows - again this happens all the time. The whole process is educated guess work with no guarantees.

So let's have a look at the rewards. On the information available, if all goes according to plan then a rough estimate, based on current 1C resources being produced over 5 years from 3 wells, of post tax project level NPV is around $220m - could be better could be worse and we won't get a realistic NPV until after the appraisal well results are known. So what does that translate into in terms of post tax cash flow back to ADV. Lots of assumptions needed but using reasonable yet conservative assumptions it works out as an NPV for ADV investors who have put in $13m to fund the $10m for 25% of about $20m. That assumes that the new investors own 99% of ADV. The reality is it will only be between 90%-95% (based on a placing price of around 0.05p).

So mug punters do you think a serious investor, who will work all this out for themselves, would take all that risk of losing $13m in order to have a chance of gaining $20m?

If you think that is a good deal then contact the brokers and ask to be included in the placing - they will bite your arms off for anything as they won't get their nice fat fees if the placing fails.

[therealtonythetiger] 21/12/2020 07:27

About Buffalo Redevelopment Project

Carnarvon was awarded the WA-523-P permit in May 2016 for an initial six-year term which included the previously developed Buffalo field. The Field was discovered by BHP in 1996 and subsequently developed using four wells drilled from a small, unmanned wellhead platform installed in 25 metres water depth, tied back to
an FPSO.

Production commenced in December 1999 at production rates up to approximately 50,000stb/d and terminated in November 2004 after the production of 20.5MMstb of highly-undersaturated, light oil (53°API) from the Jurassic-age Elang Formation. All existing facilities and wells were decommissioned and removed prior to Carnarvon being awarded the permit.

Carnarvon initially focussed its technical work on reprocessing of the 3D seismic dataset using state-of-the-art full waveform inversion (FWI) technology. This work supports the interpretation of a significant attic oil accumulation remaining after the original development, based on sub-optimal positioning of early wells using
poorly processed seismic data. Reservoir modelling has been conducted using the latest structural interpretation and available well data, including an extensive history-matching effort to calibrate model/well performance to production rates and water-cut development (governed by strong aquifer drive) observed during the original production period.

Based on this work, independently audited volumetric estimates of contingent resources in the Buffalo oil field are 31.1 million barrels (2C) with low estimates of 15.3 million barrels (1C) and high estimates of 47.8 million
barrels (3C) - Refer to Carnarvon Petroleum’s ASX announcement on 28 August 2017.

[sweet karolina2] 20/12/2020 22:25

Still no COGS then

[therealtonythetiger] 20/12/2020 21:28

Some light reading (link copied from LSE)

hxxps://www.carnarvon.com.au/

Then click LATEST ASX ANNOUNCEMENTS 17th december

[therealtonythetiger] 20/12/2020 21:27

Carnarvon Petroleum has entered a binding agreement with Advance Energy concerning the redevelopment of the Buffalo oil field offshore northwest Australia.

[cal57] 20/12/2020 20:05

Carnarvon said independent costs analysis showed the field could be redeveloped with three production wells for less than $US150 million and operated at an cost of between $US80 million and $US100 million over five years.

RELATED QUOTES
BHPBHP Billiton
$43
Working on a contingent resource of 31 million barrels and current Brent oil prices of around $US74 a barrel, Carnarvon expects the field to generate about $US2.3 billion in revenue.

hxxps://www.afr.com/companies/energy/timorleste-banking-on-billiondollar-boost-from-former-bhp-oil-field-20180503-h0zkrm

[cal57] 20/12/2020 19:57

Carnarvon Petroleum Limited (ASX:CVN) has received new data that shows increasingly clear definition around the producing reservoir in the Buffalo oil field.

The data further improves imaging at the Elang formation, which is the producing reservoir in the field off Western Australia’s northern coast.

A seismic image shows reservoir up-dip of the Buffalo-5 production well into an area Carnarvon expects will contain unproduced oil.

The reservoir has been reconciled with important well data within the oil field.

[...]

[sweet karolina2] 20/12/2020 19:56

And the COGS?

[cal57] 20/12/2020 19:56

The above results have been possible due to significant increases in computing power since the field was last in production in 2004. Carnarvon has been working in concert with the seismic reprocessing firm, DownUnder GeoSolutions, to achieve the current results. Further, more detailed illustrations of the above are provided in Figures 1 and 2 below.

hxxps://www.energy-pedia.com/news/australia/carnarvon-looking-to-take-buffalo-oil-field-project-forward-to-drilling-and-development-172908

[cal57] 20/12/2020 19:46

News listings
energy-pedia development and production
Australia flagAustralia
Australia: Carnarvon looking to take Buffalo oil field project forward to drilling and redevelopment

20 Feb 2018
Photo - see caption
Highlights

Third iteration of FWI seismic reprocessing technology was recently completed
This new data further improves the imaging of the Buffalo oil reservoir
Third iteration of FWI seismic reprocessing is being used to support development planning
Carnarvon Petroleum has provided an update on its subsurface work in the Buffalo project in WA-523-P. The update follows those previously provided to ASX on 31 July 2017, 28 August 2017 and 5 September 2017.

In its announcement of July 2017, Carnarvon said it had completed an extensive body of technical work around the Buffalo oil field and that there was strong evidence the original field development did not produce all of the economically recoverable oil. This was due to imperfect seismic imaging and mapping, which led to suboptimal well placement and significant areas of unswept oil. Of note, in 2004 those wells were still producing approx. 4,000 barrels of oil per day when production ceased.

In its announcement of August 2017, Carnarvon said the Buffalo field contains a best estimate resource (2C) of 31 million barrels of light premium oil, an that there is a range of options to redevelop the field and scoping studies show that the redevelopment of the Buffalo oil field is economic at current oil prices; even at the 1C outcome. This indicates the project to be low risk, and gave Carnarvon the confidence to advance the project immediately.

[cal57] 20/12/2020 19:31

Drilling & re-development features
7
A two stepped approach to re-development
Buffalo-10 well ▪ Drill a ~30 day well up-dip of previously drilled wells
▪ Suspend the well as a future production well
Resource ▪ 1C Resource: 15.3 million barrels
▪ 2C Resource: 31.1 million barrels
▪ 3C Resource: 47.8 million barrels
▪ The resource estimates will be re-evaluated after Buffalo-10 well
Development optionality ▪ Either wellhead platform connected to an FPSO (figure 1); or
▪ Mobile operating production unit (MOPU) / converted jack-up rig
(with production equipment) connected to an FSO (figure 2)
▪ Drill one or two more production wells
▪ There is a lot of previously used, low cost equipment available that
is suitable for the Buffalo field
▪ The selected option will be based on the result of the Buffalo-10
well and market pricing of the above development options
Low cost & fast
development
▪ Shallow water development with highly productive reservoir leads
to a low cost development using proven development concepts
▪ Some early development studies have already taken place meaning
the time between Buffalo-10 and development can be compressed
Rapid payback period ▪ Anticipated flow rates and low cost environment results in a short
duration between developing the field and a return on investment
Robust economics ▪ The resource size, special fiscal regime and low cost development
concept options result in strong economic outcomes


hxxps://www.carnarvon.com.au/wp-content/uploads/2020/12/2157542.pdf

[sweet karolina2] 20/12/2020 14:24

So BARTS what is the 1C resource and the COGS of the project?

Answer those to establish that you are not a mugpunter and have done some basic research so that others can rely on you and not need to bury their heads in the sand by filtering someone who at least knows the right questions to ask.

[barts] 20/12/2020 12:46

Best to filter the bashers, you will find life suddenly seems a lot less stressful...GLAH

[sweet karolina2] 20/12/2020 11:49

So where is the CPR on the project? Have you done any research yourself? What is the 1C resource and who has derived that and how?

Whitby had decades of experience as did Gorringe.

As I ask further up, what is ADV bringing to the party ahead of funding? - very little. If you were putting in £10m (gross to have $10m net and fund the PLC for over 2 years) to get a 25% stake in the project would you be happy that you only had 2/3rd of that 25% and the other 1/3rd went to existing shareholders who are bringing very little. Look at things through the eyes of serious investors not through your own self interested rose tinted glasses. That way, one day, you might stop being a mugpunter and start being a proper investor.

At the placing price you are deluding yourself with, $10m for 25% becomes $13m for 17%. Find out what the 1C resource is, factor in that COGS is high but not 100% as the prospect has never been drilled before. Ask how much should be paid per barrel for such a resource (somewhere between $3 and $5) then look at the all up capital cost - around $120m and ask does this offer an attractive risk reward for serious investors who have many other places where they could invest their money for a much better risk reward balance.

[cal57] 20/12/2020 09:09

It has everything to do with the board.I am sure that ,with decades of experience they have carried out the necessary due diligence to ensure the value and economic viability of the deal.Funding is often raised at a 15-20% discount.At the price your predicting ,the deal won't go through.As a mug punter,I thank you for your concern.Sweet? More like Sour.

[sweet karolina2] 20/12/2020 00:07

Nothing to do with the board, just commercial reality. It does not matter how good a board is they can't make a silk purse out of a sow's ear.

95% chance they won't be able to raise the money. If they do it will be at around 0.05p.

Have you done any research at all into the project?

[fund1] 19/12/2020 20:22

I guarantee you this it will come back higher than 0.25. You are judging this board against boards of old totally different kettle of fish.

[sweet karolina2] 19/12/2020 14:21

Have you managed to find the CPR? The estimates are an in house job!

Cautionary Statement

The estimates of contingent resources included in this report have been prepared in accordance with the definitions and guidelines set forth in the SPE-PRMS.
A combination of deterministic and probabilistic methods were used to prepare the estimates of these contingent resources.

The resource estimates outlined in this report were compiled by the Company’s Chief Operating Officer, Mr Philip Huizenga, who is a full-time employee of the Company. Mr Huizenga has over 20 years’ experience in petroleum exploration and engineering. Mr Huizenga holds a Bachelor Degree in Engineering and a Masters Degree in Petroleum Engineering. Mr Huizenga is qualified in accordance with ASX Listing Rules and has
consented to the form and context in which this statement appears.

Carnarvon is not aware of any new information or data that materially affects the information included in this announcement and that all material assumptions and technical parameters underpinning the estimates in this Presentation continue to apply and have not materially changed.

This document may contain forward-looking information. Forward-looking information is generally identifiable by the terminology used, such as "expect", "believe", "estimate", "should", "anticipate" and "potential" or other similar wording. Forward-looking information in this document includes, but is not limited to, references to: well drilling programs and drilling plans, estimates of reserves and potentially
recoverable resources, and information on future production and project start-ups. By their very nature, the forward-looking statements contained in this news release require Carnarvon and its management to make assumptions that may not materialize or that may not be accurate. The forward-looking information contained in this news release is subject to known and unknown risks and uncertainties and other factors,
which could cause actual results, expectations, achievements or performance to differ materially, including without limitation: imprecision of reserve estimates and estimates of recoverable quantities of oil, changes in project schedules, operating and reservoir performance, the effects of weather and climate change, the results of exploration and development drilling and related activities, demand for oil and gas, commercial negotiations, other technical and economic factors or revisions and other factors, many of which are beyond the control of Carnarvon. Although Carnarvon believes that the expectations reflected in its forward-looking statements are reasonable, it can give no assurances that the expectations of any forward-looking statements will prove to be correct.

[therealtonythetiger] 19/12/2020 12:01

Fundy

"On completion of this transaction Advance will own up to a 50% beneficial interest in a proven oil field with material resources: independently certified 2C oil resources of 31.1 MMbbls"

[sweet karolina2] 19/12/2020 10:38

Ahh the delusion of mugpunters.

The capital costs are enormous $20m just for an appraisal well into a previously undrilled area - whilst the likelihood of finding oil (chances of geological success) must be high, that does not mean it will be commercial - it is a relatively small resource. There is no chance of getting debt funding until it is upgraded to 2P reserves.

If it is commercial there is then a further $100m to bring it into production, all of which is down to ADV to fund through equity and debt (30/70). Why would anyone think to ask an AIM micro cap with a track record of abject failure to try to fund such a project? The answer is simple nobody else fancies the risks involved.

The placing will need to be for a minimum of £10 gross to cover all the fees, the $10m minimum and ongoing PLC costs - there would be no cashflow back to ADV for at least 2 years. MCap at suspension was less than half of that.

So what is ADV bringing to the party? All they have is a high risk deal, an AIM listing and a little bit of cash from the last placing. It won't be the usual bucketshop placing to flip to mugpunters to keep the lights on. It will require serious investors who will need to see a clear risk reward balance. It is highly unlikely that such investors would be remotely interested in putting money into a company that has had a going concern emphasis of matter on every single annual report since its last readmission. But let's suspend that reality for a minute and think about how much would serious investors be willing to pay for what ADV is bringing to the party. It is not worth more than AIM shell value plus cash - say £500m. Add a bit for the opportunity to get into the project (noting $10m only buys 25%). I can't see a placing price above 0.05p being remotely attractive to any serious investor.

Time will tell but all the talk of a higher shareprice is just deluded mugpunter nonsense. At least with the shares suspended you can't waste anymore money buying in the market. However you could contact Optiva / Novum and ask to be let in on the placing, but do your research very carefully on the prospectus.

[cal57] 18/12/2020 21:35

Yep agree I think once the shares start trading again next year the share price will be a lot higher.These guys know what they're doing and they've skin in the game which is good sign.

[fund1] 18/12/2020 21:26

Be nice for once to have a board that looks out for shareholders very few and far apart. But so far he as been spot on. He definitely talked about funding in part with debt so I think it will be 50/50 and definitely at a much higher price.