Iog Share Discussion Threads

[ashkv] 26/8/2022 07:32

Xnjr "According to the EIA, once they get out of the 12¼" section (assuming we do!) there are another 70 drilling days to go including stimulation and well clean up. So probably unlikely to see any production from this well before November. With the 2nd already drilled well coming on stream after a further 40 days , or so."

Could you provide link for the above - it isn't from yesterday's IOG RNS?

[xxnjr] 26/8/2022 00:37

Would have preferred to scribble something more encouraging Dh!

[dunderheed] 26/8/2022 00:26

Good summary xxnjr.

[xxnjr] 26/8/2022 00:17

Hi folks. Just a couple of thoughts.

"At the time of [this] release, the Southwark A1 well was in the 12¼" section in the Bunter sandstone formation. Drilling progress to date has been hindered by drilling fluid losses both in this section and higher up in the well."

According to the EIA, once they get out of the 12¼" section (assuming we do!) there are another 70 drilling days to go including stimulation and well clean up. So probably unlikely to see any production from this well before November. With the 2nd already drilled well coming on stream after a further 40 days , or so.

"Tests are currently being run to establish the source of the water, which requires switching off either Blythe or Elgood for periods of time."

Both are horizontal wells with 1238ft and 1080ft Hz sections respectively. Ultimately finding the exact location of the saline water ingress within those sections could be less than fun.

[bbluesky] 25/8/2022 19:20

At the end of the day, they are in the right place at the right time.

[bountyhunter] 25/8/2022 19:05

No need to apologize I know you have a lifetime of knowledge and experience so it's me likely getting confused!
This saline/water/fluids downer does need some clarification by management, pronto imv or at least to be dealt with and communicated with a sense of urgency.

O/t have you checked out SOUC? More and more of the experienced O&G posters are appearing over there. NAI of course.
SOUC has compensated to an extent for the circus act over here today!

[dunderheed] 25/8/2022 18:48

BH apologies I wasn't saying this was water cut - I was just saying that when fluids invade well for whatever reason - they are titled more generically using such terms as those referenced in 2109.
It is indeed quite specific and I do wonder exactly what this may mean and the "solutions" - no pun intended.

[bountyhunter] 25/8/2022 17:46

There's a new presentation on the website today...



added to the header, at the end.

"Opex guidance revised from 10-15p/therm to 10-20p/therm (~$8-15/boe) to account for extra fluids handling costs"

not a very significant increase considering the sales price

[bountyhunter] 25/8/2022 17:11

Is it possible that these "saline fluids" could be coming from somewhere else rather than from the actual well(s)?

Don't say the sea that won't be funny!!

Presumably they should have done some analysis by now to help identify the source? This process seems to be taking some time considering the water was known about months ago.

At one point they refer to "saline produced water" which does seem to be rather unusual terminology if they mean water cut?

[dunderheed] 25/8/2022 17:01

hpcg - thanks very much I am very aware of what MEG is and does but, genuinely thank you for taking the time to help explain!

I was just commenting (perhaps not well!) I'd never seen such issues as referred - normally it is "water cut" or "water production" - not as exacting as "saline and MEG" etc etc!

[hpcg] 25/8/2022 16:51

Dunderhead - MEG is the monoethylene glycol loop. It is discussed within the text, including the reasons for using. Its standard for offshore gas. Injection is normally done at warm wet points like the well head. Once onshore it is processed to have salt and water removed before it is sent back to the platform for reuse.

"In early July, aqueous liquids first arrived at the Saturn Banks Reception Facilities (SBRF). These liquids include water and mono-ethylene glycol (MEG). MEG is intended to be used in a closed-loop system to inhibit free water and prevent hydrate formation in the pipeline. It is injected at the Blythe and Elgood wells as an MEG/water mix, recovered at Bacton and then regenerated and shipped back offshore for reinjection at the wells.

The timing of aqueous liquids production was in line with expectations, however the volume of water and salinity levels have been considerably higher than expected. At the current time the salinity of the returned fluids is higher than the maximum allowable for processing at Bacton. In order to prevent these high salinity fluids contaminating the other MEG users at Bacton, an alternating regime of batch slugcatcher liquid let down has been implemented.


These high salinity aqueous liquids and slugcatcher letdown constraints have required gross production to be curtailed over recent weeks, initially to around 40 mmscf/d and subsequently to 30 mmscf/d in mid-August in order to isolate the source of the produced water. Tests are currently being run to establish the source of the water, which requires switching off either Blythe or Elgood for periods of time."

[bountyhunter] 25/8/2022 15:59

"we have revised our 2H 2022 guidance to a more conservative 30-50 mmscf/d."

That's with just one well online at once which should be a temporary situation if it's just to identify which is producing the water cut.

H2 guidance was 45-60 mmscf/d so given the massive increase in forward gas prices today's fall seems overdone.

Much of the problem seems to be a lack of confidence in management given the confusing information over the "saline fluids" and lack of progress in understanding the problem and putting in place a plan to deal with this issue. Have they all been on holiday the last couple of months? Probably a silly question ;)

[kibes] 25/8/2022 15:09

There is a lot of uncertainty here. Water production may be minor but it can also become a serious problem which can become terminal in a gas well. Which is it? I've no idea. If there is a problem the wells may have to be choked back at lower rates to reduce water ingress. Currently we have wells capable of producing 60mmscf/d but only have one online producing 20mmscf/d. Is the one which is online (Elgood) producing water? If so, how much? They aren't telling us. The bottom line is are Blythe and Elgood going to be able to produce 60mmscfd, or not?

[hpcg] 25/8/2022 14:38

Dunderhead - I'm not congratulating the management on getting lucky with high gas prices, I'm saying that for investors it is a core component of the investment case, without which many, myself included, would not be here. I somewhat disagree about the predictability of high gas prices, there is endless evidence through events since the war started:

* Forward curve for the coming winter.
* European storage rate of fill.
* Nordstream 2 sanctions.
* Freeport LNG explosion and time line to delivery.
* French nuclear reactor problems.
* Nordstream 1 turbine.
* Hot dry European summer leading to lower hydro production and increased AC load.

Looking forward with the static war of attrition ongoing we can see these high prices going on at least through next summer. This is not just with reference to what the futures are saying but the practical reality of where supplies will be coming from.

I'm not surprised people have sold out, I should have reduced first thing but dallied having come off a stellar period across my portfolio. I'm not surprised people are angry, and I'm certainly disappointed, but the revenue line still provides not just protection but GAAP profit.

[sludgesurfer] 25/8/2022 14:34

ROBIZM,That's the issue. They don't yet know. Best case, they confirm the water has stabilised, they implement a change at Bacton to drain higher volumes of liquids and return both wells to full production. Worst case - one of the wells has an increasing water cut, they can't handle the liquids and the well needs shut in. Very worst case, the issue affects both wells. That's the problem with having your entire revenue stream dependent on 2 wells. It's the uncertainty that will continue to kill this. I could easily see the low 20s again.

[robizm] 25/8/2022 14:29

I sold lost £1000. No trust in management. Not blaming them for problems but bad communication (even SQZ had major problems with a well recently). Now log has started selling who knows where the price will go.

[bomfin] 25/8/2022 14:12

Well. I read the announcement this morning and managed to hurdle my way out of here at 38p ! Gee. What a pile.

[bountyhunter] 25/8/2022 13:52

The CalEnergy asset view:
(click UK then Saturn Banks)

[bountyhunter] 25/8/2022 13:47

Not all bad then. I guess this will take a while to crawl back up to my average of 37p however. Maybe if all goes smoothly with Southwark then that will be before Christmas. It could go back up before then if both wells are put back on stream simultaneously.

[tidy 2] 25/8/2022 13:44

BH have you spotted the ANGS production figures. Well B2 has alone been delivering at an equivalent rate of 5 million standard cubic feet per day, surpassing the Company's internal expectations51k scuffs per day. Cap 40m

[robizm] 25/8/2022 13:42

What worries me is they have not said what they must do to fix it. Is it both wells and does it involve getting a rig? They were 6 months late and now problems at all fields and they are still patting themselves on the back for a job well done.

[sphere25] 25/8/2022 13:33

Anddddd back to the original buy price.

All that time, which is an eternity at this end, and no progress in price. If you hear me banging on about the resource plays (and this one is producing with a big tailwind, let alone just a hole in the ground) being high risk and speculative, you can see why now.

Clearly the bull case is not over, and if they can fix these teething issues, the price will eventually end up higher. However, all these set backs are making me want to punch myself in the face so I've come out with a small gain.

I will look to re-enter IF they can resolve the issues and show the market sustainable form in hitting forecasts. I suspect a re-rating could be a while away and it might just bounce around in a range.

Judging by the way they were buying ahead of the results, the market clearly was expecting good news. An opportunity to sell at 40p and just above was there but there was no reason to with the way it was moving and no prior warning here - didn't see it coming.

All this engineering stuff is too technical for me. I don't know if all these issues are a sign of worse to come or not. I'll just watch the news and see.

Blooming resource plays! Should just stick to trading them.

All imo
DYOR