Courtesy of Rabito79 on the LSE chat site. It was posted across a few chopped up posts so hope I to have put it back in the correct order
Well worth the read, Its a very good report on the Pub meeting, and answers a few pertinent questions
All,
I am sharing the below notes from a fellow PANR holder who attended Friday’s presentation. As per his closing comments, I am not looking to argue with anyone rather share what are the most detailed notes I have seen from the meeting. We both believe there is a benefit to following the activities of each other’s companies given the similarity in the plays. The post is extensive so may take a few comment
GLA
Dear All,
I attended the 88E presentation at The Globe on Friday (29/11/19). The presenters were Dave Wall (CEO) and Dr Stephen Staley. Im going to estimate the number of attendees at 50-60. I understand more had indicated they would attend but there was a terror attack 3 hours earlier so that would likely explain the no shows.
I am reasonably new to 88E and certainly new to the science behind the HRZ so Ill firstly attempt just to transcribe my notes and maybe Ill have a stab at comparable contrast in the coming days. To be clear, this was the first time Id met 88E management in person, all videos/podcasts/RNSs/pdfs until now. I am not going to attempt to speak to the slides which may be available on the company's website “ some of the verbal content from Friday referred to a few slides but some of the content was more off the cuff and in answer to attendees many questions. Im going to attempt to transcribe my notes in chronological order but there was a fair amount of dipping in and out of topics so probably best to accept this post as providing debating points or points worthy of further investigation/discussion and not gospel truth, ok?
Dave Wall (DW): In Alaska, you cant drill conventional targets without seismic. The Charlie-1 well is the well 88E management has been looking to drill for the last 5 years. The drilling data collected by the likes of ARCO and BP in the 70s, 80s, 90s has only been able to be re-interpreted in the last 10 years or so due to improvements in computer processing power."
DW: Premier has no interest in the HRZ shale play. In a statement which may lead to some raised eyebrows on this thread, DW said that 88Es PR since the farm out with Premier (PMO) has had to be more conservative, lol! To be clear, I am not for one second suggesting 88Es PR strategy is conservative/flamboyant/has changed since the PMO deal, just that us LTHs of PANR can observe a fairly differentiated tone in PR strategy, agreed?! Anyhoo, if their public statements have indeed been more conservative since the PMO deal, thats fair enough as 88E have now got a big brother as a partner and, as DW conceded, they'll be running the information releases alongside PMO as they, too, are of course listed.
Both presenters advised the audience that they should prepare themselves for mixed news from Charlie-1. Statistically, they warned not all of the zones will work. I know theres been some reporting on other threads that there would be news every two weeks? but thats inaccurate IMO. Quite correctly, DW guided that news would be released as and when, and that would quite likely mean there could be good news followed by bad, etc. He also said that ought to mean there wouldn't be an *absence of news for any 2 week period* during operations. PMO had provided technical input on the location and design of the well Premier spotted something we hadn't and suggested a couple of changes which we were happy to do?.
DW stated explicitly that he wasn't here this time in the UK to raise cash. He flew back to Oz on Saturday so I think we have got to take that statement at face value. He was asked if 88E had sufficient cash should Charlie-1 run over budget. He replied that they had indeed and that 88Es contribution to Charlie-1 was $600k only (is that correct, happy to be corrected? Would this sum be 88Es contribution to drilling down to the HRZ maybe because we know PMO is not interested in HRZ?). He was asked about 88Es most recent fund raise with the questioner asking what happened to the $10m targeted raise amount, "does that mean youre here to raise more cash as you fell short", etc? Fascinating explanation from DW (to me anyway). He explained that the minimum raise required was $6m and that the company had raised that sum from Aussie sources. Having secured commitments of $6m from Oz, he *then* flew to London to pitch for the $4m balance from UK institutions. Despite seeing a decent number of institutions, the broker failed to raise any money here in London. Huh, interesting. The broker gave the standard Brexit excuse for lack of interest, lol.
Premier farm out: DW stated there were, multiple interested parties involved, some of which were many times the size of Premier. I was able to grab a few minutes with DW after the formal presentation and I asked him, now that its after the fact, who those other interested parties were. Hilcorp, Oil Search, Conoco, BP, Repsol, Armstrong are the names I remember. I think there may have been others? I dont remember him mentioning Exxon, for example, and I was surprised Armstrong had had a look. I would be genuinely surprised if most of those companies (and others) hadn't been in touch with PANR, perhaps with the exception of Armstrong and BP? How come 88E didn't sign a deal with any of the corporates listed above? Some didn't go any further than initial discussions; for others the unconventional was a complicating factor; others were asking for too great a percentage of the W.I. and also operatorship; others were unable to fit in with 88Es time frame for activity on the ground.
If I understood it correctly, there are 7 conventional targets and the HRZ which sits below. TD is 11,500ft with the primary Torok target located at c.9,000ft. My understanding of the history of Great Bear (GB) and 88E is that they were both initially looking primarily (solely?) at the unconventional in Alaska. It *sounds* to me that Great Bear made the decision to switch their main strategy to conventional prior to 88E adopting a similar stance? In fact it was clear from a number of questions from the floor that, for many 88E shareholders, their original motivation to invest was due to their interest and belief in the HRZ. It seemed to me that some 88E shareholders (NB some, not all) remain wedded to the unconventional strategy and they haven't quite accepted that for the HRZ to be of any value to the 88E equity investment case, the price of oil would likely have to be at least $20 higher than current levels *and* the conventional play located above the HRZ would *need* to be commercial to defray/contribute to the capex/opex required to make the HRZ work. Sidewall cores will be essential to understanding the HRZ play so these samples will be sent off to a lab for analysis and DW gave guidance indicating it would take c.2 months to receive the results back from the lab.
Charlie-1 well location: the historical Magaluk well drilled in 1991 by BP is approximately 1 mile away. Naturally 88E and PMO have been pouring over the historical data from that well. Some of the oil extracted in 1991 was sent for analysis and registered an API of 38. [Geos I think theres a read across to PANR here and Ill try later to refer to the 88E slides which point towards this suggestion which encompass sand movement northwards from the mountains to the south and the locations of various cliffs and shorelines on the sandstone's "journey" to Prudhoe Bay.]
Both speakers made it very clear the primary targets were located in the Torok....from memory three intervals named various shades of Stellar. DW said that the Torok generally contained thinner sands elsewhere in Alaska at that depth but the Torok data from the Magaluk well showed good, thick sands with a porosity of 18%?. DW admitted that sands at 9000ft would normally be tighter but the data from Magaluk indicated otherwise. He did give an explanation or theory for this but I wasn't able to follow it in real time“ sorry.
Naturally, management were asked about CoS for Charlie-1. Both presenters were extremely confident that the drill would encounter hydrocarbons. It was almost a case of,How could it not? based on the historical data from nearby wells. This was not said in a boastful or arrogant fashion, rather a presumption based on all available well data and also including more recent seismic studies. They were at pains to explain to the audience that Charlie-1 had been designed for maximum data collection which meant that the intersection of the drill with each interval was not optimal. That said, it looked and sounded to me that the wells top priority was to intersect the three Stellar zones at decent locations (away from the edges or periphery of those 3 zones).
I *think* a fair amount of the audience was surprised when DW stated that a flow test of 100 bopd from the primary target would be viewed as a genuine success and would be sufficient to surpass the data watermark required to proceed with more drilling activity in the block “ more on that later.
Im now going to try to describe the CoS information given:
Indigo: well not optimally located for Indigo, historical data from 2 nearby wells suggest a 100% likelihood of encountering hydrocarbons but there is insufficient data to even estimate whether Indigo will flow at a commercial rate.
Charlie: a topset with similar characteristics to Winx, "looks interesting". Geological (hydrocarbon) CoS estimated at 20-30% with no estimate given for commercial flow.
Lima: data suggests 60% oil saturation but sands are tight, 11% porosity. 100% CoS on encountering hydrocarbons but no guidance given on commercial flow.
Torok: CoS on encountering oil is 100%. 50% CoS guidance given on whether oil would flow at commercial rates within this zone.
*My* interpretation of managements view on order of importance to 88E, from most to least is: 1st Torok, =2nd Charlie & Indigo, 3rd Lima. I swear I could not work out where to place the HRZ in that list, I just couldnt work it out!
DW got a fair amount of mostly good-natured stick from some attendees concerning the good-then-bad-then-good-then-bad news releases around the Winx-1 well earlier in the year. Personally I felt the criticism was a tad unfair as 88E, being the operator, was reacting to news from the site in Alaska whilst juggling with the regulatory demands for timely release of price sensitive news in both London and Australia. They did the best they could and I sympathised with DW when he talked attendees through the order of events. Just an aside to prove that other management teams cop it sometimes too!
Charlie-1 is located 30 miles from the Dalton Highway. Thats a direct quote. Some of us on this thread, including me, had guessed, using maps, the distance was anywhere from 35-45 miles but heres the definitive answer. We were in the right ballpark“ much more on this later. DW stated the ground wasnt yet cold enough to begin constructing the ice road (btw, Ive seen local Alaskan guidance of anywhere from $200k-$450k per mile cost for the construction of an ice road fyi) and theyve got sensors in place to indicate when construction may begin. I think he said theyd most likely begin construction of the road at the start of January, and mid-January at the latest
The drilling schedule suggests spudding in early February, drilling to take 20-30 days, undertake 2 weeks of logging, 1 week to analyse the data collected followed by 2x 2 week periods of flow testing (NB two intervals only to be flow tested). Oil-based mud will be used during drilling. [I recall some of the engineers on this thread wondering whether the mud type had impacted the analysis of Winx-1....thats why I mention it now]. Logging will include wireline and magnetic resonance tests. DW also stated they planned to undertake (a)small frack(s) as part of the flow test
What happens next? If the Charlie-1 well is labelled a success, DW outlined a tentative plan which might see Charlie-1 re-entered next Winter and a lateral drilled plus one other new well? Winter 21/22 could see 4 wells drilled, opening up the two main blocks either side of Charlie-1. He mentioned wanting to shoot seismic on the Eastern Blocks, was it in 2020 or 2021? Naturally he admitted 88E would have to raise new capital at some point next year but that he wished to wait until after Charlie-1 to raise money, hopefully at a higher share price than current levels. Asked if 88E will be looking to add to their acreage, DW replied they would consider minimal lease additions only.
If the HRZ portion of Charlie-1 is unsuccessful, its likely that itll be the end of going for the HRZ on this acreage as far as 88E is concerned. I think, but am not certain, DW said that c.50% of 88Es total Alaskan acreage reflected their interest in the unconventional HRZ.
The Yukon leases on the coastline to the north-east is something to look at "in the longer term".
Winx: its unlikely 88E will drill another well in the Winx area and that theyll likely try to realise some value by selling their interest there. Interestingly, DW said that PANR had been a really good partner on Winx and he said he rated Bob Rosenthal extremely highly. At this point he did say that the ARCO well close to Talitha looked very interesting. At that point he did address the PANR or 88E question. He did this with a smile on his face and was *not* being competitive or seeking to disparage a neighbour. He simply said that 88E are happy with their acreage, no doubt PANR are happy with theirs too....obviously he believed 88E had the better acreage and that PANR likely thought the same thing about their asset. He was obviously very aware of PANR, had built an amicable and constructive relationship with Bob Rosenthal and said he wished PANR success and naturally hed be interested in reading any info/data which is available from PANRs future operations.
Interesting snippet of information: Conoco has just drilled a 6 mile lateral well in Alaska, a new record for the state.
88Es PR , make of this what you will. When asked about the recent PR blitz (which I think has been pretty extensive, agreed?) and the decision to give the investment case a push now rather than early next year immediately prior to spudding, DW said that a) he always does some PR when he comes to London whether hes raising capital or not and b) 88E has a history of undertaking a PR strategy 6 weeks or so after a fund raise in order to reward shareholders for their faith and support of the company.
Management: I have to say that I warmed to DW. He came over as credible, passionate, on top of his brief, aligned financially with shareholders and genuinely sympathetic and appreciative of retail shareholders support. I didnt feel that he gilded the lily too much. It was clear that many of the attendees knew each other, knew DW and were LTHs. Quite understandably, he did respond to some questions from the floor asking him to expand on what success in Alaska could mean when reflected in the share price. Always careful *not* to offer any guarantees, an internal management target would see 88E proving up 200-300m barrels of reserves and selling them at $4 - $5 per barrel. I didnt pick up on any desire from DW for 88E to become a producer, rather it was the prove up and sell on model, which was described as being the most likely end goal.
Ok, heres what sticks out to me as being the main differences between the two companies.
a) Volume of seismic data. PANR appears to be a few years and 10's of millions of $'s ahead on this front. We know that Great Bear invested $80m in seismic across the Alaskan leases - fact. DW did mention they were using local geophysicists as consultants but he didn't name the firm, fyi.
b) Scale of OIP - looks to me from a cursory glance that PANR has outlined a greater absolute number and has also defined or identified more specific targets.
c) Proximity to infrastructure. This is perhaps the most acute difference between the two investment cases at this precise point in their respective journeys. Attendees at PANR's recent presentation in London will recall how often and forcefully Bob Rosenthal stated the importance to PANR of Alkaid literally being intersected by the Dalton Highway and TAPS. This factor has *massive* implications for timing of operations, ease of operations, capex, opex, timing of cash inflows, collection of pertinent data, etc. All of these considerations, and likely many more I haven't thought of, all feed into the noteworthy NPV per barrel differential published by each company.
d) NPV per barrel valuations: 88Es $3-$5 vs PANRs $7-$12
e) Time to first production: PANR *could* be as early as next Summer/Autumn. 88E? 2025. Although it's entirely possible/probable 88E will never become a producer and will have sold out by then.
f) Flow test pointing to commercial oil: PANR @ Alkaid tick, 88E TBC in April '20?
g) 88E has negotiated a farm in partner guaranteeing operational activity from Fed-Apr 20. PANR? TBC!
Thats it for now. I might have a stab at comparative valuation for both stocks “ lets see if the exercise is even possible. Might not be, apples vs oranges, etc, etc.
Any 88E shareholders reading this “ please feel free to correct me on this post by emailing me privately via ADVFN and Ill correct/edit the post. I dont propose to get into a public debate on this thread as it wasnt created for that purpose and I dont intend to comment on 88E again unless theres a direct readacross on either valuation or geology. I am only posting this set of notes because when I said I was attending the 88E presentation some people requested I publish my notes - there is no other motivation other than to seek data points for comparative valuation and to understand any geological links between the two companies. Please feel free to copy this post and use it on an 88E thread for debating purposes as long as you attribute it to scot126 on ADVFN so that I'm not misquoted or taken out of context.
To be crystal clear, I wish 88E all the very best with the upcoming Charlie-1 drill. I will be genuinely delighted if it proves to be a success. GLA and good luck to 88E.
(20min delay)