.

wont be dropping to <1 or even 1 lol - honestly some people!

Don't need critiques like canaccord.People have funds in this company with huge loses.
As I was told ,how can the board purchase shares they would be accused of market minipulation. Don't laugh, they could pay back to the company a percentage of the shares they sold.

XEL is stuck at 170p now. Urgh!

From Gramacho on iii

Firstly thanks to superfast and michmcin for posting the two notes. It was particularly good to see the Edison note issued promptly as it addresses some of the concerns raised at the AGM about the lack of information about the FSP available to investors. The Board have shown they were listening.

The OIP of 625 mm bbl mentioned in the Oriel note is a downgrade from the estimate of 689 mm bbl associated with the main field (excluding Bentley East) most likely structure (range 521 downside structure to 886 mm bbl upside structure) in the June 2009 XEL management estimates. This confirms the disappointing RAR was primarily due to the view TRACS took on the volumetric OIP estimate rather than any concerns about field performance and recovery factor. Recovery from the June 2009 OIP estimate of 689 mm bbl STOIP was 120 mm bbl, hence RF = 17%. From the Oriel note one can infer that the TRACS RAR recovers 115 mm bbl from the 625 mm bbl STOOIP which is an RF of 18%. (Dont know why Edison refers to an RF of 22%.)

I take a bit of comfort from this in that if the upside structure does prove to be there then at least we should be able to supply a similar RF. Had the hit we have taken been predominantly a function of an RF downgrade then that lower RF would have been applied against any structural upside.

The Oriel and Edison notes reveal the extent to which the project is now based on the use of multi-lateral drilling technology. Both Oriel and Edison indicate that the SSP is based on only 8 multilaterals. This is a marked reduction in the number of wells versus the 2009 CPR which was based on conventional horizontal wells with a number of these sidetracked when they watered out.

Much has been made of the potential for EOR (Enhanced Oil Recovery) to increase ultimate recovery but IMO the current focus should be on ensuring that IOR (Improved Oil Recovery), in the form of multi-lateral wells, delivers the first 115 mm bbl. Multi-lateral wells start out as a single well at the surface but have multiple branches that penetrate the reservoir to improve overall recovery.

This is an ambitious application of this technology (Stu255, with some justification, might use a different and much less complimentary adjective) and the risks in its application will need to be managed carefully. I believe the FSP will probably start with 2 branches (i.e. a dual lateral) on the first or second well but progress to four laterals in later wells. It is worth remembering that the 9/3b-6z well was suspended for possible future use as a FSP producer. XEL may chose to complete this well as a conventional horizontal and produce it early in the program to discover any issues with the topsides and establish a revenue stream.

Multilateral drilling and completion technology has advanced tremendously in recent years. The technology began onshore but has become more common in the offshore arena. There are examples of offshore fields that have been developed predominantly using dual laterals, i.e. with 2 branches and tri-laterals were drilled on the super giant Troll field as far back as 2002. However developing an offshore field with quadrilaterals I suspect will be at the fore front of multi-lateral technology application. Moreover Edison goes on to say With Bentley requiring multi-lateral wells of between four and nine laterals each, this technology will be vital to the success of the wells. So the SSP will go a step further and hence the revised development plan (versus the CPR) is critically dependent on multilateral drilling technology.

So next year it may not be a case of Fire up the Quattro, rather Fire up the Quad or even Fire up the Bentley lol.

Edison correctly identified one of the keys to successful application of the technology: The ability to control water shut-off in the multi-laterals will also be crucial in maximising recovery, as water production in one lateral will negatively affect production from the remaining laterals if it cannot be isolated. Xcite is currently working on development options to achieve this. So it is not just about drilling the branches but being able to complete the wells and have some control over production from each leg.

I had to laugh when I read the quote by Bakers directional guru in SpikeyDTs post:

Integration of the RNS interpretation and distance to bed calculations facilitated the construction of 2D minimum tension grids, the results of which accurately depicted the morphology, orientation, and position of the reservoir roof and were used to update the 3D earth model post-well.

Although directional drillers have always been the cre de la cre of the drilling world, believe me you would not have heard words such as this being uttered 10-15 years ago, indeed you would have been accused of taking the p..s lol!

As far as the Rowan Norway is concerned the design will allow simultaneous drilling and production but this is not a dual derrick design. It will only drill one well at a time. The secondary drilling position is used to allow installation of the process modules. It is interesting to note that in 2010 GS and JP Morgan had small stakes in Skeie Drilling who own the three rigs and I presume still maintain their interest. It is in GSs interest for the project to be successful so hopefully they produce a bullish note.

The MCR indicated total FSP capital costs of $676MM. IMO a reasonable ball park breakdown of these costs would be as follows (note no attempt to match the total exactly):

Export P/Line & STL Mooring Buoy System $60MM
Topsides Equipment $140MM
Wells and Risers $170MM
Rig Rental $325MM
Total $695MM

The FSU costs are an operating expense and would not be include in the capex estimate.

Suggestions that the entire $676MM FSP costs have to be raised at the outset are way off the mark IMO. It is important to realise that a large proportion of this total is not a commitment, even after receiving DECC development approval. If the project went belly up after 18 months of production (which I am not suggesting) and the field turned out to be uneconomic then XEL would not be locked into a further 2 years/$185MM of Rowan Norway rig costs. Also the remaining costs are not required up front, nor indeed is there a contractual commitment to all of these costs prior to start up.

Here is an estimate of the funds required to complete 12 months of production i.e. mid 2013:

Second Rig Payment into escrow account $30MM
Export P/Line & STL Mooring Buoy System $60MM
Topsides Equipment $140MM
Wells and Risers Tangible Costs (i.e. hardware long leads) $34MM for first 4 wells
Additional 125 days rig rental beyond initial 240 days $32MM
FSU 1 year minimum rental guarantee $16MM
XEL Staff costs and overheads to mid 2013 $22MM
Production crew costs $11MM
Tanker spot hire $2MM
Early Abandonment escrow account * $27MM
Ongoing SSP Pre-FEED/FEED studies $25MM
Total Costs $399MM

*It is assumed the government would also want evidence of the ability to pay abandonment costs which could be of the order of $25-30MM for early abandonment of the FSP.

One area of uncertainty is the rig rate prior to start up. It is not clear whether the rate is reduced to a standby rate during the period required to install and hook up the topsides. Neither is it clear to me whether the rate excludes rig crew costs (i.e. is a bare boat charter rate) or includes Rowan crew costs.

Offset against the total costs would be production from the 6z well and other wells as they come on stream. To be conservative if we assume only production from the 6z well, and it averages 3500 bbl/d over the first 12 months then:

Revenue = 3500 * 90*365/1000000 = $115MM

And net funding requirement = $399 $115 = $284MM which is comparable with the Edison note and nowhere near as onerous as the $676MM total FPS costs.

IMO the 6z well is so important; it is a banker given the outstanding results and particularly its decent stand off from the underlying aquifer and evidence of tight streaks between it and the aquifer. At 3500 bbl/d it will generate $315,000/d revenue at $90/bbl. This will cover the FSP operating expenses and the bulk of the rig lease costs.

A year into production and we can expect to be producing well over 10,000 bbl/d (perhaps >15,000 bbl/d) generating a minimum revenue of $900k/d about 2.5x day to day costs. Repayment of debt will be underway and the deposit on the SSP will be accruing rapidly.

I will leave others to debate the FSP debt to equity split as I dont have a feel for what debt would be offered at this stage. The annual report indicates 67MM or roughly $104MM of the SEDA facility remains available. In the cost scenario discussed above this suggests the minimum loan required would be about $180MM which is only half of the future post tax net revenue of $362MM for the P90 reserves case of 22 mm bbl.

A 2:1 ratio of post tax net revenue to loan value appears quite modest to me and suggests a future placing may not be required although the dilutive effects of using some or all of the remaining SEDA will apply.

After reflecting on matters I feel much better about the SP prospects than I did one week ago.

Regards and have a great weekend,

Gramacho

abysmal, and worse to come as people see through the deep,deep BS

Price still looking weak.

Thought the sp would hold. wrong !

Back to the gap @160.

It's not picking up. Looks weak in the next few weeks.

I sold out at a heavy loss on Friday and bought RKH which has turned out so far a good move.

Have 2 ISA in this still holding but 50% down just a matter of holding hoping things will change in time.

Any guesses what these are going to drift down to.

The shares I hold now are 50 % down

Name a good reason why they should rise is more important.

I can only guess towards drilling.

m
re your post 1858
now you tell us. it wasnt the impression you gave in your post 1852.
why couldnt you have told us on friday or at the very least over the weekend? you do realise that many rely on your comments and genuine and honest posts?
telling us all now is very disappointing.,especially after close and given the relevant price movements of each stock today.
oh well just goes to show and confirm that we must all do our own research.
good luck and regards to you
jkd

since when was marky meant to be his brother's keeper?

cynic
he wasnt.and neither are you, nor me, or anyone else.
as always just my opinion , and please be sure to do your own research.
regards
jkd

i never research!

Whats your secret then, to investing?

Little bit of sour grapes I think jkd.........