BLMC gets an ORRI (B&L subsidiary gets 1.5% ORRI, BLMC slightly less) on approx. 60,000 acres in the Highlander area. Besides the Highlander #1 (Lamond North) structure, FCX has mentioned there are "several" more structures that are prospects in the Highlander area.
BLMC does not get an ORRI on Lineham Creek, GULTU does. I don't think either gets an ORRI on Farthest Gate West.
The shelf UD is probably dead - at least for the foreseeable future. The onshore ILT seems to be more of the "sweet spot" in this play and is much less expensive to drill & operate than on the shelf.
Between the two (BLMC and GULTU), I tend to lean towards BLMC. I believe it has higher potential should the onshore ILT work out (which is looking better now that Highlander #1 was tested - will have to wait and see how it produces over the next year to make a better determination). However, that is just my opinion (and, I own shares in BLMC). FWIW.
Agricultural commodities in general are in a down cycle. Since crop prices are down, it takes down the fertilizers as well - much like the recent plunge in oil prices will mean less oil services in the short-intermediate term. However, I think we may be close to the bottom of the ag commodity cycle. Taking a look at DBA and RJA (ETN baskets of crop futures), they are at a point where history suggests is near a bottom (DBA under 24, RJA under 7). I think now is a good time to be accumulating the likes of DBA, RJA, UAN, etc.
All JMO, of course.
Also prudent to get at least a few months of Highlander production under their belt before committing to development wells. Seismic, logs, cores, and flow test all point to a nice reservoir that COULD hold multi-TCFs. However, the flow test does not confirm the reservoir over the entire structure. Getting a few months of production should answer that question. Meanwhile, the reduced capex needs to be directed to the higher IRR deep water oil projects in their portfolio.
I do believe that Highlander's time will come - assuming #1 produces well over time. I'm very bullish on NG medium to long term. Capex has been directed towards oil for a number of years now. Only reason NG supplies have kept rising is due to the Marcellus and secondary gas from shale oil wells. Now, Marcellus looks to have peaked - rig count starting to come down fairly quickly in that region. Also, secondary gas from oil wells will start coming down as well. Meanwhile, NG demand keeps growing.
basin - although I agree with you there is long term value, I do differ in your total risk conclusions and the mark to market value assumptions you listed. Reading the details of the release, the mark to market charge they took on oil was based on full year 2014 avg. oil price of $94+. They warn that if the 2015 full year avg price is below that $94+ (a very strong possibility at this point), they will have another mark to market write down at the end of 2015. Also, I would not say that there is "very little downside risk from here". They have $19 billion in debt. Any big hiccup in operations at their mines/fields could add to the risk that is current with the low commodity prices. That being said, I do think that accumulating some shares at these levels should be a good investment 1 - 3 years out. JMO
last part got cut off:
In response to current oil and gas market conditions, future activities at other Inboard Lower Tertiary/Cretaceous prospects have been deferred.
From the release - looks like things will be on hold for a while until NG prices improve and they get production info from Highlander (prudent).
Inboard Lower Tertiary/Cretaceous. FM O&G has an industry-leading position in the emerging Inboard Lower Tertiary/Cretaceous natural gas trend, located on the Shelf of the GOM and onshore in South Louisiana. FM O&G has a large onshore and offshore lease acreage position with high-quality prospects and the potential to develop a significant long-term, low-cost source of natural gas. Data from eight wells drilled to date indicate the presence of geologic formations that are analogous to productive formations in the Deepwater GOM and onshore in the Gulf Coast region.
In December 2014, FM O&G announced a successful flow test from the Tuscaloosa sands in the Highlander discovery well located onshore in South Louisiana. During the testing period, the well flowed at a rate of 43.5 MMcf per day (approximately 21 MMcf per day net to FM O&G) on a 22/64th choke with flowing tubing pressure of 11,880 pounds per square inch. First production is expected in first-quarter 2015 using facilities in the immediate area. The optimal production rate for the well will be determined based on results from the flow test and production history. A second well location has been identified and future plans will be determined pending review of well performance from the first well. FM O&G is the operator and has a 72 percent working interest and an approximate 49 percent net revenue interest in Highlander. FM O&G has identified multiple prospects in the Highlander area where it controls rights to more than 50,000 gross acres.
The Farthest Gate West onshore exploration prospect commenced drilling in October 2014 and is currently drilling below 18,500 feet towards a proposed total depth of 24,000 feet. Farthest Gate West is located onshore in Cameron Parish, Louisiana, and is a Lineham Creek analog prospect with Paleogene objectives.
In response to
A couple of items;
Highlander: "( - depending on oil price used)" You should not be using oil price for Highlander as it is all dry gas.
Davy Jones: With both the crete/tusc and Wilcox flowing water, Davy Jones is done. I wouldn't be surprised if they let their Davy Jones & Blackbeard leases go/expire. With oil/gas prices where they are, FCX will not be putting any cap ex $$$ towards the UD shelf.
They will probably look to keep the onshore ILT (i.e. Highlander, Farthest Gate West, and the other acreage (about 60,000) around them alive. However, they probably will look to do minimal cap ex towards this area until NG prices improve. They will look to do just enough to keep the leases until then.
The highest priority in the oil/gas area of FCX is the deep water oil and will attract the most cap ex $$$ in a current declining cap ex budget environment.
RJ3 - are you sure they will start Highlander #2 by the end of Jan/Feb? With NG prices where they are, I'm thinking they may hold off on starting Highlander #2.
FCX is estimating $70 million per year for this well at today's NG prices. This would equate to about $1.05 million per year to BLMC with their ORRI. Will be interesting to see if FCX goes ahead with the permitted Highlander #2 well given current NG prices.
Permit to perf Highlander is still showing as not performed in SONRIS. Therefore, I would guess that they will not make the end of year timeframe they mentioned last month. Not sure what is taking so long to prep the well for perf'g.
Did you see the latest scout report on Farthest Gate West? Looks like they hit a section that started given them problems just below 12,000'. Well started to flow on them. They probably new about this section from the seismic/nearby wells as they recently set a string of pipe just above this section. Thoughts?
If you go to the MMR IV board, the links for the wells are up top. Click the Highlander link and then scroll down to the bottom of the report to see the change permits for the well. Currently, there is just one - the perf'g permit. The table has a column named "Work Performed", which is currently "N". Once perf'd, this should change to "Y" (I've seen them get updated for other wells on SONRIS. Hope this helps.
Davy Jones is done - at least for now. DJ1 could not/would not flow due to either the mud/barite/completion issues they had or unfavorable reservoir characteristics (Flores hinted that he though it was the latter). DJ2 flowed mostly water from both the cret/tusc and wilcox tests. Both are "temporarily abandoned" - which is probably just to delay the write offs. Flores stated "all eyes should be on Highlander", and I think he meant it.
SERIAL WELL NAME WELL NUM ORG ID FIELD PARISH PROD TYPE SEC TWN RGE EFFECTIVE DATE API NUM
245356 EOC-TUSC BL UDS SUA;J MIN LLC 001 M224 0875 50 00 011 13S 11E 07/02/2013 17099216180000
Scroll to the bottom of the report - shows permits and whether the work has been performed. They do update this section (seen in other wells) once the work is performed.
I think you mean "preparing for testing began in early November". I don't think the actual flow testing has begun as the perming for perf'g the well still shows it has not been perf'd via SONRIS.