Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Is it overthinking it to guess that there was some hurried selling to take profits, and then some buying interest based on the filing of the EP? Just a thought. I checked the BOEM website and the EP was received on February 15, 4 months ago. That’s about twice as long as those usually take.
Wanted to say that the problems that Gulfslope ran into on Tau-1 were not an indication of screwing up by their engineers. Even the big boys have to deal with those problems all the time. I was involved with the drilling of two GoM exploration wells at ConocoPhillips and they both ran into pressure problems and got stuck in gunk and had to redrill sections of the hole. It’s just what you have to deal with when you drill in the GoM. Managed Pressure Drilling (MPD) didn’t exist back then, so when the mud weight got within half a pound-per-gallon of the formation pressure you had no choice but to run casing. With MPD you can dynamically fine-tune the mud pressure to the point where you don’t have to worry about losing mud or taking a kick. So you just keep drilling. It will make a huge difference in Tau-2 (if they use it).
Will do. If you guys have had enough let me know.
I think there is a good chance that they will get the well done this year. But with everything that is going on - Covid shutdowns, lack of capital for projects, Delek financial uncertainty - it could be that it doesn’t happen.
I would say that the biggest risk for subsalt on the shelf is lack of sufficient reservoir. Tau looks like it is going to have lots of it. The wet sands are a worry. Overall I think at this point it is maybe a toss up - 50/50. But I have been wrong before.
You’re welcome. I will have more, unless you guys get sick of technical stuff. Doesn’t take much to get me going.
One more and then I will go away for awhile. I have been thinking about why the sands were wet. Assuming Gulfslope properly evaluated the prospect, there must be a trap at Tau. We know there was good quality reservoir. So either no oil migrated into the trap, or it leaked out the top or the side. If I’m right that the subsalt rocks were overpressured, which would not be a surprise, then the shales may not have been competent enough to provide a topseal. As they drill deeper they could go through a pressure regression which allows the shales to hold together enough to be a topseal. I have seen this happen in a couple of deep water fields, but it could also happen on the shelf. If that happens then the sands below that point could all be pays. Assuming that oil migrated into Tau, and that is usually not a problem in these types of prospects. It is so frustrating, knowing that they were probably very close to having a discovery and then got stopped. Or it may be that Tau really is a true bust. I hope they get another bite of the apple.
Unfortunately that wellbore is probably not usable. They were probably in a very small hole at the bottom, and apparently had a downhole blowout of some sort. I would guess they were lucky to get the hole stabilized and plugged, and don’t want anything more to do with it. When you have a lot of things happening in a wellbore, the rocks tend to get really messed up. And you usually leave a bunch of pipe in the hole unless you get really lucky. Tau-1 is history, except for the well logs. Hope they at least have some of those.
As far as the well cost, I believe the original Tau-1 projected cost was supposed to be around $45 million dry hole. In the end with all of the problems, I think the final cost was about double that. But the beauty of the insurance settlement is that the partners get to drill to the TD of Tau-1 for free. If it costs the insurance company $100 million, they have to spend that and can’t charge the partners a dime. The cost for Gulfslope is only their share of getting from where the insurance money runs out to the Tau-2 total depth. We know they drilled into sands that were wet, but had better quality than they were expecting. So all they have to do now is drill deeper until they find more sands and one or two that have oil. Let’s assume they have to go 2000 feet, and Gulfslope is responsible for 25%. I don’t know the rig cost, so I can’t be very accurate. But somewhere between 3 to 5 million would be a guess at what Gulfslope needs to provide.
Losing Clint was indeed a major blow. He worked long hours, handling all kinds of issues for very little compensation. He was a true believer in Seitz’s vision, and he is impossible to replace. All of the original technical pros are gone now.
As is always the case in the GoM, Tau had a ton of trouble with Low Effective Stress. This is a condition where relatively shallow reservoir rocks are tapped into high-pressure deeper in the basin. The high-pressure deeper rocks produce a situation where the water in the shallower rock you are trying to drill forces the rock grains apart. You end up trying to drill something that is more like mush, than rock. You get into situations where there is a razor-thin divide between a mud weight that causes mud loss, and a mud weight which allows the well to flow. The only solution is to keep casing every 1000 feet, which eats up all of your hole size and drastically shortens how deep you can go. This explains the two extra casing strings the partners referred to in the PRs. It wasn’t any surprise what happened to them, because it happens a lot. Gumbo and over-pressure are very common. Having already drilled Tau-1, they should be able to handle it much better the second time around.
There were two issues. Clint Moore, knowing the challenges of gumbo on the shelf, had wanted to go with MPD, but the engineers thought if they handled the mud composition right could avoid the problem. Unfortunately that wasn’t true, and once the wrong mud was in the hole, they never got the situation under control. The other problem was they were getting massive amounts of gunk up from the hole and the cuttings handling system couldn’t manage it. Because they were near a waterbottom bio-buildup, they couldn’t just dump over the side. They had to drop everything down a pipe to the bottom, and the rig hadn’t been properly set up to do that. Pretty much a perfect storm of coincidental problems that all added up to having to stop all the time and fix something or other. Anyway, on the redrill they will have the MPD equipment on the rig, and a cuttings handling method that will work.
Delek isn’t authorized by the government to operate wells in the GoM, so any drilling will be done by Gulfslope, in partnership with Delek. Even if they get a permit, they don’t have a drill rig under contract, so would have to take care of that. I believe they could just re-establish the contract they had before, so that shouldn’t be a problem. There is some specialized equipment that is normally not on the rig that would need to be installed and tested. This is to enable them to continue drilling when they encounter the conditions that stopped them 4 or 5 times on Tau-1. I don’t know how many of the engineering staff at Gulfslope are still around, but that team will have to be put back together to handle the drilling operations. Hopefully the Gulfslope drilling team has been working along from home while the office is closed and has all of the planning and pre-drill processes well underway. Since this is essentially a redrill of Tau-1 they shouldn’t have to redo everything. But it is still going to be a drawn-out process. I am still concerned that Delek hasn’t publicly committed to drilling a second well. Without them Tau-2 is dead in the water.
You’re welcome. I will have more information coming up.
A relevant post would be something like this:
Gulfslope never announced whether Canoe Shallow was a dry hole or a discovery. Their partner, Delek, called it a dry hole and wrote it off. The seismic data available was too noisy and low frequency for Gulfslope to say anything definitive. I have heard that the seismic is being reprocessed to produce some new products which have shown pretty strong results with noisy, low-frequency data. That project is funded and ongoing. Gulfslope did announce that there was some thin pay in the well, so hopefully these new seismic products will show that it is enough to be economic. If that was the case then maybe Delek would come back in and the partners could consider developing it. Wouldn’t be a company maker, but it would provide some income.
Totally irrelevant
Very good points. There could well, be another crash this year, and if so, it will be the real one. Everyone should keep in mind that Covid-19 hospitalizations in Texas hit a record high yesterday. People who are hospitalized have a much increased chance of dying. 90% of patients put on ventilators don’t make it. So Texas Covid deaths will be climbing unless another shutdown is imposed. I really don’t think we should be talking about normalization and recovery at this point when the pandemic has yet to be addressed. The stock market is very much divorced from reality.
Having said all this, it actually has nothing to do with Gulfslope and their chance of surviving. That is all about Tau-2. Period.
The point is that Gulfslope’s prospect economics have always been spectacular, even with low oil prices. No-one disputes that. But if you don’t have any producible reserves the value of a barrel is completely irrelevant. Until Gulfslope can convince another company, like they convinced Delek, that there is a reasonable chance that their prospects contain significant reserves, they won’t have money to drill, and their reserves will remain theoretical. And as I pointed out, they have tried very hard, but they haven’t been able to convince likely partners that Tau, Corvette, Canoe Deep etc. are better than what those potential partners already have in their inventories. I know this is a fact because I have discussed it with a number of Gulfslope employees. It’s tough to get people to invest in an unproven subsalt play at any time. When the entire industry is reeling and everyone is just trying to survive, it’s nearly impossible. I hope Delek will step up and just provide the necessary funds, so they don’t lose those potential Tau reserves, and waste all the money they spent on Tau-1. It makes sense that they would, but they haven’t publicly committed to anything, which leaves us all hanging.
What Gulfslope runs into over and over is that all of the obvious, small, shelf partners have their own portfolio of prospects. In order for a Gulfslope prospect to dislodge one of their prospects, it has to be seen as superior. Most shelf players evaluate risk and reserves in a way that makes Tau etal. seem much riskier. For instance, the other guys routinely use amplitude and AVO analysis, which aren’t applicable for subsalt prospects like Tau. So it is very difficult to overcome the NIH syndrome without good hydrocarbon indicators, and we don’t have them. It’s a tough sell - an unusual play seen as higher risk, and lacking the usual risk reducers. Bigger players like Shell and Chevron and BP can see the potential, but they have generally eliminated their shelf operations, and prefer to stay with the proven deep water prospects. I have all the sympathy in the world for Gulfslope, because they have such a difficult job. Add in the economic difficulties of a continuing pandemic and I don’t know if Gulfslope will ever get new partners. I think what we have to hope for is that Delek gets their problems sorted out, and that they will work something out to pay Gulfslope’s share of Tau. The motivation would be that they recognize how big Tau could be and don’t want to lose those barrels to a competitor.
I was inclined to be a bit pessimistic about Corvette, because Gulfslope doesn’t appear able to drill even the Tau-2 well that is partially paid for. However, the Corvette leases both appear to be secure. Vermillion block 375 is in SOP status, which means the BOEM is waiting on Gulfslope to present a plan for appraisal and development of the Anadarko 1996 discovery. This would require a relatively shallow well to confirm the presence of the pay sand found by Anadarko. That well could be drilled from the existing production platform in Vermillion block 376, which I understand Gulfslope can access. So it would be a quick and easy way to get some production on line. The main Corvette structure, with targets in the upper and middle Miocene, similar to the Tau targets, is deeper. It would require a separate, more expensive well. The good news is that if Tau can be drilled and is a success, then Corvette is still there as a very substantial follow up exploration prospect. And it won’t be lost by lease expiration until after Tau-2 is drilled. If Tau is successful I would assume that Gulfslope’s funding problems might be much less of a problem. Best case scenario five years down the line would have both Tau and Corvette being developed, with combined reserves of several hundred million barrels. Just have to get Tau to work and we’re off to the races.
I have to think with the bid and ask being so far apart, and sellers asking for and getting a big premium over the bid, that GSPE is not being traded based on any real information related to their business activities. Everything about the way this is trading screams manipulation. It appears that somebody or -bodies are using this extremely cheap stock in a way I don’t understand to make money. There isn’t anything real that has come to light in the last two weeks that would explain very high volume and a big increase in SP. I don’t have the expertise to even guess what might be going on but it doesn’t seem legitimate. I hope I’m wrong. That’s why we need some real step toward drilling, so we can get back to investing in the real world, instead of the stock being a toy for people who are just messing around.
That 1 cent per share price that I have been fantasizing about looks attainable! Who would have thought we would be so close at this point. But 2 cents, 3 cents per share? Let’s not get out of control here guys.
Doesn’t matter what the details are, the fact is that Tau-2 is the only thing that Gulfslope has left that has a chance of getting drilled. It all comes down to one drilling permit, and I will keep checking on it. Will let everyone know when it shows up.
As of May 29, still no indication of any activity on Tau-2 permit or EP on BOEM website.
Gulfslope closed their office several weeks ago in response to the pandemic. As of last week they were still closed. Haven’t checked this week.
Do we dare hope to get to a penny a share sometime soon? SP soared a tenth of a penny today. In the green!
Just checked BOEM. No activity related to Gulfslope.
Well said. Thanks.
You’re scaring me Trip. Without Delek’s 75% share of the insurance money being applied to Tau-2, that prospect will be dead in the water. As it is, right now, Gulfslope barely has enough cash to keep the lights on. And capital sources, both financial companies and oil companies, are a smoking ruin. It will be an uphill battle for Gulfslope to put together funding for Tau-2. The only other way Gulfslope has to raise money is to sell new shares, and that is a joke at this point. Plus their current staff is a mere shadow of what it started out as. Ron Bain was a highly respected and capable VP of Exploration, but he has been gone for several years and he was never officially replaced. When he left, John just dumped his duties on Clint Moore, who was a great guy, but no Ron Bain. Now Clint has been replaced by a guy who I have been told is not at all well-regarded in the oil industry. I still think there’s hope, and I’m not selling. But if Delek goes away, it’ll be time to seriously consider bailing.
Thanks for jumping in. Investors in Gulfslope should be aware that the extremely experienced and well-thought-of geoscientists who took Gulfslope from zero to a potential huge player on the shelf are pretty much long gone. Only a couple of the original 8 are still working even part time for Gulfslope. John recently brought in a couple of new guys to handle all of the geology and geophysics, but in my opinion they don’t have the experience and knowledge of the shelf subsalt play that they need to get partners and get wells drilled. The only thread that is keeping the whole thing from falling apart is the insurance money for Tau-2. We don’t know at this point if Delek is even interested in participating in another well.
I am hanging on because Tau-2 really is significant, and appears to have a chance to get drilled. But the oil price isn’t helping. It will be a very near thing. It worries me that the BOEM still hasn’t granted a Tau-2 drilling permit. If that doesn’t happen it is game over. I won’t sell my stock at this point, but I won’t be too surprised if it ends up worthless.
Yesterday’s massive trading spree amounted, in the end to a little over $22,000 changing hands. Not exactly high finance.
Where the hell is our drilling permit? I know there’s a wee pandemic on, but those guys can work from home. I can’t believe they’ve been buried under an avalanch of applications, considering there probably won’t be more than a handful of wells drilled in the GOM in the next year. I’m beginning to strongly suspect that Gulfslope screwed up the permit application and are having to redo it without being able to meet in the office. There is no reason in the world why we aren’t drilling Tau-2 right now. Unless the new staff at Gulfslope doesn’t know what they’re doing.
Oops, should have said $6600. Point is the same.
With the current environment in the GOM, with virtually nothing going on, Gulfslope will be able to pick any rig they want for a virtual song. Not being on anyone’s drilling schedule is absolutely nothing to worry about. Worry about the absent drilling permit, if you want something to be concerned about. Until that shows up we will be dead in the water, with a SP as near to zero as you can go without actually being there. I’m tempted to buy another million shares, which at this point would cost about $2000. Imagine. That’s what you call cost averaging!
What’s going on with the stock is really irrelevant at this point. What is relevant is that Gulfslope has money for a Tau-2 well, and the well will be much cheaper than thought. At this point a drilling contractor might drill for cost, just to keep a rig and crew together and busy for a few months. We don’t care what the price of oil is until a couple of years in the future when presumably the price will have recovered. Since Gulfslope has no current production they aren’t having to shut in wells to avoid going broke. So there is good news. I just wish that the BOEM guys would get on the stick and approve the Tau-2 drilling permit. If we had that, things would be really good. Despite the meltdown.
Current oil price is $23.40/barrel, up 1.5% today. Not exactly a ringing endorsement of the “historic” agreement. As trump himself pointed out, demand is going to have to increase substantially to balance the market before anything meaningful in terms of price increases occurs. Probably will be a long wait. In terms of Gulfslope it doesn’t really matter, because by the time Tau is put on line the price will be up to a more normal level, and the economics will be great. What we really need to see now is approval of the Tau-2 drilling permit, and news about how the partners will pay for the extension below the insurance-financed drill depth. That will be historic news for Gulfslope stockholders.
Putin said today that he would be happy to cut Russia’s production if trump agrees to make similar cuts to US production. So believe the production cuts when somebody gets serious. All it has been so far is posturing for home audiences.
By the way, it is probably illegal for US producers to agree to cutting production together. Antitrust.
The rig won’t move until there is a permitted location to go to. So far BOEM doesn’t show that they have received, let alone approved, an application for any well site from Gulfslope. Doesn’t mean they aren’t working on it, but until it’s approved nothing happens. Also the Tau-2 may have a new location that might even be in a different lease from Tau-1. I don’t think they’re anxious to mess around in gumbo for weeks like last time.
I’m as anxious and hopeful as anyone here that Tau-2 will get going this spring. But patience is required. When they get their permit it probably won’t take long. Until then, that rig will stay in port.
The company which should be happy about reduced drilling costs is the insurance company which will be paying the bills. They are getting a big break. They can also take advantage of the lessons learned from Tau-1. Good chance everything will be smooth and cheap for Tau-2.
I’m guessing Gulfslope and partners are pretty much ready to roll and just need a drilling permit. Have heard from friends in the industry that BOEM has continued to work on application processing, so they shouldn’t hold things up. Maybe sometime in the next two months we will be drilling and can get a nice bump to the SP. If wishes were horses............
Well, it’s now official - GSPE is a (1) penny stock. A buck will get you a hundred. Hope they weren’t counting on selling stock to raise drilling funds! It’s ludicrous to see almost 2 million shares traded in one day on a stock that is trading for less than a penny a share. It is a truly odd situation. Who in their right mind would see this as a worthwhile investment? Or even know it existed? I know why I own it, but I have a lot of detailed knowledge from following it for years. Is it all insiders that are trading this? If so, a bunch of them are dumping it. It’s truly weird. I can’t imagine where this is going to end up. We’re approaching zero asymptotically.
Just to clarify - the insurance company settlement is to provide money for a new well to the depth of 15,254 feet, regardless of cost. At that point they will be gone, and any deepening of the hole will be the responsibility of, and will be paid for, by whatever partners are involved. You are correct that drilling cost reductions will be good for Tau, but only below 15,254 feet. Which is still significant, because the deeper they go, the more potential pay zones will be seen.
I think the Saudis are trying to kill the US shale play, which has always had dicey economics. Even the people involved in that play are not sure it will ever make money. Gulfslope is in probably the best economic scenario of any US oil trend, so they should survive even if a lot of other plays don’t. As you say, we just need to make a discovery and we will be flying. Global oil economics are not our problem. Funding the drilling program is.
I believe that was a sale, not a purchase, and I won’t sell anything until SP is back above $.50. May have to buy more if we get much lower.
Strange days indeed.
The point of Gulfslope is that they have access to large fields and a very low producing cost. There are pipelines already in place on the shelf that are not running at capacity. Gulfslope has already arranged to use the platform in VR376 that is no longer producing, if that proves to be the easiest way to drill Corvette. Saudi oil has to be shipped half way around the world to get to US markets, and that is expensive. Gulfslope should survive, because if they do find something at Tau or Corvette or one of their other prospects, they should be able to compete head to head with the Saudis or anyone else. Low finding and development costs are critical, and the guys at Gulfslope have always emphasized that.
Yes, that’s what the press release said. Maybe they’re right. But I will wait to see how the drilling goes.
At least this go-round they don’t have to pay to get through the gumbo zone. So if it does bite them it’s the insurance company that will be crying, not us.