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Very interesting. Does sound like the BOEM will be pretty forgiving of delays if there is a legitimate effort to move ahead. Thanks for digging deep.
Yes, very good information. But if BOEM doesn’t see concrete evidence that the milestones are going to be met, Gulfslope is screwed. Everything after the development well is drilled ie. completion, facilities, pipeline is no problem. It’s getting the millions to drill the well that has me worried. I wish we had some announcement that that money is available, either from Gulfslope or partners. In my opinion, Corvette Deep might be an even better, bigger prospect than Tau. It would be sickening if Gulfslope lost it and one of the big subsalt players made a 500 million barrel discovery there. Gulfslope needs to reassure the stockholders that Corvette is safe and under control for the long term, not just 3 months.
The end date is January 31, 2020, which allows the BOEM time for the lease to be put into the March, 2020 lease sale. Basically the BOEM is looking for some action to get the lease into production, like now. If they aren’t satisfied that things are moving forward they will make the lease available again and Gulfslope will have to spend millions to re-lease it. So, good news, but only for 3 months. I hope the company has the funds to get the Corvette shallow well drilled or they will run a real risk of losing both the shallow discovery and the deep prospect. At least they didn’t lose the lease when it expired on July, 31. Kudos to the Gulfslope team for getting at least a brief reprieve.
There is a downside to Delek being the biggest shareholder.They could decide that they have the right to more aggressively push the development of the company in the direction they want it to go. If this is at odds with the plan that Gulfslope management has in mind things could get complicated. Gulfslope is unusual in the fact that one person is largely responsible for the company’s existence and has provided the guidance for how to grow the company from the beginning. I wonder if this is about to change. I think it’s significant that there has been no announcement of what the next two-well phase will be (Corvette and Canoe Deep??) or whether Delek will participate. If Delek is only interested in following up on Tau with a second well, and has no plans for further exploration, then that puts Gulfslope right back in the position of having to find a partner for the next wells. I would love to hear how Delek, as potentially the biggest stockholder, plans to help make Gulfslope successful.
If Delek wants to get any return for buying 22% of Gulfslope then they are going to have to act to increase the company value. That means moving some of the “probable” reserves into the “proven” category. And the only way to do that is drill wells. I know past results won’t necessarily be duplicated, but last winter when Tau was being drilled the stock price went to 7 cents and pretty much stayed there for months. When there was positive news it went as high as 15 cents for a few days. So........Delek has to drill or write off their investment. When they do drill the stock might go to 7 or so like it did last time. Sounds like an argument for picking some up for 3.5 cents now. Unless you think Delek will walk away from Tau. Delek’s investment is in the company, not in a few specific prospects. So that gives them an incentive to participate in things like Corvette and Canoe Deep. Delek needs Gulfslope to succeed and they have the money to take a good shot at it.
Interesting that you brought up Cobalt. That was a bunch of ex-major oil company executives who got a line of credit from financial interests that was somewhere close to $1/2 billion. That allowed them to behave like a major in terms of staffing, technology and buying acreage. The down side to it was that the financial types wanted big success for their money, and they wanted it with the first well. That made it pretty uncomfortable when Cobalt didn’t have immediate success and the financial types started meddling in Cobalt’s business, despite their lack of exploration expertise. It all worked out after a few wells, and Cobalt was able to go public and dump the financial Albatross. Gulfslope could have done what Cobalt did when they were first starting out and grabbed a bunch of investment bank money. But John Seitz was well aware of the strings attached and went for “friends and family” funding to maintain the company’s independence. Not sure if he regrets his decision or not, but he is still around and still relatively independent. Just really unfortunate that the Tau well had so much trouble, and never reached the mother lode.
Great scenario. Key blocks for Corvette and Tau are safe for a year or more. They have a good rig under contract. They actually now have a platform next door to Corvette which can be used for producing the shallow discovery in less than a year. Once they have several thousand barrels a day of production the cash woes will subside rapidly. Assuming Corvette shallow works out, Corvette deep can be drilled at their leisure. And somewhere in there Tau 2 gets drilled with it’s 400 million barrel potential. I would say that Gulfslope is looking like a multibillion dollar potential value, and all they have to do to get a good chance at it is complete a reservoir that has already tested oil at good rates. I don’t know why so few people seem interested, but I at least am going to go along for this ride, for sure.
Davy Jones and LaFitte were two prospects drilled by McMoran in 2009, 2010. The targets there were in older rocks than Gulfslope is drilling, and the depths of the wells were record breaking. Davy Jones actually got below 34000 feet. In contrast Tao was only going to get to 25000 feet or so in the best case. It actually got to only about 15000 feet before hole problems shut it down. McMoran was looking for gas rather than oil. They found some pay zones and tried to test them, but nothing economic ever came of it. They were in such high temperatures and pressures that operations were extremely difficult to impossible. Gulfslope is going for much more conventional stuff in Miocene reservoirs which produce beaucoup oil in deeper water. A much easier play, theoretically, but shallow rock problems will have to be overcome, if Tao #2 is going to be drilled successfully and economically.
The lease on VR375 was supposed to have expired on July 1, 2019. I just checked the lease status on the BOEM website and it is still leased. I assume there is some sort of ongoing negotiation to extend the lease as was done with Tau. I recall that Gulfslope picked up VR376, right next door to VR375, just last year. There was some discussion here last year about Corvette likely extending onto both leases. Given that they have contracted for a rig to drill a shallow well (one month to drill), they must be thinking of drilling Corvette Shallow to hold VR375 and protect the deep (subsalt) structure. This will be indicated by some change in the status of VR375 from Primary to “held by operations” or something like that. It certainly appears that they plan to drill Corvette and redrill Tau in fairly short order. If either of them is successful that will validate Gulfslope’s ability to find oil. Should be fun to watch. Maybe profitable too.
I think you’re right. Which means Delek is definitely going to want to drill a second well to prove up all of those reserves. Even in the most likely case the oil would be worth billions. Which would cover all of the drilling costs and make a huge profit for the partners. They can’t just walk away and leave that in the ground for some other company.
My reading of the agreements indicates that Delek had a limited time after Tau #1 well was completed to commit to the next two wells in the program. Gulfslope appears to be permitting a well at Corvette, and has the rig to drill it. But I haven’t heard anything on a second well. At any rate, Delek didn’t appear to commit to the next two wells in the required time, so apparently that program is over with. This new shallow deal is with a small oil company, so Delek wouldn’t necessarily have anything to do with that. Having said all this, Delek has something like a 25% interest in Gulfslope, so I assume they plan to keep participating in whatever Gulfslope does. The relationship is probably being reconfigured as Delek gets a more realistic view of what is involved in subsalt exploration. Hope they will stay around with their deep pockets. But Gulfslope appears to be moving ahead, with them or without them.
I am thrilled to hear about this. It potentially means an important turning point that will allow Gulfslope to stop worrying about paying bills, and have the time and partners to let them prove up the subsalt shelf play. Very significant moment, and I can’t believe the market response was negative. I expect more good news shortly. Things are moving in the right direction. Next thing I would like to see is a plan for the 2nd Tau well, and a partner for Corvette. Also some indication that the Corvette lease has been extended. I’m very encouraged.
I know for a fact that 2 of the original four prospect generators that identified the Gulfslope portfolio, and supported drilling the first wells, are still actively involved in technical work for Gulfslope. Losing Ron Bain is significant, but he had to leave for personal reasons. Clint Moore is an able replacement with decades of GoM experience, and he is getting things done. The high-end geophysical processing that Exxon and BP use is available to anyone through the vendors, like TGS and Western Geophysical. There is no chance that either Tau or Corvette was worked up for drilling using the spec data and processing. That would have been done with proprietary re-processed data that only Gulfslope and Delek have access to. Yes, it would be much better to have newer raw data, but for exploration, the reprocessed spec. stuff is probably fine. The Canoe well would have used the spec time data, which is what everyone uses for bright spots. You seem to be awfully negative about Gulfslope and their exploration approach. I think they have probably done a perfectly industry standard job of finding good prospects in the Shelf Subsalt play. Have some patience.
Well, the thing that jumps out is that Delek is now 22% owner of an exploration company in the GOM. The only two choices they have are to just write it off as a bad bet, or continue to drill the portfolio of the exploration company. I would guess they will be reluctant to just drop it. But now that they have found out how expensive exploration can be when there are problems, they will probably try to change the terms to reduce their cost exposure.
At this point Gulfslope has no obligation to drill another partnership well, since Delek didn’t exercise their option for the next two-well package. So they may just decide to move on from Delek and find a new partner. Or Delek may hang around with a reduced interest in a three company partnership. Looks like Gulfslope is trying to move on with the program. We just don’t know who else will be involved.
Gulfslope just leased the block right next to Corvette, so it’s likely they think it has part of the prospect. And that lease will be valid for another 4 years. With the Corvette block they have two choices. If they don’t think the prospect is worthwhile, they can just let it go. If they like it they will have to drill or lose the lease. If they lose the lease they can try to re-lease it next spring at the next sale. But this sounds risky if some other company is lusting after the block. I would be watching the BOEM website for an APD and filing of an exploration plan. If that doesn’t happen in the next few weeks the block is probably history. Then the partners (if Delek goes along) will have whatever is on the nextdoor block, and we would have to hope that it’s a good prospect.
By far the most common result of an exploration well always has been “maybe we could develop this”. I think most people have this vision from the movies of the ground rumbling, the rig hands bailing off and then a huge fountain of oil spewing from the well. Sorry. What almost always happens is there is some evidence of reservoir, some evidence of hydrocarbons, maybe a hint that a trap is in place. But it’s all based on electronic measurements that can be screwed up in any number of ways. So.....I think it’s obvious that the measurements from both Canoe and Tau were inconclusive, because the partners have been unwilling to call either one a dry hole. What do you do in this situation? First, you can do every bit of analysis possible on the information you have. But in the end you have to gut up and go try it again. And the second time around use what you know from the first well to avoid the mistakes and get a cleaner, less ambiguous result.
Very good summary IMO. Question is, if Delek thinks they found some hydrocarbon zones that suggest a large deposit, what are they going to do about it? If Gulfslope had any money, I’m sure they would be finding a new rig and drilling a second well ASAP. But Delek is in the driver’s seat on this one because they have the deep pockets. The partners have, apparently, been through hell with the wildcat, but presumably could now drill a second well without the problems. Assume a new well might cost $50 million and result in 300 mm barrels? How could they turn that down? I’m hanging in until I find out which way the big dog is going to jump.
For non-geologic reasons the original Selectron (VR375) had to be renamed. Gulfslope decided to call it Corvette - the type of ship, not the Chevy. First bidding round had an atomic particle theme (Tau, Selectron, Proton, Electron, Photon, Tachyon). Second round theme appeared to be ship types. Hence Canoe, although that indicates a weird kind of humor.
With that strong version of things she is either going to be seen as a real idiot, or as a genius, depending on how things turn out. Hope she ends up a prophet.
Taking a little liberty with Nobel Prize winner Bobby Dylan:
Stick with me baby, stick with me Tau
Things should start to get interesting right about now
Maybe wishful thinking, but this can’t go on much longer. For better or worse, I think we will get some answer soon. (BTW the song is “Mississippi”. Great lyrics).
You’re right to point that out. It is pretty amazing that virtually no info has leaked. It’s very hard to keep secrets, especially about exploration wells. Huh. I’m still not clear what if anything would happen if Tau was announced as a discovery. Might just be a shrug. Or all hell could break loose. Hope we get to see!
99% probability it’s for drilling. They have been out there for months at at least $250000/day. They are either having unbelievable trouble, or will have the deepest shelf hole ever drilled. If Delek really is putting $80 million into Tau, then they are a serious company. Not what I expected - somehow I thought they would hightail it when things got tough. Course with even a small field at Tau they will get their money back. Shelf economics are truly outrageous, which is the point.
Couple more ponderables. If Delek and Gulfslope are becoming closer partners, as indicated by Delek buying more interest, then will they partner in all aspects of GoM activities? Will we see some sort of joint action involving Delek’s interest in Caesar Field? Delek might want to tap Gulfslope’s expertise in return for some production? Interesting to watch that.
Also, haven’t seen a bit of talk about Gulfslope leasing additional block at Canoe/Canoe Deep. Lots of room for speculation there. It’s got to be positive, though, I would think.
Everyone is naturally focused on Tau for obvious reasons. But I’m thinking Tau is less important to the overall Delek/Gulfslope effort than we might think. Could even have a nasty dry hole there and just keep forging ahead. Lots going on.
Once the deal closes, either Chevron or Occidental will be the operator. Anadarko will be history, unfortunately.
Not anymore.
Kind of surprised that no one is talking about Delek’s purchase of interest in the Caesar Field in the Gulf. This will give them an additional income stream which can be used for exploration and development. So they should be even more bullish on drilling exploration wells with Gulfslope. And, since they aren’t an American company, they could use Gulfslope as a sort of American subsidiary to simplify US operations. I think it is very positive for both Delek and Gulfslope over the next few years. Really good news IMHO. Only caveat is that the Caesar deal still has to close.
A bypass means that your original hole to the desired subsurface target has gotten messed up and the bypass is essentially having to redrill it. A sidetrack indicates that you want to drill a separate hole to another target, or possibly the original target higher up on the structure. Either way it says to me that they must have some encouragement in the original hole, or why spend more megabucks going to a different location? Cartwheels, for me. Now it is just a matter of getting to the new target(s) and logging some pay. That could still fail for any number of reasons, and Tau could be dry/subeconomic. But sounds like they might have some encouraging geologic results for the play even then.
The BOP is a device on the rig that prevents the well from flowing uncontrollably. Short for Blow Out Preventer. Government requires that drillers test it every two weeks to make sure it will work in an emergency. Tests involve pressuring it up to certain levels, which may be what was referenced. Not likely any pressures from the wellbore itself.
It’s pretty obvious from the length of time the rig has been out there, and the number of different wellbores, that they have been having trouble getting anywhere. Bypasses usually are a result of losing the hole and having to go around the mess. Essentially drilling a section and then having to redrill some or all of it. That could explain why it is taking forever - they’re not only drilling it once, then they drill it again. A sidetrack, on the other hand, usually indicates that one target has been penetrated and the well is being re-directed to that target in another location, or to another target. Bypass - trouble. Sidetrack - cartwheels. Haven’t been following all of the permitting on the government website, but if a Sidetrack shows up for approval, that could be a nice indication.
Even if they didn’t re-lease anything, and why wouldn’t they, they would still have half of Corvette, all of Deep Canoe, a big chunk of Proton and potentially Tau and Canoe development. That alone would be enough to keep them going for years. Lease expiration is a non-issue. Unless there is some competitor out there that has been hiding out, not bidding in the sales and with the proprietary data to see the prospects. That is what I would call very unlikely. Gulfslope is still the only game in town, and they can have all the leases they want for a relative song.
In this play, because there is basically only one company pursuing it, the only way you lose a lease is if you stop going after it. If they expire, you just lease them again with no competition.
To everyone: Oil exploration is very complex, so I understand why there is confusion. Gulfslope’s emphasis is to try to find deepwater type oil accumulations on the GoM Shelf, the Shelf being the shallow water area that goes out a long way from shore. The company has never leased a “deepwater” block, so they obviously want to stay in the shallower water where everything is cheaper. So, yes, they would never be on a list of companies drilling in deep water. This should all be covered somewhere in the public information on Gulfslope. This board is pretty outstanding about providing information - if you have questions just ask rather than fumbling around and speculating. Also, if the company had released the rig, or made any other fundamental move on Tau, we would have heard. The rig is still at Tau and conducting some kind of operation. Beyond that is unknown, and we will have to wait for news.
W & T Offshore bought a bunch of blocks in Eugene Island and northern Green Canyon along a north-south trend. They operate Mahogany, so they are familiar with the play. They don’t do a lot of exploration, so this is an interesting move for them. Doubt if they are looking shallow, so they must see a deep subsalt structure?
That block is adjacent to VR378, which is where the Canoe well was drilled. Interesting.
It will be extremely interesting to see if Gulfslope bids on any blocks tomorrow. And how it effects the SP. I agree wirh those who are seeing this as more of a long term play, rather than a quick hit. A nice pickup of several new leases would reinforce that view. Also interested to see if any new competitors show up. Will be an interesting day.
Cobalt assets were all in deep water, which means 5 or 10 times higher costs to produce a barrel of oil. So Gulfslope barrels should be worth a lot more. Typical production facilities in deep water ca. $2 billion. For Tau, probably $100 million or less. The shelf is the place to be these days.
C’mon guys. If we can see that leases are going to expire, surely the Gulfslope team can see it. This is not an uncommon thing that you don’t get the well drilled until late in the lease term. The government wants badly to get wells drilled so they have a number of ways to extend the lease terms if the company can show a plan to get them drilled soon. On Corvette I think I saw that an exploration plan had been filed, so that will probably give Gulfslope a good case. Also, if you have a lease go beyond the term, that doesn’t mean you have lost it forever. You can always pick it up again. There is so little shelf activity that releasing is pretty easy.
The lease sale next week will be very interesting. If Gulfslope is active that would indicate that they’re in for the long haul. I’ll be watching closely to see if the level of competition is going up.
Most likely answer if Tau is a discovery would be a second well at Tau after the wildcat at Corvette. Objective would be to confirm the Tau reserves and look at any remaining deeper targets which the first well couldn’t reach. Obviously Delek would want to be involved in a second Tau well. Haven’t heard any confirmation that Delek is signed up for Corvette.
Often there will be a supply boat tied up alongside the rig if they are doing something major like casing or changing out the size of the drill pipe. Could be there for several days. No particular significance to it at this time IMO.
They do, and it will be in downtown Houston.