Chesapeake acquires Eagle Ford acreage for $10,434/acre and goes for gas to liquids transition!!

Escondido Resources II LLC sold 11,050 net acres in the Eagle Ford Shale to Chesapeake Energy and EnCap Investments for a total consideration of $115.3 million. The properties consist of three distinct blocks of acreage located primarily in La Salle County in South Texas. Escondido II was advised on the sales transactions by Griffis & Associates LLC and Simmons & Company International.

“This sale is very strategic for Escondido Resources,” said William E. Deupree, President and CEO of Escondido Resources II, LLC. “It allows us to focus on our ‘bread and butter’ Escondido and Olmos reservoirs, which are very economic even in today’s low gas price environment, while still having a substantial position in the gas-prone portion of the Eagle Ford Shale.

Chesapeake shifts from gas to liquids!!

Chesapeake, in Oct 2010, signed a $2 billion Eagle Ford JV with CNOOC. Chesapeake is utilizing 10-12 operated rigs to develop its Eagle Ford leasehold and with the additional capital from CNOOC anticipates increasing its drilling activity to approximately 31 rigs by year-end 2011 and approximately 40 rigs by year-end 2012. Approximately 900 wells are expected to be drilled by year-end 2012.

Chesapeake is ramping up development quickly in the Eagle Ford Shale as the company seeks to shift from ~90% gas to a more balanced oil/gas production mix of 75/25% in 2012.

Click here to see more publications on Eagle Ford Shale: http://docsearch.derrickpetroleum.com/research/q/%22eagle%20ford%22.html

The Bold and the Beautiful; Total to plough about $2.1 billion into exploration in 2011!

Total plans to pursue a bolder exploration strategy for coming years to maintain and increase its reserves replacement ratio. About $2.1 billion will be invested into exploration activities-and about the same in 2012; 75 exploration wells to be drilled in 2011 with a focus more on the frontier areas.

• Chief Executive Christophe de Margerie , during the Company’s 2010 financial results, said that the Company will increasingly focus on the upstream business, though “not at the expense” of its downstream unit, which is not performing well.
• Few key wells would be drilled in French Guiana, Bolivia and Brazil in Latin America, in Libya, Nigeria and Angola in Africa and off Norway and the UK in Europe.

• The Zaedyus wildcat in the Guyane Maritime, off French Guiana and Absheron probe in the Azerbaijaini sector of the Caspain Sea, which are currently being drilled, are the probes to be watched.

• In the North Sea, five exploration wells will be drilled around the Alwyn complex in 2011 and one exploration on the Corfe prospect in Block 29/3b close to the Elgin-Franklin complex in 2012.
• On  unconventional shale gas, De Margerie commented that Total’s focus would be more on the plays in the US, Eastern Europe and China. In France, where it has Montelimar license, it has no immediate plans to carry out drilling activities.
• Through exploration and asset deals, Total aims to maintain a reserve replacement ratio of 124%-which it achieved in 2010-with a nominal 50% of this to come from exploring and remainder from acquisitions , possibly in the North Sea.

For information on Total, please click here:

http://docsearch.derrickpetroleum.com/research/q/Total.html

South America - Massive step up in activity driven by Asian NOCs as well as OECD oil companies

M&A activity in South America took a massive step up, totalled $36bn in 2010, making it the second largest region globally. Total of 75 transactions recorded (excluding new exploration awards), of which 45 deals with disclosed deal value.

Brazil was the top country with several large sized transactions totalling $16bn. Argentina was number 2 with $13bn in total transactions, of which $10bn from the Pan American Energy related transactions. Colombia was ranked third with $4.3bn in disclosed transactions from 12 deals in total.

10 transactions were recorded above $1bn, with Chinese oil and gas companies involved in five of these worth  $23bn in total.

M&A activity in South America in 2010 as share of total global activity exceeds the region’s share of resources and asset values which is in the range of 7-11%.

For more details look at http://www.derrickpetroleum.com/reports1.html

We have also recently published a report for E&P Business Development and New Ventures professionals working on deals globally. This report provides information on $93 billion of global oil and gas assets on the market.

The report provides details on ~500 opportunities:

·         Assets for sale

·         Corporate M&A opportunities

·         JV opportunities

·         Exploration farm-ins

You can view a sample copy of this report at http://www.derrickpetroleum.com/reports2.html

For more information on the topic, please write to rupesh.govindan@derrickpetroleum.com

Range Resources announced 2010 annual results; Production up 18% over last year; Plan to invest $1.38 billion, of which 86% directed to Marcellus

Range Resources reported production for 2010 totaled 181 Bcfe, comprised of 142 Bcf of natural gas (79%), 4.5 million barrels of NGLs (15%) and 2.0 million barrels of oil (6%). Production for 2009 totaled 159 Bcfe and was 82% natural gas, 8% NGLs and 10% crude oil. The company has increased its natural gas production by 9% but has increased its NGLs and crude oil production by 36% when compared year-over-year. Reserves increased 1,313 Bcfe or 42% compared to the prior year. The company replaced 931% of production in 2010.

Key points:

-- 2010 production up 12% and reserves/share ratio up 32% over 2009

-- Higher quality asset base – producing more with less wells

-- Plan to invest $1.38 billion in 2011, of which 86% is allocating to Marcellus

Total spends $4 billion for a stake in Russia’s Novatek and enters Yamal LNG. Russian reserves are powering up the economy!!

Total and Novatek signed two Memorandums of Cooperation under which:

• Total will become the main international partner on the Yamal LNG project holding a 20% share. Novatek will hold a 51% interest in the project.
• Total will take a 12.08% shareholding in Novatek with the intent of both parties to increase the share to 15% within 12 months and to 19.40% within 36 months.

Yamal project overview:

The Yamal LNG project includes the construction of production, storage and loading facilities for LNG based on the resources of the South-Tambeyskoye field. The South-Tambeyskoye field discovered in 1974 is located in the arctic area of the Yamal peninsula.

As of 31 December 2010, the South-Tambeyskoye field’s proved reserves under SEC standards totaled 418 billion cubic meters of natural gas and 15 million tons of gas condensate while the field’s proved plus probable reserves appraised in accordance with PRMS methodologies totaled 802 billion cubic meters of natural gas and 31 million tons of gas condensate. The project calls for the construction of a 15 million ton per annum LNG plant and production capacity for up to one million tons of gas condensate per annum. The project requires investment of $20 billion and launch of the first train of the LNG plant is scheduled for 2016.

Novatek’s chief financial officer Mark Gyetvay said, the company has just completed pre-FEED study on the project and is studying the results to launch the final FEED. Novatek's CEO Leonid Mikhelson earlier said the final front-end engineering design was to be completed in late 2012 or early 2013.

Novatek overview:

Novatek is the largest independent gas producer in Russia and supplies approximately 10% of the domestic market. Its 2010 production reached 37.8 billion cubic meters of gas per year (750,000 BOE/d including condensates). Novatek’s portfolio of resources is made of several giant fields that underlie Novatek’s strong potential for growth. Since 2009, Total and Novatek are jointly developing the Termokarstovoye field.

The 12% stake will be acquired by Total from Novatek’s two main shareholders based on stock market quotations. The transaction is expected to be closed by April 2011 and amounts to approximately 4 billion dollars. Through this acquisition, Total will have access to an equity production of 120,000 BOE/d and to proved and probable reserves of about 1 BBOE.

Russian reserves are powering up the economy!!

Russia is appealing for investors today and this is particularly obvious on the back of events that are going on in the world," Total Chief Executive Officer Christophe de Margerie said, referring to turmoil in Libya that has pushed oil prices to $116 per barrel. He adds saying, “Russia needs our investment and we need its resources.”

Super-majors like ExxonMobil and BP’s invasion into Russia supports Christophe de Margerie’s statement on the investors’ interest in Russia. Here is the list of recent deals in Russia:

Since the beginning of 2011, Russian transactions have accounted for approximately $10 billion out of the total global transaction value of approximately $41 billion.

Novatek expects to choose “more than one” international partner for its Yamal LNG project by the end of 2011; Total is the first to buy interest - Which supermajor will be the Next??

Novatek, which will hold 51 percent of the project, plans to select other participants “soon,” keeping Total as the main partner. Novatek plans to add more major partners are planned, who can help with bringing in finances to the project, and has expertize in marketing and building LNG facilities. Many international majors such as Shell, ConocoPhillips, ExxonMobil and Total, as well as investors from Asia, have expressed interest in the project.

Novatek, initially expected foreign partners for Yamal LNG to be chosen by the end of 2010 but in the middle of the last year Novatek suspended the talks until the government clarifies the tax regime for the gas-rich but remote Yamal Peninsula located in harsh climate conditions of the Arctic. The government has published its plan for the Yamal in late 2010 and is fully supportive for the project.

Yamal LNG plan

Novatek plans to build a 118.5 MMBOE/year LNG plant at Yamal. The governmental program for the project envisages the construction of the first train over the 2012-16 period. The project’s second and third stages are to be built starting 2013 and 2014 and ending in 2016 and 2018, respectively. Decision on if the project would see three trains with capacity of 39.5 MMBOE/year each or two trains with capacity of around 59.25 MMBOE/year is yet to be taken. The company has just completed pre-FEED study on the project and is studying now its results to launch the final FEED likely to be completed in late 2012 or early 2013.

Potential Market

On potential markets for future LNG supplies, company’s chief financial officer Mark Gyetvay said said: “We are looking at all the three markets. We look to the US to a less degree, possibly in the long-term, in the near future we believe the Asian-Pacific market is very attractive, we look at Europe as we think we can be competitive on the European market.”

Novatek expects to send at least one tanker with condensate to Asian markets via a so-called North Sea Route in 2011 to test once again the route, which the company plans to use for supplies of LNG cargoes from Yamal. Last year, Novatek and Russia’s biggest shipper Sovcomflot “successfully” tested the route. The route significantly reduces shipping time in comparison with the Suez Canal, but requires major ice-breakers to take tankers.

For more on Novatek http://docsearch.derrickpetroleum.com/research/q/Novatek.html

For more on Total Novatek deal: http://mergersandacquisitionreviewcom.blogspot.com/2011/03/total-spends-4-billion-for-stake-in.html