Here’s my view on OEXs immediate 77H prospects and rationale’.
Status of original OEX investment case: remains unchanged:
- No major change in either business operation or market conditions re sale of oil/gas
- No basis to change investment other than personal discomfort at this stage of proceedings
Risk:
reduction in major operational risk items eg drill, fracc, plug mill-out etc
- Overall significant reduction in risk conditions – especially when compared to 76H
- Though several major non-operational risks still remain – successful flow back & flow test results for commerciality
- Any CR ann would severely dent SP going forward
Risk:
positives include significant market announcements of 21 & 24/7 regarding initial flow back of ~40% of fracc fluids on good pressure
- Better than expected oil shows at API 50, observation that 77H compares well with typical high performance wells
Reasonable current expectations based on news at hand:
- Next ann expected sometime between 4/8 to 11/8 reporting back on matters flagged in initial post fracc announcement of 21/7 re “CAMBAY-77H – Flaring Gas and Light Oil Recovered in Clean-up”
oStrong clean-up hydrocarbon flow encountered following mill-out operations
oGas flaring operations have commenced to ensure well-site safety
oLight oil/condensate flows to surface during flow-back and recovered for sale
oHigher than expected light oil/condensate flows particularly encouraging
o~40% of the frac water has been recovered
- “The well is currently cleaning up and Oilex will advise the market of a stabilized flow rate via a production test once frac fluid return and clean-up operations have been completed ….. Flowback started very strongly (on 7/4) and remains on track to take 2 to 3 weeks “
onext ann re
stabilized flow rate expected sometime between 4/8 to 11/8
othis is
not expected to be a final assessment of commerciality, which will come after completion of production testing in 1 to 2 months TBA
ohowever, the stabilized flow rate will give a reasonable early indication of commerciality
Possible scenarios and risk for impending announcement/report on stabilised flow rates
News to include finalisation of clean-up, majority of fracc fluids recovered with further news on stabilised oil/gas flow rates & volumes as follows:
- .High Case: initial good flow rates followed by increase instabilised flow rates pre production test
- Excellent prospects for commerciality – time to crank up the printing press
- Strong market response – possible SP ~ >40c +++ ???
- Medium Case: initial good flow rates followed by continuing stabilised rates, no increase
- Average to good prospects for commerciality – lower/minor risk
- Average to good market response – possible SP ~ 20 to 30c+ ???
- Indecisive Case: initial good flow rates followed by minor to moderate decrease in stabilised rates pre production test; within ‘normal’ range
- Average prospects for commerciality; some minor risk
- Flat market response – SP fluctuation ~ 10 to 20c ???
- Worst Case: initial good flow rates followed by significantly decreased stabilised rates pre production test
- Minor to poor prospects of commerciality, highest risk
- Possible panicky market response – possible SP crash to ~ <5c ???
My assessment, for what it’s worth, is that circumstances and risk have not materially changed since 21/7.
Based on 77H announcements to date and industry knowledge of comparable wells (not my personal knowledge mind you, but others' experiences aired on this and similar O&G threads), I’d rate our current prospects at:
- >80% confidence of 3 or better
- >50% confidence of 2 or better and
- <20% confidence of 4.
We’ll all know soon enough.
My apologies about the formatting, it doesn't seem to like copying and pasting from word.
