- Joined
- 13 December 2010
- Posts
- 135
- Reactions
- 0
All great information Condog.. I didnt know you held the stock.. Have you held for long?
HOG - Hawkley Oil and Gas
- Thread starter System
- Start date
-
- Tags
- hawkley oil and gas hog
The peer competitor analysis from Hartleys makes it look cheap , but its simply carrying a lot more risk then its peers.
I found the well cost at $6.7M and it took 9 months which , i know it had its problems, but thats a rediculous cost for a vertical well of only 4400ft depth. They will need to do far better then that in terms of cost and time for verticals. Luckily for them the flows have been rediculously good.
I found the well cost at $6.7M and it took 9 months which , i know it had its problems, but thats a rediculous cost for a vertical well of only 4400ft depth. They will need to do far better then that in terms of cost and time for verticals. Luckily for them the flows have been rediculously good.
- Joined
- 30 June 2008
- Posts
- 15,586
- Reactions
- 7,466
It is very expensive and slow for a drill. HOG decided that they would use local Ukraine oil drillers rather than Western technology. Basically it is to keep the locals onside giving them some part of the action and defusing resentments. What they have done is substantially improve the sealing of the well which apparently is responsible for actually getting it drilled properly and, it appears, upgrading the the flow rates 4 fold.
As it is HOG will be making out like bandits on this deal and keeping the local wheels greased and happy will just be another business expense.
Thanks Basilio
Theres obviously something still missing though, as a 4400m vertical well built for dry gas should only cost approx $1m. I understand this one cost more due to difficulties along the way, however, at $6.7M, and with Hartleys projecting well costs at $9M connected to sales, something just doesnt add up. There is just no reason that a vertical can or should cost that much. Difficult geology can increase prices, but 9fold??
At $9m those wheels would be so greasy theyd spin on the spot. Still incredibly economic with those flows, but you got to question a $9m well cost.
- Joined
- 19 January 2010
- Posts
- 63
- Reactions
- 0
Yhe ive had it for about half an hour
Welcome to HOG Condog, it will be great to have your input here!
I really like this stock, the location and the politics etc in Ukraine may be a reason why the stock was undervalued and the barrier to entry due to the need of local knowledge means that management IMO are well placed to succeed where others might have failed.
Lets not get too worried about the drilling costs.
Attached are some excerpts from the Moyes report (June 2010).
1. Western rig: $12m, 4 to 5 months to drill 4500m.
Russian rig: $10m, 6 to 8 months.
These are even higher than the $6.7m Hartleys' figure.
2. Fig 29:Capital Cost Schedule - almost all of the cost is drilling.
3. Fig 30: Unrisked Cash Flow Profile. The capital costs are the magenta bit - even at $10m - $12m per well, these costs are peanuts compared to the potential net cash flow (dark blue). And the difference will be even more pronounced when the effects of the x4 flow rates and possibly lower drilling costs (viz Hartleys' $6.7m) are included.
Additional point, re possible capital raising - HOG stated in their 31 Jan 1011 release that "Current exploration and development expenditure.....will be funded through cashflow generated through sales of gas and liquids from Well #201"
Re possible P/E ratio, HOG noted in their Jan 2011 presentation that another company is operating in Ukraine on an 8.7 P/E
Attached are some excerpts from the Moyes report (June 2010).
1. Western rig: $12m, 4 to 5 months to drill 4500m.
Russian rig: $10m, 6 to 8 months.
These are even higher than the $6.7m Hartleys' figure.
2. Fig 29:Capital Cost Schedule - almost all of the cost is drilling.
3. Fig 30: Unrisked Cash Flow Profile. The capital costs are the magenta bit - even at $10m - $12m per well, these costs are peanuts compared to the potential net cash flow (dark blue). And the difference will be even more pronounced when the effects of the x4 flow rates and possibly lower drilling costs (viz Hartleys' $6.7m) are included.
Additional point, re possible capital raising - HOG stated in their 31 Jan 1011 release that "Current exploration and development expenditure.....will be funded through cashflow generated through sales of gas and liquids from Well #201"
Re possible P/E ratio, HOG noted in their Jan 2011 presentation that another company is operating in Ukraine on an 8.7 P/E
Attached is part of Dec 2009 news article on a company called Regal Petroleum (AIM listed), that is also operating in Ukraine.
It notes that although modern rigs are a lot faster than the Soviet-era rigs used elsewhere, it still takes months to drill a well - yeah, Condog, the rock must be hard! Whatever, "slow" drilling progress is apparently not just confined to HOG.
It notes that although modern rigs are a lot faster than the Soviet-era rigs used elsewhere, it still takes months to drill a well - yeah, Condog, the rock must be hard! Whatever, "slow" drilling progress is apparently not just confined to HOG.
I just took a quick trip to Ukraine and managed to take a snap of the Russian drill rig. It explains a lot about the slow drilling speed. Theres plenty more kegs to store the oil / condensate, but the drill crew have to drink them first.
Attachments
- Joined
- 19 January 2010
- Posts
- 63
- Reactions
- 0
That is funny! You had me for a minute, but this would not surprise me, they do love their alcohol over there.
Interfax reported that Ukraine will pay an average of USD 280 per thousand cubic meters of gas in 2011.
This is good news for Hog, with increase from $264, so about a 10% increase.
To put that into perspective with kfcgas we are used to its $280 per 27000 cubic feet of gas.
Gas flow during production testing = 12,641,550cfgpd / 27000 = 468 * $280 = $131,000 USD per day on the 9mm choke for the dry gas.
The condensate price is much harder to pin down in the Ukraine but if we go with $90 we wont be too far off. 504 * 90 = $45300 USD
with 1 well = $176300 pd gross revenue x 39% = $68757 net per day = approx $24M net per annum.
2 wells 48m, 3 m, 72
Because where using net figures lets mcap it out using a more significant PE of say 14.
1 well mcap value $336million
2........................$772 - (Thats a 10 bagger)
3........................$1Billion plus
6.......................$2B plus (thats a 30 bagger)
Current mcap is $65M ( doesnt take a rocket scientist to draw a conclusion from this info). But the second well has to hit gas gold to derisk the acerage and operator.
Right now they are intending on drilling wells at say $8m cost out of cash flow.
We currently have 1 well. We can assume we will have the cash to drill the second in approx 4 months of sales. So 2nd well in approx April looks right - Chernetska. 3rd well in approx Aug Sept if Chernetska is a dud. If Chernetska is as good as #201, then 3rd well should be in approx July, with then possibly a well per month beginning if cash flow allows.
Now whilst i need to clarrify this only has one successful well at present , and it is an amazingly successful well, if its other wells reflect this look at the possible upside. Even if ones a dud, as long as its not the early next one or 2 its hardly going to cause any grief, if well #201 keeps flowing proloficly as expected.
Seriously feel free to read this and get a little excited, but for god sake make sure you cross check it at least and , better still Do your own research. This is not without risk. But as you can see the possible reward is significant as well.
risk 100% , reward possible 3000%
What i tend to do is , gradually lift my exposure as the risks get eliminated. AS an example if the Chernetska well is similar to #201 i will double my holding, if they then drill a third well and its good to, i will increase again.
This is good news for Hog, with increase from $264, so about a 10% increase.
To put that into perspective with kfcgas we are used to its $280 per 27000 cubic feet of gas.
Gas flow during production testing = 12,641,550cfgpd / 27000 = 468 * $280 = $131,000 USD per day on the 9mm choke for the dry gas.
The condensate price is much harder to pin down in the Ukraine but if we go with $90 we wont be too far off. 504 * 90 = $45300 USD
with 1 well = $176300 pd gross revenue x 39% = $68757 net per day = approx $24M net per annum.
2 wells 48m, 3 m, 72
Because where using net figures lets mcap it out using a more significant PE of say 14.
1 well mcap value $336million
2........................$772 - (Thats a 10 bagger)
3........................$1Billion plus
6.......................$2B plus (thats a 30 bagger)
Current mcap is $65M ( doesnt take a rocket scientist to draw a conclusion from this info). But the second well has to hit gas gold to derisk the acerage and operator.
Right now they are intending on drilling wells at say $8m cost out of cash flow.
We currently have 1 well. We can assume we will have the cash to drill the second in approx 4 months of sales. So 2nd well in approx April looks right - Chernetska. 3rd well in approx Aug Sept if Chernetska is a dud. If Chernetska is as good as #201, then 3rd well should be in approx July, with then possibly a well per month beginning if cash flow allows.
Now whilst i need to clarrify this only has one successful well at present , and it is an amazingly successful well, if its other wells reflect this look at the possible upside. Even if ones a dud, as long as its not the early next one or 2 its hardly going to cause any grief, if well #201 keeps flowing proloficly as expected.
Seriously feel free to read this and get a little excited, but for god sake make sure you cross check it at least and , better still Do your own research. This is not without risk. But as you can see the possible reward is significant as well.
risk 100% , reward possible 3000%
What i tend to do is , gradually lift my exposure as the risks get eliminated. AS an example if the Chernetska well is similar to #201 i will double my holding, if they then drill a third well and its good to, i will increase again.
- Joined
- 5 May 2010
- Posts
- 269
- Reactions
- 1
So you believe it's a possible 30-bagger from the current SP?
Using the information above, yes its possible. Does that mean it will happen no.
But i can tell you this i wouldnt be in it if i didnt think it was
1. presently undervalued significantly
2. Likely to make me a lot more money then lose me money.
Does that mean it will happen, hell no. But right now with a $22-$24M net revenue stream from one well, its got a hell of a lot of room to move compared to most similar mcap explorer / fledgling producers.
Its next well might be a complete dud, who knows, but the nice thing this one has going for it is it can actually afford to pay for a complete dud or two without troubling it too much.
The real nice thing is if its next well is even half as good as #201, then wow, watch the pace of development blow your mind .
Its funny you know, today 100,000 people probably went into a electronic store and blew $1000 plus on a big screen TV or other crap thats only going down in value rapidly, and in 4-6 years time will be completely worthless.
Id imagine a $1000 investment in this company, may do better. It has the potential to be $30K, $50K, who knows. And yes it has the potential to be worthless in 5 years.
But i bet youd have less trouble selling these shares if you didnt like proceedings and id bet thered be a willing market to buy them. Sometime, we stress far too much over taking a EDUCATED AND CALCULATED RISK / REWARD PLAY, yet we willingly hand our dosh over for soon to be worthless crap on a regular basis.
Right now this thing looks way undervalued, its literally flying under the radar, there are other oilers / gassers out ther with far less upside and far more risk operating at multiples to this company.
Only reason i found it was cause someone PM'd me to take a look see. The company is not doing a very good job of marketing its brilliant success with well #201, to potential investors. Something that someone here needs to take up with managment.
- Joined
- 30 June 2008
- Posts
- 15,586
- Reactions
- 7,466
Nice analysis Coondog. We all "knew" that if you passed your eyes over the deal you'd wet yourself and become a very keen player.
Which of course will certainly open other forum members eyes very quickly.
Just to go back on your analysis a bit. I think there is very little likelihood of the wells being duds. The original analysis by Moyes pointed out that the wells are in areas that have proven reserves. The problems in the past seem mostly related to poor engineering with subsequent well problems and relatively poor outputs.
The outstanding result from the first drill (400% better than previous) seems likely to be a result of a better well casing. It also appears that the entire field has been underrated and as a result of the first drill HOG is reviewing the reserves. These results should be due fairly soon and if there is a decent upward revision there should be some extra multiples on the production/profit figures.
And of course the uplift in gas and oil prices over the past 5-6 years has turned a good result into an outstanding one.
So why arn't management making more of a song and dance over this ? Actually I think their information has been pretty good. Timely and highly instructive. For example when the first well showed the extraordinary flow rates HOG mapped out a clear financial return table based on the flow rates. Good simple stuff with lot's of green in the table. Trouble is I don't think any of the "proper" analysts will even sniff at a share that isn't in the ASX 100. It has to actually beat them over the head before they will recognise it as a worthwhile investment.
Finally HOG is valued at around $116 m. There are an additional 119 million shares held in escrow - I think by the Board. (This was pointed out to me a few months ago when I also got excited at the ridiculously low company value)
- Joined
- 6 July 2010
- Posts
- 279
- Reactions
- 3
Condog ,I admire your expertise ,I to am in HOG, are there any related books [ oilers for dummies] you could recommend so I can understand WTF your talking about
Thanks
Thanks
Hey , i would just reccomend learning and interacting on the forums, there are a lot of very knowledgable people online. In particular, whether you hold or not i suggest reading the AUT TXN SEA . In short i reckon it will take you about 6-12 months and you will be on top of your game in this respect.
Other then that, read the reports put out by the broker firms and see what they talk about, why they like a stock, why they value them. Go to the AUT and TXN website and read the broker reports, they explain why those stocks are good. More importantly though, you will see upgrades and the events that trigger brokers to change value on the stocks.
The first few you reead you will need to google terms to know the definitions of some of the Jargon, but in no time you will be up to speed.
Doesnt matter at this stage its all risk, so you got to price it in. I think the markets just havent discovered HOG yet and that needs to be addressed. The mgmt need to keep thier presentation matierial current and start presenting at some of the Good oil conferences etc.
Initially you have to pay for a broker to put out reports. You go to smaller niche brokers like Hartleys, Euroz etc that have exsisting clientell happily investing in minow oil and gas companies. Then once your on thier radar, the word starts to get out, very soon the number of brokers "if the stock is good value " begins to climb and they continue thier coverage for free. Mgmt now is definitely at the stage where they should have at least one paid broker report. No excuses, you cant attract the investors to bid up your stock to fair value without it.
Rest assured if mgmt dont start selling this story publicly via conferences, presentations and broker reports, i will be gone in a matter of months , and id chase a company even of lower quality, thats willing to attract investors. Its so crucial for these small companies.
yes i remeber that now. cheers for that. Its still even at that very cheap, i think $175- $240m would be more appropriate for the current state of affairs. On an mcap PE basis its worth $336, but then you need to discount the valuation to apply a risk discount for all the unknowns. I thnk an approx 40% discount at this stage is ample for me .
Hi guys
I agree with the foregoing analysis - I've done my own and that's why I'm in.
Moyes are talking about 50 wells over the licence area, 34 for Chernestska, and 16 for Sorochynska (Ref Moyes pp 32 and 34 resp)
I'm not sure exactly how many shares are potentially on issue - I depends where I look! Basilio's extra 119m must be near enough for valuation purposes.
The gas price in Ukraine is a huge plus for HOG - more than double the US price.
I agree with the foregoing analysis - I've done my own and that's why I'm in.
Moyes are talking about 50 wells over the licence area, 34 for Chernestska, and 16 for Sorochynska (Ref Moyes pp 32 and 34 resp)
I'm not sure exactly how many shares are potentially on issue - I depends where I look! Basilio's extra 119m must be near enough for valuation purposes.
The gas price in Ukraine is a huge plus for HOG - more than double the US price.
