Ineos confirmed Monday that it has decided to implement a controlled shut down of the Forties Pipeline system after a hairline crack was found in the pipe at Red Moss near Netherley, south of Aberdeen.
Despite reducing the pipeline pressure while a full assessment of the situation was made, Ineos said the crack extended, which led to the Incident Management Team deciding that a controlled shutdown was the safest way to proceed.
I read a report somewhere stating there was a rock buried against the pipe which had caused the problem.
If that is the case then the worry is it could happen at other points, and the whole line could need detailed inspection.
Or could there have been a construction defect in the pipe? As well as BP staff originally, who verified that the fabrication and installation were in accordance with the specification? What due diligence was carried out before the recent purchase?
I dont think Pyrrho were ever unhappy with the deal, it was just games being played to ensure that the conversion price was as low as possible. But as a shareholder, I hated the deal, granted it stopped equity being totally wiped out, and there werent many options on the table, but the costs to shareholders was huge. $150m refinancing costs, increased interests rates, increased debt and 70% more shares in issue. The more annoying thing is that for those that saw the opportunity for Premier to return to a reasonable valuation following the refinancing, is the effects of the deal appear to be still being felt, and more depressingly, might be for a long time to come.
With regards to the confidence in the CEO, Im not sure that will ever come back. The downturn wasnt his fault, but ultimately he is responsible for delivering shareholder value, something that he hasnt managed to achieve. Granted for those buying now, shareholders should hopefully do quite well, but have the lessons been learnt about not over-leveraging the balance sheet that will ensure the business doesnt find itself in this situation again?! If I was him, Id change my tune from the delivering value for all stakeholders line, to banging on about maximising value for shareholders, something that he is essentially employed to do.
The fact that some analyst asked Tony, during the half year results, what he thought about the comment that company is only run for the benefit of its creditors, probably tells us a low how the company is perceived in the city. Shareholders want dividends, buybacks and good returns on investments, Oasis Petroleum have just shown us what shareholders dont want, growth without considering short/mid term shareholder value is now very much a defunct model. Hopefully TD gets that.
How do you see production going over 100k? Current production is around 77k, but next year we'll lose wynch farm (5.1k) and the Pakistan assets (6.6k), add in some natural decline (3-5k)and I think we'll be more like 60k before Catcher takes us to around 90k.
I believe the whole pipeline including the landward leg was replaced with 36" pipe in the 90s. I recall seeing trenching works for it. This "crack" is in a buried section of pipe close to the Netherly to Cookney road and not far from the Netherly pumping station.
It might be a local fatigue induced weld crack from transmitted pump vibrations. If so. It can be repaired and forgotten about. But if it is corrosion, then the fate of the pipeline is at risk, and Ineos might be hard pressed to replace it.
Might be good for PoO but devastating for the North Sea. SNP might pay for a new pipeline from all those North Sea taxes they were going to enjoy eh?
The original line was replaced with a larger diameter pipeline along with the Unity platform to future proof it for third party tie ins. The second jetty at hound point was also added to increase capacity.
There may well have corrosion, but it wasnt the only reason for the replacement.
A Cracked steel pipe! Give me a break.
Do we have low temperatures?
Do we have H2S?
I suspect good old corrosion and the internal pressure has split the pipe.
The Forties Sea-line was replaced in the early 90's because of corrosion. As I remember it was in the 6 o'clock position because water separated out and corroded the pipe as the anti corrosion treatment wasnt effective.
If there is corrosion, the the whole 100mile onshore line is suspect.
This will run and run.
BP got ride of it just in time.
The lawyers must think Xmas has arrived early!
Pyrrho were in a very small minority (only Pyrrho) and basically just wanted (needed ?) their money back at the expiry date of the previous CBs.
They made a bit of noise but nobody was very interested in them at the end of the day and the vote sailed through. Not surprising really as it was great deal for the CBH's who didn't mind keeping their cash in PMO CBs.
It would not surprise me if they exercise their right to convert at 74p or above, if they have not done so already.
As I say, Catcher (at full production) is the key to moving the SP.
If that doesn't do the trick, then I agree, it's probably time to move on.
If the CEO can successfully get Catcher away and achieve & sustain production targets and realise the funds from asset sales to pay down debt that should restore a lot of confidence in him.
If the sp can get to £1.04 then the CB's could be removed. The issue is whether the sp can get there or if the current controls will stop that happening. What catalyst will move the sp up best part of 50%?
I think that PMO's debt level and it's ability to pay down the debt is what is holding some of the big players back at this stage in the proceedings.
Once Catcher is up and running (providing about $440M free cash flow) and Wytch Farm is sold ( taking about $325M off the balance sheet), I would hope to see some of the bigger players start to build a stake in PMO.
By the end of the year EBITDA should be down to roughly 3x and this will enable the institutional investors with stricter guidelines to participate.
Another catalyst would be rejoining the ranks of of the FTSE 350.
What the SP needs to rise is volume and any CBH's price manipulation abilities will shrink somewhat.
I'd be amazed if PMO did not use the call option on the CBs at 104p and then after sometime to digest the new shares the SP can go about it's business unhindered by CB arbitrage. A big proportion of those new shares will simply be returned to whence the CBH's borrowed them to close off the shorts, so will not hit the market with a "for sale" sign attached at that point in time.
If Catcher producing 60k bopd (30k bopd net to PMO) and with Brent at $60 doesn't shift the SP then it's probably time to call it a day.
Only time will tell but that's my opinion for what it's worth.
A) Big players do not need to get involved in a battle with CB hedge funds, they will wait until it is all resolved then invest. The reward is not worth the risk for them in a war of attrition when they can just wait.
B) No confidence in the CEO to deliver.Past performance and lack of support for equity shareholders adds to the perceived risk.
can you please explain the impact of North Sea oil pipeline shutdown to Premier Oil in the following contexts:
- near term and long term revenue impact
- near term and long term operation impact
-near term and long term impact to Catcher.
also, what is happening with Catcher at the moment?
Natalie Fortescure (from PMO) reply:
"I am afraid I cannot provide the level of detail that you want as we do not know how long the pipeline will be shut down.
what I can say is that it impacts production from our B Block, Elgin Franklin and a couple of tiny ex E.ON fields so a maximum of c 9000(net) to us per day. On the flip side the UK gas and Brent price have spiked and so this will partially compensate.
It has zero impact on Catcher which does not use this infrastructure."
very quick response (within 10 mins after I send my email).
I keep hearing the argument of Big Investors will not touch PMO until CB is cleared? can you explain why?
From fundamental point of view, if PMO production is going to top 100k, with huge reserve and potential at Zama, together with oil price at 60s, this means debt can be easily reduced and big profit is on the card in 2018.
But why the Big Investors ignores the fundamentals, instead, they are kept away by roughly 250m of CB holders?
although I doubt if the pipe has anything to do with us. We offload to tanker dirct at sea don't we then it sails off to wherever? Brent now at $64.93. Frankly I see it going a lot higher. Lost production is 450,000 barels per day and it's going to go on for 3 to 7 weeks I have read.
I make lost production from pipeline closure at 9.6kbpd
Made up of:
Elgin- Franklin 6.5k
This is the map of the pipeline I used https://subseaworldnews.com/2017/03/17/bp-negotiating-sale-of-forties-pipeline-to-ineos/
Pemex dont have any money?! Lol Ive heard it all now. Mexicos production is dropping like a stone, they desperately need the tax dollars from Zama, which is why I firmly believe the overlap issue will be sorted and this will be fast tracked to production. Suits me as well, with an expected break-even of less than $25, this really is a world class asset.
As for sea-lion, FID should be delayed until late 2019 to ensure that the recovery in oil prices is stable and to give Premier chance to delever the balance sheet. The fact that no one appears interested in buying a stake just goes to show the value of the asset in the current market. But then is it all that surprising, when you consider you can buy producing assets for $14 a barrel (Wynch Farm) who really wants to take the risk on a development in the middle of nowhere that has a break-even at $45?!
Nice to see Brent above $65, even if it is only temporary. Does anyone know how much of our own production could be impacted by the pipeline closer?
Still waiting for first oil, but wont be long now. We should get 10 tbd quite quickly but winding up to the promised 60 tbd may take until Easter to get the compression and subsea wells flowing consistently.
This is very important to PMO as a decision on Sealion may depend on it. We have to have reliable FPSO operations and production from the reservoirs that support the reservoir engineering. (Dont forget we didnt see that with solan).
TD doing a great job to get us deleveraged. Things are quiet on the Babbage/Cobra front but lets hope that before Easter he gets this one in the bag. 47% down to 23.5% .
These secondary assets must waste a lot of core team time so we gain in various ways.
I would bet we get FID on this project before the end of April 2018.
The PoO will be more certain; probably in the low $60/bbl
Catcher will have proved itself
PMO will have to kick the gear lever in some time soon or the low fixed prices they have negotiated will evaporate.
April FID would be first oil by Dec 21 (summer in the Falklands)
Max cash flow will be in 2020/21 when Tolmount is on stream. Good timing.
FID in the first half of 2018 and first gas for late 2020
Singa Laut 177ft of wet gas/Kuda Laut 183ft of net oil and 327ft net gas
At least 100 mmbbl recoverable
Excellent news on the agreement to use the same line that the Chim Sao gas goes through. This will facilitate all technical/financial issues.
Field appraisal to build reserves and first gas/oil in 2022 via an FPSO (?)
25% field to be sold.
Im not holding my breath for this on. The reserves go into the neighboring block. No unitisation procedures in place. Will Pemex put an appraisal well in to define their share? I doubt it, they havent any money. Best solution would be to split their block and the Zama partners buy it. PMO may have trouble finding the money so TD would have to become inventive (again).
Until unitisation is in place Zama partners wont do any more drilling.
Mexico needs the production so that's a positive to help get it moving especially as the latest auction fell flat on its face.
Dont forget conceptual and front end design are needed before FID.
We have a very strong forward program.
One for EC.......oil is now $64.6!
Important message from the Financial Conduct Authority:
Posting inside information that is not public knowledge, or information that is false or misleading, may constitute market abuse.
This could lead to an unlimited fine and up to seven years in prison.
If you have any information, concerns or queries about market abuse, click here.
The content of the messages posted represents the opinions of the author, and does not represent the opinions of Interactive Investor Trading Limited or its affiliates and has not been approved or issued by Interactive Investor Trading Limited.
You should be aware that the other participants of the above discussion group are strangers to you and may make statements which may be misleading, deceptive or wrong.
Please remember that the value of investments or income from them may go down as well as up and that the past performance of an investment is not a guide to its performance in the future.
The discussion boards on this site are intended to be an information sharing forum and is not intended to address your particular requirements.
Whilst information provided on them can help with your investment research you need to consider carefully whether you should make (or refraining from making) investment or other decisions based on what you see without doing further research on investments you are interested in.
Participating in this forum cannot be a substitute for obtaining advice from an appropriate expert independent adviser who takes into account your circumstances and specific investment needs in selected investments that are appropriate for you.