Relationship with our Strategic Partner

[petrengr1]

This is all speculation so don’t buy or sell based on these comments!!!

If we have a look at the relationship between Exxon and Oil Search we may be able to get a better understanding of how the planned strategic relationship between Exxon and IOC will work. We found out a while back that Exxon bought two new rigs from Nabors specifically for drilling in PNG. http://shareholdersunite.com/mybb/showthread.php?tid=4274&highlight=Nabor
 Exxon is drilling the development wells at Hides and I believe they will be drilling the other wells (Juha, Angore etc) as necessary in the other gas fields to be used to send gas to the PNG LNG plant. So Exxon is in charge of everything from the well head to the LNG plant, i.e. drilling and equipping the wells, condensate stripping and gas conditioning plant, pipelines offshore and onshore and the LNG plant. Oil search is responsible for finding more gas for the plant expansion. Of course Oil Search has some oil fields that they operate that were acquired from Chevron but these were there before Exxon entered the scene.

So I believe the plan will likely be the same for the relationship between Exxon and IOC. This of course fits with the strategic plan laid out by Michael Hession. The plan stated that IOC has no present ambition to be an LNG plant owner/operator but that IOC is interested in being involved in non-operated LNG plants, running an ambitious exploration program to prove up the identified prospects, finding more new prospects and finding a strategic partner that fits well with these plans.

I can not vouch for the accuracy of this but a news article recently said: “PNGIndustryNews.net has additionally received information that InterOil is winding back its construction arm”. This would tie in with the new strategy.
If Exxon (or our strategic partner) will be doing all of the development work they will be responsible for all of the roads and pipeline rights-of-way etc so IOC will have no need for this kind of equipment, with the exception of PPL 236 where the prospects are near the Government road. They may need to hold some equipment that can be heli-lifted into remote sites for location preparation.

Regarding PRL-15, the latest M D & A states: “In addition, the terms of the grant of PRL 15 require us to spend $73.0 million on the development of the Elk and Antelope fields by the end of 2014.  All work program commitments with the exception of two wells, are complete.”  The annual information form for 2012 stated: “On June 27, 2012, we submitted an application for a variation of the PRL15 License commitment to extend the well commitments into years three and four of the License. After the successful mobilization and spudding of the Antelope-3 on September 8, 2012 we submitted a request to modify this variation to the extension of 1 well obligation into Years 3 and 4. The variation was granted by the DPE on November 27, 2012.” These two statements seem to be in conflict but I believe that the drilling of Elk-3 will fulfill this well commitment.

 We have been told that several more wells will be drilled at Antelope before the recertification of the reserves will be made that will determine Exxon’s interest in PRL 15. If Exxon and IOC end up agreeing that IOC will have an interest in trains 3 and 4 we will have 3 or 4 years to get these wells drilled. Exxon could pay IOC their initial payments based on the current GLJ report and adjust the amounts later based on the recertification. In the mean time IOC could take their rigs and proceed to do exploration work and Exxon could order another rig or two from Nabors to do development work on the fields that IOC already has or finds with the exploration program. By doing the work in this manner the next wells to be drilled, other than Elk-3, could be equipped for use as producers by Exxon as they are drilled.

If IOC is going to be an Exploration Company in the jungle of PNG they will have to use primarily heli-rigs. We know that Rig 2 is a heli-rig and when IOC bought Rig 3 it was advertised as being a heli-rig. IOC did a lot of up grading of Rig 3 at Napa Napa and decided that it was no longer a heli-rig. It was stated that it had too much baggage (equipment, camp facilities etc) to be a heli-rig and it would be too expensive to fly all of this stuff in to every well. It is possible that the up grading included the addition of some parts (substructure?) that would exceed the lifting capacity of most helicopters. However there are two ways to make a rig heli-portable, make the pieces smaller or increase the lifting capacity. The Russians make a heavy lift helicopter called an MI-26 that is capable of lifting 20 long tons or 44,000 lbs. That would take care of just about any of Rig 3’s dismantled parts. This helicopter is very expensive to lease and/or operate. An out of date cost I have seen was $22,500/hour. It is probably more than that now. Chevron used some of these helicopters when they were developing the fields in the highlands. There are one or more helicopter contractors in PNG that have these MI-26’s available. https://heliniugini.aero/aircraft-fleet/ This large helicopter would only be needed for the heaviest loads and there are probably not more than 2 or 3 loads that will require this much lift. It is quite possible that Exxon  already has some of these heavy lift helicopters under contract.

Since most of the work is going to be concentrated around or between the Antelope and Triceratops fields most of the equipment can be heli-lifted from staging areas at the Herd and Hou Creek sites.

It has been stated here before that the drilling arm of New Guinea Energy has two heli-rigs in country that might be available. IOC may be thinking of using one of these at Wahoo-1 although it might be possible to bring in a land Contract rig to Wahoo with a bit of road building to the new location. I would like to see IOC get a long term contract for the NGE rigs or if the economics allow, it might be possible to buy these rigs if we have sufficient funds in the near term.

Rig 3 is still at Elk-3 so I assume it will drill Elk-3 to fulfill our license commitment.

Rig 2 is being refurbished at the Herd base so it may be shipped out for exploration work after the deal is announced. Just a guess.

[Palm]

Pet, excellent thoughts and I agree with how Exxon wants to proceed. Since they have stated that basically their plan is for PNG to be their main hub for its Asian development, it makes sense that they want to be sure and control expansion of PNG LNG to max it out as quickly as possible. They will likely bring in rigs for EA drilling.

The interesting comment on Rig 2 I think is, "back to Herd Base for consolidation of camp locations"

Is this reference of "consolidating" to Herd and Hou Creek? Or something else? Consolidation is a reference to a combination or bringing together. The next 2 mentions in the MD&A are to Triceratops and the work of and with PRE and "OSE". The last of that is, "to further define future drilling targets". My guess is that Rig 2 likely goes back to Tri assuming the seismics show what they think and this is part of a 2nd LNG plant

[petrengr1]

This is all speculation so don’t buy or sell based on these comments!!!

If we have a look at the relationship between Exxon and Oil Search we may be able to get a better understanding of how the planned strategic relationship between Exxon and IOC will work. We found out a while back that Exxon bought two new rigs from Nabors specifically for drilling in PNG. http://shareholdersunite.com/mybb/showthread.php?tid=4274&highlight=Nabor
 Exxon is drilling the development wells at Hides and I believe they will be drilling the other wells (Juha, Angore etc) as necessary in the other gas fields to be used to send gas to the PNG LNG plant. So Exxon is in charge of everything from the well head to the LNG plant, i.e. drilling and equipping the wells, condensate stripping and gas conditioning plant, pipelines offshore and onshore and the LNG plant. Oil search is responsible for finding more gas for the plant expansion. Of course Oil Search has some oil fields that they operate that were acquired from Chevron but these were there before Exxon entered the scene.

So I believe the plan will likely be the same for the relationship between Exxon and IOC. This of course fits with the strategic plan laid out by Michael Hession. The plan stated that IOC has no present ambition to be an LNG plant owner/operator but that IOC is interested in being involved in non-operated LNG plants, running an ambitious exploration program to prove up the identified prospects, finding more new prospects and finding a strategic partner that fits well with these plans.

I can not vouch for the accuracy of this but a news article recently said: “PNGIndustryNews.net has additionally received information that InterOil is winding back its construction arm”. This would tie in with the new strategy.
If Exxon (or our strategic partner) will be doing all of the development work they will be responsible for all of the roads and pipeline rights-of-way etc so IOC will have no need for this kind of equipment, with the exception of PPL 236 where the prospects are near the Government road. They may need to hold some equipment that can be heli-lifted into remote sites for location preparation.

Regarding PRL-15, the latest M D & A states: “In addition, the terms of the grant of PRL 15 require us to spend $73.0 million on the development of the Elk and Antelope fields by the end of 2014.  All work program commitments with the exception of two wells, are complete.”  The annual information form for 2012 stated: “On June 27, 2012, we submitted an application for a variation of the PRL15 License commitment to extend the well commitments into years three and four of the License. After the successful mobilization and spudding of the Antelope-3 on September 8, 2012 we submitted a request to modify this variation to the extension of 1 well obligation into Years 3 and 4. The variation was granted by the DPE on November 27, 2012.” These two statements seem to be in conflict but I believe that the drilling of Elk-3 will fulfill this well commitment.

 We have been told that several more wells will be drilled at Antelope before the recertification of the reserves will be made that will determine Exxon’s interest in PRL 15. If Exxon and IOC end up agreeing that IOC will have an interest in trains 3 and 4 we will have 3 or 4 years to get these wells drilled. Exxon could pay IOC their initial payments based on the current GLJ report and adjust the amounts later based on the recertification. In the mean time IOC could take their rigs and proceed to do exploration work and Exxon could order another rig or two from Nabors to do development work on the fields that IOC already has or finds with the exploration program. By doing the work in this manner the next wells to be drilled, other than Elk-3, could be equipped for use as producers by Exxon as they are drilled.

If IOC is going to be an Exploration Company in the jungle of PNG they will have to use primarily heli-rigs. We know that Rig 2 is a heli-rig and when IOC bought Rig 3 it was advertised as being a heli-rig. IOC did a lot of up grading of Rig 3 at Napa Napa and decided that it was no longer a heli-rig. It was stated that it had too much baggage (equipment, camp facilities etc) to be a heli-rig and it would be too expensive to fly all of this stuff in to every well. It is possible that the up grading included the addition of some parts (substructure?) that would exceed the lifting capacity of most helicopters. However there are two ways to make a rig heli-portable, make the pieces smaller or increase the lifting capacity. The Russians make a heavy lift helicopter called an MI-26 that is capable of lifting 20 long tons or 44,000 lbs. That would take care of just about any of Rig 3’s dismantled parts. This helicopter is very expensive to lease and/or operate. An out of date cost I have seen was $22,500/hour. It is probably more than that now. Chevron used some of these helicopters when they were developing the fields in the highlands. There are one or more helicopter contractors in PNG that have these MI-26’s available. https://heliniugini.aero/aircraft-fleet/ This large helicopter would only be needed for the heaviest loads and there are probably not more than 2 or 3 loads that will require this much lift. It is quite possible that Exxon  already has some of these heavy lift helicopters under contract.

Since most of the work is going to be concentrated around or between the Antelope and Triceratops fields most of the equipment can be heli-lifted from staging areas at the Herd and Hou Creek sites.

It has been stated here before that the drilling arm of New Guinea Energy has two heli-rigs in country that might be available. IOC may be thinking of using one of these at Wahoo-1 although it might be possible to bring in a land Contract rig to Wahoo with a bit of road building to the new location. I would like to see IOC get a long term contract for the NGE rigs or if the economics allow, it might be possible to buy these rigs if we have sufficient funds in the near term.

Rig 3 is still at Elk-3 so I assume it will drill Elk-3 to fulfill our license commitment.

Rig 2 is being refurbished at the Herd base so it may be shipped out for exploration work after the deal is announced. Just a guess.

From NGE presentations:

DRILLING RIG
The drilling rig owned by Western Drilling Limited (WDL), a Company in which NGE holds a 50% interest with Maps Tuna Limited, is attracting interest from a number of PNG explorers. As part of ongoing discussions with third parties for leasing of the rig plus crew, WDL was invited to submit formal tenders to two operators during the quarter for upcoming drilling programs.

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Valuable fixed assets through NGE’s 50% ownership of Western Drilling Limited that can be a source of revenue from the drilling rig and camp assets.

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And from http://announcements.fortbridge.net/tag/...g-limited/

Tendered for multiple-well drilling contracts.

[admin]

Nice catch, Pet!