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Gold/Mining/Energy : Lundin Oil (LOILY, LOILB Sweden)

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To: Razorbak who wrote (814)	11/5/1998 8:09:00 AM
From: Tomas	Read Replies (2) of 2742

"I was at a Sodra presentation yesterday". From GHH on the Hemscott site From Hemmington Scott Information Exchange Posted by GHHGHH on 05/November/1998 at 10:24 The bad news is that, although they still have $12.5m, Sodra seem very unlikely to drill another well in the current round. They say that they need alot more time to process the results to date in order to identify the next location. Their current thinking seems to be that maybe they should have drilled on the flanks. Sodra also thought it unlikey that Desire would drill in this round since they have only recently completed their seismic. The results to date: 1. The Amerada well encountered good source rock. 2. The Lasmo well encountered good quality sandstone reservoir but no source rock. 3. The Shell well encountered mature source rock and both oil and gas. (Strong rumours suggest that Shell encountered a large gas find that would have been commercial if in the North Sea.) 4. The Sodra well found good reservoir rock, but at too shallow a depth, and the source rock was too immature. 5. The second Amerada evidently encountered oil shows and reservoir rock. However the agreement to share info expired with well no. 4 so Sodra did not know the full details. 6. Shell have just started drilling the sixth well. This is evidently an 'appraisal' well. It seems that the problem is that, although all the ingredients to find commercial oil have now been established (i.e. source rock to provide the oil, good quality reservoir rock to contain the oil and a cap to stop the oil escaping), so far the reservoir rock has been at the wrong depth. As Sodra said ' We now know enough to say that its not going to be great but it could still be good'. Short term everything hinges on the current Shell well. I assume that they are 'appraising' an extension of their previous gas find? Since they did not need to drill this well, it is encouraging that they feel that they have found something sufficiently interesting that they wish to immediately drill another well close to it. Clearly in a virgin basin you can be more confident of the geology if you are drilling close to an existing well. Unfortunately Shell no longer have an obligation to share whatever info they find and it will be advantageous to keep the well results as quiet as possible. Consequently Desire, Sodra et al are unlikely to have much of a run in the next few weeks and could then fall off a cliff when Shell announce that they are going home and the current drilling programme has ended. However this could present the long term buying opportunity of a lifetime! To conclude, the Shell well looks the most interesting todate but can they keep it quiet. >>> Greywolf - can you please confirm the Shell location. >>> Pup - how do you interpret 'appraisal well' when the first well hit a major gas find? Would you assume that Shell have spotted another adjacent lower structure (hence could be oil) so the risk would be more on the reservoir quality. hemscott.com

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