Tuesday, March 1, 2011

Vertex to shell out $120M for Shell's Niger Delta block



Vertex Energy made Shell an offer it could not refuse for the acquisition of swamp Block OML 40, effectively removing the licence from a list of four currently under auction in the supermajor’s second divestment programme. OMLs 30, 34, 40 and 42, all in Delta State, were offered by Shell in one of the most volatile areas of Nigeria’s oilpatch, attracting 18 consortia comprising Nigerian and international companies. OML 40 was one of the least prospective and it is understood a bid of more than $120 million swung the Vertex deal. For the remaining blocks bids have been received and   a bids qualification round was scheduled later this week in which suitors would have an opportunity to tweak their bids and convince Shell of their financial capacity and corporate social responsibility commitment before formal sales and purchase awards expected at the weekend.

Probable winners for the remaining blocks

OML34- Niger Delta Petroleum’s $600 million bid for OML 34 easily outshone the $290 million bid by the Seven Energy and Petrofac consortium and, barring technical considerations, will likely clinch it for the independent.

OML 42- India’s Essar Group in league with Nigerian-owned Energy Equity Resources remains the front-runner for OML 42 at $400 million, ahead of the Oando Group’s $300 million.

OML 30- OML 30 attracted an $800 million bid from Essar, $755 million from Afren, $750 from PanOcean, $650 million from Conoil, $600 million from Camac, $522 million from local independent EMO E&P, $515 million from African petroleum (Forte Oil) and $450 million from Oando.

The deals represent the latest in a series of Niger Delta farm-outs in which operator Shell and partners (Total and Agip) are selling a combined equity of 45% in sensitive swamp and creekside acreage.

To read more on Shell: http://docsearch.derrickpetroleum.com/research/q/Shell.html

Linn Energy enters Bakken Shale and adds Permian oil assets to its portfolio in a $434 million deal


Linn Energy agreed to acquire oil properties for a total combined contract price of $434 million in three separate deals. One acquisition of non-operated properties for $196 million from Concho Resources marks Linn's entry into the Williston Basin Bakken play. The additional two are bolt-on acquisitions, which further expand the company's position in the Permian Basin of Texas and New Mexico.


Combined Statistics of three acquisitions totalling $434 Million:
  • Current net production of approximately 3,000 Boe/d
  • Current net production is approximately 90% oil and NGLs
  • Significant organic growth expected, with an estimated 2011 exit rate of approximately 4,000 Boe/d
  • Combined purchase price represents an EBITDA multiple of approximately 6x
  • Proved reserves of approximately 22 MMBoe (approximately 40% proved developed)
  • Reserve life of more than 20 years and approximately 600 oil drilling locations



Mark E. Ellis, President and Chief Executive Officer, said, “The deal positions us in another oil basin with numerous mature producing assets providing Linn with the opportunity for further consolidation. All of these properties generate high cash margins in the current oil environment and meaningfully add to our inventory of oil drilling locations."


North American shale plays by location and maturity



Key US shale plays:
       Barnett Shale in Texas, dry and wet gas zones, combo area with oil/condensate as well
       Fayetteville Shale in Arkansas, mainly dry gas
       Haynesville Shale on the Louisiana-Texas border, mainly dry gas
       Marcellus Shale in Appalaichia, covering multiple states with Pennsylvania as main state, NE-part dry, SW-part with wet gas area
       Bakken Shale, hybrid shale system with mainly oil production, also exploiting underlying Three Forks tight sands formation.
Emerging plays:
       Eagle Ford in South Texas, oil and wet gas in addition to dry gas
       Niobrara in the Rockies, mostly oil
       Avalon in the Permian, mostly oil
       Utica in eastern Ohio and western Pennsylvani may be oil prone and future target by companies
       Canadian plays, notably Montney and Horn River in British Columbia, Utica in Quebec currently put on hold by Talisman.

PDC Energy announced 2010 year-end results; Production down 9.6%; Plan to invest $233 million in 2011

PDC’s annual 2010 production from continuing operations was 37.6 Bcfe down 9.6% compared to 41.6 Bcfe of production from continuing operations in 2009. The company reported 861 Bcfe of proved reserves, up 20% over 2009. PDC’s CAPEX budget for 2011 is expected to be approximately $233 million, including $206 million of development CAPEX, which represents a 46% increase over the 2010 development CAPEX of $141 million. The 2011 CAPEX budget does not include the previously announced offer to repurchase the Company’s three 2005 partnerships for $36.4 million


Keypoints:



861 Bcfe of 1P reserves, up 20% for the year, or 585% on a reserve replacement basis


Estimated 2011 production growth from 37.6 Bcfe to 44.9 Bcfe, 19% over 2010; with 2005 partnership buyback, growth over 20%


CAPEX budget for 2011 is expected to be approximately $233 million





Range drops Barnett for $900 million and diverts 86% of 2011 capex to Marcellus... Marcellus challenges even oil plays for high rate of return!!!

Range Resources agreed to sell its Barnett Shale properties in the Fort Worth Basin to Legend Natural Gas for $900 million. The properties included in the sale encompass 390 producing wells covering approximately 52,000 net acres. Current production is approximately 113 Mmcfe per day. The assets have a large resource base with 1.7 Tcfe of total 3P potential and ~700 low risk infill drilling locations. Range is retaining certain non-producing land holdings in the Barnett Shale, which it values at approximately $50 million. Scotia Waterous advised Range in connection with this transaction.



Range- Exits Barnett and Enters Marcellus!!
Commenting on the announcement, John Pinkerton, Range's Chairman and CEO, said, "The sale of our Barnett Shale properties will be the catalyst for Range becoming cash flow positive in 2013. Under our plan, we will retain 100% of the resource potential of our Marcellus Shale play as well as from the Upper Devonian and Utica Shale plays. It will also allow us to pursue our other opportunities in the Nora area, the Midcontinent and Permian Basin”.


Range announced that its 2011 capital expenditure budget has been set at $1.38 billion. Approximately 86% of the budget will be directed toward the Marcellus Shale play. Also, Range disclosed in one of their reports that:
- Marcellus generates 79% rate of return (5.0 Bcfe) at $5.00 flat NYMEX
- Nora and Barnett generate 32% rate of return at $5.00 flat NYMEX.

The divestiture is in-line with Range’s strategy to sell non-core properties and reinvest in its higher-return projects.




In addition to this $900 million divestiture, Range has also identified $200 to $250 million of miscellaneous properties it plans to offer for sale over the next 12 months.

A “new normal” for the Gulf of Mexico in a post-Mocondo world; Noble Energy to lead the industry back to drilling in the deepwaters!!

The US Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) approved the first permit for Noble Energy to drill at its Santiago prospect  in the Mississippi Canyon area of the Gulf, about 70 miles south of the Louisiana coast, since the Deepwater Horizon spill shut Gulf of Mexico drilling last April.

Michael Bromwich , director for BOEMRE, said in a statement that, “This permit was issued for one simple reason: the operator successfully demonstrated that it can drill its deep-water well safely and that it is capable of containing a subsea blowout if it were to occur”. He also added that, “We expect further deep-water permits to be approved in coming weeks and months based on the same process that led to the approval of this permit.”



  • Santiago is a middle Miocene amplitude prospect on Mississippi Canyon Block 519. Noble Energy is the operator with a 23.25 percent working interest.
  • Well operations were suspended in June 2010 as a result of the deepwater Gulf of Mexico drilling moratorium.
  • Located in 6,500 feet of water, the Santiago exploration well had previously drilled to a depth of 13,585 feet at the time of the moratorium. Drilling operations are anticipated to resume in late March 2011, targeting total drilling depth of approximately 19,000 feet.
  • The Ensco 8501 rig, which performed completion operations on the Santa Cruz and Isabela discoveries at the Galapagos project during the second half of 2010, will perform the drilling at Santiago.

For more information on Noble Energy, please click here:
http://docsearch.derrickpetroleum.com/research/q/Noble%20Energy.html

Back to back Eagle Ford JVs in 2010; In 2011, Anadarko to hunt for partners



Anadarko is also jumping on the Eagle Ford bandwagon by having exclusive talks with a partner for JV. Anadarko plans to double its drilling activity in the Eagle Ford to more than 200 wells this year, as it looks to boost output of petroleum liquids, The company estimated ultimate recoveries from existing Eagle Ford wells to be 450,000 barrels of oil per well on average. Anadarko’s  JV plans in Eagleford is a significant development, as it has the past record of pulling off one of the priciest joint ventures with Mitsui ($14,000 per Marcellus acre) in 2010.



In the past also companies reaped the benefits by striking JVs in Eagle Ford. 

Heading
Deal Value ($MM)
Hydrocarbon
$/Acre
Announce Date
CNOOC and Chesapeake form JV
2,160
Oil
10,800
10-10-2010
Talisman and Statoil form $1.3B JV
1,325
Oil + Gas
10,900
10-10-2010
Reliance and Pioneer form JV
1,315
Oil + Gas
11,111
06-24-2010
KKR and Hilcorp Energy  form JV
400
Oil
10,000
06-14-2010
Talisman contributes acreage to JV
180
Oil + Gas
9,730
10-10-2010
BP and Lewis Energy form JV
160
Gas
4,000
03-02-2010
Swift Energy and Petrohawk  form JV
39
Gas
3,000
11-02-2009
Blue Stone and Abraxas form JV
18.75
Oil + Gas
3,000
08-18-2010


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