BHP debuts in US shale business by purchasing Chesapeake's Fayetteville assets for $4.8 billion

BHP Billiton has made its first move into the US shale gas business with the acquisition of Fayetteville shale assets from Chesapeake for $US4.75 billion cash. Chesapeake's Fayetteville shale assets include approximately 487,000 acres of leasehold and producing natural gas properties located in Arkansas. This is the second largest position in one of the largest gas fields in the world. This acquisition will increase BHP Billiton's net reserve and resource base by 45%. These assets currently produce approximately 415 MMcf/d and include development options that will support substantially higher production over a 40 year operating life. The assets include 2.4 Tcf of proved reserves and 10 Tcf of total risked resource potential. The transaction also includes midstream assets with approximately 420 miles of pipeline.

It’s a material asset with room to grow:

The acquisition is consistent with BHP Billiton's strategy of investing in large, long-life, low cost assets with significant volume growth from future development. BHP said it is paying $1.77/Mcf of proved reserves which is consistent with the recent ExxonMobil’s acquisition of Petrohawk’s Fayetteville assets for $1.92/Mcf. BHP aims to triple daily production from the new asset as the field is developed, and plans to spend $800 million to $1 billion a year over 10 years to develop the field, BHP chief Michael Yeager said.

Unconventional gas to quench the thirst of US gas demand:

Chesapeake says, “Enormous value created through JV transactions – More to come in 2011”

This Fayetteville transaction is in line with Chesapeake’s 2011-12’s “25/25” plan, ie., reducing debt by 25% by selling assets, while increasing production by 25%. Chesapeake’s drilling capital to be invested in liquid plays will move from 10% in 2009 to 70% in 2012. In 2010, Chesapeake invested ~$5.0 billion of leasehold in liquids-rich plays which will be largely recovered from JV partners in next few years. In the past two years, Chesapeake has created enormous value through JV transactions and more to come in 2011…

After Encana's JV for shale gas, now Cenovus looks for JV partners to develop its oil sands resources

Cenovus, which was split from Encana in December 2009, would be following its predecessor that has formed joint ventures with Petro-China, CNPC and Korea Gas to develop unconventional resources. 

Cenovus Energy Inc is currently seeking a joint-venture partner to speed development of its Alberta oil sands holdings and boost the value of its reserves.

Cenovus’ oilsands projects overview:

-- Core oilsands projects: Foster Creek, Christina Lake and Pelican Lake; Cenovus holds approximately 800,000 net acres of existing bitumen leases within the Athabasca and Cold Lake areas and has additional 652,000 net acres on the Cold Lake Air Weapons Range.

-- Combined production of Foster Creek, Christina Lake and Pelican Lake was 82,527 BO/d net to Cenovus in Q4-2010.
-- Foster Creek in 2011F: $350 - 400 million of capital; 2.1-2.3 SOR; $11.10-11.85/bbl operating cost; 110-120 gross strat wells; Phases F, G and H construction ramp up; Expects production of 56,000 BO/d in later 2011.
-- Christina Lake in 2011F: $350-400 million of capital; 2.4-2.7 SOR; $18.65-19.40/bbl operating costs; 50-60 strat wells; Continue construction on Phase C and D; Expects net production of 16,000 BO/d in later 2011.

-- Pelican Lake: $175-200 million of capital; $14-15/bbl operating cost; 40-45 gross strat wells; Start drilling infill patterns; Potentially accelerate drilling program.
-- As of December 31, 2010, Proved bitumen reserves - 1,154 MMBO; Proved plus Probable bitumen reserves - 1,677 MMBO.
-- The increase in reserves is mainly attributed to the approved expansion of the Foster Creek development area and increased recovery due to advancements in technology, such as wedge wells, and improved reservoir performance.
-- In addition to the expanded reserves numbers, there was a significant increase to the company’s bitumen economic contingent resources in 2010, mainly attributed to the assessment data collected from stratigraphic (strat) wells. Best estimate bitumen economic contingent resources at year-end 2010 were 6.1 billion bbls, a 13% increase over 2009.
-- On a gross basis, about 260 of the assessment wells were drilled at the company’s oil sands properties in 2010 and an additional 450 strat wells are expected to be completed in 2011.
-- In addition, Cenovus has identified 10 other oilsands projects - Narrows Lake, Grand Rapids in the Greater Pelican region and Telephone Lake project in the Borealis region for future development.

BP changes gears from survival to growth!! BP and Reliance in $7.2 billion alliance...

After tying up with Rosneft in Jan 2011, BP is acquiring a 30% stake in 23 oil and gas blocks that Reliance operates in India, including the producing KG D6 block and forming a 50:50 joint venture between the two companies for the sourcing and marketing of gas in India. The joint venture will also endeavour to accelerate the creation of infrastructure for receiving, transporting and marketing of natural gas in India. This will make the partnership India’s largest private sector holder of exploration acreage.

BP will pay Reliance an aggregate consideration of US$7.2 billion, and completion adjustments, for the interests to be acquired in the 23 blocks (~270,000 sq km). Future performance payments of up to US$1.8 billion could be paid based on exploration success that results in development of commercial discoveries. These payments and combined investment could amount to US$20 billion.

Reliance will continue to be the operator under the production sharing contracts, whose blocks lie in water depths ranging from 400 to over 3,000 metres. These currently produce about 1.8 bcf/d, over 30% of India’s total consumption, and over 40% of India’s total production.

BP has been working with Reliance since December 2008 on the D-17 deepwater block in the KG basin on the east coast of India. BP, with a 50% interest, operates the block and Reliance holds the remaining interest. However, Oil Secretary S Sundareshan said that the deal will require the government's approval as New Exploration and Licensing Policy blocks are involved.

ONGC says Jai ho!

Commenting on the deal former chairman of ONGC RS Sharma said, “This is positive news for the entire E&P sector for India. The deal covers the entire value chain - upstream and downstream." Referring to the Cairn-Vedanta deal that has failed to take off, Sharma said "the sentiments have been negatively impacted because of one deal...this deal shows confidence in the Indian oil sector."

What are the financing options of BP?

BP's recent deal with Rosneft did not involve any cash payment which is in line with BP's need to raise cash after the Macondo oil spill. This current Indian alliance involves upfront payment of $7.2 billion. How is BP planning to make the payment??

Oil and Gas - Mergers and Acquisition Review: Nexen plans to follow in Encana's footsteps in fin...

Oil and Gas - Mergers and Acquisition Review: Nexen plans to follow in Encana's footsteps in fin...: "Nexen Inc has initiated a process to seek a joint venture partner for various portions of the company’s northeast British Colum..."

Oil and gas companies go diving into Trinidad waters – Plan to spud 25 wells in 2011

Drilling activities onshore and offshore Trinidad & Tobago is said to increase this year as players from the oil and industry plan to spud more than 25 wells in 2011, up from five wells in 2010 and just seven wells in 2009.

Here‘s what is on the menu….

Petrotrin

• State-run Petrotrin is planning to drill 16 wells on its Trinmar acreage from March 2011 with one exploration well, four appraisal wells and remaining eleven to be development wells.

Parex Resources

• Parex Resources is targeting a three to five-well drilling programme as well as testing its Snowcap-1 and deepening the Firecrown-1 well on its Moruga block
• It is also planning a pair of 4500-foot exploration wells on its onshore Central Block at Cribo-1 and Mapepire-1

BP

• BPTT, the Trinidad & Tobago unit of BP, plans to drill least seven new wells and complete a well spudded in 2010.

EOG Resources

• EOG will drill a total of eight wells in 2011 at its offshore Toucan field out of which seven wells are development wells while the eighth well is a step out well.

Niko Resources 

• Niko Resources is planning to drill three wells on offshore Block 2ab in August 2011.

Bayfield Energy

• Bayfield Energy is planning to carry out a seven-well exploration and appraisal programme over the course of next two years on its Galeota block, with drilling scheduled to begin in Q3 2011.

For more details please visit:
  http://docsearch.derrickpetroleum.com/research/q/BP.html
  http://docsearch.derrickpetroleum.com/research/q/Niko%20Resources.html
  http://docsearch.derrickpetroleum.com/research/q/EOG%20Resources.html

Nexen plans to follow in Encana's footsteps in finding a joint-venture partner

Nexen Inc has initiated a process to seek a joint venture partner for various portions of the company’s northeast British Columbia shale gas acreage. The company has engaged Bank of America Merrill Lynch as its exclusive advisor on this sale process.

Northeast BC shale gas:
-- 300,000 acres (100% working interest) split over three areas of Horn River, Cordova and Liard
-- Horn River is median depth and GIP; Cordova is shallower, lower GIP; Liard is deeper, potentially higher GIP
-- Delivered drilling, fracing and completions program at industry-leading pace with a 100% success rate
-- Successfully drilled and brought on-stream of eight-well pad and commenced drilling another nine-well pad late in the year; New industry record of 3.5 fracs/day on our 8-well pad
-- 8-well pad program adding 50 MMcf/d in early 2011
-- ~4 to 15 Tcf of contingent resource in the Horn River and Cordova basins and 5 to 23 Tcf of prospective resource in the Liard basin
-- The company is also progressing plans to drill an 18-well pad in the second half of 2011. First shale gas production from the nine-well pad is expected in Q4-2011, while production from the 18-well pad would be in late 2012.

To know more about shale. Please click

http://docsearch.derrickpetroleum.com/research/q/Canada%20shale.html

Implied reserves value recovered in 2010, stronger for oil than for gas

On a worldwide basis, the implied reserves values, $/2P reserves (entitlement), recovered largely by the end of 2009 and stayed at similar levels throughout 2010, but still below the high levels of 2007-2008.

Implied reserves by country and by hydrocarbon type is readily available for US and Canada whereas the rest of the world gives limited data sets for statistical analysis.

For the US, implied proved oil reserves values appear robust with 2010 full year average $15.6/boe for proved reserves, whereas gas reserves values are still below 2007 and 2008 levels albeit up from 2009 levels.

For Canada, the separation of implied reserves values for gas and oil widened further in 2010, following the last years’ trend. For the full year, the average price of oil deals was $16.5/boe for 2P reserves and of gas reserves was $9.4/boe.

Transaction metrics for selected deals outside North America