Oil Search fails to hit gas at Hides well in Papua New Guinea

[Stavros]

Palm:

YOU APTLY SAID THE FOLLOWING:

<< "Our appraisal and exploration drilling success will be watched even more closely now. Hopefully our Ant Deep doesn't suffer the same fate as Hides Deep; OSH just cornered the market on water. " >>

I would very much like to get a comment NOW from IOC telling us why they think Antelope Deep is different (and has more likelihood of containing gas or oil) than Hides Deep in terms of expected positive outcome.

Perhaps Petrengr1 can give us his thoughts since getting such a statement from IOC is very wishful thinking indeed?

[Thylacine-2]

Stavros, the only thing Antelope South and Hides Deep have in common is that they are both on PNG. A comment from IOC comparing AS to HD would make
no more sense than a comment comparing Wahoo to Hides Deep.

[Stavros]

I agree and disagree with you Thylacine-2:

I AGREE .... Hides and Antelope are in entirely different geographical locations and therefore the makeup of the formations are most certainly different

I DISAGREE ... the fact that both are called XXX Deep can very well lead to "uneducated" investors concluding that the outcome will be the same.

As such, I believe it's important for IOC to be proactive and tell their shareholders and the investing community at large why they think it is prudent to spend shareholders money to drill Antelope Deep. Why do they think it has a good chance of success relative to the abject failure of Hides Deep? After all, OSH and Santos spent serious money to drill such a deep "wet hole" under Hides, so they also must have felt they had a measurable potential to find something valuable.

[Palm]

The difference is that OSH made a proper disclosure to let their shareholders know the situation. The purpose of the drilling at Hides was primarily to provide another producer well for PNG LNG. At the same time the partners there decided to test Hides Deep to see if it held hydrocarbons for possible expansion. Didn't work, but the objective of having another producer well was fulfilled.

OSH shareholder now timely know material info regarding the drilling of that well. It will be sealed off from the water-bearing lower section and used as a producer. A fairly inexpensive way to test Hides Deep. Now off to P'nyang; a very important formation now.

[ArtM72]

Now off to P'nyang; a very important formation now.

I'm not sure if we haven't underestimated the importance of the Hides Deep failure.  Anybody remember Resourcecarb?  Haven't seen much from him recently but here's a link to the SA article where he talked about P'nyang.

http://seekingalpha.com/article/1385261-...eroils-gas

It might be worth a reread at this time. Here is an excerpt:

"P'nyang is far away from the other PNG LNG gas fields, and a 90 kilometer pipeline built to between P'nyang and Juha,which is part of the current PNG LNG development, would have to traverse very remote and rugged territory. Consequently, industry experts with whom I've spoken estimate that the development of P'nyang would add $1.5 -$2 billion to the cost of PNG LNG's train 3, taking the total budget for an additional train from $3.5 billion to $5 - $5.5 billion. Assuming 2.5 Tcf of gas is ultimately discovered in the P'nyang field, it would only supply an additional PNG LNG train for 12 years. Hence the PRL 3 joint venture's decision to refrain from drilling additional wells at P'nyang may be indicative of significant risk that the reservoir thickness will be inadequate to justify the cost of building additional infrastructure to supply PNG LNG's train 3."

[jft310]

Ah Art gets what I was saying about Hides and now a high need for Exxon to offer more friendly terms but are they friendly enough for Total ??
Also there is no master compliance manual for disclosures of Information. There is a desire for more information sure and comparisons are easy to make comparisons one company to another . But many NYSE companies only reveal what they have to reveal and they only do that at quarterly Conference calls . Frustrating you bet within guidelines errrr well yes .
The better question being ignored is why has he chosen this approach . ?..

[petrengr1]

Palm: YOU APTLY SAID THE FOLLOWING: << "Our appraisal and exploration drilling success will be watched even more closely now. Hopefully our Ant Deep doesn't suffer the same fate as Hides Deep; OSH just cornered the market on water. " >> I would very much like to get a comment NOW from IOC telling us why they think Antelope Deep is different (and has more likelihood of containing gas or oil) than Hides Deep in terms of expected positive outcome. Perhaps Petrengr1 can give us his thoughts since getting such a statement from IOC is very wishful thinking indeed?

How about if I answer this in a different thread? See Antelope South-1.

[Getitrt2]

In the OSH year-end conference call, one analyst raised a question about whether there were concerns about both the Antelope LNG project and the PNG LNG expansion project targeting the same time frame for reaching FID in early 2017 and competing for government and other resources simultaneously, and about which project gets priority if "one goes before the other". In response, OSH confirmed "relatively limited support structures present in the PNG government", and said, "We've already had discussions around how the things may work together.", and, "We will certainly be looking at ways to avoid the pitfalls of two projects moving forward exactly at the same time without combination and coordination. And as far as that's certainly part of our ongoing discussions at this stage and as joint venture partner."

Given that Hides Deep as part of the gas source for PNG LNG train 3 expansion has now turned out to be a failure, it seems to me that if Antelope proceeds as now planned, it appears that competition/conflict from simultaneous FID targeting is unlikely to be the issue of concern as thought and that the Antelope project should get the priority to move ahead. Therefore, hopefully OSH won't have to worry about that, and too bad for them and Exxon. HO HO! Maybe IOC will be proceeding with FID on Antelope LNG while Exxon and OSH try to find and confirm enough gas elsewhere or wait for a deal and completion of appraisal on Wahoo!

[Palm]

Interesting response from OSH; Hides Deep was not high on the list for expansion prospects because 2 more years of drilling would be required to prove it up. Will be interesting to see what they will say about the time horizon on P'nyang. Anyone know?

"Hides lets down Santos, Oil Search

Monday, 9 March 2015
SHARES of Santos and Oil Search took a hit on Friday after reporting that the Hides Deep exploration well they had hoped would net a sizable discovery ended up finding water instead of gas.

Rig 702 at the Hides Well Pad B. Image courtesy of Santos.

Oil Search advised the market on Friday that the Hides F1 (Hides Deep) well had reached total depth of 4633m. Thick argillaceous sandstone intervals were encountered in the exploration target, the Koi-Iange Formation; while Santos said “wireline evaluation confirms an absence of reservoir quality”.

The exploration component of the well will now be abandoned and the development section completed as a gas producer for the PNG LNG project.
Exxon (36.8%) operates the permit with Santos (24%) and Oil Search (16.7%) also having operating interests, with PNG government entities taking up the remainder.]
Santos shares dropped 1% on Friday to $7.77, while Oil Search shed as much as 4.2% to $7.74. The pair have been trading places as who’s ranked higher on the ASX, though Oil Search appears to be more resilient these days, with Santos announcing nearly $1 billion in losses for 2014 while Oil Search has been buoyed by a windfall of over $1 billion.
The result was not entirely unexpected and would not have immediate implications on the expansion of PNG LNG, though discovering gas right under the existing field feeding the LNG project means operator ExxonMobil and its partners could have potentially expanded the project with lower costs.
However, success on Hides Deep would have meant two years of appraisal drilling so was not in line as a gas source for the first expansion phase, an Oil Search spokesperson told The Sydney Morning Herald.
While ExxonMobil and Oil Search had already designated P'nyang to underpin a third LNG train at the project, analysts said Hides Deep’s negative result still reduced options for gas feed for the PNG LNG expansion and made the task of finding gas resources slightly harder.
"We are still pretty confident that gas options will de-risk over 2015," RBC Capital Markets analyst Andrew Williams said.
"Does this make it harder incrementally? Yes, but there are still other options out there.”

[Palm]

Article posted by Tree last October:

"The ExxonMobil-led owners of the Papua New Guinea liquefied natural gas project are about to spud a much-anticipated gas ­exploration well into a deeper reservoir target.
The Hides F1 well, previously known as Hides Deep, is designed both as a production well and an exploration well that will penetrate a deeper target directly below the existing Hides field.

According to project co-owners Oil Search and Santos, the well has significant resource potential, and the Nabors-owned drilling rig 703 is mobilising to the location to drill the prospect.

Oil Search explained recently that the deep well is to be drilled from existing Wellpad F, and will penetrate the Koi-Iange reservoir, which is mapped as being 700 metres below the standard Toro-Digimu reservoirs.

“The Koi-lange reservoir is one that hasn’t been penetrated before at the Hides field,” said Julian Fowles, Oil Search’s executive general manager for exploration.

“We see significant potential there for expansion of the resource base that we have at Hides itself.”

The Hides field is a multi-­trillion cubic foot gas field that is the principal feedstock for the two LNG trains.

Oil Search said Hides development drilling is nearly complete. The eighth production well has hit the Toro-Digimu reservoir and has been completed as a producer.

The produced water disposal well has also reached total depth and has been completed as a water injection well.

Oil Search said results were largely as expected, and all the wells showed good pressure communication.

The new structural, log and pressure data from all the wells will be used to help further define the Hides gas resources and distribution when the analysis is completed next year.

Another Nabors rig, Rig 702, is about to drill two more production wells on the Angore field, which is also a LNG feedstock source.

The PNG LNG project currently has proven and probable reserves of nearly 8 trillion cubic feet of gas spread across the Hides, Kutubu, Moran, Gobe, SE Hedinia, Angore and Juha fields.

In addition, there is nearly 800 billion cubic feet of contingent gas resources.

The contingent resource excludes the P’nyang, Juha North, Kimu, Uramu, Barikewa, Iehi and Cobra discoveries, accordingto Oil Search.

P’nyang is the discovery which the PNG LNG project partners hope will be the resource that underpins a third-train expansion. Juha North is understood to be another expansion candidate.

Concept selection work is well advanced on P’nyang and the partners plan to submit to the PNG authorities an application for a development licence in early 2015.

At Juha North, gas has been proven up, and Oil Search said it believes there is large potential upside, but appraisal work is necessary.

A batch of seismic data was acquired in the second quarter of 2014, and a second phase is planned to begin in the coming months."