anyone got any ideas about the block trades that went through today?

website: http://www.sterlingenergyplc.com/



weather: www.nhc.noaa.gov/refresh/graphics_at4+shtml/084938.shtml?50wind120

Pond Life - I too hold SEY and BUR and quite a number of others ...... Please be very cautious in your buying (if any), for though the market has taken a hammering (as if we hadn't noticed!) and there is very likley to be a (significant?) bounce, that is no certain indication that the storm has passed for good ...... The severely overbought position is copper futures is a very great worry, for if there are significant casualties from the correction (it must come), then the market will nosedive again

Below is an article from Oil Barrel which talks about the Mauritanian project. But before you read it let me just first give you my reation to it.

What this article shows is the technical challenges that face every oil company in the world. Oil extraction is not an easy business but it is a highly profitable one. Far too many people concentrate on the minor problems and don`t focus on the real issues. The problems in Mauritania will be overcome in the near term and what people should be focusing on is the upside that exists when new fields are brought into the project which is still young by any standards.
Rather than focus on the failure of a compression unit which is going to be fixed pronto, people should be focusing on other areas of the article like:

The exploration campaign is expected to get underway in July with a hole on the possible 170 million barrel Colin prospect in PSC A and Flamant in the Dana-operated Block 8, which could hold 5 trillion cubic feet of gas.

In the fullness of time it will be items like this and all their other exciting projects that will be coming on stream that is going to value the company, NOT a faulty compression unit.

And now the article:

18.05.2006
Production Worries At Chinguetti As Hardman Drills Ahead In Uganda
The science of finding, drilling and draining pockets of hydrocarbons, cooked over many millions of years in deep underground kitchens and hidden under several miles of subsurface rocks and ocean, often proves to be inexact. The past hundred years or so have seen the oil industry become increasingly skilled at finding and extracting oil and gas in ever more extreme environments.

But the fact remains that this incredibly high tech, high cost business can still throw up a curve ball that can wrong foot the best laid plans. This appears to be the case at the Chinguetti oilfield off the coast of Mauritania, Africas newest oil province. The field, operated by Australian oil major Woodside, was discovered back in 2001 and came onstream in February 2006. It was then expected to ramp up to a plateau production rate of 75,000 barrels per day, a rate that was briefly achieved in early March.

But this week it emerged that the project has hit what investors will be hoping is a mere production glitch. Production averaged 66,000 bpd in March and 53,000 bpd in April. These production hiccups were first highlighted by joint venture partner Hardman Resources, which has a 19 per cent stake in the field. Hardmans quarterly report for the first three months of the year indicated problems with the commissioning of gas compression equipment on the Berge Helene FPSO, delaying the re-injection of produced gas into the Banda reservoir.

This is not a major issue: equipment problems can be fixed in time. But Hardman also gave warning of more fundamental issues with the performance of the reservoir. While the four wells in the southern portion of the field are performing as expected given the problems with the gas-handling equipment, the two wells on the northern fringes of the field, drilled on the periphery of the main channel axis, are performing below expectations.

Over the first ten days of May, output dipped to an average of 45,000 bpd. With the gas handling equipment still out of commission, the partners cant use gas lift to sustain production levels and volumes are going to remain reduced until such time the partners can either side-track the problem wells or sink new wells.

This work is unlikely to take place until the final quarter although the work could get underway sooner if the partners can source the right completion equipment and are prepared to delay planned exploration work. The exploration campaign is expected to get underway in July with a hole on the possible 170 million barrel Colin prospect in PSC A and Flamant in the Dana-operated Block 8, which could hold 5 trillion cubic feet of gas.

This is a concern for followers of those companies carrying exposure to the US$708 million project. In addition to Woodside and Hardman, the partners in the project are the Mauritanian state oil company (the recently renamed Societe Mauritanienne des Hydrocarbures, which has a 12 per cent interest in the field) and London-listed BG (10 per cent), Premier Oil (8 per cent) and ROC Oil (3 per cent). Sterling has what amounts to an 8 per cent economic interest in the field as a result of financing the state oil firms share of the project costs and its chief executive was putting a brave face on the news this week.

Some initial fluctuations in production are always to be expected as reservoir management is optimized, said Harry Wilson. The reserve estimates are of course unaffected and given the strength of the oil price, Sterling's realised cash flow continues in line with the Board's projections.

Hardman, which is most closely aligned with the project, having first spotted the potential of these previously untested waters and then brought in Woodside to share the costs and risks of the deepwater wildcatting, has seen its share price slip on the back of the problems at Chinguetti. Investors are always cautious about under-performing wells: as followers of Ramco Energy will painfully recall, production issues can be an indication of far more fundamental reservoir problems.

So far there appear to be no such concerns about Chinguetti. The partners say the problems with the northern wells do not impact the reserves estimates although additional investment may be required to access those reserves. Whats more, while it may take time to rectify this problem there is the hope of near-term production increases as the existing wells on the field reach optimum configuration and sidetracks are drilled, adding at least 10,000 bpd per well in the southern sector of the field and 5,000 to 10,000 bpd in the northern sector.

For Hardman followers, theres plenty of other newsflow in the pipeline. A development decision is due this quarter on the large but complex 1 billion barrel Tiof discovery in Mauritania. The company is also still drilling ahead on the Mputa-2 appraisal well in Uganda, which has a target depth of 1,500 metres. Success here will help Hardman and its 50/50 partner Tullow determine the reserve potential and commerciality for the fault block which is home to the Mputa and Waraga-1 oil finds, which is to be flow tested. The results will also help plan further exploration of larger, deeper prospects under Lake Albert.

And the Hardman portfolio is no longer highly geared to success or failure in Mauritania. The first months of this year have seen the London and ASX-listed firm add new projects in Suriname and Tanzania to the mix. However, investors will still be anxious for further updates about progress on Chinguetti and will be glad this company is one of the better communicators among its peers.

now is the time for sey to strike and strike fast on a bid for another oiliy

hnr would be a good move imho

even pvr pre

Production Worries At Chinguetti As Hardman Drills Ahead In Uganda


How important is the above and/or does it impact SEY?

Post 5954 by fido covers this cynic.

cynic

Could be quite significant. HNR have stated that they were to undertake an independent report on reserves at Ching. Currently 120 million compared to SEY`s stated 139 million. With production from the Northern part of the field less than expected and drilled on a 20% down dip ( I think) it is possible the field is not as big as first thought or the oil expected to be recovered is less than anticipated.

If the field comes in at a lower rate say HNR then SEY will have to reduce there reserves which IMHO are small for the market Cap.

The question everyone needs to think about is the terms of the Tie back clause in the origional agreement. WILL IT ALLOW SEY TO BOOK RESERVES????????

regards

With regard to Kurdistan, here is an article about another oil company that has started drilling operations in the area. Three things stand out in the article.

I.This could be a world class oil producing area.
2.Kurdistan are desperate for oil production to satisfy local demand.
3.Neither this company or DNO are having any problems working in the area.
All these bode well for Sterling as Kurdistan gears up its oil industry.

Have a read on:
http://www.oilvoice.com/Addax_Partnership_Spuds_its_First_Well_in_Kurdistan_/6401.htm

I just cant understand the principle with shares fluctuation at the moment....

Do investors realise that at Ching alone, SEY are gaining $6 for every barrel sold (this is based on $40 a barrel) and if the rate of production is an average of 50,000 barrels per day for the year, it does not take much to appreciate how much SEY is making or going to make...in one year there is 10 years worth of oil in this area. With prospects that the production are likely to quadruple in the next 3 years, the income surely is going to be substantial...even good enough to pay well earned dividend for us the shareholders!

Dr Square,

I think it may be a bit early to start considering a possible reduction in reserves personally, as we seem to be at the mercy of Hardman's reports, possibly too bullish pre production, and now (hopefully) a little too bearish, as production is not as they expected.

Hardman rushed out a "full production achieved" statement soon after commencment, although SEY always predicted a run up to full production, which probably takes into account the sort of problems they are encountering now!

r88ave,

Exactly, SEY have said that the (hopefully temporary) drop in production is covered by the increased value of the oil being sold, so is nuetral to SEY with regards to 2006 earnings targets.

If full production is achieved at around the current price of oil, that would increase the targets for 2006.

Andy

Thanks and yes Hardman were drumming a bit hard but it does not escape the fact SEY, If HNR figure of 123 million are taken have a possible 6% reduction in assets . I have been fortunate and sold some of my holding so Negative posting may come across as being for other reasons.

But I would like everyone to consider two more thing. That is the hedge agreement SEY have and the production they have lost. I may have my calculations wrong but it is now very close to only being covered by total production including GOM, If no improvement happens.

The second issue is currency while earnings may be the same in $ profit in will be possible 10% below expected.

Long term this is still a screaming buy and hold ( a no brainer ) short term some little bits need ironed out. IMHO

That is why I only reduced my holding.

Regards to all

What we have in Kurdistan is a situation which favours the brave. The big boys are sitting back and keeping an eye on things allowing the smaller guys to test the water. If this was southern Iraq then it would be warrented, but Kurdistan is completly different. If you follow the news in Kurdistan like I do then you will know that we are seeing a procession of international diplomats wanting to do deals in Kurdistan. Well Sterling are already there. We have a good relationship with the Kurdistan government, we have our MOU and we have a right to negotiate a PSA. Sterling are as we speak, out conducting field studies and if they are happy with their findings then they will be sitting down at the table hammering out a deal. As the report demonstrates, the Kurdistan government are keen to get the oil out of the ground for local demand, so they want a deal as much as we do. If sterling can pull this off then they are either going to be catapulted into the big time or they are going to be taken out by one of the big guns.
But the story does not stop there. As I said before, because they are on an escalating royalty with their production their projected revenue is still intact even though the field has not yet been optimised, and when it is then the revenue is going to be very high indeed if the oil price remains high. This then is going to give them the fire power to do deals at a time when the froth has been knocked off the sector. All in all we should not have long to wait because our chairman has indicated that deals are going to flow within the next six months and I am confident that this step change in the company is going to confirm what an exciting play Sterling is for the months ahead.

Dr Square,

Some good points, and yes you may well be correct re the hedge.

It is my intention to attend the AGM, and I will try and ask some pertinent questions to try and clarify some of the issues or doubts.

Andy

Thank you for that. I value your thoughts and posts

Can I please beg a favour. The issue that I feel is most important going forward (filling the gap between Mauritania & Madagascar / Kurdistan ) has to be the Tie back terms to ching. Can you try and get something on what revenue this would generate or anything at all on terms.

I wish I could attend but the little man keeps me tied.

I have posted on JKX would value your thoughts being a longterm holder

Regards

As I said before, people are paying too much attention to the start up problems in Mauritania and not thinking about the long term potential of the area. In the months and years ahead the present problems will have been forgotten and the present production levels will have been dwarfed as new projects come on line.
Here`s a snippet. Note the possible 350 million barrels of oil at the Tiof oilfiel and a porduction of 150,000 bopd by 2008.

In February 2006, Mauritania began producing its first oil from the Chinguetti oilfield, which is located offshore 56 miles southwest of Nouakchott. The field has estimated proven reserves of 123 million barrels of oil. Currently, the field is producing around 15,000 barrels per day (bbl/d), but output is expected to reach capacity of 75,000 bbl/d by the end of 2006. Woodside Petroleum operates the Chinguetti field with a 47.38 percent interest and is joined with partners Hardman Resources (19.01 percent), Mauritanian-government controlled SociMauritanienne des Hydrocarbures (12 percent), BG Group (10.23 percent), Premier Oil (8.12 percent) and Roc Oil (3.25 percent). The Mauritanian government created the national oil company in 2004.

In addition to Chinguetti field, Mauritania possesses several other promising offshore oil and gas fields. The Tiof oilfield, which is located 16 miles north of the Chinguetti field, may contain up to 350 million barrels of oil. The Tiof-6 exploration well was drilled successfully in February 2005. Woodside and its partners believe that the field may start producing at 50,000 bbl/d in mid-2007, with production potentially rising to 150,000 bbl/d in 2008. The Banda field, located 12 miles east of Nouakchott, may contain natural gas reserves of 3-5 trillion cubic feet (Tcf), while the Pelican natural gas field is estimated to hold 1 to 1.5 Tcf. UK-based Dana Petroleum is working with LNG operators to determine development options for the Pelican field.

The present problems of shorting the oil companies is short term and will dissapear as quickly as it occured. The real problems are in keeping up with the worlds hunger for oil. That I believe is not going to go away for decades until a new source of energy is found. That is going to keep the price of oil and gas high in the long term. For those seeking to exite the sector maybe they can tell me where else is there where high profits are going to be the norm for decades to come.
Have a read of the following article.

Totals exploration chief believes world cannot meet oil demand
by Carl Mortished

29-04-06 The world lacks the means to produce enough oil to meet rising projections of demand for fuel over the next decade, according to Christophe de Margerie, head of exploration for Total and heir presumptive to the leadership of the French energy multinational.
The world is mistakenly focusing on oil reserves when the problem is capacity to produce oil, de Margerie said. Forecasters, such as the International Energy Agency (IEA), have failed to consider the speed at which new resources can be brought into production, he believes.
Numbers like 120 mm bpd will never be reached, never, he said.

The IEA predicted in its World Energy Outlook that global demand for crude oil would reach 121 mm bpd by 2030, of which more than half would be supplied by OPEC. The agency predicted that more than $ 3 tn ( 1.72 tn) of investment in wells, pipelines and refineries would be needed to raise output to such levels.
However, Totals exploration chief reckons the output rise is impossible, given available resources and geopolitical constraints on gaining access to reserves in OPEC countries.

De Margerie argued that the resources were simply not available. He said: Take Qatar. How many projects can you have at the same time? You have more than 100,000 people working on sites. Its a big city of contractors. Now they have the problem of having to build a new power plant to supply a city of contractors.
The IEA was mistaken in using recovery factors that failed to consider the timing of new resources coming on stream, de Margerie said. The world was confusing the issue of reserves with the scale of the problem in producing those reserves.

He said: The oil reserves are there, that is the good news, but what we can bring on today to meet demand is limited by factors other than what scientists see in a lab or think-tanks.

Fido - who are you working for?

fido gone very quiet.

good dog