According to the Lampoc Record's Nov 29 article, there will be a series of meetings for public comment on California's Environmental Impact Report for statewide oil and gas well stimulation activities. I would be surprised if the environmental people did not show up and have a lot to say and there should be press coverage, at least locally. So it will be interesting to see how ROYT investors react to all this.
The meetings are
Oakland, 4 to 8 p.m., Dec. 10, Oakland Convention Center, 550 10th St.
Sacramento, 4 to 8 p.m. Dec. 11, Tsakopoulos Library Galleria, 828 I St.
Bakersfield, 4 to 8 p.m., Dec. 12, Kern County Library Beale Memorial Auditorium, 701 Truxtun Ave.
Ventura, 4 to 8 p.m., Jan. 8, Ventura College Performing Arts Center, 4700 Loma Vista Road.
Long Beach, 4 to 8 p.m., Jan. 9, Long Beach Convention Center, 300 E. Ocean Blvd.
ROYT investors who live nearby, feel free to attend and express your views!
No, it is not. m20m75ph has a much more sophisticated model that says it is not, but here are the numbers for my more simplistic approach, with figures for barrels per day and monthly production::
Dec 2011 3,458 Boe/d x 31 = 107,200 boe monthly production
Jun 2013 3,243 Boe/d x 30 = 97,300 boe monthly production
October 2013 (31 days)............109,170 boe monthly production (from the Distribution release)
If PCEC/ROYT were not allowed to steam inject Orcutt wells, production would decline, but I see no way that could happen. Ruellia
jonesville, Yes, ROYT was a trap today -- for shorts hoping for a massacre.
Any idea why? I have been buying all the way down, but it has been quite scary. I still think, as I have said several times, that the 96 wells will get permitted and that a healthy distribution will continue. The threat seemed to me to be about growth prospects and therefore how the stock was valued, as I said. But some good news has to be out there.
Anyone reading my posts (there appear to be some investors in ROYT this afternoon for a change!), be aware that I have made no statements about income, revenue, or distributions. All the numbers I have provided have been production and reserve numbers. It is easy for people to get confused about this. You have to extrapolate the income, revenue & distribution numbers yourself based on the Trust's treatment of Developed vs. Remaining Properties, and the fact that they do not break out production along those lines.
I continue to be very long ROYT, although wishing that I knew more.
lack of incentive for others to drill for gas and resulting supply issues would certainly be a positive scenario for Miller and the North Fork. ConocoPhillips also included that as a possibility. As you have said, Miller will focus on exploring for oil, but North Fork will provide stable cash flow and the potential for upside down the road.
The North Fork sounds like a good deal to me. As to why the partners sold and what the shorts are thinking, my guess is that it is concerns about lack of additional demand for ngas, given Alaska's 4.8 M population.
The state of Alaska asked ConocoPhillips to apply for a three-year federal LNG export license and reopen its mothballed Kenai Peninsula 1969 LNG plant at Nikiski, about 70 miles SW of Anchorage.
ConocoPhillips announced it would not extend its license beyond March 31, 2013 but would consider a new license if the needs of local gas markets were met and sufficient natural gas were on hand to export.
Conoco's Balash said contracts are in place to support local utility needs through 2018. Future exploration may not be warranted
“Without market opportunities for gas discoveries, companies lack the incentive to invest in continued exploration activities,” he wrote. “In addition to the economic challenges this would present for those employed in the Cook Inlet energy industry, a lack of healthy exploration now may lead to supply contractions in the future as existing wells’ production levels decline.”
This is not the only scenario, as Conoco's willingness to reevaluate in the future indicates. In the meantime there is all that cash flow. Ruellia
I am not a lawyer, but I do not think the Santa Barbara county supervisors will reject the permits. They gave well permits to Santa Barbara for steam injection just 2 weeks ago. The meeting was bitterly divided with half of the supervisors pushing hard for higher emissions limits for Santa Maria due to the jobs & business the company will provide. My best guess is that PCEC will get the permits with a 10,000 tons of carbon restriction/offset with carbon credits. This will cost more money and reduce the distribution from Remaining Properties, but not from the Developed Properties. The Remaining Properties are 25% of ROYT's production but account for a much smaller percentage of our distribution.
I think some people are selling because they think the price of oil will go down due to the Iran deal. I am not so sure it will. Who knows. I am still long, but the depletion of the Los Angeles basis does concern me. It is not a problem as long as steam injection of the Orcutt Diatomite more than compensates for it, but I can see why investors are nervous about the permits.
As long as PCEC can steam inject the Orcutt Diatomite wells, ROYT has high distributions, the potential for ongoing growth such as you see in the graph in ROYT's September presentation, and long reserve life. Without that, you would still have the Conventional wells and the steam injection wells already permitted along with a shorter reported reserve life for the Underlying Properties, so investors think ROYT should be priced differently from before, at the moment anyway.
As far as I can tell, PCEC can steam inject the already-permitted wells indefinitely, so I cannot see how Santa Barbara restrictions would effect our ROYT distribution, other than that I was surprised at how much the depletion rate for the Los Angeles basin was, which our currently permitted 96 Orcutt steam injection wells have been more than compensating for. The Los Angeles basin is a smaller part of ROYT production but the depletion reported is quite rapid. Of course, you never know with reported depletion.
I assume all this causes some people to take another look at valuation. There is a very impressive chart of production growth at ROYT in the September presentation, and as far as I can see this is due to the Orcutt steam injection. So now this is in question. Although the article on Santa Maria said that its steam injection wells would still be profitable even with the 10,000 metric tons restricction.
Plus I imagine that there are different ways of calculating "additional" and even the metric tons.
I would love to have some one weigh in on the legal basis for County Supervisors regulating wells on the basis of air quality. Maybe counties regulate incinerators, trash burning, fumes, etc so they used this ability to keep stuff out of the air to set a limit on carbon emissions.
What the September 2013 ROYT presentation says about steam injection and the 96 permits, which I fear will cause the Santa Barbara environmentalists to gnash their teeth, particularly the part about repeating the cycle every 30-50 days. I believe they will try to get the same deal as from Santa Maria Energy. From Presentation:
2013: In permitting process for 96-well expansion
Steam injection for 3-6 days
--A soak period of 2-3 days
--Return to production, well flows for 7-10 days, then is pumped for 7-14 days
--Normal production / injection cycle is about 30-50 days when the well is steamed again and the process repeated
1. Steam Injection
(5 days / 2,000-2,500 bbls Cold Water Equivalent)
--Injection pressurizes formation
--Release oil from diatoms
--Heat lowers oil viscosity
--Formation imbibes condensed steam
2. Soak (2-3 days)
--Allows steam to condense further
--Allows oil to flow
3. Production (20–40 days / 400–2000 bbls oil)
--Heated oil travels towards wellbore
--Hot water flashes to steam
--Steam provides gas lift
--Wells flow (IP 100 BOPD)
--Cooling reduces pressure and oil cut
--Wells stop flowing
--Put well on pump
Production and Reserve numbers from December 2011 and June 2013
Underlying Properties as of 12/31/2011
according to reserve report in Prospectus
-- Average Net Daily Production for
the Month Ended 12/31/2011 (Boe/d)
--Proved Developed Reserves Percentage
--Total Proved reserves (MBoe)
--R/P Ratio as of 12/31/11
SANTA MARIA BASIN.........................(Boe/d)..%ProDev (MBoe) %oil....R/P
Orcutt, Conventional 2004 – Present.... 2,093.. 100%.. 11,737..100%....15.4
Orcutt, Diatomite....2005 – Present...... 673....25%.. 15,563..100%....63.3
Total.................................................. 2,766....57%.. 27,300..100%....27.0
LOS ANGELOS BASIN
West Pico 1993 – Present..................628....65%....3,808.. 82%....16.6
Sawtelle 1993 – April 2012................ 37.. 100%....1,346.. 92%....99.7
East Coyote 1999 – April 2012............27.. 100%....1,674..100%.. 169.9
Los Angeles Basin Total.................. 692....80%....6,828.. 88%....27.0
TOTAL........................................ 3,458....62%.. 34,128.. 98%....27.0
Basin Totals for June 2013......................Proved Reserves June 2013
SANTA MARIA BASIN...................... (Boe/d)..%ProDev (MBoe)..%oil...
Total June, 2013 Reserve life 24 yrs....3,243.... 67%.. 28,200..100%....
LOS ANGELES BASIN
LA Basin Total.. Reserve life 14 yrs....1,063.... 93%....5,500.. 86%....
TOTAL June, 2013 .......................4,306.... 71%.. 33,700.. 98%....
Total Proved Reserve Life (R/P)........21 yrs
Proved Developed Reserve Life (R/P)....15 yrs
The Orcutt Diatomite, for which ROYT through PCEC will be requesting 96 additional steam injection permits in 2 months, provides more than 20% of ROYT's production, and at least half of productioin growth.
In 2011 the Orcutt (Santa Maria) basin provided 80% of ROYT's total production and the Los Angelos basin only 20%. The Orcutt Diatomite, which are the wells which require steam injection, were providing 20% of ROYT's total Trust production. The Diatomite part of the Orcutt was clearly the growth area with only 25% of reserves as proved developed.
The September 2013 presentation gives us basin totals for June, 2013. The Orcutt basin total daily production has risen by 25%, from 2,766 to 3,243 Boe/d. A very large percentage of this is the Diatomite, i.e. steam injection, and not from the Conventional wells. The Los Angeles basin total has risen 40% from 692 to 1,063 Boe/d. But the reserves of the Los Angeles basin are shown as going down from 6,828 too 5,500 MBoe, whereas the reserves of the Orcutt have gone up from 27,300 to 28,200 MBoe.
So the Diatomite (steam injection) is at least 20% of production and also the key to maintaining long reserve life.
I will post the 2011 numbers from the Prospectus and the June 2013 numbers from the September 2013 presentation in my next post.
The concerns seem exagerated to me, but Santa Barbara's stance towards steam injection and oil seeps is the only thing I have been able to find that seems to coincide with the drop in ROYT from $15. I have been buying, but I do think there could be pressure on the price around the time PCEC's application for 96 new well permits comes up. Unless all the nervous investors have already soldl by then. Ruellia
It is not the Trust i.e. ROYT that needs approval for 96 new wells, it is PCEC the private company, ROYT's parent exploration company. But presumably people think that this affects the valuation for ROYT. Worst case (and hard to believe) scenario, if PCEC can not steam inject any more wells in the Orcutt, then ROYT has very limited ability to replace production declines. Santa Barbara's actions clearly spooked investors very badly.
This will make investors favor the Permian even more, on the idea that who knows what California counties will do. Santa Maria feels blind-sided as they had just gotten this settled with a higher 29,000 ton offset. So I feel sure PCEC will not be taken by surprise. I would expect them to dangle a lot of incentives for Santa Barbara, and to try to get their message out to voters as well as supervisors. How that will work out I have no idea. I live in Texas, where oil can do almost no wrong.
I have tried to post the path to the article in several different disguises, but the post deleters are too smart for me. So just seek out Santa Maria Energy Santa Barbara supervisors or some such. The Independent article is a must read. Opponents are extremely passionate and they really put pressure on.
I am long and I kept buying in the panic, but we have unanticipated forces at work here. Ruellia
Last paragraph from the Independent article on Santa Maria on Nov 13:
According to the county, steam injection is believed to exacerbate the occurrence of naturally occurring seeps, and although Pacific Coast Energy Company has since taken action to prevent 90 percent of new leaks, some supervisors questioned if Santa Maria Energy’s new wells could seep, too. Buried under that discussion was Pacific Coast Energy Company’s recent application for 96 more steam injection wells.
I would be interested in hearing others comment on Santa Barbara's actions with regard to Santa Maria Energy and the potential for problems with the upcoming permits for PCEC and any potential ramifications for ROYT. Was this raising fears which were feeding into the selling?
ROYT is one of the trusts and MLPs that HedgEye said to short this summer. It is down almost 7% on a big sale of units today. It looks like a buy to me. Does anyone have any thoughts on ROYT?