ADI - Adelphi Energy

Agentm said:

perhaps read this from murphy they talk about their gaszone well in mcmullen, and then how they view the karnes county oil zone and their new well and also the play itself

many questions on the eagleford in the Q&A section

http://seekingalpha.com/article/185259-murphy-oil-corp-q4-2009-earnings-call-transcript

no one thinks this play is valid i know with the jvp, but imho its a seriously wrong view..

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Hi Agent m
thanks for that post.
I seems that others appreciate the value of Sugarloaf but the aussie market just doesn't get it... yet. Even at the current SP it may be worth picking up some more.
I have been trying to calculate how much HILCORP paid the JVP for their 10% share in Sugarloaf. Now maths is not my strong point so I was interested to read that David Morgan from Murphy Oil estimated that to drill 3 wells including fracturing would be between $8 - $13 million.
So say HILCORP paid $8m for a 10% interest based on the 3 existing wells success at any of the 3 new wells that HILCORP is drilling will add significantly to the SP.
Am I taking a too simplistic view of the value of ADI?

How about looking at it this way...
Hilcorp has paid for 50% of ADI's stake. Lets say costs blow way out fixing up their current mistakes of dropping lines etc. Call it 25Mil total for all the work they need to do (3 wells plus fracs (7ish million per well), and 3 fracs (1ish million per frac)) - This is all figures out of the air with a little research - nobody knows the real cost at this point - take it as a pure estimation.

They'll have paid ADI effectively 20% (that's ADI's share pre farm out - and Hilcorps covering that share of cost to get 10% off ADI) of 25 Mil est. for 50% of ADI's share in the eagleford region. $5Mil

Let's hope that one day we all (market included) consider it to be too cheap a price! I know I already do.

Hatchy,

I don't think that you can use Hilcorp's estimated cost for the 3 fracs + 3 new wells to value the acreage. Hilcorp will earn 50% by shouldering the full cost of that work and then 50% of the cost of all future works in line with its WI.

Frankly, if they can realise the value of this acreage it's a good deal for ADI.

The indications are that they are prepared to spend the money to get the results. Kowalik was not completed to be fracced and yet the frac team managed to frac 75% - OK, they have a problem with a fatigued string...

Kennedy was fracced twice a year ago or more and the formation got blocked. The 2nd frac had to be abandoned. That might have weakened the lining because there is specific mention by EME of unduly high pumping pressures. But the bottom 600ft seems to have been re-fracced (3rd time) to their satisfaction - no contrary comment and Plymouth comment on HC of rumoured high wellhead pressures. If so, these guys know their stuff. What can they do with a properly completed well? Let's ssee what they can do with Easley. The jury's out until that well is tested.

Weston was completed early because of "challenges". It flared up to 60ft. It could be an animal. But is was drilled in the chalk. The frac design is to frac both the Eagleford and the Austin. They might not be able to do that from the Austin.

Easley will be the first proper test.

But that frac team did 8 stages and over 2,000 ft of Kennedy as compared to 1 frac of 600 ft and a subsequent, failed, re-frac of that 600 ft.

I am impressed if that means anything. Just reading the accounts of the early attempts and then comparing to what appears to be a stunning achievement gives me confidence. And if you compare it to wells such as Kunde 3 in Live Oak fracced by COP - 5 failed attempts....Early days, maybe.

The value is not simple arithmetic based on what Hilcorp might spend, imo. They are buying expertise and experience from all appearances. Let's see what they can do. They may make it happen.

Esteon,
I sure hope that Hilcorp does make it happen.

I think shale plays are undergoing a similar evolution of understading that CSM plays did about 4-5 years ago. Companies are still trying to work out the best techniques for fraccing and like anything experience is the key - as you said.

Great news out today. Very encouraging.

All in all (much like yourself) I am happy that Hilcorp is now going to be on board - I have had the impression over the last few years that TCEI might be taking advantage of the 'little aussies'. Hilcorp seems to be more interested in getting a job done and pushing this thing forward - TCEI were on too steep a learning curve IMO.

Hatchy

KENNEDY #1H - OPERATIONS UPDATE

Adelphi Energy Limited (“Adelphi”) is pleased to provide the following update on operations at the Kennedy #1H well.

Adelphi has been advised by the Operator, Texas Crude Energy Inc (“TCEI”), that the isolation plugs set as part of the fracture stimulation operations have been drilled out and the well commenced unloading at 0100 hrs on Thursday, 28 January 2010 (USCST).

The initial production rate going to sales at 0700 hrs on Saturday 30, January (USCST) using a 22/64 choke was 4.39 mmscf/d gas and 1,132 bpd of condensate. The water production rate, from the recovery of frac fluids, was 408 bwpd.

Whilst these initial rates are very encouraging, the following points should be noted:-

• This is an initial production rate during clean up and is not yet indicative of a short or long term production profile.
• The well still has considerable fluids to recover from the fracture stimulation operations.
• The well is flowing from approximately 2,200 ft of stimulated Eagle Ford Shale with the remainder of the 4,000 ft horizontal liner isolated and not contributing.
• The well is currently producing through the 7" production casing, with a production tubing string to be installed in due course.

Adelphi’s Managing Director, Chris Hodge commented:
“Whilst it is early days, these initial flow rates are extremely encouraging including the expected high condensate ratio. We look forward to seeing how the well cleans up as well as the imminent fracture stimulation of our Weston well. Together with the three new wells being drilled as part of the farm-in program by Hilcorp across the Sugarloaf AMI, we expect to obtain additional valuable production performance data in the very near term to further
prove up the commercial potential of our interests."

Adelphi will continue to advise the market on production rates as part of its regular updates or as specifically required.

Adelphi currently (pre-farmout) has a 20% working interest in the Sugarloaf AMI including the Kennedy #1well.

I know its early and we have frac fluids included, but those figures where better then I was expecting off 8 stages.....it will be good to see what they are in a weeks time...

Fantastic news IMO

Hi guys,

I hold AUT and wondering why the last couple of days ADI has gone up and AUT has gone a little lower.

I'm certainly no stock market expert or and know nothing about mining. I have done a lot of reading over this forum and the two companies seem very similar.

Have a made the wrong choice in your opinion buying AUT over ADI or will they pretty much stay 'together' or could they go there seperate ways?
Will the latest annoucement help AUT as well? No movement in price today.

Thanks form a nubie..

condog said:

I know its early and we have frac fluids included, but those figures where better then I was expecting off 8 stages.....it will be good to see what they are in a weeks time...

Fantastic news IMO

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• The well is currently producing through the 7" production casing, with a production tubing string to be installed in due course.

Adelphi’s Managing Director, Chris Hodge commented:
“Whilst it is early days, these initial flow rates are extremely encouraging including the expected high condensate ratio. We look forward to seeing how the well cleans up as well as the imminent fracture stimulation of our Weston well.

condog, murphy had a well doing this..

We are off to a great start with our Eagle Ford Shale program in south Texas. We recently announced the discovery at our first well, the George Miles number one drilled in McMullen County.

Initial rate of flow from the well was approximately 7.5 million cubic feet a day. This was increased to 11.7 million cubic feet a day once tubing was run.

once the production string is put in the well can perform a lot better again..

imho the result is exceptional. and hilcorp imho will go full steam ahead.. look out karnes county!!

After the tubing is run and the injections are complete that sucker should take off like all hell froze over when the rest of the fracs are completed. I am very pleased with the Kenedy 1 Operations Update. Sounds like it will be an exciting week for ADI.


I am currently (and happily) holding ADIHF. DYOD and IMHO as always.

I am a bit confused, even with such a good result the SP drop by almost 6%. Not too sure why, i am currently the holder of ADI.

G'day YMA , It would appear that the market still doesn't understand what we have here.

All around the AMI there are wells being drilled and flowing gas and condensate.
We have a good result here with the Kennedy Frac, with more to come from Easley.

With the expertise on hand and the area to drill and explore , it seems that the S.P. must surely appreciate in the short term.

ADI has cash in the bank, and a free carry ahead of them, the risk versus reward has decreased , with an opportunity for a catalyst if Easley proves to be a producer.

I still hold and will continue to hold to ensure I can be part of a re-rating once the market realises what the future may hold.

Regards
bazollie

Any word on the Yemen sale ? Haven't heard that mentioned in quite awhile. It was being discussed back in December and I was wondering if it is still being pursued.

Great news on the Kenedy well.

Just thought I'd add a little fuel to the fire. News over the weekend that EOG is producing as much as 25,000 bbls/oil/day in their new Gonzales County wells (N/E and updip of your holdings). That is a disgustingly high number not seen from land-based wells in this area in a long time. Log analyst with Baker Hughes confirmed the news. Gold rush!

I also had an EOG drilling engineer drunk at a bachelor party in my house this weekend, but was unable to pry any info from him. That's a fine sign if you ask me!

Onthebeach,

Those are some crazy numbers for EOG in Gonzales. Best I can tell they have only completed four wells in that area. If that is true that is about 6,000 bbl/day per well. That would be simply amazing if that is the case. Makes me wonder if those wells are in the Austin Chalk or Eagleford?

onthebeach said:

News over the weekend that EOG is producing as much as 25,000 bbls/oil/day in their new Gonzales County wells

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This would be a cumulative total across multile wells, impressive at that though. How many wells are we talking here ????

Taken from the Lucas website. This says there were at least 22 at time of publication of this article back in August.

Lucas Energy announced the commencement of drilling the Norris No.1 well, Gonzales County, Texas, a re-entry of a vertical Austin Chalk well originally drilled down to the Buda and Georgetown formations.

The well was spudded on August 10, 2009 and is expected to be drilled down to total depth within the next few days. After drilling out the cement plugs in the casing, the well will be cleaned out to total depth and the lower intervals (Eagleford Shale, Buda, and Georgetown) will be tested. If the lower intervals are noncommercial, the Austin Chalk interval will be perforated and acidized. This well is a part of a joint venture program involving Lucas Energy, Inc., as operator, and two other non-operator working interest owners, one of which purchased an eighty percent BPO (before payout) working interest in the subject well.

Lucas operates twenty-two wells in Gonzales County, Texas. Of these, seven are vertical wells completed in the Austin Chalk and Buda formations. The Company's wells are in the new Eagleford Shale trend now being explored to the Northeast and Southwest of Gonzales County, Texas. Another well in the joint venture program, the Mills Oil Unit No.1, was spudded on August 4, 2009 and is expected to be completed within the next week.

William A. Sawyer, President and CEO of Lucas Energy, said, "Lucas Energy, Inc. has been leasing acreage and buying up wells in Gonzales County, Texas for several years. This joint venture program is the formula for proving up our acreage position and developing new reserves."

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http://www.rigzone.com/news/article.asp?a_id=79456

Ramblin,

That says that Lucas Energy has 22 old wellbores in Gonzales that they are re-entering for the eagleford/chalk. I don't think Lucas has any involvement with EOG in Gonzales County. EOG has drilled 4 wells in Gonzales and is currently drilling two more.

It said they operate 22 wells with 7 being directional. Sorry, I've never heard of Lucas either. With the info. being that outdated I was probaby better off not posting it.

hi rambling

adi have the yemen asset on sale, i think once the process is certain you may get comment, but imho there will be no updates on it in the interim

also re eog and gonzales... Lucas has said 22 wells

eog has 6 wells in the eagleford in gonzales

2 verticals and 4 marshall wells which are horizontal.. 2H 3H 5H 6H

the rates onthebeach quote staggering to say the least, 25,000 bopd off the 4 horizontal and 2 verticals are way off the dial


kennedy is going to return about $2 mill for the month if its ip keeps up for a month. and there is a chance with a production string in place of improvement and or a decrease.. who can tell. my view is that the eagleford is definitely looking commercial. and its not unreasonable to have have expectations of 3 times the flow rate or more coming from the new wells being drilled, they are designed to be around 5000 - 6000 feet and they will be drilled differently and completed with a cemented liner

my view is that the slick water fracs are superior to any acid wash treatments conoco have thus far utilised in live oak experimental wells. they would have to consider them in their thinking imho. tcei and conoco are partners in a lot of acreages, so imho their would be some data shared in that configuration..

the advent of a brilliant partner such as hilcorp whom are totally capable of dealing with a project this size, and with the slck water frac treatments imho demonstrating commercial flow, it would be difficult to envisage tcei/hilcorp adopting conoco style completions atm.. i think a full forward drilling program would be the next step for the jvp.. my view is that one rig is no way near enough and there would have to be indications of a step up in operations very quickly. if that does not happen i know i am bailing big time.. my research tells me the use of a single rig would be a disaster for the jvp..

looking forward to seeing what i think the next steps are for adi.. if this is the real deal then things are about to get mighty busy for the jvp..

i think aut with its acreages are surely going to be temptation for many??

ops atm in the adi ami

conoco has a permit for the next well, eskew east..



this from saf on the petrohawk presentation i mentioned the other day

Petrohawk results Feb 1

http://www.prnewswire.com/news-rele...oration-doubles-proved-reserves-83234617.html

“Eagle Ford Shale

Petrohawk's position in the Eagle Ford Shale, comprising 310,000 total net acres and producing in Hawkville Field between the Edwards and Sligo reef trends in McMullen and LaSalle Counties, Texas, continues to deliver ever-improving results with four rigs currently running. The overall play is unique in its varied composition of dry gas, condensate and oil deposits in a geologically diverse, highly faulted and overall more complex exploration area compared to the blanket depositional patterns encountered in other shale plays. In particular, the presence of condensate yield in Hawkville Field appears higher than originally expected, making the area potentially even more economic on a revenue equivalency basis.
The Company drilled six wells in the Eagle Ford Shale during the fourth quarter of 2009, of which five were on production at year end, and drilled 24 wells during 2009, bringing the total number of Eagle Ford Shale operated wells on production at year end to 20, all located in Hawkville Field. The average initial production rate for the 22 wells to date is 9.7 Mmcfe/d adjusted on 6:1 natural gas to condensate ratio and 10.4 Mmcfe/d adjusted on a 12:1 ratio. Average production for the first 30 days for the 19 wells with sufficient production history has increased to 7.2 Mmcfe/d and 7.8 Mmcfe/d adjusted on a 6:1 and 12:1 ratio, respectively. Average production for the first 60 days for the 18 wells with sufficient production history has increased to 6.0 Mmcfe/d and 6.6 Mmcfe/d adjusted on a 6:1 and 12:1 ratio, respectively. Total gross operated production as of mid-January, 2010 was approximately 66 Mmcfe/d (or approximately 61 Mmcf/d and 800 Bc/d) from 22 operated wells.
Petrohawk is currently operating four horizontal rigs in Hawkville Field and expects to drill approximately 60 operated wells during 2010. The Company continues to see dramatic improvement in performance in the Hawkville Field wells. The primary drivers in this improvement are drilling longer laterals, the ongoing refinement of the completion technique, as well as operational efficiencies on existing wells. The first extended reach lateral, the Caroline Pielop #4H, was completed in December 2009. It was completed with 16 stages over a approximately 5500' lateral. The initial production rate from the well was 11.6 Mmcf/d on a 24/64" choke with 4800# flowing casing pressure. When compared to other wells completed nearby, early data indicates that this well could have a significantly higher EUR. The Company intends to drill the majority of its upcoming wells with lateral lengths approaching 6,000', and possibly exceeding that length if the results continue to suggest improved recoveries for longer lateral lengths.”