Back to 12-8-E after 6-12 Wells?I believe that there is a...

Back to 12-8-E after 6-12 Wells?

I believe that there is a possibility that we may commence 12-8-E Phase 2 immediately after the current 6-12 program. This would be dependent on

1. Firstly, satisfactory 12-8-E production over the duration of the 6-12 program (several weeks)

2. And secondly, rig availability which probably comes down to CNOOC priorities.

My Previous Prediction

I have previously posted that I thought that they may continue drilling (Phase 2) after the 12-8-E-A8 well.

That didn’t happen. I was wrong then, so I may be wrong now.

Why was I wrong (trying to save face )

Production from 12-8-E was interrupted for approximately 6 weeks.

Hence they could not collect the necessary production data.

Data that would be essential to assess whether field performance of Phase 1 would justify an immediate Phase 2 at 12-8-E.

A Cunning Plan 2 was Hatched (perhaps my over active imagination is running rampant again)

Initially the current 6-12 wells were scheduled at the same time as some of the 12-8-E wells (the Strike Rig).

This implies a different rig for the 6-12 wells..

Clearly in a high oil price environment rigs are going to be tight, so It is almost certain that the Strike rig was the first available rig, and therefore perhaps the logical choice.

However, and I may be completely wrong here, my thinking is along these lines

• A smaller workover rig would suffice for the 6-12 program

• The Strike Rig (12-8-E rig) is an overkill for the 6-12 program

• CNOOC would have numerous higher value targets for the Strike Rig.

• CNOOC could have waited for a workover rig for 6-12, but they didn’t.

• Rig movement costs saving wouldn’t have been significant

To my mind, this may indicate that our JV want to keep the Strike rig close by, on standby, should production at 12-8-E over the next several weeks justify an immediate 12-8-E Phase 2,

Timing of Phase 2: immediately, in about 12 months, or never: all possible.

For the immediate case to come to pass….there are a couple of hurdles…..

The first hurdle is that Phase 2 has to be justified by 12-8-E production over the period taken to drill the 6-12 wells.

Announced 12-8-E production, whilst very early days, are encouraging, perhaps even very encouraging.

Time will tell.

The second hurdle (if we cleared the first) is that CNOOC needs to prioritise 12-8-E Phase 2 drilling over all of their other opportunities.

Realistically, CNOOC would have higher value targets in their portfolio.

However, working in our favour, it is clear from the CNOOC 12-8-E video (see HZN website) that 12-8-E has unlocked numerous analogous fields for CNOOC.

I am hopeful that CNOOC would be keen to gather additional information from the 12-8-E development to better understand the potential of the numerous analogous fields in their portfolio.

In other words, CNOOC’s strategic imperative would carry more weight than their short term goal of maximising production.

Again time will tell.

Still lots of unknowns.

However if the ducks line up, I believe that there is a possibility that a 12-8-E Phase 2 drilling program will immediately follow completion of the current 6-12 drilling program.