She is a Giant!!

[petrengr1]

I have been looking at the last couple of presentations again (since we have nothing else to look at) and I think I am seeing a couple more indications that “She is a Giant!!”. Let me see if I can explain what I am thinking.

1. First, let’s look at http://tinyurl.com/p5bttdy page 5. This East/West cross section indicates, in the post drill picture at the bottom, that they think the reef extends all the way to the gas/water contact to the West. I believe there is an error in this chart and it appears that IOC also believes the same as shown on page 6. A cross section from Antelope-3 to Antelope-5 is more of a North/South cross section than it is an East/West cross section (see map on the right). You will also note that the formation no longer dips to the West on this map but it stays high all the way to the fault. There is no gas/water contact to the West. Instead we will have “wedge” of reef that gets thinner as it approaches the fault and it is too high to have a gas/water contact to the West. You can see on this latest map that most of the area to the West of Anteople-5 is even higher than Antelope-1 and Antelope-5 and about the same as Antleope-3 which is the highest well in the Field.

2. I really like this new map much better than the old maps shown on http://tinyurl.com/q2lzmbq pages 9, 10, 12 - 15 etc. Of course one reason is that the new map shows all of the area to the West as being higher and thus containing more gas than the old map would have allowed. Another reason is the intriguing area to the Southeast on the new map at http://tinyurl.com/p5bttdy page 6 which I will discuss below.

3. The new map on page 6 does not do justice to the size of the field because it does not show all of the area of the field that is above the gas/water contact. You can see a  little piece of the gas/water contact which is the dotted line in the northeast corner of the map by the big N. So the entire area of this map is filled with gas and there is  more to the North, East and South that is not shown on the map.

4. The intriguing area to the Southeast is interesting because that is where we are drilling the side track at Antelope-4. It is intriguing because to the Southeast of Antelope-4 the formation is no longer going down dip but it is going up dip a little and the map does not show how big this area is. The gas/water contact is at -2,214 meters sub sea so every thing above that depth contains gas. As you can see the map is only showing us the area that is above -1,900 / -2,000 meters sub sea in the Southeast corner of the map. So there is a lot more area to the Southeast that is gas filled but is not shown on this map.

5. Now let’s turn our attention to the North/South cross section on page 6. You can see that the distance from Antelope-1 to Antelope-5 is 2.5 km. Using this measurement we can determine that it is about 5 km from Antelope-1 to Antelope-4.  Now looking back at the map you can see that if it is 5 km from Antelope-1 to Antelope-4 then there is another 2 km of gas field to the Southeast of Antelope-4. This is just the area that is shown on the map and it is clear that the productive area is larger than what is shown on the map because it does not include the area all the way down to the gas/water contact at  -2,214 meters sub sea.

6. Looking again at the cross section on page 6 you will see that if we just talk about the high porosity limestone cap and the dolomite section (where about 95% of the gas is located) Antelope 5 has the thickest section of good rock. You will also notice that the dolomite section is getting thicker to the South. Antelope-2 had the thickest dolomite zone drilled to date. What is South of Antelope-2? That would be Antelope-4 and Antelope-4 ST-1. From the picture of the cross section you can see that if they are kicking the well to the South (or Southeast) that it is quite possible that we could have dolomite from the top of the zone all the way to the gas/water contact. We know from the September 18th  Press Release http://tinyurl.com/pse9bd5  that Antelope-4 ST-1 found the top of the reservoir 36 meters higher than Antelope-4. We were previously told that they found the top of the formation at Antelope-4 at -1,911 meters sub sea. So Antelope-4 ST-1 found the top of the formation at -1,875 meters sub sea. We expected to find a gross gas column thickness at Antelope-4 of (-2214 - 1,911) or 303 meters or 994 feet.

Now we find the top 36 meters higher at Antelope-4 ST-1. The vertical thickness of the gross gas column at that point would be (303 + 36) 339 meters or 1,112 feet. The deviated hole will be somewhat thicker due to the angle of the hole. This may sound like a pretty thin zone when compared to the +/- 2,200 foot gas column up dip but I can assure you that people anywhere in the world would die for a 1,112 foot gas column in 100% dolomite. Let’s hope that is what they report after reaching TD.

Have a good evening!!!

******

Thanks, Pet.  Many of your statements (as well as the potential implications that arise from them) are over my head.  The title of your post makes it clear that you think there could be a lot more gas in E/A than others may be predicting, however, I'm not fully clear how you see that playing-out. 

As we know, there are two ways IOC will make money on E/A.  Ultimately, they will have part ownership in the plant, for which they will make money based on total production.  So, if production turns out to be more than expected (and more than gets originally certified) they will still reap rewards via that compnent of the deal.  The other way they get paid is based on the certification numbers...which may or may not end up accurately reflecting how much gas is really there.  

So my layman's question to you is...do you believe most of the optimistic statements in your post which suggest we might ultimately have a "giant", will be sufficiently proveable as part of the certification process (so we benefit via both the production AND the certification payment)...or that it will eventually "turn out that way" (in which case it would benefit IOC much more down the line via the production money and less so for the certification money)? 

CAC- By the middle of next year we should know as accurately as it is possible to determine what the recoverable gas volume for Antelope Field will be. We will have up to 5 different Engineering Companies study the data and provide their best answer as to what the reservoir volume is. I say that based on the normal report that IOC gets annually from GLJ, the two companies selected by OSH and Pacific LNG Group Companies and the two companies selected by IOC and Total. Of course it is possible that the same Engineering Company may be selected by more than one of the entities so there could be less than five determinations of the resource volume. I do not know if any of these reports will be made public but we will eventually know the average volume determined by the firms selected by IOC and Total because that is the number our recertification payment will be based on. My point is that with all of these experts working on this problem we should have a number that is as accurate as it is possible to determine without producing the field.

I believe the most important number is the near term recertification payment by Total to IOC because the Net Present Value will be much higher than any later resource or recertification payment will be due to the discounting of the later payment i.e. Time value of money. IOC can call for the second determination at any time but there will likely be no need for that until some amount of production from the Field has occurred. If there is no water drive, as expected, an accurate resource volume can be determined based on the pressure loss for a given amount of production. However this later payment may come 8 or 10 years from now (4 or 5 years to build the plant and 4 or 5 years to produce up to 20% of the resource volume). After 8 to 10 years the NPV of this payment will be relatively small, if it ever occurs.

If IOC stays independent for the life of the Project they will of course receive their pro rata share of the income from the field over the life of the project which again makes the NPV of these sales reduced due to the time value of money. However these numbers are expected to be rather large and will therefore be very important to the ongoing Company.

Other than that I am not smart enough to tell you which is the most important number for IOC (production or certification payment) because at this point we do not know the value of either number. Several of the analysts  have given us reports on what they think. I can not improve on that other than to say that I think the resource volume (certification payment) will end up being more than any of the analysts have used in their reports.

I suggest that you have another look at the UBS report at http://tinyurl.com/o5lgsbw .

[ArtM72]

I guess you still haven't learned. That makes one of us a VIER ECKE ARSCH LOCH I just looked ... I know it ain't me. I suggest you take a look at the recent data from Asian countries whose GDPs reflect whether they're selling goods to USA, Europe and China. You'll see they're all in recession. http://www.channelnewsasia.com/news/sing...18084.html WHY? Could it be that their overseas markets have cut back on purchasing because they entered recessions 6 months ago? Nah ... Or ... Maybe they're really flourishing and reporting negative growth just to fool you.

That is quite impolite German.

Do you think it is possible the European recession is what has acted to reduce China's growth RATE by the couple of points it is missing?  How does that stand as an arguement to support your conclusion our government is providing falsified economic statistics.  That view is of course consistant with your views on the current grand international scientific community conspiracy.

Yesterday I spent the day in the Lincoln Library and Museum.  One of the exhibits had two hallways and a room full of nasty political cartoons attacking Lincoln.

[jft310]

Very well said PET , impactive you think the actual number will be higher than any estimates given by any of the analyst's . Morgan had the highest number at least $1.7 Billion in this certification payment . You previousely stated 10 T's as your guess which is closer to $2 Billion payment and now you view the asset as even bigger than your previous 10 T's .
Looking at how you stated it over 1,100 feet of pay of 100% dolomite over a large area to me means you are in Henry Aldorf estimate area today . Henry was 12-16 T's . Agreed?????
Yes it's a Guess!!!But your guess is important .
To those that bashed Henry for his estimate they failed to understand Business 101 you don't keep a CEO job for years and years without being right most of the time .
PET please provide us with your current best guess !! Thanks ..

[petrengr1]

I have been looking at the last couple of presentations again (since we have nothing else to look at) and I think I am seeing a couple more indications that “She is a Giant!!”. Let me see if I can explain what I am thinking.

1. First, let’s look at http://tinyurl.com/p5bttdy page 5. This East/West cross section indicates, in the post drill picture at the bottom, that they think the reef extends all the way to the gas/water contact to the West. I believe there is an error in this chart and it appears that IOC also believes the same as shown on page 6. A cross section from Antelope-3 to Antelope-5 is more of a North/South cross section than it is an East/West cross section (see map on the right). You will also note that the formation no longer dips to the West on this map but it stays high all the way to the fault. There is no gas/water contact to the West. Instead we will have “wedge” of reef that gets thinner as it approaches the fault and it is too high to have a gas/water contact to the West. You can see on this latest map that most of the area to the West of Anteople-5 is even higher than Antelope-1 and Antelope-5 and about the same as Antleope-3 which is the highest well in the Field.

2. I really like this new map much better than the old maps shown on http://tinyurl.com/q2lzmbq pages 9, 10, 12 - 15 etc. Of course one reason is that the new map shows all of the area to the West as being higher and thus containing more gas than the old map would have allowed. Another reason is the intriguing area to the Southeast on the new map at http://tinyurl.com/p5bttdy page 6 which I will discuss below.

3. The new map on page 6 does not do justice to the size of the field because it does not show all of the area of the field that is above the gas/water contact. You can see a  little piece of the gas/water contact which is the dotted line in the northeast corner of the map by the big N. So the entire area of this map is filled with gas and there is  more to the North, East and South that is not shown on the map.

4. The intriguing area to the Southeast is interesting because that is where we are drilling the side track at Antelope-4. It is intriguing because to the Southeast of Antelope-4 the formation is no longer going down dip but it is going up dip a little and the map does not show how big this area is. The gas/water contact is at -2,214 meters sub sea so every thing above that depth contains gas. As you can see the map is only showing us the area that is above -1,900 / -2,000 meters sub sea in the Southeast corner of the map. So there is a lot more area to the Southeast that is gas filled but is not shown on this map.

5. Now let’s turn our attention to the North/South cross section on page 6. You can see that the distance from Antelope-1 to Antelope-5 is 2.5 km. Using this measurement we can determine that it is about 5 km from Antelope-1 to Antelope-4.  Now looking back at the map you can see that if it is 5 km from Antelope-1 to Antelope-4 then there is another 2 km of gas field to the Southeast of Antelope-4. This is just the area that is shown on the map and it is clear that the productive area is larger than what is shown on the map because it does not include the area all the way down to the gas/water contact at  -2,214 meters sub sea.

6. Looking again at the cross section on page 6 you will see that if we just talk about the high porosity limestone cap and the dolomite section (where about 95% of the gas is located) Antelope 5 has the thickest section of good rock. You will also notice that the dolomite section is getting thicker to the South. Antelope-2 had the thickest dolomite zone drilled to date. What is South of Antelope-2? That would be Antelope-4 and Antelope-4 ST-1. From the picture of the cross section you can see that if they are kicking the well to the South (or Southeast) that it is quite possible that we could have dolomite from the top of the zone all the way to the gas/water contact. We know from the September 18th  Press Release http://tinyurl.com/pse9bd5  that Antelope-4 ST-1 found the top of the reservoir 36 meters higher than Antelope-4. We were previously told that they found the top of the formation at Antelope-4 at -1,911 meters sub sea. So Antelope-4 ST-1 found the top of the formation at -1,875 meters sub sea. We expected to find a gross gas column thickness at Antelope-4 of (-2214 - 1,911) or 303 meters or 994 feet.

Now we find the top 36 meters higher at Antelope-4 ST-1. The vertical thickness of the gross gas column at that point would be (303 + 36) 339 meters or 1,112 feet. The deviated hole will be somewhat thicker due to the angle of the hole. This may sound like a pretty thin zone when compared to the +/- 2,200 foot gas column up dip but I can assure you that people anywhere in the world would die for a 1,112 foot gas column in 100% dolomite. Let’s hope that is what they report after reaching TD.

Have a good evening!!!

Pet, thanks for the extremely interesting, worthwhile, and positive commentary.

Given that the cross section is north-south, Ant 5 is south of Ant 1, and Ant 4 is mostly southeast of Ant 5, it seems to me that the distance from Ant 5 to Ant 4 is actually more than 2.5 km, in fact significantly more, based on my impression of the reservoir map insert and understanding of geometry.  That, I think, would be an even more positive interpretation of what we are seeing and hearing.  Would you agree?

In response to people complaining about the delays with and resulting from the extended Ant 4 ST in recent weeks, I have been trying to point out the very positive impressions I have had of the decision to take time to drill it and the ramifications there seemed to be of higher 100% dolomite much further south, without seeming to have much effect.  It is nice to have confirmation of those impressions and comments from you with the much greater credibility you can offer in such areas, not to mention the extremely insightful and positive aspects about the western parts of the formation you have identified and evaluated and pointed out to us.

In spite of the limited information and the concerns, I think this management knows what they are doing and are effectively pursuing what they see as in the best interest of shareholders.  I think they want to be very careful and not get ahead of what they know, and now they have taken action to move ahead with Ant 6 while still being able to thoroughly do everything they want with Ant 4 and the side track, all in consultation with and with the approval of Total.  As far as I know, we still have no information on the Ant 7 decision related to your comments on the western parts of the formation.  It will be interesting to see whether they think that is needed and worthwhile, and what the decision is with Total.  Any comments on that?

Thanks again for your efforts and valuable comments.

Getit-Regarding the distances between wells, when I put my ruler on the cross section and the map at http://tinyurl.com/p5bttdy page 5,  I find that the distance from Antelope-1 to Antelope-5 and the distance from Antelope-5 to Antelope-4 to be more or less exactly the same. This is the straight line distance from one well to the other. I also check it out on the maps at   http://tinyurl.com/q2lzmbq pages 9, 10 and 12. These maps have a scale at the bottom so you can check the distance between wells.

I have no information regarding the likelihood of Antelope-7 being drilled to the West before or after the certification. I would prefer that it be drilled before certification but I do not want certification delayed beyond mid-year 2016. To accomplish both they need to “get on it” without delay. I think they should drill some wells to the west in order to establish a better (firm) location of the fault.

Here is a bonus for you. I think if they find 300 meters of dolomite at Antelope-4 ST-1 they will eventually need to drill another well southeast of Antelope-4 to determine how far the thick dolomite extends. We had about 200 meters of dolomite at Antelope-1, about 170 meters at Antelope-3 and 250 meters at Antelope-2. Since the dolomite seems to be thicken to the South it is quite possible that Antelope 4 ST-1 could find 300 meters. See  the cross section at http://tinyurl.com/p5bttdy page 5.

[ArtM72]

Pet -

At A4 IOC was challenged by loss of drilling fluids and now A4S is dealing with well cementing adequacy. Do you have reason to suspect the fundamental problems with A4 are due to an especially high overall void ratio in the dolomite with a consequential loss of bore hole structure stability leading to extensive delays? That would certainly seem to be trouble now but great opportunity down the line. Thoughts?

[petrengr1]

Pet - At A4 IOC was challenged by loss of drilling fluids and now A4S is dealing with well cementing adequacy. Do you have reason to suspect the fundamental problems with A4 are due to an especially high overall void ratio in the dolomite with a consequential loss of bore hole structure stability leading to extensive delays? That would certainly seem to be trouble now but great opportunity down the line. Thoughts?

Art- I explained some of this in my “cementing seminar” http://tinyurl.com/qjhnk7p  post no. 4.

We were above the dolomite pay zone at the time of the cementing problems so any voids in the dolomite would have had nothing to do with the cementing. I explained in the above post what needed to be done to achieve a good cement job and how to repair a poor cement job.

We have not heard a “peep” from them since Oct. 19th when they said “Casing has been set above the reservoir and cement bond logs recorded. Prior to drilling ahead additional cementing operations are being conducted to ensure integrity of the casing shoe.”

I do not know how long they spent repairing the cement bonding but they should be drilling the reservoir by now or even logging, coring or testing. We do not yet know if they experienced any delays while drilling through the pay zone.

[jft310]

["I can assure you that people anywhere in the world would die for a 1,112 foot gas column in 100% dolomite. Let’s hope that is what they report after reaching TD."] Yea, thanks for that, Pet. 100% dolomite in a 1112 foot column, as the quality of the rock seems to matter much more, as you argue that 95% of the gas is in the sections with dolomite, this is indeed quite a spectacle to behold!

PET has shown the board readers how the estimates could rise and why . This fits with Hession statements that the mid case has become the low case or the high case becomes the mid case . That's 11.8 T's the high case moving to the mid and a payment near $2.5 Billion for the mid case the number we get paid on by Total . So what is the new high case . .?Using 13.7 T 's as a new high case and we don't know how many kilometers of 1100 foot dolomite we are adding this is not an unreasonable guess the payment jumps to $3.571 Billion if proven as P-50. We get paid on the mid case of course .

So we have several kilometers more gas to the West and several kilometers of dolomite to the SE . The estimates must rise .

A former executive guessed we receive on this payment $3-4 Billion . Not out of the realm of possibilities . See PET's work and see why higher estimates  makes sense . How much higher is to be determined .

It's a big deal this extra dolomite and It's almost November with the payment due mid 2016 .

[sageo]

["I can assure you that people anywhere in the world would die for a 1,112 foot gas column in 100% dolomite. Let’s hope that is what they report after reaching TD."] Yea, thanks for that, Pet. 100% dolomite in a 1112 foot column, as the quality of the rock seems to matter much more, as you argue that 95% of the gas is in the sections with dolomite, this is indeed quite a spectacle to behold!

PET has shown the board readers how the estimates could rise and why . This fits with Hession statements that the mid case has become the low case or the high case becomes the mid case . That's 11.8 T's the high case moving to the mid and a payment near $2.5 Billion for the mid case the number we get paid on by Total . So what is the new high case . .?Using 13.7 T 's as a new high case and we don't know how many kilometers of 1100 foot dolomite we are adding this is not an unreasonable guess the payment jumps to $3.571 Billion if proven as P-50. We get paid on the mid case of course .

So we have several kilometers more gas to the West and several kilometers of dolomite to the SE . The estimates must rise .

A former executive guessed we receive on this payment $3-4 Billion . Not out of the realm of possibilities . See PET's work and see why higher estimates  makes sense . How much higher is to be determined .

It's a big deal this extra dolomite and It's almost November with the payment due mid 2016 .

Jft - Thanks for your comments on Pet's fine post . If the former executive's guess is even close to the actual amount(and if Total doesn't want to part with that much "scratch" ), do you think we might,at some point next year, become the proud(??) owners of some Total stock ? Just doing some more wondering as the wait continues.

[jft310]

Sageo-These 2 PET posts are the best ever in my opinion . Who will offer to buy Interoil?? I believe more than 1 person would have a deep interest . A low bid just will not get her dune .

[sageo]

Sageo-These 2 PET posts are the best ever in my opinion . Who will offer to buy Interoil?? I believe more than 1 person would have a deep interest . A low bid just will not get her dune .

 Jft - Good am ! Fact : Pet's 2 posts were exceptional . Maybe a fact (??) ....."a low bid just will not get her done" . When we settle the 68 -70 million dollar payout in a few days,that will ,in mho,cause the pps to "shudder a bit". (who knows for sure how much) .Then when all the questions are answered ( maybe on Nov. 13th),we should stabilize at some level. Best to you.