Tuesday, May 24, 2011

Endeavour International posted 6.6% decline in O&G Production for Q1-2011; Poised for Significant Production Growth in the UK and the US

Endeavour is an independent oil and gas company and has operations in the North Sea and the United States. In May, 2009, the company completed the sale of its Norwegian subsidiary for US$150 million, and those proceeds combined with current cash flow will fund future growth initiatives. Endeavour is currently developing three field discoveries in the United Kingdom sector of the North Sea that will serve as the foundation for production growth over the next two years.
Source: Derrick Petroleum E&P Transactions Database

The company’s first quarter 2011 production was 3,001 boepd, down 6.6% over the same quarter last year. Though the company was not performed for the quarter, the pieces are in place for significant production growth and lower operating costs in the near future; the Bacchus UK oil development is moving forward and appears to be on schedule to start production in Q2-2011, with production expected to ramp-up to 4,000–5,000 bpd net to the company's interest. This more than doubles the company's current production rate. Meanwhile, the company continues to push forward many of its smaller, shorter cycle-time projects.

Poised for Significant Production Growth in the UK and US

Rapid Growth Expected Over Next Three Years:
Endeavour expanded into the US in 2010 with the purchase of lower-cost, shorter cycle time conventional and unconventional onshore reserves. As it brings its balanced portfolio of oil and gas properties on to full production, management expects to organically double annual production in each of the next three years.  END believes that its existing total reserves can produce 30,000 to 40,000 BOEPD by 2015. During 2011, capital expenditures of about $150 million will target its two key initiatives in the U.K. North Sea – Bacchus and Greater Rochelle and the remainder will be directed toward the Haynesville and Marcellus areas in the U.S. to bring on production.

Bringing North Sea Assets On-Line
In the Central North Sea, Endeavour has three primary development projects – Bacchus, Columbus and the Greater Rochelle area, which have the potential to significantly expand its production levels and total proved reserves over the next three years. The Company recently increased its working interested in Bacchus from 10% to 30%, giving it an even greater position in this near-term proven oil play.

Operating the Greater Rochelle Development toward First Production
 In February 2011, the company received final approval of its Field Development Plan for East Rochelle from the Department of Energy and Climate Change (DECC). This is an important next step in moving the field toward first production in late 2012. In the fall of 2010, END also achieved commercial drilling success at West Rochelle confirming a second excellent quality reservoir.

Significant Reserve Growth Driven by the Drill Bit
During 2010, Endeavour grew its 2P oil and gas reserves by 12.3% to 43.7 MMBOE from 38.9 MMBOE, representing a 419% replacement of 2010 production. Production volumes averaged about 4,100 BOEPD during the year. END expects to generate significant production growth from its definable projects in the second half of 2011, with an opportunity to double its production flow rates in each of the next three years from its existing assets.

West Africa's Ghana emerging from the dust! Oil discoveries in Ghana so far..

Ghana is emerging from decades of unsuccessful oil and gas exploration to becoming one of the global exploration hotspots. Despite a few discoveries prior to 2007, there wasn’t much to talk about. However, the game changer turned out to be the billion barrel Jubilee oil field discovery in 2007 by Kosmos Energy, drilled by the Mahogany-1 well. This, as it turned out, was also extremely fortuitous because Kosmos was drilling a stratigraphic trap (more subtle to map) and not the easily identifiable structural traps. Locating and mapping these stratigraphic traps can potentially lead to world class discoveries, as the Jubilee discovery has shown, and as the other companies are also now doing. With exploratory success coming in Ghana, and subsequently along the West African coast, increasing attention is being focussed in this region, and it is becoming increasingly likely that huge reserves of hydrocarbons lie under the offshore. Ghana has led the way so far, and I have listed out all the oil and gas discoveries in Ghana to date. This list is sure to grow as more exploration picks up in this country. For a list of oil companies with plans to drill in West Africa click here. For a list of recent discoveries and companies planning to drill in Ghana click here. For a discussion on Angola’s oil industry and companies planning to drill in Angola click here. For a list of discoveries in Cote D'Ivoire and exploration plans in 2011 - 2012 click here. All data is from Derrick Petroleum’s extensive exploration and deals databases and Derrick Petroleum analysts.
List of Discoveries in Ghana upto 2011

The following maps show the location of these discoveries
Source: Kosmos

Source: Tullow

Source: Kosmos

NOTE: On 6 June, 2011, Kosmos Energy announced that the Banda-1 probe, drilled to a total depth of 4580 metres on the Banda Deep prospect by Atwood Oceanics’ semi-submersible Atwood Hunter, found hydrocarbons over a gross interval of 300 metres in Cenomanian-aged reservoirs. The interval contained more than 100 metres of low-porosity sandstone and three metres of 40 degrees-API oil pay. On completion, the well will be suspended and the rig moved to complete drilling of the Makore-1 well, which is targeting Turonian age reservoirs in the south of the licence. The well was drilled in the West Cape Three Points Block. Kosmos (30.875%) is operator and partners are Anadarko (30.875%), Tullow (22.896%), EO Group (3.5%), Sabre Oil and Gas (1.854%) and GNPC (10% carried interest).

US/Canada unconventional assets worth ~$14 billion available on market. Marcellus Shale leads the play.

The unconventional marketplace is being driven by motivated buyers (majors, internationals like KNOC, Marubeni, CNOOC, BHP, etc.,) and opportunistic sellers (Anadarko, Chesapeake, EnCana, Talisman, etc.,). Unconventional transactions dominated the upstream asset transactions in Q1-2011, nearly 35% of the total upstream value. PetroChina’s C$5.4 billion for a 50% interest in Cutbank Ridge assets in the Montney shale play from EnCana and BHP Billiton’s $4.75 billion for acquisition of interest in Fayetteville shale play from Chesapeake were the two major gas weighted shale deals in Q1-2011. However, number of transactions were more towards oil weighted Bakken and Eagle Ford plays. The following two tables show the significant unconventional deals of Q1-2011 in US/Canada.
In United States...

In Canada...

Unconventional assets worth $14 billion up for sale

A total of $13,671 million worth of shale oil/gas assets are available for sale in the United States and Canada. The Marcellus shale gas assets top the sale activity and account for 44% of the total value. The key and the emerging shale plays and the assets put up for sale in those areas are detailed below-

Key US shale plays:
Bakken Shale, hybrid shale system with mainly oil production, also exploiting underlying Three Forks tight sands formation

Marcellus Shale in Appalachia, covering multiple states with Pennsylvania as main state, NE-part dry, SW-part with wet gas area

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

Emerging plays:
Eagle Ford in South Texas, oil and wet gas in addition to dry gas

Niobrara in the Rockies, mostly oil

Utica in eastern Ohio and western Pennsylvani may be oil prone and future target by companies

• Avalon in the Permian, mostly oil
• Canadian plays, notably Montney and Horn River in British Columbia; and Oilsands in Alberta.


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