Connectivity Testing

[petrengr1]

They already had pressure gauges in Antelope-1 when the 4 rate flow test was done June 2nd  through June 5th. See http://tinyurl.com/palye9e ; slide 17 and comments. I quote:
“A pressure gauge has already been successfully set in Antelope-1 to monitor the pressure responses during the four-rate flow test.”

If these two wells are connected through the extensive fracture system they should know by now.

[Putncalls]

That is a significant statement petrengr1.

[ArtM72]

When I saw slide 16 with the accompanying comments it didn't register this was data that was all static pressure based and did not reflect dynamic response from any remote well. If the standard of connectivity is consistent pressure/elevation relationships among the wells then the flow tests would be pretty much superfluous other than to demonstrate important pressure drawdown and recovery characteristics.

While there seems no way these wells can not be connected I suppose the gold standard is dynamic pressure response data taken from wells simultaneously during flows. The name of that kind of test in this business must be "interference testing".

As Pet says if A1 and A4 are connected they must have seen evidence of it by now, over one month past the four rate flow test.

[petrengr1]

When I saw slide 16 with the accompanying comments it didn't register this was data that was all static pressure based and did not reflect dynamic response from any remote well. If the standard of connectivity is consistent pressure/elevation relationships among the wells then the flow tests would be pretty much superfluous other than to demonstrate important pressure drawdown and recovery characteristics. While there seems no way these wells can not be connected I suppose the gold standard is dynamic pressure response data taken from wells simultaneously during flows. The name of that kind of test in this business must be "interference testing". As Pet says if A1 and A4 are connected they must have seen evidence of it by now, over one month past the four rate flow test.

Art- Actually the four rate test he is referring to started on June 2 and ended on June 5. So it has been about 6 days now since the test ended. I assume the gauge was put in Antelope-1 sometime before June 2nd.

[ArtM72]

When I saw slide 16 with the accompanying comments it didn't register this was data that was all static pressure based and did not reflect dynamic response from any remote well. If the standard of connectivity is consistent pressure/elevation relationships among the wells then the flow tests would be pretty much superfluous other than to demonstrate important pressure drawdown and recovery characteristics. While there seems no way these wells can not be connected I suppose the gold standard is dynamic pressure response data taken from wells simultaneously during flows. The name of that kind of test in this business must be "interference testing". As Pet says if A1 and A4 are connected they must have seen evidence of it by now, over one month past the four rate flow test.

Art- Actually the four rate test he is referring to started on June 2 and ended on June 5. So it has been about 6 days now since the test ended. I assume the gauge was put in Antelope-1 sometime before June 2nd.

I stand corrected Pet.  I was looking at a small display before and now I see the date format to be D/M/YY. Thanks for the correction.  Slide 16 does state no flow barriers seen in dynamic test data.

[petrengr1]

Hession did a lot of talking and dancing around connectivity testing or interference testing at the MS Interview  http://tinyurl.com/os6hndf pages 4 - 6. I think he misled a lot of people into thinking that he has new data from the flow test that shows no compartmentalization. I also believe there is no compartmentalization but this information is not from the connectivity testing presently being conducted.

He is talking about http://tinyurl.com/q2lzmbq ; slides 16 and 17 .

He says this is all the latest data he has. The problem is all of the data shown on Slide 16 is old data from DST’s from old wells several years old. This data is from Elk-1, Elk-2, Elk-4, Antelope-1 and Antelope-2. No data from Antelope-3, Antelope-4 or Antelope-5. There is nothing on Slide16 about the present connectivity test being conducted at Antelope-5. At the bottom of Slide 16 it says “No evidence of compartmentalization” but that statement is just based on the old pressure data, static pressure is the same in all wells, common gas/water contact and similar hydrocarbon composition. There is no dynamic flow data or any new data from the last three wells. This is all old data. We have known that for years


On slide 17 they show the four point test conducted at Antelope-5. All of this information is about Antelope-5 and has nothing to do with connectivity between wells.  He says they have a gauge in Antelope-1 but he didn’t say what the gauge shows if anything. If he had any data from Antelope-1 I believe he would have clearly said there was a pressure response that showed connectivity.  He says he will test through the summer and that they will probably test through September and October and again he says they will put gauges in “various holes”. Why do you suppose they don’t already have gauges in all of the wells? That is because the other wells are not open to the formation. He has previously said they will put a gauge in Antelope-4 after the side track. By October maybe he can put a gauge in Antelope-6 but I doubt that it will be completed by October. So we may eventually find out if there is any response from the very tight zone at the bottom of Antelope-1 and we can expect to see the connectivity between Antelope-5 and Antelope-4. I guess “various holes” means Antelope-1 and Antelope-4.

[admin]

["At the bottom of Slide 16 it says “No evidence of compartmentalization” but that statement is just based on the old pressure data, static pressure is the same in all wells, common gas/water contact and similar hydrocarbon composition."]

Based on that (all wells having similar pressure, gas composition, gas/water contact), how conclusive is that? I suppose not watertight otherwise they wouldn't talk about a connectivity test, but based on these similarities, what is the chance they're not connected (at least the wells on which they have data)?

Thanks.

[petrengr1]

["At the bottom of Slide 16 it says “No evidence of compartmentalization” but that statement is just based on the old pressure data, static pressure is the same in all wells, common gas/water contact and similar hydrocarbon composition."] Based on that (all wells having similar pressure, gas composition, gas/water contact), how conclusive is that? I suppose not watertight otherwise they wouldn't talk about a connectivity test, but based on these similarities, what is the chance they're not connected (at least the wells on which they have data)? Thanks.

I have always thought the wells are connected and the data presented is part of the evidence but the conclusive proof was to be the interference testing by producing one well and montitoring the other wells for a pressure response. So far no data has been presented that says they have seen a pressure response in Antelope-1 and they don't even have gauges in any other wells. Hession keeps saying they have plans to put gauges in the other wells. I do not think they are really producing Antelope-5 continuously for I see no reason for doing so. When he says they are "going to test this thing" until October I think he will just open the well when he get some gauges in some other well. That could include Antelope-4 when it is completed but I think some well work will have to be done at Antelope-2 and Antelope-3 before they can be monitored for a pressure response. The same may be true for Antelope-1 if they don't see a pressure response from the tight zone at the bottom of the well. This lower tight zone in Antelope-1 is probably only connected through the fracture system if it is connected at all. I feel sure the upper high permeability zone is connected but it is not open so it can be monitored for a pressure response. If Antelope-1 is not working for them they don't presently have anything to monitor. They could monitor the pressure build up in Antelope-5 after it is shut-in to try to see if they can determine the distance to the falut but I think that is a long shot because of the limited pressure draw down and quick pressure build up and the fact the fault is at a shallow  angle rather than a vertical barrier. Also the fault may be quite a distance away from the well. I guess I just don't like the smoke and mirrors approach. I am like Hession, I would like to see some data to prove the wells are connected.

[Palm]

"He says this is all the latest data he has."

I guess I would disagree with inserting the word "all" in that sentence. I do agree that the discussion can be a little confusing, and I think Hession gets overly excited at times when discussing this resource. Evan asks him the first question after diung a quick synopsis of the AGM etc abd the excitement of the IOC team:

"Question. And with that, I am going to turn it over and a question for Michael. I know it’s been a busy week. You had your recent AGM meeting and in that meeting and recent client meetings, in my view, you and the entire management team sounded much more confident in the Elk Antelope resource and frankly the broader portfolio of potential resource. Before we discuss specifics, can you walk me through how your view of these assets has changed or evolved in your tenure, and why you project more confidence today than maybe even last time we met?"

Hession jumps right into the specifics anyway and goes on for a good bit about ALL of the data they have gathered since he came aboard. It includes the team he's assembled and goes into the data starting with:

"Let me break that down. We appointed a new team and what I believe is a first class team, a high quality team of petroleum professionals who understand LNG and understand gas geology and Asia in general. And what we’ve done is gathered a new data set, and I like to make calls on data. I like to make calls on things that have been looked up by professional people and that have been looked at the appropriate amount of time. So, when I first came on board, people would ask me how much resource is there? What’s the prospectivity, and I was always very cautious because I didn’t have the team, I didn’t have the data and I hadn’t had the time."

He then says:

"What I can tell you today is now we’ve looked at it carefully. We’ve increased the data. And, the new gravity that we’ve picked up in terms of gravity gradiometry has been very revealing. We’ve picked up new seismic both in terms of acquisitions, and I’ll take you through that in a second, and in terms of reprocessing. And then very importantly, I sit with you today having drilled two appraisal wells and with two new discoveries. So, we’ve been busy over the last two years and now we’ve got a better understanding of what we’ve got. So, let me just take you through maybe the data side of things, and I’ll start with the Antelope 5. If you could look at slide 13"

He then goes through all of the data all the way through the slides 16/17 which they have to date. A reason I believe this is he makes this statement part way through:

"Now, InterOil has had an interesting history and one of the things I am continually challenged on is the amount of test data. You know, how much we flow these things."

In other words, historically IOC has not had complete data with which to really appraise the resource. We know that from all of the challenges while PM was CEO. Everyone (rightly so) wanted more difinitive data but didn't get it and so assumed the worst as far as compartmentilization, etc. If you've got it, prove it with data. 

So Hession presents all of the data they have to date and then says:

"So, I stand here, and I’m sitting thinking there are a number of pieces of evidence that is making me feel relatively good about this, but then I actually hired a couple of the best test engineers that I know in the business. I was out on site four weeks ago, five weeks ago, and we stood there, and we actually said you know this thing is behaving like a giant. And that’s the quote that I’ve been using. We stood there and the power of the reservoir and the force at which the gas was coming out, the test engineer I’ve known very well, and she is a person who is not prone to exaggeration, and she turned around to me on site and said I’ve never seen anything like this. So, things are looking more positive in that space. Again, about data, about people and about the time to look at it, Evan."

He also mentions that tests will likely go through October etc. 

So when I read this part of the interview I see him going through the history of  "all" data gathered on EA including DSTs, new seismic, Ant 5s amazing results, and the beginning of the test which by fall sometime he feels they will finally have all of the drilling and test results needed to give them very comprehensive data to give the selected firms what they need to confirm this is truly a "giant". They've sat with Total's top people to design tests and pull together all of the data; not much more they can do. 

Could he have been more clear? Probably, but we all and the markets coitanly have much more confidence in what we have, and by fall any doubters will clearly be able to be labeled as "stooooooopid". 

[jft310]

This information Palm is using is on the Morgan call in number provided by Tree so you can listen to it and you can also read a transcript provided by Gator .
There is so much information it's easy to miss some pieces which is the value of this board .The key is to not slam other posters but just come back with the facts to remind or educate the other person.