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Harken Energy Corporation (HEC) Message Board

  • dhrosier dhrosier Mar 9, 1998 10:11 AM Flag

    Yahoo message board identity

    Dark blue bar at top, just under Yahoo banner, click on "Edit Identities" at right end of bar.

    A few posters have contacted me off line which is fine. No one has abused the privilege. Generally they wanted to explore issues which are not on any of the threads such as shared interests - Geaux Tigres!! (LSU-BR alums, for example!)

    At least two have indicated they do not know how to change their profiles which is the reason I decided to burden you with an administrative post.

    My personal feelings are that I can control any problems which arise, and although I may be wholly inaccurate in a post, my plan is to post thoughts and facts as best as I understand them. That is, I plan to have no reason to obscure the source of my comments. If I am wrong, I have been often enough to be at ease with mortification of being personally associated with my musings.

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    • Though this is the case with smallproducers in the U S A it isn't so with Harken. Not when your talking about billion + barrels. Even if oil was worth only $5 a barrel it wouldn't cost you $5 billion to pump (1 billion barrels) and ship it.

      Art

    • If crude prices continue to fall and the supply continues to rise at some point all this oil that Harkin is sitting on isn't
      going to be worth extracting i.e more costly than the return. There are no indicators that I see out there that oil consumption is
      going to increase substantially in the near future. Asia consumption is down and the US and Europe had warm winters. OPEC is also
      in no state of affairs to restrict production and seams pretty defunct. Are these legitimate concerns or are there trends I
      don't see??????

    • "I've seen numbers used from $3-$6/bbl all around the world, depending on development costs, lifting costs, and fiscal terms. The number will be different for each specific development, but you can use the above range for a good conservative-to-liberal valuation spread. I'm not as sure about natural gas valuations,
      but if you convert the above figures to $/mscf at 6:1, you get $0.50-$1.00/mscf. Try that and see if it get you in the ballpark."(From an the ex senior oil analyst for Murphy Oil..)
      -------------------
      "Maybe they do --- maybe they don't. It doesn't matter. I certainly doubt it would be a reserves firm's "reputation" that dictates such a decision. The reality of the matter when
      you are dealing with an outright hypothetical number such as "potential" reseves wherethe likelihood of them even existing is 10% or less ---- reducing the original "estimate" by 15% is rather meaningless. It would not in my opinion be indicative of
      "conservatism" at all. This approach to "conservatism" would not even begin to adjust for any weak or faulty assumptions or parameters used in the estimating methodology. Or even the quality of very old seismic data which must be the major basis of any study like this to begin with.
      So you can put the concept of "potential reserves into perspective, here's some definitions:
      Proved reserves - Reserves that have been proved to a high degree of certainty by analysis of the producing history of a
      reservoir and/or by volumetric analysis of adequate geological and engineering data. Commercial productivity has been established by
      actual production, successful testing, or in certain cases by favorable core analyses and electrical-log interpretation when the
      producing characteristics of the formation are known from nearby fields.Volumetrically, the structure, areal extent, volume and
      characteristics of the reservoir are well defined by a reasonable interpretation of adequate subsurface well control and by known continuity
      of hydrocarbon-saturated material above known fluid contacts, if any, or above the lowest known structural occurrence of
      hydrocarbons.
      Probable reserves - Reserves susceptible of being proved that are based on reasonable evidence of producible hydrocarbons
      within the limits of a structure or reservoir above known or inferred fluid contacts but are defined to a lesser degree of
      certainty because of more limited well control and/or the lack of definitive production tests. Probable reserves may include
      extensions of proved reservoirs or other reservoirs that have not been tested at commercial rates of flow or reserves recoverable by
      enhanced recovery methods that have not yet been tested in the same reservoir or where there is reasonable uncertainty that the
      program will be implemented.
      Possible reserves - Reserves that may exist but are
      less well defined by well control than probable reserves. These include those based largely on log interpretation and other
      evidence of hydrocarbon saturation in zones behind the pipe in
      existing wells, possible extensions to proved and probable reserve areas where indicated by geophysical or geological
      studies, and those to be recovered by enhanced recovery methods where the data are insufficient to classify the reserves as proved or
      probable.Includes hydrocarbons in fields which have been discovered but need further delineation, ownership extension or some combination of
      lower development costs and higher prices (and, therefore, are not currently commercial) before they can be considered proved or
      probable reserves.
      (4) Potential reserves ----- whatever weak data is left over that can't even qualify for Possible. <vbg> In other words very very low likelihood of occurring. ( description-by Taylor Mills)
      __________________________Hope this is helpful--I agree with Ed's dollar value..it's in the ballpark DD

    • "I've seen numbers used from $3-$6/bbl all around the world, depending on development costs, lifting costs, and fiscal terms. The number will be different for each specific development, but you can use the above range for a good conservative-to-liberal valuation spread. I'm not as sure about natural gas valuations,
      but if you convert the above figures to $/mscf at 6:1, you get $0.50-$1.00/mscf. Try that and see if it get you in the ballpark."(From an the ex senior oil analyst for Murphy Oil..)
      -------------------
      "Maybe they do --- maybe they don't. It doesn't matter. I certainly doubt it would be a reserves firm's "reputation" that dictates such a decision. The reality of the matter when
      you are dealing with an outright hypothetical number such as "potential" reseves wherethe likelihood of them even existing is 10% or less ---- reducing the original "estimate" by 15% is rather meaningless. It would not in my opinion be indicative of
      "conservatism" at all. This approach to "conservatism" would not even begin to adjust for any weak or faulty assumptions or parameters used in the estimating methodology. Or even the quality of very old seismic data which must be the major basis of any study like this to begin with.
      So you can put the concept of "potential reserves into perspective, here's some definitions:
      Proved reserves - Reserves that have been proved to a high degree of certainty by analysis of the producing history of a
      reservoir and/or by volumetric analysis of adequate geological and engineering data. Commercial productivity has been established by
      actual production, successful testing, or in certain cases by favorable core analyses and electrical-log interpretation when the
      producing characteristics of the formation are known from nearby fields.Volumetrically, the structure, areal extent, volume and
      characteristics of the reservoir are well defined by a reasonable interpretation of adequate subsurface well control and by known continuity
      of hydrocarbon-saturated material above known fluid contacts, if any, or above the lowest known structural occurrence of
      hydrocarbons.
      Probable reserves - Reserves susceptible of being proved that are based on reasonable evidence of producible hydrocarbons
      within the limits of a structure or reservoir above known or inferred fluid contacts but are defined to a lesser degree of
      certainty because of more limited well control and/or the lack of definitive production tests. Probable reserves may include
      extensions of proved reservoirs or other reservoirs that have not been tested at commercial rates of flow or reserves recoverable by
      enhanced recovery methods that have not yet been tested in the same reservoir or where there is reasonable uncertainty that the
      program will be implemented.
      Possible reserves - Reserves that may exist but are
      less well defined by well control than probable reserves. These include those based largely on log interpretation and other
      evidence of hydrocarbon saturation in zones behind the pipe in
      existing wells, possible extensions to proved and probable reserve areas where indicated by geophysical or geological
      studies, and those to be recovered by enhanced recovery methods where the data are insufficient to classify the reserves as proved or
      probable.Includes hydrocarbons in fields which have been discovered but need further delineation, ownership extension or some combination of
      lower development costs and higher prices (and, therefore, are not currently commercial) before they can be considered proved or
      probable reserves.
      (4) Potential reserves ----- whatever weak data is left over that can't even qualify for Possible. <vbg> In other words very very low likelihood of occurring. ( description-by Taylor Mills)
      __________________________Hope this is helpful--I agre with Ed's dollar value..it's in the ballpark DD

    • Jackie,

      Great to see you coming up with 128 mmbo for the recoverable oil in the Palo Blanco field. Proving up this quantity of oil will make ROH and PKC stock go nutty.

      If you're even just half right the price of ROH should double!

      The present value of the net revenues to be received from selling a barrel of oil over the life of a well in Colombia is about $4 -- $5 right now. That is what the oil would be valued at by the markets.

    • dhrosier,

      Thanks for your kind words. I am not related to Mr. Simmons of Houston. If he is the one cited on occasion by Barron's, I do know him by reputation. I eagerly look forward to his comments on the oil industry whenever they become available.

      I left out what is called the formation volume factor or FVF. It refers to the ratio between the barrel in the formation and the barrel in the tank. Obviously, considering the extreme conditions oil can find itself in, due to heat, pressure, dissolved gases, etc., it will shrink when taken out of that environment. Therefore the volume taken up by a barrel in the reservoir is greater than that taken in the tank.

      The FVF can run from 1.0 to 1.7. Typical values are 1.2 to 1.4. You would have to adjust my figures by dividing the FVF into the numbers I calculated.

      The final volumetric formula is given as:

      volume of payzone X porosity X oil saturation X recovery factor
      divided by FVF

      Naturally, recovery factor and FVF cannot be determined until the well is completed and production has started. I estimated 40% for my recovery factor. It is dependent on what drives the pressure on the well; dissolved gas, free-gas, water, or gravity. Water driven is the best and can go as high as 75%. Solution gas and gravity are the worst giving 5 - 30 %. Free gas 20 to 40%.

      We'll just have to wait and see what those might be for our wells. However, Harken has told us everything that can be determined from a well at this point.

      By the way, I'm learning this stuff from my reading. Fortunately I'm not really running a well. That would be similar to performing surgery as the procedure is read from a book.

      "Oh, Nurse, could you read that again. Is the femoral artery to the left or right of the knee cap?"

      Regards,

      Jack Simmons

    • Jack,

      Thanks for bringing order out of the chaos. I am just an old country actuary so we need to find someone who really knows something to keep us both honest. I have been and oil and gas exploration investor 25 years with mixed success. I am sometimes lucky at spotting good ideas and people who can do the job but when it comes to making sense of the hard data, a la Simmons, I need all of the help I can get.

      Is it coincidence or are you related to the Simmons in Houston who is a petroleum consultant?

    • Jack,
      Thanks for a most informative post. I am not an oil expert, and appreciate your calculations. Go HEC.
      Regards, Stan Beckerman

    • dhrosier,

      Using the information found in the link supplied in your message, I've compiled the following:


      Formation Net Thickness Porosity Oil Saturation Oil Per Productive Acre
      (Cubic Ft)
      Mirador 54 .21 .46 227,226
      Guadalupe 163 .21 .42 626,244
      Ubaque 12 .22 .60 68,994
      Total 922,469

      Calculations used: Net Productive Thickness X Porosity X
      Oil Satuartion X 43,560 feet per acre =
      Cubic Feet per Acre

      922,469 cubic feet/acre X 0.028 cubic feet per meter cubed =

      25,829 cubic meters oil per acre

      X 6.25 barrels per cubic meter = 161,432 barrels per acre.

      Round down to 160,000 barrels per acre. This is total oil, not recoverable. Assume 40% recovery, 64,000 barrels recoverable oil per acre.

      All we need now is the size of the field. Which is exactly what the company is endeavoring to determine with the delineation drilling.

      What if the field is 2,000 acres? Translates into 128,000,000 barrels.

      At $14 per barrel, it is worth $1.8 billion. I don't know what Harken's share will be after paying all the royalties and so forth but let's say it's 40%. That translates into $700 million.
      That number is approximately equal to the market cap of Harken based on Friday's close (773.2 Million).

      Not bad for a little spin around the block while we wait for confirmation of the Catalina, Cambulos, the rest of the Alcaravan, Bocachico, and the Los Olmos.

      By the way, the above does not include what they will find underneath the Mirador, Guadalupe, and Ubaque in the Paleozoic zone.

      Bear with me, these are only one amatuer reservoir engineer's guess at what's going on here. If I've made a mistake somewhere in my calculations, I would appreciate a correction.

      I don't think I'm too far off though. Otherwise, why would Harken be building a pipeline to the Alcaravan Miradores?

      Regards,

      Jack Simmons

    • I have resisted the temptation to trade out of Harken to buy into some of the flyers that have been talked up on the Neuen
      Market. My concern is that I am never lucky at guessing when to trade whenever I try to out guess the pros. I expect a few investors
      with large amounts to invest will be able to track projects like Cambulos without violating insider information rules. How? Send
      someone to the drill site for example. It is not that expensive when there are $ millions in the balance. {Not MY millions, but
      there are some playing stakes of that size.}

      Estero #3 is exciting because it will be a step towards delineating the Palo Blanco field. You should reread the report that
      Estero #3 evaluation was "favorable" by following the link below. Note that Estero #1 flowed 4,000 barrels of oil per day, not bad
      by itself, from only one formation (the Ubaque). There are many important questions that remain. First, how long will the 4,000
      bopd continue from the Ubaque? They cannot tell the size of the underground reservoir except by drilling other areas around it
      and testing the flow rates {and other stuff I do not understand} of the two bores against each other. So, is the Estero #1
      reservoir only a few hundred square yards? or MILES? or whatever!

      Estero #3 will also test other depths. If you think of a vertical bore, there are often several reservoirs "stacked" on top
      of one another separated by hundreds of feet of rock, dirt and God only knows what all. I tried to find how much deeper 3 will
      go than 1 but could not right away. However, the article linked below suggests that both the Guadaloupe and Mirador formations
      are bigger than the Ubaque at the point at which #3 penetrated them. It could turn out that Estero 1 will also be productive at
      the Guadalupe and Mirador.

      But hey, I am not an oil expert. Some one with better knowledge may jump in and explain it MUCH better. But Estero 3 is important because it has a lot of promise even though it has not generated the excitement of the Cambulos.

      target=new >http://biz.yahoo.com/prnews/980121/tx_harken__1.html

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