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:http://docsearch.derrickpetroleum.com/research/cmp/225/Forest%20Oil.html

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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