Dear PCL Punters,
Writing as a long term PCL punter who capitulated after Woodside’s withdrawal and endeavouring to bring some reality into investor thinking stemming from my background as a retired petroleum geologist with 46 years industry experience, working in various parts of the world at both ends of the oil patch.
Over the years the petroleum industry has spent a great deal of effort to manage and understand risk and prospect ranking and often gets things very wrong.Pancon are not bound to make public more information than that in the Prospective Resource Estimates released on 18 March and its their choice what to release.Flooding the market with too much information at the wrong time can be counter productive when the greatest priority is to get a suitable farmout and not spend huge amounts of time releasing endless technical information to the public.Assessment of risk is subjective unless its been peer reviewed and its very difficult for shareholders to properly assess risk with what has been released as there is no advice of the peer review process.To understand the Saturn fan, the only mapping of top fan structural closure that has been released is old mapping based on 2D seismic data where top fan dip closures of 32 and 45 sqkm were mapped in the general area of Oryx.So we assume that the only closure (trap) now envisaged is stratigraphic within discrete fan lobes.We know that stratigraphic trapping is working with some Orange Basin discoveries.As a reality check, long term PCL shareholders would recall the dry Tullow/PCL Cormorant-1 well, also with a Class 2 AVO amplitude anomaly, drilled further north off Namibia in PEL37 during 2018.Cormorant tested more of a slope fan, rather than the ponded Saturn fan geometry.Thief zones often breach stratigraphic traps and are often below resolution on the best quality seismic data. Pancon blamed failure of Cormorant on a thick shale preventing vertical migration from the oil source at depth (sic).IMHO Cormorant seismic character looked more convincing than Saturn.
From my recall of public data, the Saturn fan does not seem to have seismic amplitudes as bright as with discoveries to the south and this may simply reflect more gassy charge and entrapment further south in the deeper part of the basin.
Interesting to view the GCoS (Pg) ranking of the various stratigraphic bodies that make up the Saturn fan complex.Pg numbers reflect the probability of finding the 99% probable pool size that would sustain a hydrocarbon flow, (be it even a short duration) and not the probability of Low, Best and High volumes. Pg estimates therefore reflect the minimum geological (technical) success. Prospect assessors often apply a DHI (Direct Hydrocarbon Indicator) Boost to Pg estimates, based on international statistics, if there are strong seismic hydrocarbon indicators (usually AVO) and this does not seem to have been done. A great deal of uncertainty arises from ability to ground truth actual Orange Basin (technical) success rates from public information but one suspects that the Pg estimates would be significantly higher than Pancon estimates.Very high Pg numbers may over excite and mislead the market and investors.
From what we have been provided and complexity within the fan, it is likely to be a difficult business selecting the best drilling location to adequately test the superfan. IMHO, perhaps the best shot for a dual zone test is probably Addax South and Hyrax. From the one arbitrary seismic line provided, Oryx is the oldest geobody with classic mounding of a sand prone body BUT it is overlapped and onlapped by a succession of younger geobodies and therefore the probability of breaching thief zones is high. From the information provided and for this reason, it is hard to imagine Oryx having the best GCoS (Pg) and being intact without being breached and leaking into shallower fan lobes. Hyrax is closest to known quality reservoir sand (Mopane) and that may go in its favour. I backed out some numbers for Hyrax on the Best Case volume and came out with an average net pay of 20 ft across its total area. Not huge compared with discoveries to the south but the potential volumetrics in each geobody is within reasonable ranges. Several competitor exploration wells are reported to have had low permeability in the reservoir and whether the parallel ridges on some of the fan lobes are sediment slump related or bottom current action related, not clear from what we have seen. Winnowing by contourite paleo ocean currents is an important process to clean turbidite sands and whether Saturn had sufficient paleo bathymetry for strong contourite action we do not know. There seem to have been mixed results on the Venus trend in the deeper part of the basin and distance from the paleo shelf and distance down the paleo slope may, or may not (?Mopane), be critical. Very tricky for farmees and investors to assess these probabilities.
The Saturn fan is the main game, and the obvious play, but we know that the Orange Basin is supercharged with hydrocarbons, there are some shallow seismic bright amplitudes in the overburden sedimentary sequence and there are inshore marine oil seeps, providing hope that there may be additional plays to attract parties to the petroleum licence.Such plays take time to interpret and mature for drilling, likely being most relevant for later drilling programs but may add value to the leads portfolio.It is hoped that Pancon may still pursue these while the farmout campaign is underway, though clearly the company will have their hands full conducting and completing a successful farmout and this will take time.
Some Sintana acreage maps show a host of undrilled leads or prospects in the northern part of the Galp licence area.It will be interesting to follow those as they may eventually upgrade the (proximity / trendology) perception of PEL87.Galp clearly have their hands full with Mopane so unlikely they will do exploration drilling farther north for some time.
The internet lists Woodside as the world’s 53rd largest E&P company by market cap.The list includes national oil companies and we have seen a number of corporate actions by Woodside since their withdrawal that would indicate that PEL87 had too much risk and too much financial exposure under the agreed terms, preferring downstream investment with no exploration risk.Some investors have mooted that a 2 well farmout should be sought but times are tough and getting more uncertain in a troubled world with a drifting oil price. A great deal of work needs to be done to prepare for drilling this licence year to meet contract terms and keep it in good standing.The easiest path would be from an established Namibian operator and /or gaining a slot of convenience from a local rig.With NAMCOR and Custos requiring a full carry, the residual Pancon post-farmout interest is unlikely to be large under current market conditions.If a variation to licence terms is needed, one hopes that Custos may have clout to sway the government regulator.
The above are personal thoughts only and do not constitute any recommendation to investors. For all concerned, I hope that Saturn is brim full and chockas with oil. There is a great deal of risk in the way ahead and it will be an interesting journey. Saturn needs to be drilled but the risks have a great deal of uncertainty. Investors need to be very patient and allow time for the process to proceed normally. There would be great incentive at PCL to secure a good farmout.
Wishing investors good luck and perfect timing.
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