Where we are Well on May 9th Zaza spent £130,000 on shares - so I think that is a pretty good indicator of his view of life. On the podcasts he stated that they had tried several approaches but that at the end of the day the poor cementing at different points all ended up with the flows go into the drill walls. I am realistic enough to accept that the news through May/June/July would have been a series of aborted attempts, and that at some point they decided to call it a day. Unlikely to have been the day before the announcement - but anyone who has been in business would expect to try to manage both good and bad news. That’s the real world. Anyway - I decided to ring the Nomad about this just to satisfy my own curiosity. Obviously no inside story but he did indicate that they had tried a variety of approaches before finally pulling the plug. Clearly we were all disappointed but I repeat a) this was a £750K initiative - well below the oil drill costs - and which 33% was funded by ZM/SN share purchase, and b) at no time did WHI or ZM put a monetary target on this. They did on the oil - from day one. Re share sales I would 100% discount that. Apart from throwing their own money down the tube it would effectively finish them as directors of a listed company. I also know the Nomad is absolutely clear on this type of issue - and indeed will have been consulted before any sale or purchase. You may choose not to believe my point here - I don’t really care. I am absolutely 100% confident on it being accurate. I should also say that some of the rubbish flying around at the moment suggests that some should never invest in O&G, mining or similar stocks in the first place.
Where we are Since May this S/P is marked down by 1+ p Now it is at 27p At 1p rate how many days this can be marked down and where will this bottom Zaza you have made too many statements NOT “true” Gas cementing problems he must have known last year or early this year So why did he withhold that information Till last month? My big question to all the so hold permanent members? Who is selling shares on a daily basis? I am beginning feel that Zaza and their colonies are selling their shares to pay YA and any short fall to cover the operating cost as Zaza can’t issue any more new shares? Any take on that view?
Where we are Hi DKOK Like your numbers - but I think they will be lower! The T39 number was at the top of the range by valve opening - and in his podcast Zaza quotes the 250 number, but he may of course be downplaying here Re T45 and Dino there will almost certainly have been fall off - and the uncertainty here is causing the current SP wobble. On the other hand those figures were without Z9. And come what may they are determined to stick to an extended test regime For me - anything north of 500 for the lot is a success simply because that alone delivers around $1 million per month. And with Niko at year end plus T39 upside they should hit the 1000 bopd and $2 million per month.
Where we are Hi Devex I have been tracking back through the RNS’s to see if it is possible to try and establish a rough idea of where we are with production, and this is basically what I have found; T45 - RNS 20/02/18 - Zaza identified 383 bbls/d Dino 2 - RNS 21/05/18 - Zaza identified 315 bbls/d T39 - R|NS 19/07/18 - Zaza identified 529 bbls/d on 8/64 chok from Eldari B (no frac as identified in yesterday’s WHI report) This gives a total of 1227 bbls/d which is currently the best info that we have as a possible run rate currently during testing. This would equate to around $2.4M/month with oil at $70/b. This also doesn’t take account of the gas idnetified in Eldari B. I don’t think we are necessarily at this level, but it is reasonable to suppose that we are at least very close to this (but we could be higher!), as Zaza noted in the T45 announcement that the 383bbls included heavy muds from the wellbore cleanout, and that downhole pressure was high at 7500psi, from which I take the inference that with the pressure, once the mud had cleared then the flow rate may increase. We really could do with a comprehensive update with the results of the frac’s and stimulations on T45 and Dino 2, and what stabilised flow rate we have got out of T39 in the month since we were told that they had gone to Z19 in Eldari B . if we are already producing 1000 bbls/d fromt he three wells, then we will soon be in a position where we can clear of YA (the sooner the better!), and not too far off a position where we could be funding additional wells ourselves. After all, if we are at 1000 bbls/d that equates to $70k/day income, $490k/week and therefore $2.1M a month. If we are getting this, then we are close to being able to fund Niko 1 ourselves to start in November! It would certainly be a strong case for other potential major funding investors to come on board to develop a large scale development programme for 2019, with relatively short periods to return on investment. Come on Zaza, time to show your hand! glta dkok
Still standing Shoulder-2-Shoulder …with Zaza. Why? He has some serious skin in the game [no denying that]. Agreed that he has worked his socks off over the past year. Agreed he has dragged this company out of a prolonged slumber to kick off a 4 well campaign. But, in reality, all this will mean jack if he cannot convert these actions in to oil production. Anyway, Zaza’s Year-1 is nearly up as the commander-in-chief. Let us hope for all the LTHs and indeed all the new ones that bought in to his vision [including the institutional investors who invested in the 0.40s and 0.50s), that he can deliver the goods this time. And if he can, that will set us up nicely for phase 2 in 2019. Other potential developments? I reckon concurrently he is working on securing some conventional form of borrowings, maybe from the likes of EBRD [as Georgia and energy are strategic for the country and region]. I still hoping for some news tomorrow but honestly wfdik? JMO
Where we are Just picking up on points made on the various boards – and reading some rather divided views. So I decided to replay the last podcast and read the WHI update again – they are inextricably linked. Well Devex remains very positive indeed - and this is where I think we are. . The report is clearly trailing a change of tack, but this is no surprise if you have listened to the podcast. But perhaps together they are also about re-affirming what the broader plan was in the first place. The 3 wells have always been about production and test – and at the last podcast ZM was pretty emphatic about 1000 bopd by year end and 10,000 bopd within 2 to 3 years. He will have been well aware of both current production levels and current market sentiment when making these statements. The 1000 bopd is really about self-sufficiency, paying YA off, etc, and given that Zaza has repeated that figure at least three times then I would assume it is based upon solid rationale (plus, as we are now at 15th August, and can safely assume another $265,000 has made its way to YA). The 10,000 bopd ambition is a new ball game all together – Eldari B or not – and is highly ambitious given the timetable. Not new (it is scheduled for late 2022 if you read the original WHI report), but in my view it can only really be achieved through either a JV/partnership or a major injection of investment funding in the very near future. Which is why the last podcast was titled “Frontera moves to field development”. A major funding programme has to be based upon either declared reserves – or confidence that reserve declarations are imminent. So what do companies need to do to demonstrate to demonstrate reserves? It is far more than flow testing (which for reserves has to be demonstrated over extended timelines anyway), and includes reservoir dynamics, oil quality (in reservoir and at ground level), porosity, permeability, proven drilling technologies, cement proving, gas content, etc etc. Add to this the testing needs to relate to each of the zones being exploited – with data being able to be clearly attributed by zone. So my take is that: The CPR is in the process of being updated (Zaza effectively says this in the podcast) They are no doubt already linked in to NSA The testing is amongst other things ensuring that all the questions required for reserve updates are answered (Ie asked by the likes of NSA) The full testing data of all three wells, zone by zone, is critical to finalising this assessment They are in serious funding discussions related to the post Niko phase They believe that more oil exists - at least in Z19 They believe that the 15% recovery factor is increasingly conservative Hence they believe the 150 million recoverable boe figure to be low They think they can deal with the gas in the short term They think that each well can co-mingle multiple A and B zones once pressures equalise Hence the ROI figures – and well lifetime profitability – increases hugely They are effectively saying that the original WHI asset valuation of $484 million is significantly understated An they are clearly creating enough cash to cover the interim requirements Well my glass is very much full
New WHI Report 14/08/2018 For anyone that has not seen the investor presentations here is a Block XII and Taribani cross section showing aged levels from presentation January 2018 slide 11. image.jpg864x350 81.9 KB Taribani is also over the World Class Maykop formation that is currently being exploited by BP at Shah Deniz
New WHI Report 14/08/2018 Symore I understand what you are saying but a key item in the WHI report identified that the oil and gas flow from Z19 in Edlari B was in a 21m pay zone which ‘was not hydraulically fractured’. I think therefore that the extra drill depth to get to this zone may actually be cheaper than the $3.5m a hole previously advised, as we do not need to frac the zone in order to get it to pay, so there may be further benefits in Eldari B as well, as the lack of use of stimulation fluid and propants and no fracking, means that the time to production is quicker as you are not fracking, not shutting in for pressure build-up and not waiting a few weeks to get the stimulation fluid out before you get to the clear oil. Only when the Eldari B zone starts to drop pressure/rate of return would it then be needed to frac the upper zones to bring them on line and co-mingle the results to keep the weel going. This is (I think) the first we have been told that in going to z19 that the flow of O&G was without fracking this zone, which seems very significant to me. I would guess that this is also the reason for no further news, as FRR are probably monitoring the flow rate on z19 of T39 to see if there is a drop-off of pressure/flow rate, which would be a key factor in determining a way forward. Looking forward to further news which I think may well be due in the next week or two. glta dkok
New WHI Report 14/08/2018 Well I thought that was a very well written report. Clearly the author knows the business inside out and that will carry a lot of weight in respect of the funding of future wells and a revised CPR. The likes of Repsol and Exxon will no doubt be perusing it as we speak, whether that’s because of a direct interest in Block XII or other blocks they might be looking at. In that respect it would be good to know the extent (if any) of the presence of the Eldari B elsewhere in Georgia as I have never seen it directly referred to in reports from other explorers. Key section for me was this “Better than assumed petrophysical parameters stand to increase both the oil in place estimate and the recovery factor. We believe that almost across the board petrophysical assumptions made in 2005 appear likely to be favourably revised based on better quality data. In addition to the noted increased vertical column of oil bearing producible resource (net pay), Zone 19 is likely to have a more favourable oil/water ratio (translating to more oil in place and a higher recovery rate) and potentially a better than expected gas to oil ratio than previously envisaged, which would provide more energy (gas expansion) and improve the oil recovery rate. At this stage of testing, we have not yet reviewed new petrophysical data, but intend to do so as part of a comprehensive analysis in due course.” Going deeper in new wells will be more expensive as SB has pointed out, but the cost pales into insignificance compared to the offshore wells in the Caspian. With the ready access to pipelines it is therefore very easy to see how the Block would be an attractive target for a major. This is one more piece of evidence which if I am reading things correctly will be backed up by comprehensive well results within the next week or so. It’s primary purpose imo being to ensure that the market gives adequate recognition to the significance of the results from Eldari B if extended testing of Eldari B has produced only modest results. It’s still all there to play for folks and I intend to remain fully invested until true value is realised. Tot
New WHI Report 14/08/2018 Agreed Eldari B looks like a game changer in terms of getting higher production rates due to its natural high downhole pressures and natural gases. So, comingling deeper zones with 9, 14 and 15 seems the way to go. But…at the end of the day, it comes down to money - and drilling down another 300-400mts in to Eldari B will cost money. Remember all three wells (T45, Dino and T39) were already drilled to a depth of c.2,400mtrs, and in the current campaign, each well was deepened by c.300mtrs to depths of 2,700-2,750mts, costing per well was c.$3.5M. Nevertheless, when T39 RNS was released, I thought the Market underestimated the importance of the success the company had achieved with Eldari B (both operationally and on the production side), but slowly it is coming to the fore and it was important that WHI recognized this because historically they have taken a more cautious approach with us. On the negative side, implicity it feels as if Eldari A flow rates from 9,14 and 15 may be towards the lower end although WHI haven’t specifically really said this as they will hold judgment until official data is released [which is fair enough]. Still think news this week but we’ll see… JMO
New WHI Report 14/08/2018 Looks good !! Maybe some hard choices for FRR to make going forward, but very positive views by WHI based on the new drilling results and information DD
New WHI Report 14/08/2018 So my take as follows: WHI will have talked to FRR in detail prior to this update - will reflect FRR thinking They are trailing the possibility of Zone 19/Eldari B first, followed by co-mingling with Eldari A once the divergent pressures are equalised The whole tone is that the resource estimate from NSA in 2005 is understated. I wouldn’t be surprised if NSA are already in this loop re an update to the CPR. Which in my view takes us back to preparing for a reserve declaration at some point - possibly linked to funding it also implies that the original economic model from last year understates the long term value of the field As most holders will have expected the strategic plan will no doubt be re-based - with the likely focus being on Eldari B first, then Eldari B and mainly from single wells. In reality I suspect there will be combinations of approaches dependent on location. It also seems to reinforce the view that the drill techniques are now able to deal with the geology, at least thus far, again crucial for any move on reserves So could we see an updated CPR in the near future? Quite possible in my view
New WHI Report 14/08/2018 WHIreland note on Frontera Resources - 14 August Potential High-grading of Zone 19 and the Eldari B Formation On 19 July 2018 Frontera announced that the T-39 well produced on test at a rate of 529b/d of oil and 6,000 mcf/d of gas (or 629 boe/d consisting of 86% oil and 14% gas) with a choke of 8/64” and that the well tested a rate of 250 b/d of oil and 350 mcf/d with a choke of 6/64”. These rates were achieved from a 21m perforated interval in Zone 19 of the Eldari B formation which was not hydraulically fractured. We believe that Zone 19 is in contention to displace zones 9, 14 and 15 (in the Eldari A formation) as the resource that stands to deliver the most generous returns for every dollar invested. We note that production tests are ongoing in the Eldari A formation (sidetrack wells Dino-2 and T-45) and the Eldari B formation (sidetrack well T-39), which will likely be determinant in terms of where future capital allocations will be prioritised. Our estimate of the fair value per share of 0.82p had been premised on a risked valuation of the development of the Eldari A formation, which, depending on ongoing production tests, may not reflect where future capital allocations will be prioritised. For this reason, we are placing our assessment of the fair value per share under review. The shallower Eldari A formation relative to the deeper Eldari B is in a lower pressure regime than that of Eldari B (0.73 psi/ft relative to 0.76 psi/ft), which means that comingling production from Eldari A and Eldari B will require the recompletion (isolation/perforating/fracturing) of Eldari A after Eldari B has been produced sufficiently to lower its pressure. Once operationally proved, a “stack and frack” approach could see Eldari A and Eldari B both being depleted by a single well; however, in the near term (2018/2019) we anticipate that either one or the other horizons will be developed in priority. Both formations (Eldari A and Eldari B) were deposited (Early Pliocene) in conjunction with the eastward retrenching of the Caspian Sea to its current shoreline to the east. The Eldari B formation is geologically similar to the Eldari A, albeit the Eldari B formation represents a shallow marine depositional setting whereas the overlying Eldari A formation is fluvial/deltaic. In our opinion, based on conventional depositional models it would not be obvious to expect Eldari B to be more permeable than Eldari A (although this has proved to be the case). Typically, the deeper horizons in a prograding shoreline consist of lighter sediments that form tighter and shalier lithologies; however, it is possible also for intermittent deposits of high quality / heavy sands to flow into this deeper setting (turbidity currents), which may have occurred in the case of the Eldari B In our opinion, the recoverable success case resource estimate of 14.7 mb as determined by Netherland Sewell and Associates (“NSA”) in 2005 is probably out of date because, we believe, it would have been based on poor quality electric log data due to the rugosity of the boreholes drilled up to that time. We note that Frontera reported a net pay for Zone 19 of 21m which compares to a mapped net pay of 13 meters for the purposes of the NSA resource estimate at the location of the T-39 well. NSA indicated in its 2005 report that “because of the difficult drilling environment, the overall quality of the petrophysical data available for this evaluation is poor”, whereas today transformed drilling practices (oil based drilling fluid) allow for good holes to be drilled, improved casing and improved logging. We also believe that legacy information quality has generally deteriorated with depth, which favoured the prioritisation of the higher Eldari A formation relative to the deeper Eldari B formation. We believe that Zone 19 will be produced by way of solution gas drive, meaning that the oil in the formation will be produced from gas bubbling out of the oil and expanding as the well is produced (and pressure declines). In our opinion, the ultimate recoveries per well for solution gas drive wells depend partly on how production is managed over the lifetime of the well. We have assumed exceptionally steep initial declines to forecast production from the Eldari A horizon (based on 8.75 years of actual production data from the Dino-2 well specifically from Zone 9 after being hydraulically fractured). We believe that typically, conventional (unfracked) solution gas drive reservoirs, such as the Eldari B, when commercial, exhibit flatter declines in the first years of production relative to fracked wells. Therefore, like-for-like initial production rates of any given quantity would be more valuable, in our opinion, at the Eldari B, particularly once there is increased confidence in the long-term ability of Eldari B to produce on a relatively stable basis. In June 1999, the Niko-1 well (drilled by Frontera) produced at an initial rate of 960 b/d of oil from comingled production from Zone 19 (cased and perforated) and Zones 22-25 (uncased/open hole). The well ceased production after little over a month of being brought onstream due to sand ingress/collapsed well, which was caused by a poorly drilled (rugose) and poorly cemented hole. Since switching to oil based drilling fluid, Frontera has been drilling good holes and effecting sound cement jobs, which has resulted in an absence of sand production. In our opinion, it is of critical importance that the T-39 well has produced from Zone 19 without any reported sand production. We believe this implies that Frontera is likely capable of producing oil from both Zone 19 and Zones 22-25 without the production of sand or in other words that the success of Zone 19 can be replicated in the lower zones of Eldari B (Zones 22- 25). On balance, we believe the current testing programme at the Taribani field has created very tough competition between the Eldari A and Eldari B formations. If production from Eldari B can be maintained into the mid-term, we believe this formation has scope to become the new focus given that Zone 19 is producing at high rates without the need for hydraulic fracturing
News on Thursday? Well, strong possibility that we will get some news by Thursday, may be as a minimum on how the next installment to YA (of c.$265K) was paid i.e. cash or shares. From trading activity of the shares over the last 2 weeks, my view is that it will be paid from internal cash. Aside from this, we know as part of the Niko funding for $3M, the first tranche is expected to be received by 1st September, however we still do not know if the institutional investor has agreed to drilling deeper to Eldari B. Perhaps they will announce this when the next operational update is finally released. Overall, I have tampered with my own expectations and hope the 3 wells can collectively deliver 600bls - for me this will be success. Regarding Zaza previous proclamation that he hopes to finish the year at 1,000bpd is looking a little out of reach in my humble opinion, probably closer to 800bpd, and this is not including any contribution from Niko well, which is expected to start in November. With Niko on line and based on going deeper, this well has the potential of adding another 400blpd. Some may think I am being cautious, but better to be cautious and be pleasantly surprised than shooting my mouth off and suffering “forever blues”. Finally, no update on the next Investor meeting (been over 3 months since the last one) or the site visit. Awaiting patiently…
APSNY News article on IVANISHVILI sanctions This all refers back to the bipartisan proposals to Congress by Steve Russell in the middle of last year - I think it was called the Georgian Fair Trades proposition or something similar In itself very telling and related to three instances of historic unfair practice - one of which referred to FRR. So little old FRR yet again securing very powerful support from the great and the good. I interpreted the proposals as a threat re any repeat activity - and there is no record of any further activity (the proposal was in its preliminary stages regarding any Congress approval) Given that the Presidential elections are due in Georgia and that the article is prompted by an opposition leader I suspect this is as much about the politics as anything else. Natelashvili is relating to the Steve Russell “threat” and no doubt also the Daily Caller article early in July. As far as I can see there is no more online reference to the issues - so I think this is some clever political opportunism. Whatever - taken together with the political lobbying that FRR are engaged in - it shows that these guys are simply not prepared to roll over- which is another reason why I stay fully invested. As SB says operational and funding news is the real story we need to hear