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Very good interview with Mike which confirms all what was suspected.
https://audioboom.com/posts/7407804-valuethemarkets-podcast-027-with-mike-buck-ceo-of-petro-matad-matd
Heron-1 exploitation license application in process, we will see production in Q1 2020.
Incremental well count using FCF (eg no plans for any placing, generate the cash, get another well done on Heron - basic option pending band debt or farm out).
Confirms enough cash left for a cheap drill (2nd Heron well)
Heron size upgrades possible.
Gazelle - potential for thicker net pay meaning Gazelle may be a commercial size discovery.
South Tamtsag Basin (Erdenetsagaan area) potential for sone very material sized prospects now following Gazelle strat trap play prove.
No plans as yet for Phoenix or Raptor in 2020 however very interesting that they might consider using a truck mounted rig to drill bore holes into them in Block V, or at least VelociRaptor in Block V. The bore hole approach has been done before - very cheap way of proving oil or not. I like that, thinking outside the box.
Certainly looks very exciting and Mike has intimated quite clearly they have the cash to move forward in a steady way, getting Block XX into production and incrementally increasing production and therefore incrementally increasing Free Cash Flow to then reinvest.
Heron Pre-drill estimate
Heron 165 MMBO OIP with 15% RF giving 25MMBO recoverable.
So why is Mike so excited and delirious ?
Net Pay is bigger than expected as per old RNS - TICK
Porosity is way better than expected - TICK
Permeability is way better than expected - TICK
Structure 5 meters higher than pre-drill estimate, so its bigger - TICK
Flow rates (not stimulated and natural flow - wow factor) - TICK
165MMBO plus 20% for better net pay = +33MMBO
165MMBO plus 15% for better porosity = +24 MMBO
165MMBO plus 10% as bigger area = +16.5 MMBO
So now Heron might well be 165+33+24+16.5 = 238.5MMBO OIP
Now........lets say the RF is not 15% but given the very light oil and the high permeability its more like 30%......
Now means Heron is looking at being 71.5 MMBO recoverable. Which is currently 100% owned.
Now you might see why Mike is pretty damn pleased and beaming from ear to ear. BUT BUT BUT, dont forget that Gazelle has been cased and will be tested in future.
Gazelle may be the key to some very serious upside. We have NGL's in the wet gas, a lot of it and then also 3M of net oil pay and this was drilled at the fringe. So not only may Gazelle deliver something important, it will deliver some very serious upside from similar strat trap plays down at the Erdenetsagaan area........ones which are multiple times the size of Heron - a few over a hundred million MMBO recoverable targets and all there in Block XX at the southerly end of the Tamtsag basin.
Lots of upsides and upgrades to come out yet..........expect to see many interviews and loads of PR over the coming weeks as MATD have a very good story to tell now and will be a producer very soon and generating their own cash.
This was the scoping economics for Blocks IV, V and XX done some time ago (oil was 90US$ then).
As can be seen, the company expects flow rates of between 100bopd to 200bopd per production well on any of the blocks.
Link below, click on it to open the pic.
https://i.ibb.co/VxSf5bx/Annotation-2019-10-19-063458.jpg
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Testing at Heron-1 commences !!!
https://www.investegate.co.uk/petro-matad-ltd--matd-/rns/commencement-of-testing-of-heron-1/201910030700025800O/
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As its been brought it up I have run some figures to get an idea of the minor difference flow rates would have to valuations. Using 60US$ a barrel
Expectation is 200 bopd per well. You can discount down say 15% if the flow rate is a more conservative 100 bopd. You can mark up 30% if the flow rate is a more exceptional 400 bopd.
NPV10 based on Heron being 25 MMBO recoverable 145 million US$ = 118 million GBP circa 18p a share @200bopd per well @60US$ oil price
NPV10 based on Heron being 40 MMBO recoverable 260 million US$ = 213 million GBP circa 32p a share @200bopd per well @60US$ oil price
NPV10 based on Heron being 25 MMBO recoverable 124 million US$ = 102 million GBP circa 15.4p a share @100bopd per well @60US$ oil price
NPV10 based on Heron being 40 MMBO recoverable 222 million US$ = 213 million GBP circa 27.5p a share @100bopd per well @60US$ oil price
NPV10 based on Heron being 25 MMBO recoverable 189 million US$ = 118 million GBP circa 23.5p a share @400bopd per well @60US$ oil price
NPV10 based on Heron being 40 MMBO recoverable 338 million US$ = 213 million GBP circa 42p a share @400bopd per well @60US$ oil price
Running those figures with a 50% farm out to PetroChina who drill the development wells for that farm in cost......
25 MMBO @60US$ @50% post farm out @ 200 bopd per well = 9p a share
40 MMBO @60US$ @50% post farm out @ 200 bopd per well = 16p a share
Best case 40 MMBO @60US$ @50% post farm out @ 400 bopd per well = 21p a share
Worst case 25 MMBO @60US$ @50% post farm out @ 100 bopd per well = 7.7p a share
Obviously those are just rough and ready bag of the fag packet calculations and there are other possible scenarios.......but I think it gives a good idea of where valuations can be post the flow test being carried out successfully.
I absolutely think PetroChina will farm in - they will not pay cash, they will drill x number of development wells for their farm in 50%.
At the current 5p level and with Gazelle-1 to come, and MATD having cash left over to develop Heron-1 into a producer if so needed.......its cheap if you ask me.
Apologies for any errors.....just bashing from figures around.
At this juncture, if I compare what SOCO had in Mongolia (SOCO sold the producing field to PetroChina who currently own it) - it seems we have better reservoir than SOCO found.
Heron-1 has found more gross potential oil pay/net oil pay than a lot of the SOCO producing wells found.
Read through the SOCO news releases......and expect similar from MATD in the coming months and years as they take Block XX into becoming the next producing field in Mongolia with the Heron discovery.
https://www.socointernational.com/news_70
https://www.socointernational.com/news_60
https://www.socointernational.com/news_46
https://www.socointernational.com/news_35
https://www.socointernational.com/news_31
Enjoy.......given what SOCO found, what MATD have found with Heron-1 - its looking very rosy for Heron !!!!!!
Interview with CEO Mike Buck today :
https://www.valuethemarkets.com/2019/09/12/valuethemarkets-podcast-020-with-mike-buck-ceo-of-petro-matad-matd/
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PetroChina wells produce on average at up to 200 bopd. These are all pumped wells.
It will be interesting to see the flow rates from Heron-1, will they match the 200 bopd of the PetroChina wells ? or will it be better than that given the better porosity and permeability ?
From 13 minutes 10 seconds in for MATD.
https://total-market-solutions.com/2019/09/10/malcy-talks-oil-gas-xiv/
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Mike seems confident, going for Velociraptor as the 4th well........the biggie in Block V.
.......He revealed the fourth and final well of the campaign will target a prospect dubbed Velociraptor - named after a dinosaur in the Jurassic Park movies - in its Block V in the west of the country that has prospective resource potential of as much as 200 million barrels............
https://www.upstreamonline.com/incoming/1847833/petro-matad-in-mongolia-oil-strike
Petro Matad in Mongolia oil strike
London-listed explorer hoping for commercial flows from discovery amid talks with PetroChina for possible early development Steve Marshall
9 Sep 2019 07:29 GMT Updated 9 Sep 2019 14:04 GMT
Share:
Petro Matad has hit oil pay with the Heron-1 exploration well sunk on its Block XX in eastern Mongolia.
The probe, which was earlier stalled by land use issues after being spudded in July this year, encountered a 77-metre gross interval of potential oil reservoir after being drilled to a total depth of 2960 metres into the primary target in the Lower Tsagaantsav reservoir, the London-listed company said in a statement.
It stated the reservoir interval, which included both oil and gas shows, was “very similar” to productive reservoirs found in wells at the T19-46 oilfield immediately to the north in PetroChina-operated Block XIX in the landlocked East Asian country.
The well, which was drilled as an appraisal to the latter oilfield, had a pre-drill resource estimate of 25 million barrels of mean prospective recoverable resources.
Casing of the well is now being carried out ahead of a testing effort that is likely to require a further rig to be brought in.
Petro Matad chief executive Mike Buck said the test is aimed at delivering commercial oil flow rates so the company can move into the exploitation phase at the discovery once its exploration licence on the tract expires in July 2020.
“We have already been in dialogue with PetroChina with a view to using its existing field infrastructure to develop the find so that we can move into early production, contingent on commercial flows,” Buck told Upstream.
He added that commercialising the discovery would enable it to retain the block so that it could continue to appraise further possible finds on the acreage.
The well was drilled by DQE International’s rig 40105 that will now suspend it and then be mobilised to drill the Gazelle-1 hole in the same block, one of three Mongolia tracts wholly owned and operated by Petro Matad.
The Gazelle prospect lies roughly five kilometres west of Heron-1 and has been estimated to hold mean recoverable prospective resource potential of 13 million barrels.
Petro Matad aims to spud the Gazelle-1 well by the end of September targeting a structure that is on trend with a pair of oilfields operated by PetroChina to the north, with a 50% to 65% chance of success for the probe, according to Buck.
The company is meantime also drilling the Red Deer-1 well in the southern part of the block that was spudded last month and has mean recoverable prospective resource potential of 48 million barrels of oil.
The well is being drilled using rig DXZ1 supplied by Daton Petroleum Engineering and Oilfield Service but has been delayed due to equipment-related issues, with drilling results due in mid-September.
Buck said progress with the well has been in line with expectations and “there have been no surprises” in terms of the stratigraphy of the targeted structure, adding that this was “positive”.
“We thought we understood the geology here and that has been borne out,” he said.
He revealed the fourth and final well of the campaign will target a prospect dubbed Velociraptor - named after a dinosaur in the Jurassic Park movies - in its Block V in the west of the country that has prospective resource potential of as much as 200 million barrels.
The company will thus be returning to the block where it came up dry with the Snow Leopard-1 well drilled last year, although Buck said this probe also demonstrated there was a working petroleum system in the tract.
He said there was additional prospectivity of around 200 million barrels on either side of the prospect that could potentially double resources in the event of a discovery.
“The block has larger high-impact prospects that we hope can build on what we have going on in the east where we hope to generate early production revenue from possible discoveries,” he said.
However, the drilling campaign could be extended with further wells as Petro Matad would be keen to use the rig to drill more than one prospect in the east, he added.
He admitted though “we are still scratching our heads” over prospectivity in the company’s Block IV in the west where the Wild Horse-1 well drilled last year came up dry but showed source rocks exist.
Petro Matad has recently gained a two-year extension of the exploration period for blocks IV and V to July 2021.
https://www.malcysblog.com/2019/09/oil-price-hurricane-petro-matad-iog-reabold-touchstone-range-and-finally/
Petro Matad
The company announces that at Heron-1 TD of 2,60m has been reached with gross reservoir intervals appearing to be very similar to the productive reservoirs found immediately to the north in block XIX. Casing is now underway and discussions have taken place with the testing contractor to determine how quickly kit can be mobilised to the location. The timescale should be within one month and hopefully a great deal less, as the company are keen to get a flow rate and to get stimulation of the well underway.
The primary target was encountered at 2,803m some five metres shallower than expected which I am told is a good sign as was the predominantly sandstone interbedded with shales and siltstones found slightly deeper. The company are ‘encouraged and the well is better than expected’ and in my call with CEO Mike Buck this morning he was clearly delighted, particularly with the porosity and permeability in the formation a pleasant surprise.
Petro Matad is only up 5% today which is a touch parsimonious but to be fair puts it up at or near recent peaks and the market knows that they are also drilling the Red Deer well at the moment. Recent speculation about that well is just that, after some slight delays due to kit on site the bit is only ‘close to objective depth’ but should reach TD in mid September before logging.
The rig will shortly move off this site and move to drill the Gazelle-1 well which it should spud in late September which means that there is still plenty of excitement due for the company. Should Heron go on and be the success that it seems they will be able to kick on with plans to make the next steps of the operation to start producing commercial hydrocarbons from Mongolia, which they thoroughly deserve, after all some of us have been waiting a long time for this moment…
Well worth a watch ahead of Heron-1 news this coming week:
Re-looking at everything I would suggest that Red Deer-1 will drill into the Secondary target Thursday 22nd of August.
They will start going Primary targets on Monday 26th August and should be at TD around Thursday 29th August.
Then they have to do the logging run........so results from Red Deer-1 expected by me week commencing 2nd Sept.....maybe mid week to late week.
Heron-1 will be into a potential Secondary target on Sunday 25th August. Heron-1 should be into the Main Primary Target on Tuesday 3rd Sept with TD around 5th Sept. Then they have to do the logging run so results week commencing 9th September.
So.......now all the fun starts......2 drill bits now about to enter target zones (secondary upside ones) with the main primary target zones being penetrated next week for Red Deer-1 and the week after for Heron-1.
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Following todays update :
https://www.investegate.co.uk/petro-matad-ltd--matd-/rns/operational-update/201908200700115995J/
The new forecasts by me are :
Red Deer-1 well will be into Secondary target during week commencing 19th August.
Red Deer-1 well will be into Primary target during week commencing 26th August.
Red Deer-1 well results and RNS week commencing 2nd Sept.
Heron-1 well into Primary target week commencing 26th August.
Heron-1 well results and RNS week commencing 9th Sept.
Gazelle-1 spud early October
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Just for a bit of fun and note that any mechanical failure at all will totally delay everything....................
Based on other DQE drilling a rough schedule is averaging 130 meters per day (with no mechanical issues) over a well to TD.
Heron-1 is 3050 meters and so divided by 130m/d would give 24 days to get to TD, prior to initial wireline logging and then initial RNS at say day 30.
Red Deer-1 is 2106 meters and so divided by 130m/d would give 16 days to get to TD, prior to initial wireline logging and then initial RNS at say day 22.
Entering of the Primary Target at Heron-1 should be around 2800m onwards which would equate to day 22 of the drilling. Also secondary targets earlier.
Entering of the Primary Target at Red Deer-1 should be around 1650m onwards which would equate to day 13 of the drilling. Also secondary targets earlier.
Heron-1 spud was 19th July.
Volume spike time - anytime after 10th August. Results RNS after wireline anytime from 19th August.
Red Deer-1 spud ETD 29th July.
Volume spike time - anytime after 11th August. Results RNS after wireline anytime from 19th August.
So, from Monday 12th of August, if we get crazy volume spikes we will not know if its Heron or Red Deer or both.
Enjoy the ride.
I expect well results in 30 to 35 days for Heron-1
So anytime from August 19th onwards
I expect around 20 to 25 days for Red Deer-1.
So anytime from August 19th onwards.
Literally, provided they spud Red Deer-1 by end July - both wells can have the results at the same time.......going to be really exciting.
18p of upside from Heron-1 and 32p of upside from Red Deer-1, all on the table from late mid August onwards (and thats ignoring the de risking of other prospects on the licenses from any success)
No better stock that MATD for some serious % rise potential in the coming weeks.
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Looking at the RNS history you can see clearly the change from when the new CEO Mike Buck was brought in.
5th July 2017 Ridvan Karpus (RK) CEO
Plan to drill Snow Leopard-1 (50 day drill) and then Wild Horse-1 (20 day drill).
(The regime of RK wants to drill SL-1 and then WH-1. We know from presentations that SL-1 has no amplitude anomalies and is supposed to be self generating. WH-1 has amplitude anomalies and is based on migration from nearby massive kitchens).
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19th Sept 2017 Ridvan Karpus (RK) CEO
Plan for restructure of the management team with experience being bought in (RK will step down).
Rig for proposed SL-1 and WH-1 still not certified and not likely to be until at least October (maybe later) and so, with mobilization from East to West then drilling cancelled until 2018. Both ongoing permitting.
New 3D seismic over Tugrug basin. New 2D based on comments from potential farm in partners.
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21st November 2017 Mike Buck (MB) CEO
Drilling rig is now certified, finally. Contract amended.
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19th January 2018 Mike Buck CEO
MB drops Snow Leopard-1.
New drilling program will be Wild Horse-1 (always drill your best first) and then Falcon-1. WH-1 has bright amplitude anomalies. Falcon-1 has live oil in nearby core hole.
At this time both wells are in the process of permitting, only SL-1 is nearly completely permitted but now dropped like a lead balloon.
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13th February 2018 Mike Buck CEO
Plan is to drill WH-1 and Falcon-1, permitting is in progress for both. Wild Horse-1 is now a 30 day to 45 day drill.
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12th April 201b MB CEO
Bugger..........the new 3D has revealed the Falcon-1 prospect is very much smaller due to faulting now apparent with the new 3D. In view of this Falcon-1 is dropped and while they work on the 3D for a new prospect now seen (later will be known as Fox-1) they will now put Snow Leopard-1 back into the drill program.
Its the only well nigh on permitted for and Wild Horse-1 is still waiting for a few final permits.
________________________________________________________________________________
My comments/opinions = At this stage Mike Buck is feeling stressed.
His drill program is now a well he wanted to drop (SL-1), then the big prospect Wild Horse-1 he wants to drill, then 2 small wells on Block XX. Not very awe inspiring at all. He knows there are good other targets from the new 3D and 2D.
Drill program now :
1 Potential duffer SL-1 he dropped.
2 Great Propsect WH-1
3 Small low risk Block XX drill
4 Small low risk Block XX drill
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14th May 2018
SL-1 is fully permitted for. WH-1 still does not have all permits in place.
New exciting Fox-1 prospect from the new 3D which replaces Falcon-1, but which has to start the long permitting process.
________________________________________________________________________________
13th June 2018
Placing to raise money to add 2 more drills. Directors buy in to the placing at 10p a share price.
New drill program :
1 Potential duffer SL-1 he dropped.
2 Great Prospect WH-1
3 Excellent Prospect Fox-1
4 Significant Prospect Red Deer 1
5 Small low risk Block XX drill
6 Small low risk Block XX drill
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My comments/opinions = At this stage Mike Buck is feeling much happier. Even though he still has to drill the SL-1 well he dropped initially (has to drill as its the only well fully permitted for) he now has 5 excellent prospects to drill after it. Wells 2 and 3 being high impact, well 4 being excellent size and then wells 5 and 6 being good in that they both individually are worth more than the current share price on success and are relatively low risk.
________________________________________________________________________________
The rest is then very much near term knowledge. WH-1 finally got the chemical permit during SL-1 drilling last month and so can go ahead. SL-1 drilling was a duster but a good stratigraphic test well in effect, lots of data obtained.
So, MATD have drilled the well that Mike Buck dropped initially, and the next three wells are the ones that he really wants to drill. Wild Horse-1 then Fox-1 and then Red Deer-1.
Thats the hindsight after the event read of the operations RNS's and what happened in terms of the operations program. You can see why MB is pushing to get WH-1 done this year, its the well he really wanted to drill first, with both Fox and Red Deer being new prospects and wont complete permitting until Q1 2019.
Whilst some people may bemoan the 2nd placing - my view is that Mike Buck turned the company around at that point. Going from (ignoring SL-1) one prospective big drill and 2 small ones, to then three prospective big drills and 2 small ones. That second placing at 10p in which directors purchased lots of shares, is what has left MATD so exciting now with lots of back up. If they had not done it then things would not be so much lower risk now.
Looks like they have joined Twitter too, finally.
https://twitter.com/Petro_Matad
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Internal CoS for WH-1 is actually 20%. So the Elephant discovery of 2018 boils down to two last chances, CHAR with Prospect S and MATD with Wild Horse-1.
Success case upside is greater on MATD as the prospect is 100% owned and the PSC terms are superb.
A mere 150 million barrel recoverable size find on Block IV for MATD would have an NPV10 of 1.27 billion US$ thanks to low cost of development wells, easy trucking and very good PSC terms ** (that value will be higher now due to rising oil prices)
NPV10 based on Economics run at Dec ‘17 Forward Curve prices: 2018 $63.67/bbl, 2019 $60.58, 2020 $58.56, 2021 $57.62, 2022 $57.25, 2023 $57.22, 2024+ 2% Esc
Well Name: Wild Horse-1 Block IV
Targeting 480 million barrels recoverable (mid case) 100% owned
Additional follow on prospects of 750 million barrels rec. (900 million rec. high case) derkisked in the Wild Horse area if Wild Horse-1 is a success.
Internal company estimates give 20% chance of success for Wild Horse-1
Wild Horse-2 appraisal well already permitted for, in the event of success.
Wild Horse-2 would drill into the other side of the WH lead in the event of a WH-1 discovery.
Due to analogous basin geology across the border in China there is a higher than frontier chance of success for frontier levels of potential
Notable Chinese productive basins include: Junggar Basin 10 Billion barrels recoverable, Songliao Basin 20 Billion barrels recoverable and Bohai-S. North China Basin with 40 Billion barrels recoverable.
Well defined 4-way dip structure and amplitude anomalies that are indicative of hydrocarbons. (Soft amplitude anomalies which conform to structure)
CEO Mike Buck comments that it is “A must drill well”. Royal Dutch Shell have told MATD they want to see Wild Horse-1 drilled.
Endorsed by Wood Mackenzie by their inclusion of Wild Horse-1 on their “one to watch wells in 2018” placing Petro Matad on a list alongside super majors like ENI and Repsol. The only onshore well to make it into the WoodMac list.
** PSC terms (the important bit to value any discovery with)
0% Corporation Tax
Royalty: Block IV 8%
Costs of Exploration, Development, Operations and Transport can be recovered in the success case. The implication for this is that on any success, when coming to arrange finance, this puts the company in a very strong position as it can demonstrate it can repay debt out of Gross revenue rather than profits. Yes, that is remarkably excellent, even transportation costs to sell the oil are recoverable. Pretty much WOW.......... The whole lot, explo, dev, op, transport...all recoverable.
Contractor Profit oil split: Block IV 50% to 57%
You cannot really value an oil discovery unless you also know clearly the PSC terms, then you are able to get a real good read on the NPV10. Given the present oil prices and forward curve the NPV10 value stated above is actually low and should be considerably higher now. The economics and IRR get better the bigger the find, so that is based on 150 MMBO, in the event after any discovery and appraisal that Wild Horse lives up to is Pmean of 480 MMBO recoverable, the figures are mind blowing, thats why its a "well to watch".
My estimated locations of SL-1 and WH-1 and the distance (bird flies and by road). Bayansair (Bayansayr) is the nearest town. Company has confirmed that the intend to spud Wild Horse-1 this year, the move and rig up is ongoing now.
First link shows my guesstimated approx locations of SL-1 and WH-1.
Second link shows the distance (300km as the bird flies or 450km by actual road)
http://oi68.tinypic.com/20f6ovk.jpg
http://oi66.tinypic.com/2vs3vc5.jpg
I believe Wild Horse-1 is going to be spudded asap. They want it done before winter. They want the winter to be able to go to Shell and others and see who is willing to pay the most to farm in, in the event of an oil strike at Wild Horse-1.
Shell are in lead position (we know they cut Mongolia after they purchased BG, simply as they are not interested in Wild Cat wells in a new country, they are very interested in Oil discoveries in a new country - hence they told MATD they want to see Wild Horse 1 drilled and are willing to farm in and pay a lot more money AFTER a discovery). I say they are in lead position as they left in the contract that MATD have to pay Shell 5m US$ if they farm out Blocks IV/V to anyone other than Shell in future.
If, and its an big if, but if they strike oil at Wild Horse-1 then they have the winter to do a farm in deal with Shell or another.
Interestingly, if you look at the confidence levels "internally"......... Snow Leopard was never planned in advance for appraisal. Wild Horse-2, an appraisal well for Wild Horse, is already planned and permitted. So why are they planning ahead already to appraise Wild Horse...........they must have high confidence. I imagine the internal CoS for Wild Horse-1 is much higher than the advertised CoS.
Also the rig will be winterised and left over winter at Wild Horse location......... this means if they strike oil at WH-1 they can in effect, if they want, delay Block XX drilling even more and do a straight appraisal with Wild Horse-2 in April......as its already permitted. They can then move to Fox-1 to drill that after WH-2.
And if Wild Horse-1 strikes oil I imagine that is what they will tell Shell and others........... Do you want to farm in now for XXX million, or you want us to appraise Wild Horse and drill Fox-1 and you farm in for XXXX million later.
This is what makes MATD so very interesting over the winter if they strike at Wild Horse-1. A strike at Wild Horse-1 is going to rocket the price for sure..... 480MMBO recoverable and then other prospects derisked for 750MMBO recoverable - all 100% owned. But those who then sell the initial stike will perhaps miss the potential bigger rise, which will be when/if a Super Major farms in over winter.......... A farm in over winter and new funds and free carries could see a number of wells sunk into Blocks IV and V, so the farm in potential company will not want to wait for MATD to appraise and discover more oil and also will not want to waste time in the 2019 drilling season, so the potential for a winter period farm in is high.............IF they strike oil at Wild Horse-1.
All very interesting.
Well I do hope that there will be Wild Horse-1 activity this year, else the whole episode of drilling Snow Leopard-1 was a waste of time.
If you put your hindsight goggles on and go backwards now based on what is now known :
The plan was to drill Wild Horse-1 first, then Falcon-1 (as of early 2018 presentations).
Wild Horse-1 (Block IV) has only just(during SL-1 drilling it seems) received its final permits (chemical use) and so could not have been drilled until now anyway.
Falcon-1 (Block V) the 2nd planned well earlier this year was downgraded based on new 3D and removed.
Snow Leopard-1 (Block V) was the only drill ready prospect and which was the first to get all permits in place. MATD are also short of the required spend level of the license of Block V. It was rushed in as the replacement for Falcon-1
I would imagine Mike and his team were between a rock and a hard place here. Fox-1 the new exciting prospect from the new 3D is not drill ready and not permitted, permitting ongoing. Wild Horse-1 which was always your first drill, is not ready as final permits (chemical use etc..) are not in place. Falcon-1 which was your 2nd drill in the schedule is suddenly not worth drilling (too small) compared for Fox-1 so cannot be moved to be 1st.
You either cancel your 2018 drilling schedule (going down like a lead balloon)to allow Wild Horse-1 and Fox-1 back to back in 2019 or you put Snow Leopard-1 into play and drill that while you try to get the final permits for Wild Horse-1 to allow a seamless move from SL-1 to WH-1 in 2018 and go to the local temple to pray you get the Wild Horse-1 final permits before SL-1 finishes drilling.
If I go back now - with knowledge today - you really can see why the 2nd fund raise happened and why it was at 10p (compared to the earlier one at 6.5p - thats all down to Fox-1).
Looking at the prospects - Wild Horse-1 has simple faulting, its a 4 way dip (dome) and has soft amplitude anomalies. Pretty good target. Always was the 1st one they wanted to drill.
Snow Leopard-1 has complex faulting and therefore high sealing risk. In all the presentations after removing Falcon-1 there is nothing much exciting said about SL-1. Look yourselves....its as if someone writes the slide saying, yeah, we got this one too.
Fox-1 - extremely exciting, they spend 4 pages of their latest presentation detailing Fox-1. 3 way dip, normal faulting, bright spot on 3D, live oil shows in coring etc.. etc.. etc...
I feel the only reason they drilled SL-1 was to actually put the 2018 drilling into play and to bide time to get the WH-1 permits complete so they could drill WH-1, whilst also ensuring the spend on Block V was up to the level needed so as not to have any issues with Fox-1 which is also in Block V. And yes, in hindsight now I would say SL-1 was a strati-graphic test well in effect, one which also raised the spend level on Block V to the level required for compliance with the license. It had a (very limited) chance to strike oil and didn't and no surprise there.
Had I known prior that WH-1 was still waiting for final permits I might have put two and two together prior to events, but I didnt, and anyway, its far easier in hindsight, everyone is an expert after the event, as always :)
I dont blame Mike and his team for doing it this way if that is what happened, it makes sense in hindsight, just you started drilling with perhaps what was "off record internally" your worst prospect.
So in summary, my view, SL-1 was just a license spend compliance, waiting for WH-1 final permits, mobilize the rig and get in in the area ready for WH-1, fill in for the downgraded Falcon-1, in effect strati-graphic test well. And in view of that - I really cannot see them not spudding Wild Horse-1 asap, its a must and IMO, it WILL happen very soon.
All IMO, just my thoughts.
Conference call audio link :
http://s000.tinyupload.com/?file_id=81857652199626046116
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