Tuesday, February 15, 2011

Oxy buys Nations Petroleum's California Package; What next?? Run or Rest???

Nations Petroleum’s California package put up for sale in Oct 2010 is reportedly under a $500 million contract to Occidental Petroleum. The transaction values production at US$125,000 per producing barrel per day. Nations Petroleum has retained Macquarie Tristone as the advisor for the transaction.

Nations Petroleum (California) LLC holds operating assets in Kern County, California. The core asset is the Northwest Lost Hills field in the San Joaquin Basin. Production from the field has increased from 700 BOPD to 4,000 BOPD since early 2009, and is expected to peak at over 35,000 BOPD in six to seven years. Recent Monterey Shale activity in the San Joaquin Basin has highlighted unconventional resource potential that could add additional value.

Asset highlights:
-- Nations’ leasehold consists of approximately 4,834 gross and net acres; Total of 27 leases with average WI and NRI of 100% and 78% respectively
-- 271 Producing wells; Producing well count by reservoir: Tulare (204); Etchegoin (22); Williamson (43); Diatomite (2); Most of the wells were drilled in 2007 and 2008
-- According to Miller and Lents Ltd’s reserve report, effective July 1, 2010, the total reserves were: Proved Reserves – 53.328 MMBO with NPV10 of $1,026 million; Proved + Probable Reserves: 79.812 MMBO with NPV10 of $1,544 million and Proved + Probable + Possible Reserves of 103.276 MMBO with a NPV10 of $1,885 million
-- Current oil capacity of 6,500 BOPD with equipment onsite to increase capacity to 15,000 BOPD.

Nations Petroleum, a privately held company based in Calgary, acquired its Lost Hills stake in 2005 when its predecessor Nations Energy won a hostile takeover of Calgary-based Tartan Energy for a mere $63 million. It then is said to have invested about $300 million to get production up to about 4,000 b/d.


What are Oxy’s plans for 2011?  Run or Rest????
Oxy was busy making acquisitions in 2010 for ~$4.5 billion in South Texas, Permian and Bakken areas and discontinued Argentina operations for ~$2.5 billion. In particular, Oxy’s trend in 2010 was about taking over private companies like Anschutz Exploration and Yates Drilling Co. The trend continues with this Nations Petroleum deal. What next???

Oxy says, “We expect capital spending for the total year 2011 to be about $6.1 billion compared to the total 2010 capital of $3.9 billion”. Of the total capital 8% or ~$500 million will be allocated towards new acquisitions. So, Oxy will take rest with this Nations Petroleum deal or it wants to run in search of assets???

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