(ENEG) Enegi Oil

tedules has been here for 12 years a well informed and well researched investor, in fact I struggle to find someone so well versed in the geology of the play and the data from the well and acreage we are exploring

From the March presentation:

- Mean STOIIP 326 MMBO – low recovery factor (18 to 20% ) used by Tracs Intl. in 2008 CPR
- Recovery factor could be enhanced to 40% with gas injection

The 326 million was oil in place over the whole Newfoundland trend.

However, if 61,500,000 stoiip is a minimum size for Garden Hill South, then at a low estimate of $20 net revenue per barrel, GHS would be worth £311,657,076.

regards
Tedules



http://www.iii.co.uk/investment/detail?code=cotn%3AENEG.L&display=discussion&action=detail&id=9657093

http://www.iii.co.uk/investment/detail?code=cotn%3AENEG.L&display=discussion&action=detail&id=9655652

Into, O dear were you ramping again without any of your own back-up? You disappoint me with your answer. You might have at least plagiarized Tedules work in your answer.

I think he thinks it means... upside upside upside.... farmin mega investments blah.... should be this should be that dribble..... this is the low (again)...... it wont be below 20p for long (again lol) sinister traders beware the detractors curdle curdle.... brokers note from eons ago said this n that.... institutional investors 15p yada.... bopd (doesn't get that boepd does he?) could be 234567876543bopd beause of pressure yadda yadda...... this can move 34543% in a day burp..... same regurgitated keekeria!

That about covers it I think 20pt4.

BH

It doesn't need me to repeat once again the significance of this news, but I refer you to the well researched poster tedules recent posts to explain the significance.
This smacks of manipulation if ever I have seen it. Some pi s are being fleeced here.

Gl all in

Righty O Into, spell out for the rest of us dumboes just what is the significance of :- "we are at a minimum of 310boepd at a constant 3350 psi on a 90 % choke with no depletion and expected to increase as the water cut is flowed off. " I await your interpretation of the statement.

As just stated, you can't buck bad sentiment, it will turn when it turns. we can't actually blame enegi this time for the low sp, if this rns was out mid 2010 or even mid 2011 we would probably be at double or more the present market cap. Sentiment will effect enegi more than others as low volume sells takes it down 5% a day.
By the way did not anyone read the rns we are at a minimum of 310boepd at a constant 3350 psi on a 90 % choke with no depletion and expected to increase as the water cut is flowed off. I don't think many have really grasped the significance of this as the wider markets and bad sentiment have distracted many form the significance progress that has been made here. This was the point of my previous post. In a market like this patience should be rewarded, selling out to now is just in the interests of the mms as they will take advantage of this market mayhem. They will turn it at some point but by that time many who held for many months will be out. Thats how it works.

Even more reason to stay put here and load up more if you have the funds specially if SPE deliver something positive which must be close now as the tests must be well underway now.

RNS 18/11/10
"DLMC also attempted to perform a swabbing test on the well, but were unable to do so. Each time the fluid head was swabbed off, the well would start flowing oil and gas making it impossible to conduct ongoing swabbing operations"

I think this is a positive that the well was flowing at too much pressure they could not swab it.
Now we have a larger producing section so it may be easier to get less productive zones producing by swabbing. Whatever the case the improvement since this rns has been significant from the two acid processes, to what degree the next rns will tell us.

Cracking good RNS last week BUT bid 12.75 as I write - people still selling - crazy!!!!!!

It pains me to say it but I agree with Merce - we need production. In present circumstances it is the only thing the market will attach any value to.

It is worth noting that they tried swabbing the well in 2010 and it didn't work. After 4 months of THIS phase of testing, time is fast approaching to open the valve for production. As I have said before, the well is not a university PhD project it is our only source of revenue.
Get on with it.

"THE STOCK MARKET IS A VEHICLE THAT TAKES MONEY AWAY FROM THE IMPATIENT AND GIVES IT TO THE PATIENT"

I'm far from convinced Buffetisms have any relevance to a micro cap oiler on AIM. In any event it presupposes two things. The company doesn't fail and also that your original decision was correct, just badly timed.

I do agree though that patience generally pays off (or at least allows improvement in ones investment situation, perhaps paring losses even if it doesn't actually yield a profit.

After all, anybody who invested at float has to see a fair improvement. Lots of patience there will be required. 12 years from now at 25% a year will just do it.

On the subject of quotes, attributed to Keynes (incorrectly I believe) there is:-

"Markets can remain irrational a lot longer than you and I can remain solvent"

So, sticking with quotes:-

"I know what you're thinking. "Did he fire six shots or only five?" Well, to tell you the truth, in all this excitement I kind of lost track myself. But being as this is a .44 Magnum, the most powerful handgun in the world, and would blow your head clean off, you've got to ask yourself one question: Do I feel lucky?"

I must admit it must be frustrating for short termers or even some medium termers, having seen significant progress made from a none producing well to now a minimum of 310boepd and expected to increase, plus awaiting results from a potential company maker form SPE and that lucrative license investment the company will benefit from. However non of this is reflected in the sp presently.
Although not officially producing, I think the data suggests the well is generating revenue for us and hopefully will increase as we go into official production.

The EZ situation is frightening the life out of most investors and indeed not only enegi is affected here as we can see with the other aim explores and producers suffering major reductions in there market caps.

Two scenarios are the EZ situation gets sorted for a few more months it stays in the euro and the markets bounce back along with our sp.
The second is Greece exits which equals massive instability in the markets as countries heavily exposed to Greek debt need bailing causing mass panic, the printing presses will be going at it like a bull in a china shop to stave off European collapse, the result futher impact on the sp to the downside, however QE may keep the oil price at reasonable levels still and protect us from too severe losses.

In conjunction with this the powers that be that control the markets whoever they are mms or bigger players in the background or whoever they seem to be will be taking advantage of this situation using fear to cause a mass sell off sinking the markets caps of many small e&ps and others small companies.

Those that have invested for some months or years will sell out. The mms lap up the shares and when the time is right whether in two, three or six months kick the sp up the proverbial, re Jan 6th, the mms make there packet out of the impatient pi s who hate seeing there paper investment go down the pan so sell worrying about further losses, the mms lap up dirt cheap shares. Its more about emotion than fundamentals and the skilled market manipulators know this and don't they take advantage of it.

For that reason I am more happy to hold here than ever mainly due to the recent news flow, the markets will correct in there own time for which I have no control over, only that you know they will, for that reason holding and adding here is critical as to not be a victim of the markets.

"THE STOCK MARKET IS A VEHICLE THAT TAKES MONEY AWAY FROM THE IMPATIENT AND GIVES IT TO THE PATIENT

That is the reason I will be holding here.

.....we are producing Merce......all be-it in amongst continuing testing, including shut in's, but I'm sure that they are not pouring all that oil down the sink ;-)

The share price is just incredible in ratio to what we already have, let alone what we are most likely to have when all the news is confirmed. Simply staggering.

I just wish I had more money to put in.

I mentioned before that I have broken my own Golden rule and put all my eggs in 2 baskets. Enegi and GKP. GKP have had some amazing news yesterday - all the Kurdish oil plays have been largely de-risked now since announcement's at the Erbil energy conference yesterday that the Kurds are going to Bypass Iraqi Central Governments and transport oil direct via Turkey through pipeline which will be in place by Aug 2013 and by truck in the meantime. GKP are now primed for a T/O imho within the next 3 Months or so as it will take a Major to produce the volumes of oil from Shaikan that the Kurds will be looking to produce (2 million bpd) & now there are set timelines in place, the Kurds will not want to hang around.

I've researched a lot of shares and IMHO, Enegi and GKP have to be two of the best potential multi baggers in the short term out there. I don't know which one is going to pop 1st, but when it does, the profits will be immediately placed in the other. Both companies have been 99% de-risked already.

Whatever your strategies - good luck to all - I don't think we will have long to wait before Enegi or GKP for that matter are re-rated in a transformational way. Apologies, I am not ramping, this is my honest opinion and I am purely excited that after all this time, these investments are looking like they are finally coming home to roost :-)
REF

YOU NEED TO BE PRODUCING....Simples?????

MD.

Good morning All.

Market is recovering a little today and had expected Eneg to follow, but all we get is a continued fall although it must be said we are only bouncing around in a tight range. Just what has got to happen, we have had good news and that did nothing for us.

Have a nice day.

Has anyone called the company yet.?

Re Marciano's Stateside Report (last throw - today) the January article on 4 Horsemen of Green Point Shale gives NWN as the potential 10 bagger. dependent on results in 9-12 weeks.,( the others being Shoal Point, Vulcan and Enegi)
I can't find any follow up to this except that NWN announce in March proposed amalgamation with Caribe Oil.

I beleive typical drilling cost would be USD7.5m for vertical and USD10m for horizontal but additional stimulation techniques (ie fraccing) would be on top. I used USD10m in my previous post spread over 2 years (USD6m + USD4m) but it is really theoretical of course.

On 1000bopd and spending another USD10m to acheive it plus double of nominal cap ex to USD2m per annum for 22 years we acheive a valuation of GBP89.7m and virtually all the 20m resource Im using gets exhausted within the DCF even with no overheads being allocated to other cash producing projects. This is of course highly theoretical. A more likely scenario to up the valuation of GHS would be to get Shoal Point deeps into some production (or even Irish assets) whereby overheads get apportioned.

Into,

It does seem to me that the further open the choke then the "eaiser" it would be for the pressure to drop. Since it wasn't dropping at 6/64ths this is a bigger improvement on the 8 days because that was with a 4/64th choke.

Also it seems to me that there wasn't a drop off in the fully open test, though this was only for a limited duration. Overall it does seem as though the well is in a much better state now.

Time will tell what this actual results in, but cautious optimism would seem to me to be justified.

Of course how these results translate into an SP is a different thing.

noidea1960,

Regarding cap ex it's a tricky one. On this well we have spent 20 mln - not sure if that dollars or sterling though. I also can't remember exactly where I read that, though one can work it out pretty much from the accounts.

I don't really have any idea what a new well would cost - which makes any calculations more than a little fraught. However I would expect it to be considerably cheaper than what we have spent on this one.

This document has some sample cost data, and it does tend to get quite expensive fairly quickly, it might be some help with estimates.

http://www1.eere.energy.gov/geothermal/pdfs/egs_chapter_6.pdf

Without doubt an increase in Cap Ex to produce more wells and increase the flow rate would increase the value provided of course the rate increases exponentially but Im not sure what nos to run for cap ex. I'll just double the cap ex and flow rate and see what that produces.

Here is a pdf on chokes, copy and paste in your main search bar I am afraid but good information none the less.

http://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=9&sqi=2&ved=0CHAQFjAI&url=http%3A%2F%2Fgekengineering.com%2FDownloads%2FFree_Downloads%2FProduction_Choke_Basics.pdf&ei=bTK5T_KILMjrsgbNsbCOCA&usg=AFQjCNF7Q2ez4E3VXq5YmQqixWzsXOrG7w&sig2=qT_k8JGDKK-uHCu0O7mF8w

Yes Sierra,
Thanks for the clarification, not great at fractions, but it adds further weight to my point, that now we have constant bottom hole pressure at even a more open choke at around 90% choked instead of 94%.
Also significant is as I stated we don't know how open the choke has to be before we get a pressure drop, but we know it isn't from the rns at 6/64ths choke. At this choke alone we should expect further increases of flow rates once the water is flowed off.
Then we can go to lower choke settings.
Therefore on the present known information we still don't know how high flow rates can go, all we know is 310boepd is the minimum from the RNS.
We still could reasonably expect flow rates to go over 400bpd and possibly up and over the 1000boepd, although the latter figure there is no evidence either way yet if it is possible or not, but a possibility all the same if the pressure can be maintained at a lower choke setting.

But we already have good results, anything over 400boepd will be a big result for the company and produce a significant income for the company. I think tedules valued the well at £300 million or was it $300 millon on the present flow rates and reserves. So we can see how distorted the present sp is. But will it for long, if there is no EZ solution forthcoming the opportunity may persist, if a plaster job is put over the problem we could see enegi re rate significantly with accompanying news from SPE and the next flow test data.

GL all in, this is going to get interesting.

"Notice 94% choke is the same as 6/64ths"

No, 94% is 4/64 ths.

Though I think we do have grounds for being optimistic about the pressure (since the last RNS says no drop off). Things do seem to be looking more positive with each passing RNS.

noidea1960,

So, in essence you calcs suggest that anything over 8 mln recovered doesn't have value (today), and you derive a value for GHS alone of about 35p per share.

So, if we do get a good uplift in the figures the way to exploit this would be additional wells in order to get the production now when it is more valuable.

Question then is what would the cap ex be for those wells. It seems to me that they would be less profitable because the cap ex will be more since we would be starting from scratch. However there would be an added bonus since say 3 wells producing would considerably spread the op ex.

Interesting that the BoD had mentioned additional wells. Possibly a bit of a hint as to what they expect from the review of the data.

Looking at the pressure data from the last soak

RNS 27/07/12
"The time taken for the bottom hole pressure to recover from approximately 18,000kPa to 31,000kPa was 8 days in June 2011, compared to 229 days following the initial flow test in 2009 and 68 days immediately after the initial stages of the workover in November 2010"

"Between 31st May and 3rd June 2011, the well was flowed, as part of testing, for 9.5 hours each day, through a 94% choke, and produced between 75 and 94 barrels each day"

Latest RNS 14/05/12

"the Well was maintained for a period at a high constant bottomhole pressure of 228 atmospheres (3,350 psi) by using a 6/64" choke"

"The AOFP on an energy equivalent basis is at least 310 boepd at the sandface and is expected to increase after load water is flowed out"

It looks like we now have maintained constant bottom hole pressure ie the 8 days has been reduced to constant bottom hole pressure when the well is flowed, there is no reduction from 3350psi, this is maintained at 23097Kpa. This is very significant.
See conversion app
http://www.unit-conversion.info/pressure.html

Notice 94% choke is the same as 6/64ths
Therefore the well flowed back last year from the July RNS at an average of 84-85 barrels in 9.5 hours each day =212 barrels a day.

Now we have with the same choke 310 barrels per day, although the July RNS does not say whether it is boepd or bpd.

The serious positive here is the flow rate is expected to increase from 310 boepd when the water cut is dropped off. Also at this level we have not seen a pressure drop off as we did back in the July RNS. Also we don't know when the pressure will drop off and at what choke setting and in addition the effect of increasing the gas flow and gas lift on the flow rate.
So there is much scope for improvement.

But looking at the two RNS s we seem to have achieved significant improvement since the first soak data with scope now for further improvement once the water is flowed off and results of testing the well at lower pressures which means higher flow rates are obtained, this data has yet to be analyzed and the optimum flow parameters established, but the RNS seems to be clarifying at least 310boepd.
But the statement maintained high constant bottom hole pressure can't be overstated as to its importance here and is a major achievement here.

An observation I thought worthy of posting.

OK it's just a re-run of previously disseminated copy but any mention is better than none:-

http://www.proactiveinvestors.co.uk/companies/market_reports/43039/oil-and-gas-news-summary-range-resources-cove-energy-chariot-oil-gas-enegi-oil-genel-energy-tethys-petroleum-0000.html?__utma=159696636.526746745.1337510801.1337510801.1337510801.1&__utmb=159696636.10.10.1337510801&__utmc=159696636&__utmx=-&__utmz=159696636.1337510801.1.1.utmcsr=%28direct%29|utmccn=%28direct%29|utmcmd=%28none%29&__utmv=-&__utmk=254066376

Wonder what this coming week will bring - after another weekend of contemplation I might sell a few more OPHIR in my SIPP and buy Eneg as I have a strong feeling that we are near to a very important period in Enegi's history - hoping it's upwards!

LT

Hi LT
Thanks for the link. This just about sums it up in a nut shell. We are all running about trying to fathom out what the hell is going on and in fact all we can do is ride out this storm. Once the markets settle down Enegis true worth will come to the fore. Of course at time like this the the you know whos will have a field day.
So if you cant buy into these bargain basement prices then HOLD HOLD HOLD

another interesting article talking about Bakken potential and distances between wells to maximise production.

http://seekingalpha.com/article/585211-how-big-is-the-bakken

I am posting this article as GPS compares very favourably with Bakken and, to date, there has been no serious work done on GPS (as far as I can find) to determine what the optimium number of wells might be.

I would also refer folks to this article which I believe has been posted before but which hints at what we might be onto with Enegi and GPS:

http://www.resourceinvestor.com/2012/01/02/jim-letourneau-renewed-faith-in-oil-gas

OK - I should get out more!

LT

........ good mention in Monday's Stateside report -3:36 into the piece talking about Enegi's RNS set against the volatility of the markets but re-emphasising Eneg as one of the Four Horses of the Apocolypse!

http://www.statesidereport.com/

Also gives a UK BB a good punt - think he means us, i.e. iii. Goes on to talk about Chariot.

Good report which to me is a must read for anyone with flagging confidence!

20pt4 - well done in interpreting my typo into Sturminster - ended up playing 18 at Wareham which is quite a difficult course for the likes of me but thoroughly enjoyed beating my opponent - my son!

LT

Stockhouse,BB..........................sorry if already posted. Some bits about Enegi..scroll down. .




http://www.stockhouse.com/Bullboards/SymbolList.aspx?s=SHP&t=LIST

Hi can some one tell me if I am correct in assuming that the cost to produce a barrel of oil is 25% to 30% of a barrel of oil?
Thanks
kmack

Now we seem to be getting a serious up grade of in place reserves here is a paper that may explain in more detail about the acreage and could give us the reasons why, posted before but any new ones may be interested.

http://www.canadianimperial.com/downloads/xmodel.doc

A studious intellectual, I will leave this to the more geological savy, I look forward to your interpretation.
http://www3.geosc.psu.edu/courses/Geosc518/4_Sample_Prep/Chapter_4/4_7_Nitrogen/4_7_3_Organic_Matter/4_7_3_4_Sediments/4_7_3_4_5_Crude_Oil/Papers/hydrocarbons%20Weaver%20et%20al%201988.pdf

I should have added I used 10% discount rate but 5% inflation rate on overheads

I have run various flow rate discounted values but on 500 bopd and 20m recoverable resource / Net Cashback @ USD70pb for first 7 years thereafter USD50pb and assuming this was GHS as only operation (thereby allocating all company overheads as cost to GHS) then I get the following nos

Total depletion BEFORE DCF turns cash negative is 8million barrels ie well before 20m (Although still producing positive operational cashflow but not after overheads (inflated at +5% per annum)

Factoring in Cap Ex of USD2.5m year 1 and random USD1m for next 22 years

I get valuation of USD73.3m or GBP45.8m

Of course if another project comes on stream you would allocate overheads between the two and the depletion rate increases at GHS before the DCF turns negative.

LT,
hope the 9 holes went well. Really interesting that Sterminster is twinned with Sainte-Mère-Église, made famous by the 82nd's drop on D Day. Silly things that stick in the mind.
Have a good W/E, doing 18 myself tomorrow after a 3 week layoff.

TheDrewster,

Of course I meant can't really disagree!

It is also surprising how much difference small tweaks can make. Decide to be a bit bullish on the oil price and factor in a bit of a rise, drop your discount rate a bit and all of a sudden the numbers are 3 or 4 times better. They are all fairly reasonable assumptions.

It just goes to show that with the available information it would be perfectly possible to justify 20p a share, or a quid. Whether we like it or not the market will tell us what the reality is. And at the moment that's 13.5.

Tedules,

Sentiment is, as you say,key. That will make a huge difference. It doesn't really affect the value of the asset as such, it does substantially affect what people will pay for it.

I would also say that the numbers I produced were only intended to show a general thought process rather than be precise, and also to show why people can have a huge difference of opinion as to worth.

- The gas. Yes, my error. Sorry. The 2 mln P90 is for oil only. There everything has now gone up by 1/3rd.

- Also I depreciated it by 10%. Simply because it is P90. But the P50 and P10 has to be worth something.

Overall then I was taking a view of only 1.35 recoverable out of 61 mln. VERY low

If we were to get a 20% recovery rate on 61 mln then @ 10$ this would equate to an asset value of around 60p a share. 90p @ 30%. I think people can easily justify these figures to themselves (there is after all plenty of evidence for these sorts of recovery rates being achieved with light oil). [Whether that remains reflected in the SP is a different matter, that depends on how long into the future you are prepared to ascribe value in todays terms - clearly there is some].

If the dollar collapses then the price of oil is likely to rise (unless the dollar has collapsed along with everything else). However whilst we might get loads more dollars for it so what? Those are worth that much less in real terms due to the collapse. So it would pretty much balance out.

In real terms the oil price is fairly high at the moment. So whilst all other things remain equal I would expect it to stay fairly level in real terms. Unfortunately costs won't.

In terms of driving the SP to higher levels production is important - but not everything. We need the underlying asset behind it as well. So if the asset improves by the CPR this will only be partially reflected into the SP, simply because at the sort of flow rates we have been told about it will take so long to actually realise any of that value.

There is often quite a large disconnect between the underlying value of the asset and the SP, one of the reasons for that is that the asset isn't particularly liquid (unintentional pun).

Whilst I tend to ascribe less value to production than some others I think this is almost certainly key to unlocking value. Decent production levels and investment into our other projects could be a good driver for increasing the value of the other assets disproportionately. The CPR will be too, good NPV figures should help the SP too.

So many elements ignored in the analysis and very much worse case in that we only ever have GHS as an asset for ten years. I ask what about GHC, GHN EL1070 lower rights and the GPS development, if all these fail then your analysis is reasonable, but is it reasonable to expect this, plus other projects are under development ABT the Clare Basin etc.

Also if we have a minimum of 61 million SPOIIP
Say we get 500 bpd out of it in ten years that would only be 1.8 million barrels recovered
Say we get five more wells running thats still only 9 million barrels recovered from a 61 million barrel field = 18% recovery

Expected recovery is 40% but say it is just 20%, you haven't factored in further field development. Saying everything will fail is pretty unrealistic.
GHS would not therefore be a 10 year field or the others even with that intitial 61 million figure.

Good to look at worst case but I can't see five wells failing, remember Pap1 hit oil first time as an appraisal well the chances of that are very remote. The likelihood is the system is much larger than 61 million and we have not factored in GHC, GHN and 1070.

I think I will take my chances on this one that we are considerably over sold even with the limited data we have now. 13p represents a £16 million company, GHS alone should take this well over a hundred million company on a modest flow rate now with these volumes confirmed. Some farm inns confirmed will take this to completely new levels in my view. Good to get in on the bottom run if you have funds though. Will we be here in three months thats the question, who knows now what news could arrive on from SPE and GHS? but the EZ situation is certainly making this an interesting ride.

$55 costs. 7.5% discount rate, 25% of revenues "wasted", $10m cash outflow year1 and we get £29.6m/24p

$60 costs, 10% discount, 30% of revenues wasted, $10m cash outflow year1 and we get £4.3m/3p per share (not sure I like that model so much!)

I also think my $10m cash outflow in year 1 is a major issue here, as potentially we are cashed up to (or near to) production. The NPV of £1m in the bank being £1m of course.

Fun now the spreadsheet is setup, variables of Oil price, Discount rate (cost of finance), BOPD, Cost/barrel, and inflation rate for oil. Easy to see how this could explode, and the discount rate down around 5% or 6% makes for some interesting numbers. Just shows, you need a fully working Crystal Ball to make the best returns.

TheDrewster,

I can really disagree with much of that; but there are some points I would make.

- Whilst in accounting terms you could charge all costs in year 1 this wouldn't bring forward any tax reliefs on the development costs. These would still need to be capitalised and depreciated over the well life. Any remaining value would be credited at the point the well went out of production/ This wouldn't actually make any difference to the overall profitability.

- I think assuming a zero price rise in oil price is maybe a little pessimistic. If inflation runs at 3% this would imply a real terms fall over 10 years of about 35%. i.e. back to 70$ ish. That said in real terms the oil price is strong at the moment.

- I think your costs might be a little on the low side. We know the transport was equivalent to $25 from the comment at the AGM by minty jr. Can we operate the well on $5? With fixed costs of around $2 mln p.a. this equates to about $22. However if we flow at 500 (oil only) this will drop to about $11. Also these costs will increase over time. Since these costs are broadly fixed then any increase in barrelage will have a more positive effect since this won't increase the standing costs.

- There are also the license costs to consider. I can't remember what these are but it's in the prospectus. Something like $20 per hectare I think.

Certainly I think the SP is at the very least well underpinned; however it does assume that GHS will be sucessful. Overall the figures you deduce are broadly in line with those I deduce.

The updated CPR when it come will be interesting. That will include current NPV figures for the assets, be interisting to see what they are.