Sirius Petroleum Share Discussion Threads

[solarno lopez] 22/9/2016 10:51

.................Game on.......................

[dr rosso] 22/9/2016 10:41

CPR acc to Gaffney.


A Competent Person’s Report (CPR) is an independent technical report on the oil and gas assets (or mineral assets) of a company. It is normally required for an Initial Public Offering (IPO) in the oil and gas (or mineral mining) sector and for other material transactions such as mergers, acquisitions and takeovers involving a listed company in this sector.

The aim of a CPR is to provide a responsible, unbiased and independent opinion on the technical aspects of the company, with the ultimate purpose of informing and protecting investors.

Minimum Requirements for a Competent Person

The ESMA and AIM requirements to be classified as a ‘Competent Person’ are similar: professional qualification is required along with membership of an appropriate and recognised professional association. The Competent Person should have at least five years of relevant experience in the estimation, assessment and evaluation of the type of mineral or fluid deposit under consideration (e.g. oil or gas). In practice, it is usually the case that the “Competent Person” will be a firm of consultants, rather than an individual person, and the person signing off on the CPR will typically have anything from 20 to 40 years’ experience rather than just 5 years.

The Competent Person should be independent from the applicant (listing company), its directors, senior management and advisors. The remuneration of the Competent Person should be by way of a fee that is in no way linked to admission or value of the applicant, as this would compromise the independence of the Competent Person. It is also stipulated in the CPR requirements of AIM that the Competent Person should not be a sole practitioner; ESMA does not require this but in practice it is virtually impossible for a single person to prepare a CPR as a multi-disciplinary team is usually involved.

Contents of a CPR

The ESMA and AIM requirements regarding the contents of a CPR are also similar.

There should be an overview of the licences held by the company, with expiry dates and obligations (e.g. exploration wells, or minimum expenditure) and a list of assets associated with each of the licences. A geological overview is usually included, which should be written in such a way as to be accessible to readers with basic geological understanding. Where production has taken place from one or more of the assets, produced petroleum volumes and associated operating expenditures should be provided for at least the previous three years.

A key part of the CPR is concerned with the statement of the Reserves and Resources associated with each of the licences, with a brief description of how and by whom these were estimated. There are (unfortunately) numerous sets of standards that define Reserves and Resources and give guidelines for how they are to be estimated (see future article or contact the authors), but only the SPE PRMS and COGEH are recognized by both of the London Markets, while the Norwegian system is also allowed on the Main Market only. All classes of Resources are generally reported, i.e.

- Reserves (Proved, Probable and Possible): those quantities of petroleum that are anticipated to be commercially recoverable by application of development projects to known accumulations from a given date forward under defined conditions;

- Contingent Resources (Low (1C), Best (2C) and High (3C) estimates): those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations, but the applied project(s) are not yet considered mature enough for commercial development due to one or more contingencies; and

- Prospective Resources (Low, Best and High estimates together with an estimate of the “Geological Chance of Success”): those quantities of petroleum that are estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects.

A second key part of the CPR is a “valuation of Reserves”, which is required for AIM but optional for the Main Board. In fact, what is presented in the CPR is not a “market valuation”, but an “economic evaluation of Net Present Value”. Market valuation of the listing entity is performed by the Sponsor or NOMAD in setting the share price. The economic evaluation in the CPR usually takes the form of an estimate of the post-tax Net Present Value (NPV), at a 10% discount rate, of the forward cash-flow of the projects associated with production of the Reserves, under certain economic assumptions, which must be clearly stated. Sensitivities to key economic assumptions, such as oil and gas prices, project costs, discount rates, etc., are usually also presented.

Preparation of a CPR

A CPR must be an independent opinion on the technical aspects of the company, but it will rely a great deal on auditing existing interpretations, provided by the listing company. Budget and time constraints generally preclude a complete reworking of the original data, which can be very extensive. Data are normally provided to the Competent Person in a variety of industry standard digital formats. A kick-off meeting is typically held during which technical workflows can be discussed.

A multi-disciplinary approach is usually required for the preparation of a CPR, which is made much more efficient and consistent by using a multi-disciplinary team in a single location. The team would typically cover all of the following disciplines (depending on data availability and project maturity):

- Geophysics
- Geology
- Petrophysics
- Reservoir Engineering
- Production Engineering
- Facilities and Cost Engineering
- Commercial/Petroleum Economics

The typical workflow can perhaps best be understood in reverse order. The final step in any evaluation of Reserves volumes is a cash-flow calculation, which serves to establish that the development project is economic and to determine the economic limit for production (the end of project life). For assets governed by a Production Sharing Contract (PSC) or similar type of contract, the cash-flow calculation is also needed to determine the Contractor’s net entitlement.

Running the cashflow calculation obviously requires an understanding of the applicable contract terms and fiscal regime, the basis for product pricing and any applicable tariffs. It also requires estimates of future production and the associated costs. The Competent Person may estimate these independently or audit and accept (potentially with some modification) those proposed by the company. Where independent estimates are made, these are usually done with simple methods, such as “decline curve analysis”, which is essentially a process of identifying trends in current production rates and extrapolating these into the future. Such simple calculations often serve as checks on more complex modelling work in an audit process. Costs may be estimated or audited using the Competent Person’s in-house database of costs in similar (analogue) projects.

Any reputable consultancy preparing CPRs will have internal review processes to ensure the quality and rigour of the technical work, consistency from one CPR to the next, and compliance with stock market rules and guidelines.

Conclusions

In summary, a CPR is a report by an independent technical/commercial expert in support of an IPO or other stock exchange transaction and is required by stock exchange rules for mineral mining and oil and gas companies. The CPR is required in order to provide a responsible, unbiased and independent opinion on the technical aspects of the company and to inform and protect investors. The CPR is prepared following technical due diligence procedures and the effective date of the CPR should typically be no more than 6 months earlier than the date the transaction takes place.

[dr rosso] 22/9/2016 10:35

Roland Barbullushi is a world renowned geology expert on these offshore basins. Partner/colleague of Graham Lyon.

[sherl0ck] 22/9/2016 10:24

"Rockflow are effectively saying there is a 50:50 chance that they aren't enough resources for full field development"

This is a subtly misleading statement. If you refer to the Society of Petroleum Engineers guidelines for the application of PRMS (Nov 2007) the chance of development (CoD) is given as the 'chance that an accumulation will be commercially developed'.

Scale of resources will be one relevant factor but "any contingencies that currently preclude the project from being classified as commercial" are considered, some of which are non-technical/geologic focused such as the DPRs approval of our FDP, receipt of drill permit, firm commitment from Sirius and funders to proceed with O-2 etc...

Even a high profile project with massive 1P/2P reserves, whilst likely being denoted as having a high chance of full field development (maybe >80%), wouldn't logically hit 100% CoD until commercial production is actually achieved & full field development confirmed.

So given the early stage of Ororo, the number of contingencies, need for further appraisal work (EWT), no proven reserves, the current lack of firm commitment and funding to proceed even with Ororo-2 etc, I think 50% CoD is very fair. If you look at other Rockflow CPRs and other CPRs on contingent resources in general, you'll see it isn't at all an abnormal figure for this type & stage of project. I've also discussed this with a petroleum engineer who has himself authored CPRs. I remain comfortable with my investment.

[dr rosso] 22/9/2016 09:53

Ororo-1 down to 10,000 feet encountered the Upper Cretaceous oil and gas bearing zones. Stopped there due to very high psi. The prolific oil hides in the deeper sands, as Gaffney knows. Albian/Lower Cretaceous. Very similar geology all round that Delta/Benin/Dahomey coast.



Elsewhere offshore, Afren's appraisal drilling of an extra 300m down the Ogo well on OPL310 resulted in a tripling of 2C reserves from 225mmb to 775mmb.

Here's nearby Aje... Project Description
The Aje field is located in Oil Mining License 113 in the Benin Embayment. In 1996, the field was discovered by the Aje-1 well, encountering oil and gas in reservoirs of Cretaceous age, which flowed at an aggregate rate of 60.2 MMcf/d and 1,729 bcpd and 2,389 bopd over three zones. In 1997, an appraisal well, Aje-2, flowed 16.5 MMcf/d and 450 bcpd from the shallower zone tested in Aje-1, as well as 3,866 bopd from a deeper separate additional zone which had not been encountered in the Aje-1 well.

In June 2008, the Deepwater Pathfinder drillship drilled the Aje-4 well in 1,000 feet (305 meters) of water. The well was designed to evaluate two objectives, the first being to test the lateral extent of the Upper Cretaceous oil and gas bearing reservoirs, which were successfully tested in previous wells. The second objective was to evaluate additional deeper exploration targets, particularly the Albian, to map the underlying field. The well results confirmed the objectives were achieved, and the field was deemed commercially viable.

Aje has multiple oil, gas and gas condensate reservoirs in the Turonian, Cenomanian and Albian sandstones.
The field's development is being managed by Chevron, as technical advisor to YFP. The plan likely calls for a subsea development tied-back to an FPSO to process gas, LPG, condensate and oil with gas exported via a tie in to the WAGP or through a direct pipeline to the Lagos gas infrastructure.

[1alfi] 22/9/2016 09:10

Bobo Kuti, CEO of Sirius, commented:

"I am delighted to have received independent technical third-party confirmation of the material value we believe exists in the Ororo Field and support of the Company's chosen development strategy. Moreover, the field economics are robust at current oil prices. This is a major step forward toward finalising the funding and other measures necessary to bring the Ororo Field into first production."

Let the company drill the well and confirm what is down there. Better than probalistic speculation.

If/ when funding is secured the CPR has served its purpose.

[solarno lopez] 22/9/2016 09:07

what a noble gesture !

[flazak] 22/9/2016 09:05

Dr Rosso I don't know who you are. I don't know what you want. If you are looking for commission, I can tell you I don't have money. But what I do have are a very particular set of skills; skills I have acquired over a very long career. Skills that make me a nightmare for people like you. If Sirius Petroleum go bust now, that'll be the end of it. I will not look for you, I will not pursue you. But if it goes to 20p, I will look for you, I will find you, and I will buy you a drink.

[ruedolf] 21/9/2016 23:55

" Sherl0ck 21 Sep '16 - 14:21 - 55306

Ruedolf - 50% chance of full field development seems completely fair given that we currently have no funding confirmed yet for even Ororo-2. "

I doubt funding effects Rochflow's estimated chance of full field development... more likely its all down to geology risk... if the resources are there the funding will follow and verse versa .

Rockflow are effectively saying there is a 50:50 chance that they aren't enough resources for full field development which is on the high side given that a well was drilled already and is extensively studied over the years.

Ororo may only be capable of producing from one well and hence the $8.5m npv estimate by rockflow .... which seems to be a geological risk in the immediate area where oil tends to accumulate in small pools as can be seen in the number of small oil fields in the surrounding area which tend to be small and subeconomic as drrossa has pointed out ...

" Dr Rosso 21 Sep '16 - 11:27 - 55297

Ruta, Shango, Oloye and 2 or 3 more these smaller 5mmb fields into production. 8 of them flowing 2.5k boepd is uneconomic for a major "

[dr rosso] 21/9/2016 23:05

OML110, OML95 North, and OPL241. These 3 are all in Ondo offshore territory. Are we seeing a Northwards extension of the 2012 Escravos Gas Project, Sirius-Owena working alongside Schlumberger-Chevron? A gigantic gas programme hidden behind the front of the Ororo marginal?

[dr rosso] 21/9/2016 22:25

In which case, you can pay me 1% of your gain when this hits 20p (and it will.)

[carados] 21/9/2016 20:40

Just to let you people know I may not be as skilled in the market as you lot but I have 4 million shares invested in this baby and am going on your info☺

[dr rosso] 21/9/2016 19:53

Extracts from previous rnss ....

Jan 2012
"Should Sirius decide to proceed to field development, Sirius will be entitled to a 40 per cent. interest in the Ororo field, jointly operating the field with Guarantee and Owena, and Sirius will fund 100 per cent. of the development costs."

Oct 2011
" The Ororo-1 well tested at c. 2,200 barrels of oil per day ("bopd") from a single zone, and 600 bopd from another; two further zones tested gas, and eight zones remain untested.... the Ororo farm-in would mark the first stage of the delivery of our strategy to derive significant value for our shareholders and partners via the acquisition of high quality marginal field oil & gas assets to build a strong upstream business. The Ororo field itself represents an optimal first asset"........
The closest producing fields are Mina, Isan, and West Isan, all of which are operated by Chevron and are situated between 4km and 6km from Ororo providing a low cost tie-in opportunity."

[carados] 21/9/2016 19:43

Would imagine maybe with his name somebody from Nigeria??? Maybe???

[carados] 21/9/2016 19:42

Epo dokita has posted again☺ something is a foot☺

[6cer] 21/9/2016 19:30

Dr Rosso - from your last post can you speculate as to the likely value per Sirius share ?

[dr rosso] 21/9/2016 18:28

A 241

Big point today is that Ororo has been shown back in 2012 to be designated as a multi-field hub.
£100m capex for development of a stand-alone 20mmb marginal seems excessive to me. £100m for a hub...hmm.

There is just no way on earth that the likes of Schlumberger, Glencore, BTG, Havoc would be interested in production from a sole marginal field like Ororo. 5k bopd for starters from G zone, fair dos, but these guys will be targeting 100k+ boepd from a pipeline of assets.

[carados] 21/9/2016 18:25

Sorry Dr Rosso. No offence DrRichard☺

[drrichard] 21/9/2016 18:12

And the Ace, DrR? Oro,the hub, marginal fields, 241, the field and uncle Tom Cobbley and all?

[carados] 21/9/2016 18:07

And what's the ace Dr?

[dr rosso] 21/9/2016 17:54

Playing cards close to chest.

10 is Ororo upper zones D - G
J is Ororo deeper sands
Q for full field development
K for the outlying OML 95 marginals to be tied-in

[sherl0ck] 21/9/2016 14:21

Ruedolf - 50% chance of full field development seems completely fair given that we currently have no funding confirmed yet for even Ororo-2, no booked 1P/2P reserves and only one well has ever been drilled on the field 30 years ago, so even a 75% 'high chance' of full development would be completely inappropriate at this stage, with respect to the further appraisal work required to support that decision.

Circa £100m capex for full field development doesn't seem outrageously expensive to me, considering this is the high estimate based on a high resource case and could encompass anything from 5-8+ wells. A decision to spend this amount of money is underpinned by a greater understanding of the scale of the asset.

And looking at how other Nigerian field reserves have often increased (sometimes quite significantly) following additional drills, the potential upside here could be very good.

The Board have always talked about their own 'management expectations' for Ororo but have kept this close to their chests. I guess the CPR based only on what we currently know, gives us and funders a sensible baseline to work with.

[stu1210] 21/9/2016 14:14

I bloody well hope so Flazak...but I'm not holding my breath

[drrichard] 21/9/2016 13:57

Flazak, I am with you on that.

[flazak] 21/9/2016 13:56

I have a good feeling that we are nearly there!