Bakken Update: Kodiak's Purchase Of Liberty Resources Could Make Or Break Its 2013 [View article]
Mike: A good, thoughtful, article. Personally, I'd like KOG to give us some evidence that it can set a capex budget and live within it, but I suppose we are unlikely to see KOG ever either do that or make its numbers.
Overall, I think this is a pricey acquisition unless KOG can really force down costs through pad drilling (since it isn't going to have to do much drilling just to hold the leases), and--as you suggest--get decent recoveries from new target zones. If it can do both the acquisition might work out well. Unfortunately, I don't think we will have much proof one way or the other for another year at least.
Hopefully, they will be able to do a relatively cheap 10 year high-yield note to finance this.
Bakken Update: Mississippi Lime Well Design Improvement Is Increasing Estimated Recoveries, Part 3 [View article]
Brian: Good comment. The Niobrara and other formations in the Wattenberg (particularly the Codell), however, seem to be getting better and better. Not huge EUR's yet, but given the generally lower drilling costs there are some impressive IRR's. So--while I personally had some misgivings--I now think the Wattenberg needs to be added to the list of the top plays. (I give Bill Costello all credit for keeping his eyes on this). Jeep
A very good piece. I should note, though, that I am biased. Five years ago, I was very bullish about Brazil. Then I read your SA piece--and suddenly realized that things were more complex than I thought--and sold my PBR (at a small profit), In other words, you saved me a lot of money then (and you did it again when you sounded the alarm bells about Macondo the very day after the fire, when most thought it was just a small problem).
I think PBR actually might be a good trade at current prices. Top management seems to be making the right moves, but after the forced exchange two years ago I have been leery about the Brazilian government--and those feelings are not helped by a president who spent the 60's as a communist urban guerilla and who apparently still looks back fondly on those days. (To Brazilian readers--I intend no insult; the US government proved after Macondo that it would not abide by the rule of law either; few governments can really be trusted). In addition, as you convincingly point out, the asset base--while potentially huge--has lots of issues and that means it will take enormous sums and an extended time to develop. Given PBR's capital constraints I think it is unlikely that production will increase at rapid rates.
Still, if the world economy improves, I think PBR's price could bounce up from here, but given the government and the staggering capital requirements, I think your warnings are well taken for anyone thinking of a long-term investment.
Chevron's Coronado Well Comes In At 400' Of Net Pay [View article]
Micahel: Another nice article. Any thoughts on how much the litigation mess in Ecuador will end up costing CVX? (The fair answer would be "nothing" but I think this is probably one of those life is unfair situations). Jeep
Is Cobalt International Energy A Speculative Buy? [View article]
Michael: Personally I look on guys like Craig Cooper and Bill Costello as the "smart money," but I think Jan was talking about the original investors selling down part of their stakes in the most recent secondary that you discuss.
I think that for the most part that was just a portfolio decision--those funds like to exit in 5-7 years when they can--but it is certainly a potentially valid point. As for the delay on the DST for Cameia #2, CIE says it has been rig issues and I have no reason to doubt that, but again, it has been going on for a long time. Jeep
Is Cobalt International Energy A Speculative Buy? [View article]
Jan: I just went back and checked because I wasn't sure about Chariot and Angola. In fact, they are drilling off Namibia, which I believe is several hundred miles south of CIE's Angola acreage. Jeep
Is Cobalt International Energy A Speculative Buy? [View article]
Jan:
My understanding of the Falklands is that it is a question of the reservoirs and not the petroleum system. Cameia, at least, is said to have excellent reservoir qualities. And isn't it the case that the Falklands are more a mirror for further south--say South Africa itself--and not Angola and Gabon, which were close to Brazil before the continents drifted apart? If so, might not that suggest there could be different geologies at work?
My main concern about Angola is whether the oil has turned to gas. The oil in Cameia is very light; 44 degrees API, it is said--which makes it little different than condensate; while the oil off Brazil is around 28 degrees. CIE is suggesting that the oil/gas frontier lies further to the west, but until more wells are drilled that is only speculation on their part.
Is Cobalt International Energy A Speculative Buy? [View article]
Michael: Thanks, but it is a lot more work to do the research and write the article and I very much appreciate the fact that you did that here. CIE is an interesting situation--though where to buy is not an easy puzzle. Jeep
Is Cobalt International Energy A Speculative Buy? [View article]
Michael:
The production sharing and revenue sharing contracts CIE entered into Angola are truly mind numbing, but UBS came up with these estimates for current values per reserve bbl:
Gulf of Mexico--Miocene--$9.75 per bbl Gulf of Mexico--Lower Tertiary--$7.75 per bbl Gabon--$9.30 per bbl. Angola--$4-5.60 per bbl.
UBS obviously put a lot of work into those estimates (in my view their oil team does good work).
Because I like things simple, I personally use $8-10 per bbl for GOM oil, and my guess is that the Shenandoah and North Platte oil is much lighter than the "outboard" lower tertiary oil found at places like Jack (which is supposed to have an API weight of something like 20), so should be valued close to Miocene oil. Call it $9 for short. If anything is discovered in Gabon, I'll put a $7 per bbl value on it, and I use $4 for anything in Angola. Better to be conservative here, I think.
Note: CIE may not sell down individual wells in Angola--it may only sell down whole blocks, and that only makes sense once it has done some more drilling. So to raise money I expect it to sell down various GOM interests. I think the non-operated Heidelberg and Shenandoah holdings are most likely to be sold (with Heidelberg probably first), and if it does that we should get a better estimate on what Miocene and Lower Tertiary oil reserves go for in the market.
Is Cobalt International Energy A Speculative Buy? [View article]
Michael:
Nice article and I agree with your conclusion. As you aptly note, much depends on how the next several wells come in, but so far it appears that CIE's team has done a very good job with the geology.
And the values can add up fast. Assuming the 900 boe recoverable estimate for Sheandoah (and it is pretty easy to come up with higher estimates), and a $8.00 per boe pre-tax current value for high quality lower tertiary oil, you get a value for CIE's stake in Shenandoah alone of almost $1.5 billion, and perhaps twice as much for North Platte (because of CIE's bigger stake there).
CIE makes less per boe in Angola because of the terms of the contract, but Cameia is a huge find, and a few more like that will make the company.
One caution for investors. The stock tends to drift downward between announcements, and of course negative announcements (and there have been some) will hurt the price. Still their batting average so far has been quite good and in some ways the stock is a long-dated call on the price of oil, which isn't bad to have.
Bakken Update: EOG Resources' Completion Technology Is A Game Changer [View article]
Carl:
That is a terrific post, and your though on "pumping" is an intriguing idea. Science fiction today, perhaps, but as you point out, in 10 years everything might be different.
The administration keeps touting supposed "breakthrough" technologies in "green energy" (most of which seem to arguably violate the laws of thermodynamics, and almost none of which seem to work well), but it is our despised and derided domestic oil and gas industry that is to be making the real technological breakthroughs. Indeed, it is these continuing advances that are almost single handedly keeping our economy from falling back into a full recession. In the last year alone they have increased domestic oil production by almost 1.3 million bbl per day.
And, as you so aptly say, "all these shale plays are still wide open, and anything is possible." Isn't it wonderful to have part of the American economy that we can still say that about?
Those of you in the oil and gas business, congratulations on the great job you've done. Yes, you are making nice money off your work, but that is because your work is valuable and it is keeping the rest of the country more prosperous than it otherwise would be.
Bakken Update: EOG Resources' Completion Technology Is A Game Changer [View article]
Mike: Good stuff. How would you like to be the lucky landowners with the mineral rights to well 21239? That 270-day flow rate is amazing, and my guess is that the well ultimately produces significantly above 1 million boe. You can make money that way.
Bakken Update: Estimated Ultimate Recoveries In The Permian Part 3 [View article]
Rip: Even if the new regime in Venezuela doesn't further loot PDVSA to buy itself some popularity, my impression is that it will take years to repair the damage done by underinvestment there and I think they will have a hard time to bring in much outside assistance (which they need) given the fact that they have nationalized foreign companies twice now. If they could bring home all those talented former PDVSA engineers and geologists, maybe they could start turning things around, but what chance of them doing that?
Bakken Update: Kodiak's Purchase Of Liberty Resources Could Make Or Break Its 2013 [View article]
Overall, I think this is a pricey acquisition unless KOG can really force down costs through pad drilling (since it isn't going to have to do much drilling just to hold the leases), and--as you suggest--get decent recoveries from new target zones. If it can do both the acquisition might work out well. Unfortunately, I don't think we will have much proof one way or the other for another year at least.
Hopefully, they will be able to do a relatively cheap 10 year high-yield note to finance this.
Bakken Update: Investment Trends In The Bakken's First Quarter Of 2013 [View article]
Bakken Update: Small Oil And Gas Stock Picks On The Pullback [View article]
Bakken Update: Mississippi Lime Well Design Improvement Is Increasing Estimated Recoveries, Part 3 [View article]
Petrobras Revisited [View article]
A very good piece. I should note, though, that I am biased. Five years ago, I was very bullish about Brazil. Then I read your SA piece--and suddenly realized that things were more complex than I thought--and sold my PBR (at a small profit), In other words, you saved me a lot of money then (and you did it again when you sounded the alarm bells about Macondo the very day after the fire, when most thought it was just a small problem).
I think PBR actually might be a good trade at current prices. Top management seems to be making the right moves, but after the forced exchange two years ago I have been leery about the Brazilian government--and those feelings are not helped by a president who spent the 60's as a communist urban guerilla and who apparently still looks back fondly on those days. (To Brazilian readers--I intend no insult; the US government proved after Macondo that it would not abide by the rule of law either; few governments can really be trusted). In addition, as you convincingly point out, the asset base--while potentially huge--has lots of issues and that means it will take enormous sums and an extended time to develop. Given PBR's capital constraints I think it is unlikely that production will increase at rapid rates.
Still, if the world economy improves, I think PBR's price could bounce up from here, but given the government and the staggering capital requirements, I think your warnings are well taken for anyone thinking of a long-term investment.
Jeep
Chevron's Coronado Well Comes In At 400' Of Net Pay [View article]
Is Cobalt International Energy A Speculative Buy? [View article]
I think that for the most part that was just a portfolio decision--those funds like to exit in 5-7 years when they can--but it is certainly a potentially valid point. As for the delay on the DST for Cameia #2, CIE says it has been rig issues and I have no reason to doubt that, but again, it has been going on for a long time. Jeep
Is Cobalt International Energy A Speculative Buy? [View article]
Is Cobalt International Energy A Speculative Buy? [View article]
My understanding of the Falklands is that it is a question of the reservoirs and not the petroleum system. Cameia, at least, is said to have excellent reservoir qualities. And isn't it the case that the Falklands are more a mirror for further south--say South Africa itself--and not Angola and Gabon, which were close to Brazil before the continents drifted apart? If so, might not that suggest there could be different geologies at work?
My main concern about Angola is whether the oil has turned to gas. The oil in Cameia is very light; 44 degrees API, it is said--which makes it little different than condensate; while the oil off Brazil is around 28 degrees. CIE is suggesting that the oil/gas frontier lies further to the west, but until more wells are drilled that is only speculation on their part.
Jeep
Is Cobalt International Energy A Speculative Buy? [View article]
Is Cobalt International Energy A Speculative Buy? [View article]
The production sharing and revenue sharing contracts CIE entered into Angola are truly mind numbing, but UBS came up with these estimates for current values per reserve bbl:
Gulf of Mexico--Miocene--$9.75 per bbl
Gulf of Mexico--Lower Tertiary--$7.75 per bbl
Gabon--$9.30 per bbl.
Angola--$4-5.60 per bbl.
UBS obviously put a lot of work into those estimates (in my view their oil team does good work).
Because I like things simple, I personally use $8-10 per bbl for GOM oil, and my guess is that the Shenandoah and North Platte oil is much lighter than the "outboard" lower tertiary oil found at places like Jack (which is supposed to have an API weight of something like 20), so should be valued close to Miocene oil. Call it $9 for short. If anything is discovered in Gabon, I'll put a $7 per bbl value on it, and I use $4 for anything in Angola. Better to be conservative here, I think.
Note: CIE may not sell down individual wells in Angola--it may only sell down whole blocks, and that only makes sense once it has done some more drilling. So to raise money I expect it to sell down various GOM interests. I think the non-operated Heidelberg and Shenandoah holdings are most likely to be sold (with Heidelberg probably first), and if it does that we should get a better estimate on what Miocene and Lower Tertiary oil reserves go for in the market.
Jeep
Is Cobalt International Energy A Speculative Buy? [View article]
Nice article and I agree with your conclusion. As you aptly note, much depends on how the next several wells come in, but so far it appears that CIE's team has done a very good job with the geology.
And the values can add up fast. Assuming the 900 boe recoverable estimate for Sheandoah (and it is pretty easy to come up with higher estimates), and a $8.00 per boe pre-tax current value for high quality lower tertiary oil, you get a value for CIE's stake in Shenandoah alone of almost $1.5 billion, and perhaps twice as much for North Platte (because of CIE's bigger stake there).
CIE makes less per boe in Angola because of the terms of the contract, but Cameia is a huge find, and a few more like that will make the company.
One caution for investors. The stock tends to drift downward between announcements, and of course negative announcements (and there have been some) will hurt the price. Still their batting average so far has been quite good and in some ways the stock is a long-dated call on the price of oil, which isn't bad to have.
Jeep
Bakken Update: EOG Resources' Completion Technology Is A Game Changer [View article]
That is a terrific post, and your though on "pumping" is an intriguing idea. Science fiction today, perhaps, but as you point out, in 10 years everything might be different.
The administration keeps touting supposed "breakthrough" technologies in "green energy" (most of which seem to arguably violate the laws of thermodynamics, and almost none of which seem to work well), but it is our despised and derided domestic oil and gas industry that is to be making the real technological breakthroughs. Indeed, it is these continuing advances that are almost single handedly keeping our economy from falling back into a full recession. In the last year alone they have increased domestic oil production by almost 1.3 million bbl per day.
And, as you so aptly say, "all these shale plays are still wide open, and anything is possible." Isn't it wonderful to have part of the American economy that we can still say that about?
Those of you in the oil and gas business, congratulations on the great job you've done. Yes, you are making nice money off your work, but that is because your work is valuable and it is keeping the rest of the country more prosperous than it otherwise would be.
Jeep
Bakken Update: EOG Resources' Completion Technology Is A Game Changer [View article]
Bakken Update: Estimated Ultimate Recoveries In The Permian Part 3 [View article]