Thursday, March 24, 2011

Melrose Resources reports 2010 Annual Results; 2010 Production in line with Market Guidance; Plan to invest 60% of 2011 Capital budget for development programs in Egypt

Melrose’s working interest production averaged 41.1 Mboepd during the year up 6% over 2009. Approximately 83% of the production was gas. Approx. 95% of the production came from Egypt, benefited from a full year contribution from five developments brought on stream in 2009.The company's 2010 production is inline with latest market guidance of 40.7 kboepd, contained in the quarterly 2010 Interim Management Statement.

The company forecasted US$112 million capital program for 2011, of which approximately 50% will be invested to high impact exploration in Egypt, Bulgaria, Romania and Turkey.
The company projected 2011 net entitlement production to be approximately 22,000 bopd, which will be supplemented by a full year's contribution from the Kaliakra and Kavarna fields in Bulgaria

Asians gaining ground in Canada

Heightened foreign investment in Canada’s unconventional oil and gas industry will be driven primarily by Asian NOCs.

Source: Derrick Petroleum M&A

In 2010, the number of inbound oilsands-focused transactions from Asia tripled, as countries like China, Japan, Thailand and South Korea actively sought to secure natural resources around the world and completed several major deals in Western Canada.

The last 12 months have seen several notable transactions in the sector, including Sinopec International Petroleum Exploration and Production Company’s acquisition of ConocoPhillips’ 9.03% interest in the Syncrude Canada Ltd.’s oilsands operation for US$4.65 billion. Thailand made its first foray into the Canadian oilsands with PTT Exploration and Production’s purchase of 40% of the Kai Kos Dehseh oilsands project from Statoil ASA for US$2.28 billion. In all, Asian investment accounted for US$9.2 billion during 2010 (compared to US$5.9 billion in 2009 and virtually nil in 2008).

Source: Derrick Petroleum M&A Database -
About Canadian attractiveness
There are a host of reasons why Canada is such an attractive destination and why foreign companies are investing here. “Rising oil prices, high debt levels of the junior players, a stable financial and regulatory environment, huge reserves, proximity to the United States, vast expertise and a well-established infrastructure are just a few of them. But to make the most of these transactions, Canadian and foreign companies need robust due diligence and careful integration planning.

Challenges ahead
“Foreign interest in the oilsands is expected to continue in 2011 and this investment activity significantly increases the likelihood of integration challenges and complexities, which often occur in the form of cultural and business differences. To date, most investments have been in a non-operated capacity, but as foreign companies begin to take on operator roles, like in Korea National Oil Corporation’s acquisition of Harvest Energy in early 2010, various issues could surface.”

Some of these challenges could include the need for foreign investors to hang on to local talent to ensure the right skills are in place when transitioning to an operator role. A supplier challenge could also arise, with foreign companies wanting to use their own trusted suppliers instead of sourcing local resources. In addition, local companies may have difficulty adapting to new systems and processes, while foreign acquirers may be unfamiliar with local laws, regulations, as well as environmental and security guidelines.

Companies need to recognize cultural differences, embrace innovations that enable growth –
wherever they come from - and integrate systems globally as quickly as possible. A big part of determining success will come from their ability to establish effective knowledge exchange processes and programs to the benefit of all parties involved.

Asian pursuit to continue in 2011
The 2010 trend that saw Canadian and foreign entities partnering through strategic alliances and joint ventures is also expected to continue. This enables risk sharing and the pooling of Canadian technology with foreign financial strength and resources. Technology will also play a strategic role in transactions with foreign buyers looking to reap the benefits from advancements being made by Canadian oil and gas players.

O&G players’ interest towards Niobrara is heating up!! Is Niobrara the next Bakken/Eagle Ford??

Here is the brief discussion about the emerging oil play in the US- The Niobrara Shale!!

The Niobrara shale formation is situated in northeastern Colorado and parts of adjacent Wyoming, Nebraska and Kansas. Samson Oil & Gas is one of the earliest companies to establish a position in the Niobrara. Other operators in Niobrara include EOG Resources, Anadarko, SM Energy, Noble Energy, Chesapeake, Whiting Petroleum, Quicksilver Resources, MDU Resources, and Bill Barrett. Chesapeake and EOG each have about 400,000 net acres in the Niobrara.

Niobrara operators’ 2011 drilling plan
The Niobrara Shale formation was well noticed in 2010 when EOG Resources reported a well here with production of 1,558 barrels of oil per day. With a large number of companies starting their initial exploration programs in the Niobrara shale in 2011, the shale play would witness a significant increase in drilling activities over the next few years.
  • Marathon Oil plans to start an exploratory program in the shale play in 2011. Whiting Petroleum and MDU Resources plan to drill their first test well in Niobrara during the first half of 2011.
  • PDC Energy plans to drill 14 wells in the Niobrara Shale in 2011. It has budgeted between $205 million to develop the Niobrara play.
  • Carrizo Oil and Gas reported its first horizontal completion in the Niobrara in early January 2011. Carrizo has four wells either drilling or being completed. The company hasn't released its capital budget yet for 2011, but has adopted a strategy to increase development of formations that produce oil and liquids. The company spent $60 million in 2010 to acquire leasehold in the Niobrara and another oily play in Texas.
  • SM Energy has acreage in the Silo Field in Wyoming that has exposure to the Niobrara Shale. SM Energy has allocated $25 million in capital in 2011 to develop the Niobrara.

The increased interest of the companies in the shale play is also evident from the recent lease sale rounds held by the Wyoming State Lands and Investments Board for area expected to be prospective for Niobrara shale. The overall investments in the state lease sale awards increased from an average of $3.2 million in 2008-2009 rounds to an average of $37.5 million in 2010 lease rounds.

In Wyoming, as per Wyoming Oil and Gas Commission, 202 horizontal well permits targeting Niobrara formation had been issued in the state as of November 24, 2010. In Colorado, during 2009-September 2010, there were 208 approved permits for Niobrara shale formation.

A look at the 2011 Niobrara deals captured by Derrick Petroleum

Why Niobrara Shale??
What makes the Niobrara Shale a prime target is that those companies with experience in the Bakken are looking to expand while companies that missed out on the Bakken Shale and have horizontal drilling expertise in natural gas shales look to take on positions in more profitable oil production.

At the end of 2010, the Japanese company ITOCHU made an entry into Niobrara Shale with an estimated investment of $390 million. This was followed by Chinese in Jan 2011 when CNOOC entered into a $1.3 billion Niobrara JV with Chesapeake. What a good start for Niobrara in 2011! This will be the driving force for the other operators who want to exploit oil plays.

Bankers Petroleum reveals 2010 annual results; Production up 49% over 2009; Plan to achieve exit production target of 20,000 bopd for 2011

Bankers Petroleum’s 2010 average production increased 49% to 9,597 bopd from 6,438 bopd in 2009. The company increased production through annual capital investment in Albania, of US$122 million, which includes the effective implementation of the Patos-Marinza development plan as well as applying EOR and secondary extraction techniques to increase the field's recoverable reserves.

Bankers Petroleum 2011 capital program budgeted at US$ 215 million and projected 2012-2014 capital programs to average $200mm/year.

As part of 2011, the company plan to drill 66 horizontal and vertical wells and complete 120 well         reactivations and work-overs at the Patos-Marinza oilfield to increase production facilities to handle our target exit production rate of 20,000 bopd

Libya crisis forces operators to move out....What next for them???.......Is it sell off.

Immediate impact of Libyan crisis
The ongoing Libyan civil war and Western military intervention is set to take about 860,000 barrels per day of production, over a period of 90 days, out of the oil market this year.

An unresolved crisis may also lead to long-term exits by international oil companies from the North African country, putting Libya’s state-owned National Oil Corporation’s ambitious production growth goals under pressure.

Long term impact of Libyan crisis
Almost all international oil companies operating in Libya have evacuated their staff and cannot be certain when normal operations will resume. There are a number of uncertain factors affecting its estimates of the impact of the crisis on Libyan output, including how long the current abnormal situation lasts, which will determine how rapidly production can be returned to normal levels.
Operations at some projects are at “hot standby” as Italian player Eni has indicated, ready for a quick restart. Other projects will require major work before a return to normalcy.
More fields have been shut in as the unrest continues to spiral. We think it will take more time to resume production than previously estimated (30 days). Hence, we recommend raising the estimated production cut by another 60 days for the fields identified earlier, as well as for the newly impacted fields. The rate at which output recovers after the current crisis is over will to a great extent depend on which side wins.

What is next for IOC’s
With Gaddafi’s forces now apparently halted, Eni, BP, Wintershall, OMV, the big American players such as Hess, Marathon and ConocoPhillips, and a long list of other players and hopefuls, not least supermajor Shell at its gas exploration site, all have to consider two relatively simple options.
The worst option for the oil firms is that Gaddafi succeeds in dragging out the confrontation or wins the day. In these circumstances, it has become clear that neither Eni nor any of the others will really return to Libya while Gaddafi remains in power. Admittedly, Eni has an unusual position and may be granted a special status to continue producing gas for the local Libyan market.
Nearly all the companies with assets in Libya will now find that they are rooting for an early end to Gaddafi’s regime as the only clear way for their return. The Libyan leader is threatening to bring everything else – possibly including some vulnerable oil facilities - down with him if he has to leave the scene after 42 years in power, but it may be too late for him to follow through on the bluster.

 Acquisitions and divestitures in Libya - 2006 to 2011

Source: Derrick Petroleum M&A Database -

Will Argentina lead the global shale gas race?

With shale gas drilling going global, energy importing nations are evaluating their own geology, currently, to see if they have shale reserves that can be tapped.  Likewise, Argentina which imports natural gas from neighboring Bolivia is set to win the global shale race where other countries in Asia, Europe and Africa are gearing up aswell. What is considered as the “game-changer” for the US, will shale gas success be replicated outside North America ,or for that matter, in Argentina?

Currently, Europe is in the limelight for being ahead of the shale gas activities, however, one needs to watch out who might be the next one?

Whats  happening in Argentina?
  • In 2010, YPF announced a 4,500 billion cubic feet(Bcf)  shale gas  discovery in Loma de La Lata  conventional gas field  in the well known and productive Neuquen Basin in Patagonia.
  • The Company has also formed a $140 million joint venture with the Brazilian iron ore and mining multinational, Vale, which will use the gas to develop a $4.3 billion dollar potassium project in nearby Mendoza.
  • American Petrogas Inc, which holds about 16 exploration blocks, both for conventional and shale gas in the eastern and western parts of the Neuquen basin, thinks that its western blocks have the greatest potential for shale gas. It believes that about 100 tcf of gas is present in 9 of its blocks.
  • Indian Farmers Fertilizer Cooperative (IFFCO), a strategic  alliance partner with American Petrogas Inc  in Argentina has invited two government owned Indian companies, Oil India and GAIL , to invest in its shale prospects.
  • Apache Corporation expects to hold 900,000 net acres in the shale gas prone part of the Neuquen and has a partnership with YPF to develop shale gas in several prospective blocks. It is currently drilling the first horizontal multi fracture well in Argentina specifically to develop shale gas.
  • Total acquired an interest in 4 shale gas blocks in the Neuquen and will explore in partnership with YPF. This follows the acquisition of an 85% interest in 2 other Neuquen shale gas blocks recently.  Total operates about a quarter of Argentina’s natural gas production. 

Recent Shale Gas Transactions in Argentina

Global Distribution

    Source: Hart Energy Global Shale Gas Study

The Society of Petroleum Engineers estimates 2,116 tcf of shale gas in South America.
  • Argentina – Neuquen Basin, Austral Basin 
  • Colombia – “Cretaceous organic – rich shale source rocks are present in both the Maracaibo and Middle Magdalena basin of Colombia and Venezuela.
  • Peru – Ucayali Basin

As per Hart Energy Global Shale Gas Study, shale gas is plentiful around the globe. Conservative estimates place the total resource volume at about 20,000 Tcf. This volume is likely to increase as more shale gas plays are identified and evaluated.

However , the uncertainty still remains wheather the operators would be able to overcome the hurdles of tapping this source of stored energy. The biggest challenges to developing these resources outside of the US include:

  • Access to acreage / resource
  • Availability of rigs and skilled workforce
  • Access to water and environmental concerns about waste water
  • Finances, due to high cost of wells
  • Necessary infrastructure to transport the gas once in production 


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