Thursday, March 31, 2011

Haynesville- Beats Barnett in production!! Metrics run high at ~$15,000/acre.

A short note on Haynesville Shale- which beat Barnett in production!!
A recent report by the US Energy Information Administration on US gas production said the Haynesville is now producing at least 5.5 Bcf/d and overtook the Barnett Shale's production of 5.3 Bcf/d. The production from the Haynesville shale increased from 0.4 Bcf in 2007 to 410.9 Bcf in 2009. The production from the play is expected to increase to 2,328.4 Bcf in 2020 at an average annual growth rate of 15.8%. Some industry experts believe the Haynesville shale could ultimately produce as much as 30 to 40 trillion cubic feet of natural gas.
Haynesville Vs Barnett- Haynesville to be the winner??

Haynesville’s rig count has increased 11% over the past year to 168 rigs as against the Barnett’s 31% decline to 53 rigs. The drilling pace in Haynesville is ramping up due to the Barnett having many matured producing wells versus the Haynesville just speeding up the production since 2007 when the first well was hit by Chesapeake. Another reason for continued drilling in the Haynesville Shale in 2011 despite weak natural gas prices is the existence of some independent companies like BG, ExxonMobil and EXCO. These independents, in 2010, gave a new outlook to Haynesville Shale lifting the metrics to ~15,000/acre.

Source: Global Oil and Gas M&A Review

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Haynesville runs @ high metrics of ~15,000/acre
The Haynesville's average 2010 metrics of ~$15,000/acre had increased 67% from the average 2009 metrics of $9,000/acre. The Haynesville metrics is the highest of all the other unconventional gas plays! Observing the growth in Haynesville Shale play, it might become a replica of Barnett.

Here is the snapshot of a Haynesville package up for sale.

Source: Derrick Petroleum E&P Transactions Database

Wintershall reported 2010 annual results; Natural Gas Production up 5% over 2009; Plan to further expand E&P activities in the Northern sector of North Sea and in Russia

Wintershall’s 2010 natural gas production was 14.3 bcm, 5% increase over 2009 production of 13.6 bcm. This is due to activities in Argentina and the first entire year of plateau production from the west Siberian field Yuzhno Russkoye. Crude oil and condensate production down 14% to 5.8 million tons compared to 2009 (2009: 6.8). The decrease in oil and condensate production was primarily caused by the OPEC restrictions in Libya.

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Expansion of successful activities in the North Sea
Overall 23 (2009: 29) exploration and appraisal wells were conducted in 2010 in the search for new crude oil and natural gas deposits. Wintershall discovered new resources with twelve of these wells (2009: 17); five in the Norwegian North Sea alone, and three in the British North Sea. The company is involved in six of the twelve biggest oil discoveries made in Norway in the past five years.

Wintershall is planning to continue the search for new reservoirs in its core regions in 2011 and to push ahead with the development of known deposits, especially in the North Sea in the coming years. The company has earmarked investments of more than 1,000 million Euros (US$1409.79 million) for this region by 2015 and is aiming for a production level of 50,000 boepd in the Norwegian and British sectors of the North Sea.

Source:Derrick Petroleum Planned Exploration Wells Database

Shell plans to drill 17 exploration wells in China!!

Shell plans to spend about $1 billion annually over the next five years on the shale gas projects in China and plans to drill about 17 wells, including probes for tight gas and shale gas, in regions including Sichuan, China’s most prolific gas province.
  • Inspired by the massive success of unconventional gas – coal seam methane, tight gas and shale gas – in the US , China over the past year embarked on an exploration campaign for shale gas, part of Beijing’s goal to boost use of cleaner burning fuel and cut coal.
  • China does not have any shale gas production yet, but Shell has a rough target to pump some 10 per cent of its total gas output from shale gas by 2020.
  • Petrochina and Shell drilled the first evaluation well on the Fushun block in the Sichuan province of southwestern China. The Fushun block occupies an area of about 4000 sq km. 

This happens to be the first joint shale gas development project signed by the two companies with an intention to explore the untapped resources in China.The project is expected to assess China’s shale gas potential and capture the unconventional source of cleaner-burning fuel to meet that country’s increasing demand for fuel.

This is not the first time when PetroChina and Shell jointly landed on a gas development project in China. They also share a deal at Changbei natural gas field in the Shaanxi province of China. Also, Just a year ago, Shell and China National Petroleum Corp (CNPC), parent of PetroChina, signed a 30-year deal to develop another tight-gas block in Sichuan province.

China lags the U.S. in terms of development of shale gas, which is a foremost contributor to future energy mix. Will US's success in the unconventionals be replicated by China? .... its too early to comment!!! 

Forest Oil 2011 Howard Weil 39th Annual Energy Conference Presentation

Kodiak Oil and Gas 2011 Corporate Presentation

Bowleven 2010 Interim Results Presentation

Woodrich 2011 The Howard Weil 39th Annual Energy Conference presentation

Marathon - Howard Weil 2011 Energy Conference

BNK Petroleum 2011 March Corporate Presentation

Wednesday, March 30, 2011

Marathon to divest non-core Marcellus acreage, where the metrics run at $7,000 per acre

Scotia Waterous (USA) Inc has been retained as exclusive financial advisor by Marathon Oil Corporation for sale of the company’s non-core Marcellus Shale assets in West Virginia and Pennsylvania. The offering has been organized into two packages: the operated leasehold and the non-operated leasehold. The total acreage for the offering is 81,397 gross (51,679 net) acres.

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Investment Highlights:
-- Operated leasehold: This package is comprised of 21,961 gross (net) acres with 100% WI in West Virginia, primarily in Randolph, Preston and Tucker Counties.
-- Non-operated leasehold: This package is comprised of 59,436 gross (29,718 net) acres with 50% WI in West Virginia and Pennsylvania. The acreage is operated by Triana Energy LLC, a Morgan Stanley backed private company, and is located primarily in Fayette County, Pennsylvania and Preston and Randolph Counties, West Virginia.
-- Joint Venture with Triana in which the leasehold is included within an Area of Mutual Interest to be developed by Triana on behalf of both parties. Triana has committed to $45 million drilling carry to earn 50% of AMI leasehold. Minimum drilling commitment in 2011 to drill 4 wells.
-- Encouraging results from Marathon’s drilling activity provides valuable technical data to partnership. Nine wells drilled to date with a focus on data collection and delineation of acreage. Seven operated, frac’d vertical wells with core and fluid efficiency test data. Two OBO horizontal wells providing production data and conventional core data.
-- Additional assets enhance ability of buyer to develop the asset base. Full compliment of regional geological and engineering analysis used to define the play. 100 square miles of 3D seismic currently being acquired over core leasehold. Company owned, buried 3D micro seismic array for stimulation monitoring. Two taps on major interstate pipelines.

Metrics for recent deals in Marcellus

Deal Value ($MM)
Epsilon Energy and Chesapeake form Marcellus JV
Atlas Energy  and Reliance to form Marcellus JV
Anadarko and Mitsui form Marcellus JV
Williams acquires Marcellus acreage from Alta Resources
BG and  EXCO form Marcellus JV
EXCO and BG acquire Marcellus assets from Chief Oil & Gas
Rex Energy and Sumitomo form Marcellus JV
Shell acquires Marcellus acreage from East Resources
Reliance enters into Marcellus JV with Carrizo
EQT Corp acquires additional Marcellus acreage
Trans Energy and Republic Energy form Marcellus JV
Magnum Hunter acquires additional Marcellus assets
Atlas Energy and Reliance jointly acquire Marcellus assets
Antero Resources acquires Bluestone Energy Partners
Statoil acquires Chesapeake’s additional Marcellus acreage
Gastar and Atinum Partners form Marcellus JV
Williams acquires additional acreage in Marcellus Shale
EXCO Resources acquires additional Marcellus properties

Source: Derrick E&P Transactions Database

For more on Marathon,click here

TransGlobe Energy acquires Epedeco's West Bakr Concession in Egypt for $60 million

TransGlobe Energy agreed to acquire a 100% working interest in the West Bakr Concession agreement in the Arab Republic of Egypt from The Egyptian Petroleum Development Co Ltd for $60 million. EPEDECO is a joint venture established by a consortium including INPEX and Mitsui & Co.

The produced oil ranges from 17° to 20° API and is pipeline connected to the Ras Gharib terminal on the coast, which is the same export terminal that West Gharib production is currently trucked to. The West Bakr blend has historically received Brent minus 25% pricing.

The West Bakr Concession production sharing terms are as follows:  cost oil of 30%, production sharing of 15% to the Contractor and 85% to the Government, excess cost oil goes 100% to the Government, capital investments are amortized over five years and operating expenses are amortized in the quarter incurred.  All Government royalties and taxes are paid out of the Government’s share of production sharing oil.

Strategic breakthrough for Total and CNOOC - acquire one-third of Tullow Oil's Ugandan assets for $2.9 billion!!!!

Tullow Oil plc (Tullow) announced that it has signed a Sale and Purchase Agreements (SPAs) with CNOOC and Total in respect of the sale of a one third interest to each party of the interests Tullow holds in Exploration Areas 1, 2 and 3A in Uganda. Tullow will retain a one third interest. The terms of the transactions include a total cash consideration payable to Tullow of US$2.9 billion.
With the signing of these SPAs, a key condition of the Memorandum of Understanding (MoU) agreed between Tullow, the Government of Uganda (GoU) and the Uganda Revenue Authority (URA) on 15 March 2011, has been satisfied. The next step is for Tullow to make certain tax related payments to the GoU, on receipt of which all relevant consents become final and the other provisions of the MoU become effective.
Under the MoU, Tullow and its new Partners, CNOOC and Total, have been granted new licences over EA-1 and an onshore area of EA-3A and the partnership's rights to develop the Kingfisher discovery have been confirmed. A clear plan for the resolution of tax disputes on the various asset sales has been agreed by the GoU, the URA and Tullow.
Tullow and its Partners will now reactivate the significant programme of exploration and appraisal drilling and progress their development plans for the basin which they will jointly present to the Government of Uganda for approval

Marathon Oil reported 2010 annual results; Added nine onshore exploration licenses with shale gas potential in Poland for a total of 11 licenses; Announced $5.27 billion capital, investment and exploration budget for 2011

Marathon’s annual 2010 sales volumes averaged 391,000 boepd down 2% over 2009 average of 400,000 boepd from continuing operations. This is due to the result of planned downtime associated with the turnaround of production facilities in Equatorial Guinea completed in the second quarter 2010, natural field declines and asset dispositions. The company achieved 95% reserve replacement ratio for the annual year 2010.

Marathon announced $5.267 billion capital, investment and exploration budget for 2011, consistent with prior guidance and a 9% increase from 2010 capital spending. The company aim at liquids rich opportunities such as the Bakken, Anadarko Woodford, Eagle Ford and Niobrara resource plays in the U.S.

The company’s capital spending in the upstream segments is approximately $3.7 billion or 71% of total spending for 2011. This Upstream program includes spending of $1.3 billion on base assets ($1 billion on E&P base and $300 million on Oil Sands Mining and Integrated Gas), $1.9 billion on growth assets such as liquids resource plays in the U.S., and $465 million specifically for impact exploration.

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Celtic Exploration 2011 March Corporate Presentation

Baytex Energy 2011 First East Coast Energy Conference

Vermilion 2011 March Investor Presentation

Opti Canada 2011 March Project Update

Santos - March 2011 Investor Presentation

Tuesday, March 29, 2011

East Africa - continent's new hotbed for oil & gas exploration!!

Traditionally, west and north Africa have been the continent’s hotspots of oil & gas E&P, but recent success in east Africa may change that.  North Africa has seen 20,000 wells sunk over the past few decades, while drillers have sunk 14,000 wells in and off West Africa. In East Africa, the total is about 500 wells.

Significant discoveries in the region, combined with a range of new opportunities through licensing rounds, are attracting new players to relatively underexplored countries on the eastern part of the African continent.

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The East African Region has a total of 28 prospective sedimentary basins with resource potential of about 2 billion barrels of oil in place and 3 tcf of natural gas.
Datamonitor forecasts total oil production in the region (excluding Sudan and South Africa) to reach approximately 210,000 barrels per day (bpd) in 2015, and nearly 389,000 bpd by 2020.

…. oil & gas hunters!
  • Tullow Oil has already made significant discoveries in Uganda, and is targeting other exploration fields in the East African rift basins, mainly in Kenya and Ethiopia.
  • Wildcatters and majors such as Italy's Eni, Petronas of Malaysia and China National Offshore Oil Corporation (CNOOC) have all moved on East Africa in the past few years, hoping to mimic Tullow Oil’s success in the region.
  • Africa Oil Corp with its assets in Ethiopia and Somalia is yet to explore the region.
  • In addition, Dominion Petroleum has invested nearly $40m in drilling activities in Tanzania and Uganda in recent years and will continue its efforts in the region, including some farm-out initiatives.
  • Anadarko and Cove Energy also have plans to move into south-east Africa, and together intend to invest around $150m in drilling activities over the next two years.

Datamonitor forecasts a total offshore capital expenditure (CAPEX) in the region (excluding Sudan and South Africa) of nearly $400m in 2010 ($312m on drilling and $77m on seismic activities). The total offshore CAPEX is forecast to grow by a compound annual growth rate of 20%, totaling nearly $994m in 2015.

Future holds bright for East Africa!
  • Uganda Prime Minister Apollo Nsibambi said, “East African countries will jointly explore their “vast” oil and gas fields to foster development of their economies”. The cooperation will attract more investment capital and spur economic growth, Nsibambi told a petroleum conference in Kampala, the Ugandan capital, with giving details on how this will work.
  • Uganda will issue more oil-exploration licenses later this year after a new industry law is formulated, Nsibambi said. It has five remaining oil blocks after suspending the awarding of concessions in 2006 pending the new law, he said.

Source: Derrick Petroleum E&P Transactions Database
  • Kenya issued six exploration licenses between 2000 and 2002 and two more to CNOOC in the next four years. "Despite a long history of unsuccessful exploration, the oil companies are investing in Kenya," says Mwendia Nyaga, managing director of the National Oil Corporation of Kenya. "The question is not if any hydrocarbon deposits exist, but where they are."
  • Other East African countries which are likely to hold significant resource potential are Somalia, Ethiopia and Mozambique. However, Somalia remains a no-go zone for investors due to its political unrest while Ethiopia’s eastern Ogaden region is beset by a violent rebel insurgency. Mozambique is still recovering from its civil war which broke out in 1992.

Every new frontier area for oil and gas exploration & production faces its difficulties and East Africa is no exception to that. The political hurdles in the region if addressed properly, this region will prove to be a boon not only to exploration and production companies, but also to other market participants in the oil and gas value chain, such as drilling companies, service providers, and equipment manufacturers.

Forest Oil reported 2010 annual results; Average liquids net sales volumes up 33% over 2009; Plan to spend 80% of 2011 capital to liquids-rich prospects

Forest's 2010 average net sales volumes up 5% to 453 mmcfpd over 2009. The company’s average oil and natural gas liquids (NGLs) net sales volumes for the year ended December 31, 2010 organically increased 33% to 18.9 MBbls/d, compared to the corresponding 2009 period, pro forma for divestitures. The company reported 2011 production guidance of 470 mmcfpd.

Forest oil plan to Spend US$600-US$650 million in 2011, of which 50% is allocated to Texas Panhandle. The company also reported to invest 80% of its total capital expenditures to liquids-rich prospects.

The company continue to allocate about 50% of our capital budget to the Granite Wash play, including testing new zones; expect organic growth focusing on high-return, liquids-rich locations during 2011 and beyond from the Texas Panhandle - Granite Wash play.

For more information on Forest Oil, visit:

Canadian Oil Sands 2011 The First East Coast Energy Conference Presentation

Galleon Energy 2011 March Corporate Presentation

Bakken is booming with 5x growth increasing resources to 20 billion barrels!!! Production to account for 15% of US output by 2015.

“The Bakken formation in North Dakota and Montana holds about 20 billion barrels of recoverable crude, or about five times the amount previously estimated by federal geologists” said Harold Hamm, chairman and chief executive officer of Continental Resources Inc. The formation also holds 4 BBOE of gas, he said.

Increased rig count!
According to the North Dakota Industrial Commission, approximately 173 rigs are currently drilling in the North Dakota Bakken and Three Forks play, against the Eagle Ford rig count of 154. Bakken/Three Forks is forecasted to account for 15% of US output by 2015, analysts from Raymond James estimated.

Continental to spend 73% of 2011 capex on Bakken shale!
Continental Resources is the largest leaseholder in the Bakken shale formation, with more than 864,000 acres in North Dakota and Montana. The company, which has been drilling in North Dakota for 22 years, was among the first to tap a Bakken well in 2004 using horizontal drilling technology. The company was the first to drill a horizontal well in Three Forks formation in 2008. Continental Resources plans to invest $955 million (73% of 2011 capex) in drilling operations in the Bakken and Three Forks this year, adding about 120 wells to the 257 currently producing, the company said.

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A new milestone for Bakken Metrics!!
The affinity towards Bakken does not stop only with the largest Bakken leaseholder, but also continues with the large independents like Oxy, Hess, Williams, Pioneer Natural Resources, Sandridge, etc., The last quarter of 2010 had set a new milestone for Bakken acreage metrics, during when Oxy ($7,700/acre), Hess ($6,200/acre) and Williams ($10,700/acre) added Bakken acreage to their asset portfolio. Earlier to this, the Bakken metrics were in the range of $2,000-$4,000/acre.

Updated estimates on the recoverable reserves, increased rig count and a new milestone for the metrics. Bakken Shale is booming!!

Range Resources 2011 Simmons Conference Presentation

SandRidge - Barclays Capital 2011 High Yield Conference Presentation

Devon roping in partner for HRB resources... Is Asian NOCs the undeniable choice???

Devon Energy is considering establishing a joint venture (JV) to develop its Horn River shale gas assets in the Canadian province of British Columbia. The company had been approached by potential JV partners for BC's Kitimat liquefied natural gas export project. Interest in North American shale assets from foreign oil companies has heated up in recent months, with some paying top dollar for access to shale fields that hold vast amounts of natural gas. It is highly likely that an Asian NOC had been in discussions with Devon over a tie-up at Horn River. Such a development would boost the prospects for Kitimat LNG.

Following the recent Asians invasion into the Canadian Shales, it is not surprising that investors are attracted to a partnership with Devon at Horn River Basin. The BC shale play is the source of the gas that Apache intends to liquefy at the Kitimat project, which Devon is also eyeing as the route to market for its own Horn River gas.

Devon going Encana way
Devon's stated openness to a JV comes less than two months after Canadian gas producer  Encana struck a landmark CAD5.4bn (US$5.5bn) deal with state-run PetroChina to develop its Cutback Ridge shale gas project in the Montney formation. Encana subsequently acquired a stake in Kitimat, strongly suggesting that Apache and Encana were keen to involve PetroChina in the development of Canada's first LNG export project.

Looks like Devon is attempting to emulate Encana's success in securing development cash for its unconventional gas play. Specifically, we think it is likely that Devon has been talking with Asian national oil companies. Not only is the lucrative Asia-Pacific market the likely destination for LNG cargoes to be exported from Kitimat, but Chinese and South Korean NOCs in particular are keen to develop their unconventional gas skills

Devon’s assets in HRB

Devon's largely undeveloped Horn River Basin position totals 688sq km, with estimated 'net risked resources' of 227.5bn cubic metres equivalent (bcme) as of February 2011. Much of this acreage is located in close proximity to Encana and Apache's Horn River positions, further supporting the possibility of a development tie-up, with Kitimat as a pipeline destination.

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With the increased natural gas demand and better LNG market conditions prevailing in Asia, Devon might end up signing a joint venture with Chinese, Koreans or other Asians.

Deal snapshot


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