Thursday, February 24, 2011

Deepwater GoM a hard sell, but sellers continue to track

As 2011 sets sail, there are at least five sizeable property sale packages being floated in the Gulf of Mexico. One of them, a set of 22 shelf leases with 27 MMcfe/d of production and17 MMboe of reserves offered by EOG Resources, is rumored to have a tentative buyer. Net present value of the EOG properties has been said to be upwards of $200 million, with about $34MM a year in operating cash flow. Unknown is how much of EOG’s half-billion-dollars of plugging and abandonment liabilities is allocated against them.

Deepwater sale properties are facing a rougher market, however. Plains Exploration and Production announced last year it wants to exit its holdings far offshore in the Gulf and opened a data room in December in hopes of finding a buyer. With apparently a dearth of bids, however, CEO James Flores has extended the marketing effort into the first quarter. Said Flores: “The additional time is an important step in securing the optimum value for PXP shareholders.” Other sale packages being marketed include about 7 MMcfe/d of production by Sojitz Energy and others at WC 168, operated by Linder Oil. Also for sale is Leed Petroleum with ~1,200 boe/d of Gulf shelf output and an package of Merit Energy properties producing ~8,400 boe/d. Tristone is handling the Leed and Merit sales. PLS and Burks are offering the Linder package and Randall & Dewey has the PXP deepwater sale. R&D is also agent for ConocoPhillips, which is trying to sell offshore stakes at Green Canyon, Eugene Island and the Europa Field. The major said February 7 it closed the sale of six regional packages for over $1.2 billion but did not mention the offshore assets. Randall & Dewey did not respond to inquiries. Statoil, which took a big plunge into the Gulf in recent years by acquiring stakes in some 400 offshore blocks, now is trying to sell down many of those interests to reduce risk and spread big capital costs.

Major deepwater packages available

Statoil offeringStatoil ASA is planning to sell stakes in GoM exploration licenses where the company has 100% ownership to reduce risk and raise funds for projects.                                                                  

Statoil has interests in more than 400 leases in the Gulf of Mexico. In 2009, Statoil became the operator for an extensive drilling programme with two rigs in the Gulf of Mexico. In March 2010, Statoil was the highest bidder on 21 leases in the Central lease sale 213. These leases are in deepwater and predominantly in high quality Miocene sand.

ConocoPhillips offering                                                                                                 
ConocoPhillips has retained Jefferies & Co Inc to sell certain assets in the Gulf of Mexico. The package includes Green Canyon 563 (K-2 Unit) with 12.4% non-operated interest in 4,000 foot depths. Production is 22,000 BOE/d (2,400 BOE/d net) from eight wells targeting Middle and Lower Miocene turbidites.

Plains E&P offering                                                                                                                               
Plains Exploration & Production Company is in the process of marketing the company’s Gulf of Mexico deepwater assets. Plains has engaged Barclays Capital and Jefferies & Company to assist in executing this sale process.                                                                                                             

The deepwater portfolio is anchored by Friesian and Lucius, two high-quality oil discoveries, and a comprehensive exploration portfolio with interests in 107 blocks, 9 well defined prospects and an additional 22 prospects or leads in Pliocene, Miocene and Lower Tertiary reservoirs. The data room process is underway with final bids expected in late-October to mid-November. PXP expects the transaction to close by year-end 2010.  

On 20-Sep-2010, Plains E&P divested the Gulf of Mexico shallow water properties to McMoRan Exploration for $818 million. Current production from these properties is approximately 45 MMcfe/d of natural gas net to PXP. The properties include estimated Proved (1P) and Proved plus Probable Reserves (2P) of approximately 60 Bcfe (Gas- 85%) and 80 Bcfe, respectively.

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