Shell offers a significant premium for Cove

Shell has offered to acquire Cove Energy Plc, a British oil and gas explorer, for approximately $1.6 billion within one and a half months after Cove Energy was put up for sale. Shell subsidiary Shell Bidco has offered £1.95 per (US$3.08) Cove share, valuing the company at £992.4 million (~US$1.57 billion). After accounting for Cove’s working capital surplus of $172.8 million, the deal value comes to ~$1.4 billion.  Continue reading here..

Shell has signed a definitive agreement to acquire 50% interest in Blocks 2-3, Albania from Petromanas Energy Inc in exchange for payments and carried costs up to $50.3 million. Petromanas will remain as the operator with 50% interest. Continue reading here..

Low US gas prices: Shell, ConocoPhillips, Talisman, Chesapeake to lower exposure

Shell plans to cut down on its exposure to U.S. natural gas prices and increase investment for oil rich shales marking its shift to an oil focused investment. This comes in the wake of low U.S. natural gas prices which have dropped to a 10-year low, while oil prices gained 40 percent in the past two years.  Continue reading here..

Huge Potential for Shale Gas in China

According to the US Energy Information Administration, China holds the largest reserves of shale gas in the world, enough to supply China for more than 300 years. There’s no current commercial production of shale gas in China, but several companies have exploratory projects underway, including Sinopec, PetroChina, Royal Dutch Shell, BP and Chevron. Continue reading here..

Shell joins Total and ConocoPhillips in Divesting Canadian Assets

PetroChina Company Ltd has entered into binding agreements to acquire 20% interest in Shell’s Groundbirch assets, located in Northeastern British Columbia. Continue reading here..

Has Centrica Bagged a Discount Bargain in Statfjord??

In the deal announced today, Centrica has acquired Reserves estimated at 36 MMBOE for a consideration of $223 million, which yield an effective $/2P BOE of $6.19. This metric is approximately 20% lower than the one seen in the Centrica – Shell deal of Sep-2010 at $7.85 ($225 million for 28.67 MMBOE). Continue reading here..

Shell, Chevron and other large oil companies Arctic-ing towards Pole position

Major companies such as Shell, Chevron, Total, Repsol, Statoil, Novatek and Cairn, amongst others have been expanding their exploration activities in and around the Arctic Sea. Continue reading here..

Shell opts out of Mackenzie Gas Project in Canada

Shell is looking to divest its interest in the Mackenzie Gas Project which consists of
      a. Development of one of 3 natural gas fields in the Mackenzie Delta region, and its production facilities, that is planned to be tied into the Mackenzie pipeline; Taglu (Imperial Resources Canada 100%), Parsons Lake (ConocoPhillips 75% and ExxonMobil 25%) and Niglintgak (Shell Canada 100%). Approximately 6 Tcf of natural gas has already been discovered in the three fields.
     b. A gathering pipeline system
     c. A gas processing facility near Inuvik (the Inuvik area facility)
     d. A natural gas liquids pipeline from the Inuvik area facility to Norman Wells
     e. A 11.4% stake in the long delayed, 1,196-kilometre natural gas pipeline from the Inuvik area facility to        northwestern Alberta.

The Niglintgak natural gas reservoir is located at the southern end of the Niglintgak Island in the Mackenzie Delta, about 120 km northwest of Inuvik and about 85 km west of Tuktoyaktuk. Niglintgak is held 100% by Shell Canada. The field holds 1 Tcf of gas, and according to regulatory filings, its development would cost C$800 million. Subject to regulatory approval, drilling activities could begin in the winter of 2011. Drilling is expected to take three winters. Based on this schedule, production of natural gas would begin in 2014. The estimated operational life of the Niglintgak field is estimated to be about 25 years.

Derrick values the upstream portion of the deal to be between $300 - $350 million. The 1 Tcf of recoverable reserves is valued at $1.8 - $2 /BOE. This metric is based on a similar deal in the region involving MGM Energy and KOGAS in Dec 2010, where the contingent resources of the Umiak SDL 131 field was valued @ $2/BOE. The gas from the Umiak field is also to be tied up with the Mackenzie Valley Pipeline.

The Mackenzie pipeline has hit many delays and questions are being raised about its economic viability, given the abundance of shale gas that is being developed in North America, high construction costs and low gas prices. However, the chief executive of Imperial Oil, the lead partner in the project, has affirmed that they are still committed to going forward with the pipeline project. It is planned that the pipeline will carry 1.2 bcf of gas daily. Shell says it wants to focus on other opportunities.

Buyers have until August 31 to make their bids.

Shell Canada also recently announced they are looking for a JV partner to develop its Nikanassin Play in its Chinook Asset in Canada’s Deep Basin.

Shell Canada Seeks JV Partner to Develop its Canadian Deep Basin Nikanassin Play in its Chinook Asset

Main Features

a.       Shell Canada is seeking a JV partner to develop its Nikanassin Play in its Chinook Asset and has engaged TD securities as its exclusive financial advisor.

b.      Offering 25 – 50% equity in its lands to JV partner.

c.       Seeking cash with a capital component.

d.      Level of carry is a function of term and working interest acquired.

e.      Term is anticipated to be 3-5 years.

Figure 1: Map location of the Chinook Asset. Source, TD Securities.

Chinook Asset Summary

a.       Located in Deep Basin of Western Canada (See Figure 1)

b.      Average Shell working interest is ~ 90%

c.       Area covers ~ 102,000 mostly undeveloped gross acres

d.      Resource potential is large with 12 Tcf OGIP with Shell estimated recoverable resource > 4Tcf

e.      Shell has invested in infrastructure and facilities  resulting in lower operating costs (as low as $0.55/Mcf)

f.        Currently producing ~ 35 MMcf/d with plans to ramp up to 150 MMcf/d by 2015 and possibly 250 MMcf/d or higher.

Nikanassin Formation Summary

a.       Present across the deep basin with gas trapped in stratigraphic and structural settings.

b.      Thick, stacked siltstone – sandstone reservoir sequence

c.       OGIP of 60 – 80 Bcf/ Section is higher than all other area formations 

Nikanassin compared to other North American shales by TD (Broker)

Figure 2: Comparison of various parameters between the Nikanassin and other similar unconventional plays. Source, TD Securities. 

Benefits for JV partner

a.       Shell is a major player with extensive capabilities and experience in unconventional plays.

b.      Reduced drilling costs by 50%

c.       50% reduction in drilling time

d.      40% reduction in completion costs

e.      Prior investment capital has already flowed into project.

Shells Current Activity at Chinook Asset

a.       Drilled three horizontal wells in Q4-2010, all tied in and initially producing > 5 mmcf/d

b.      Completed drilling first syncline well in Q1-2011 (Figure 3) which is awaiting completion and tie-in Q2-2011

c.       Plans to drill second syncline well and four development wells in remainder of 2011

Figure 3: Subdivision of the Nikanassin play according to Shell. Source, TD Securities. 

Recent activity by other operators

Source, TD Securities. 

Analyst Comments

Derrick estimates the value of this deal to be between $25 - $100 million assuming a 50% JV based on acreage metrics from the June 2011 activity land sales published by the Canadian government.

Shell divests 20% stake in BM-S-8 for $350 million. Looks to farm out or divest additional blocks in Brazil

Barra Energia agreed to acquire 10% stake in the largest block in pre-salt area, Block BMS-8, from Shell, which currently owns a 20% participation in the area. The chief executive of Barr Energia, Joao Carlos de Luca, said that the company acquired the stake for $175 million. The other 10% was acquired by Queiroz Galvao Exploration and Production, which paid the same amount for joining the consortium that operates the block.

The block is located offshore in the Santos Basin in water depth of approximately 2,100 m. Petrobras is the operator of the block with a 66% working interest while Galp holds a 14% working interest. BM-S-8 includes two discoveries Bem-te-vi and Abare W and four prospects. The expected gross capital expenditure in 2011 is US$250 million and in 2012 is US$200 million.

Trend of M&A activity in Brazil

South America is emerging as a growing player in the oil and gas industry. With discoveries of new reserves across the continent, Brazil, Venezuela, Colombia, Chile, Peru and Argentina all look set to prosper. South America accounted for 17% of the total deal value in 2010, whereas it was not exceeding 5% in the last four years. In terms of major discoveries, Brazil has become a leading country in world rankings with oil reserves estimated to be around 26.9 billion barrels. This figure includes the Brazilian pre-salt discoveries that are revolutionising the oil & gas market in South America currently, with a number of major offshore investments taking place.

The following graph shows the trend of M&A activity in Brazil since 2007.

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Shell- Looks to restructure non-core Brazilian assets

Shell in the past one year was acquiring new assets across United States, Australia, China, Africa and none in Brazil or South America. Also, according to Shell's June 2011 presentation, the company’s investment plan in Brazil is only towards BC-10 which includes five fields Ostra, Abalone, Argonauta B-West, Argonauta O-North and Nautilus. It is observed that Shell is looking to restructure the other Brazilian assets.

Earlier in August 2010, Shell initiated a process to sell its stake in four offshore oil blocks in Brazil as part of their portfolio review. The blocks put up for sale included: BS-4, BM-S-8, BM-S-45 and BM-ES-28. In addition to Shell, Chevron, Petrobras, Petrogal and Vale also own stakes in these blocks. The sale remains pending with the remaining three blocks.

This sale represents an exciting opportunity to the interested companies to enter Brazil’s offshore oil frontier, where no new exploration and production concessions have been put up for bid by the government since the presalt oil discoveries were made in 2007.


The following map shows the acquisitions made by Shell in the past one year

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Note: The data used for obtaining the above graph and the map is sourced from Derrick Petroleum Database.

Source Documents:

Bm s-8 overview

View more presentations from derrick_anitha

US O&G Majors' Presentations in May - June 2011

BP:
China's Energy Future

ConocoPhillips:
Investor Update - June 2011
UBS Energy Conference

Chevron:
Australasia Overview - June 2011

Anadarko:
2011 Energy Capital Markets Energy & Power Conference

Devon Energy:
Annual Meeting - June 2011

Shell:

Credit Suisse European Oil & Gas Conference

Chesapeake:
June 2011 Investor Presentation

2011 Annual Meeting of Shareholders

Occidental Petroleum:
2011 UBS Global Oil & Gas Conference

EUROPE O&G Major's Presentations - 2011

Statoil:
Morgan Stanley Gas Conference 2011

Field development on the Norwegian continental shelf
Market Outlook for Natural Gas

ExxonMobil:
Business Model & Fundamental Strategies 2011
Goldman Sachs Global Energy Conference 2011

Shell:

CREDIT SUISSE EUROPEAN OIL & GAS CONFERENCE
CreditSuisse Brazil Oil Trip 2011

ENI:
2011-2014 Strategy

ConocoPhillips:
Investor Update June 2011
UBS Energy Conference May 2011

2011 Annual Meeting of Stockholders
Investor Update May 2011

BP:
China's Energy Future
BP Energy Outlook 2030

UK O&G Majors' Presentations - 2011

BP:
China’s energy future
2011 Statistical 60 Years Review


Shell:
March 2011 Investor Presentation
Goldman Sachs London 2011
Credit Suisse Energy Summit 2011

ExxonMobil:
2011 Analyst Meeting
2011 Business Model & Fundamental Strategies

ConocoPhillips:
Investor Presentation - June 2011
Investor Update - May 2011
2011 Annual Meeting of Stockholders
UBS Energy Conference 2011


TOTAL:
2010 Results and Outlook

Centrica Plc:
Annual General Meeting 2011

BG:
2011 Strategy Presentation

Nexen:
UBS Oil & Gas Conference
Investor Roadshow - May 2011
2011 Annual General Meeting

Chevron:
Tengiz Field Trip 2011
Eurasia Business Unit Overview
2011 Tengiz Field Trip - Europe, Eurasia and Middle East

ENI:
2011-2014 Strategy Presentation

Shell acquires ~A$2 billion worth stake in Wheatstone LNG project from Chevron!

Chevron has signed agreements with Shell regarding the A$30 billion Wheatstone Project as a natural gas supplier and equity participant. Under the unitization agreement with Chevron's Australian subsidiaries, Shell will assume an 8% participating interest in the Wheatstone and Iago natural gas fields in the Chevron-operated permits WA-253-P, WA-17-R and WA-16-R, located offshore northwest Australia. The Wheatstone and Iago gas fields will supply Trains 1 and 2 of the Wheatstone Project, located onshore at Ashburton North in Western Australia. Shell will also assume a 6.4% participating interest in the project facilities, with Chevron remaining project operator with 73.6% stake. Financial terms weren’t disclosed. However, the media sources are estimating the value of the stake to be around A$2 billion.

Source: Chevron Mar 2011 PPT

The front-end engineering and design activity on the Wheatstone Project is nearing completion. A final investment decision is expected in the second half of this year once environmental approvals and other associated agreements are finalized with various levels of government. The first phase of the Wheatstone Project consists of two LNG processing trains with a combined capacity of 8.9 MTPA and a domestic gas plant. The project is expected to come online in 2016.

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Asian customers for Wheatstone LNG!!

Apache and KUFPEC hold 13% and 7% stake, respectively, in the project. Chevron Australia managing director Roy Kryzwosinski said Chevron planned to divest more equity in Wheatstone to its foundation customers, including KOGAS and TEPCO, but its interest would never fall below 50%. Chevron is in negotiations with its Wheatstone customers TEPCO, KOGAS and Kyushu Electric, which are also set to take equity stakes in the project, said Chevron's spokeswoman. The three Asian LNG buyers have inked deals to lift 4.1 million mt/year, 1.5 million mt/year and 700,000 mt/year of Wheatstone LNG respectively.

Asians hunger for LNG will continue!!

The Asian spot LNG prices settled at $11.6/MMBtu in the last week of March 2011. Approximately 60% of the global LNG is delivered to the Asian markets. The Wheatstone project notably has three Asian customers (nearly 80% equity LNG under contract). With the high LNG prices and strong Asian market conditions, the project is in a robust state!! In addition, Shell's entry into the project will speed up the project's development pace. 

The following snapshot shows the LNG deals of 2010-

Source: Derrick Petroleum E&P Transactions Database

Conoil wins $650 million bid for SPDC’s Nigeria OML 30!! Shell to continue divesting Nigeria blocks.

Nigeria's billionaire business mogul, Dr. Mike Adenuga Jnr, has won Shell's most prolific onshore oil block, OML 30, located in the Niger Delta. Adenuga's Conoil Producing had submitted a bid of $650 million for each of OMLs 30 and 42. Adenuga's acquisition covers Shell's 30% stake; Total's 10% interest, and Agip's 5% stake in OML 30. OML 30 is currently producing 45,000 barrels a day. According to a report by Africa Energy Intelligence, OML 30 has 350 million barrels of proven reserves.

Source: Shell Mar 2011 Investor PPT

Shell previously said it is looking to divest $5 billion in assets this year and has sold $30 billion in assets over the past five years. Shell's recently sold its stake in Niger Delta license OML 40 to Elcrest E&P Nigeria, and said it expects to conclude the sale of its stakes in two more onshore licenses soon.

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Shell, which has already sold four of its onshore licenses in the country, launched the process to offload its 30% stakes in OMLs 30, 34, 40 and 42 last year. The licenses were said to be valued at around $4 billion. The sales are part of a Shell plan to reduce its footprint onshore Nigeria, where militant attacks and oil theft have slashed the company's output since 2006. The decision to sell assets in Nigeria is also in line with the government's plan to promote indigenous participation in the industry. Essar offered $800 million for the stake in OML 30. Other bidders were said to be: Afren ($755 million); PanOcean ($750 million); Conoil ($650 million); African Petroleum ($515 million); and Oando ($450 million).

More Nigerian pieces up for grab!!

Source: Derrick Petroleum E&P Transactions Database

Shell plans to drill 17 exploration wells in China!!

Shell plans to spend about $1 billion annually over the next five years on the shale gas projects in China and plans to drill about 17 wells, including probes for tight gas and shale gas, in regions including Sichuan, China’s most prolific gas province.

• Inspired by the massive success of unconventional gas – coal seam methane, tight gas and shale gas – in the US , China over the past year embarked on an exploration campaign for shale gas, part of Beijing’s goal to boost use of cleaner burning fuel and cut coal.
• China does not have any shale gas production yet, but Shell has a rough target to pump some 10 per cent of its total gas output from shale gas by 2020.
• Petrochina and Shell drilled the first evaluation well on the Fushun block in the Sichuan province of southwestern China. The Fushun block occupies an area of about 4000 sq km. 

Please try our new free document search tool: www.derrickpetroleum.com

This happens to be the first joint shale gas development project signed by the two companies with an intention to explore the untapped resources in China.The project is expected to assess China’s shale gas potential and capture the unconventional source of cleaner-burning fuel to meet that country’s increasing demand for fuel.

This is not the first time when PetroChina and Shell jointly landed on a gas development project in China. They also share a deal at Changbei natural gas field in the Shaanxi province of China. Also, Just a year ago, Shell and China National Petroleum Corp (CNPC), parent of PetroChina, signed a 30-year deal to develop another tight-gas block in Sichuan province.

China lags the U.S. in terms of development of shale gas, which is a foremost contributor to future energy mix. Will US's success in the unconventionals be replicated by China? .... its too early to comment!!! 

Eagle Ford Shale - the next big thing on the global exploitation map!!!!

Eagleford shale play extends about 400 miles across South Texas in a 50-mile-wide band, from the Mexican border, below San Antanio and up into East Texas. Some of the world’s biggest oil companies – including Shell, BP, Statoil and CNOOC – recently have entered the Eagle Ford and are helping to put it on the global energy map with aggressive exploration drilling planned for coming years. In 2010 in the Eagle ford, about 1,018 drilling permits were issued through November, which means that this area is definitely the next big thing to look out for. Not only the drilling permits issued in number increased but also the number of rigs have increased in number.

EOG, in 2010 averaged seven rigs in the Eagle Ford and drilled 110 wells. This year, it expects to have 14 rigs and drill 256 wells. Chesapeake, the largest leaseholder with 625,000 acres, also expects to double the dozen rigs it has working in the area. Petrohawk Energy also expects to spend more than twice as much as it did in the region in 2010. And ConocoPhillips, another major leaseholder, just leaped from seven to 11 rigs in the region.

Why Eagle Ford ?

What makes this shale play different is that it produces oil, condensate, gas and finally drier gas as drilling proceeds down dip. The carbonate content (up to 70% calcite) of the shale makes it very brittle and easily fractured during stimulation treatments, resulting in impressive production figures of both oil and gas. 

What are others thinking?

• EOG Resources, one of the major players in the Eagle Ford shale, is planning to drill about 250 wells in the area in 2011. 
• Rosetta Resources has allocated 90% of its $360 million budget for its activities in this area.
• Due to lower natural gas prices companies are focusing more on the upper, oil laden section of the Eagle Ford. Since the price of oil is high due to international demand, the upper side of the shale is where much of the new drilling activity in 2011 will take place.

There has been a huge increase in the demand for this acreage , from about $100 to $200 per acre in 2007 to more than $10,000 per acre at present, which signifies that the companies are confident to reap huge profits from this area!

Following the footsteps......

• Like other companies, Anadarko is focusing more on its liquids-rich Eagle ford acreage where it has increased the average estimated ultimate recoveries of its existing wells to more than 450,000 barrels of oil equivalent per well in the liquids-rich Eagle Ford shale.

• The Company plans to double its drilling activity at these assets with more than 200 wells planned for 2011.
• With $5.6 to $6 billion as capex for 2011, about $3.19 billion seems to be allocated to US onshore.
• The Company estimates to spend $5 to $5.5 million per well which totals up to about $1.05 billion to drill 200 wells in the Eagleford.

How Long Will Eagle Ford Shale Oil Wells Last?

What makes Eagle ford shale play the most sort after thing these days is its wide expanse and the ability to drill essentially “risk free”oil wells in a time when bankers are reluctant to lend any oil company money for exploratory drilling.  With the vast amount of infill drilling that will occur as the play is exploited we may see more than a couple of decades worth of production.

Shell 2011 Strategy Update Presentation

http://docsearch.derrickpetroleum.com/pageNav/view1/docId/11239-0000/Shell_2011_Analyst_webcast_presentation_slides.html

Shell to spend $5 billion over 5 years on China shale gas. Unconventional gas fever spreads across US, Europe and now in China…

Shell aims to spend $1 billion a year on shale gas in China over the next five years if its exploration work currently underway proves to be a success. "It’s too early to say that shale gas is game changer in China but I have great expectations. We are drilling 17 wells this year in regions such as southwestern Sichuan province. That will give us a sense of magnitude of what's available here," said Shell chief executive, Peter Voser. China does not have any shale gas production yet, but has a rough target to pump some 10% of its total gas output from shale gas by 2020. "If we are successful, we are aiming to spend $1 billion a year over the next five years on shale gas," Voser said, adding that Shell was already spending $400 million on unconventional gas in China this year.

Chinese shale gas exploitation speeds up!!

China will start the bidding for eight shale gas blocks located in Guizhou, Chongqing, Anhui and Zhejiang in this year, and each block covers an area of 6,000-7,000 sq km, according to Zhang Dawei, deputy director of the Oil and Gas Resources Strategy Research Centre under the Ministry of Land and Resource (MOLR). According to MOLR’s Oil & Gas Research Centre, China is aiming to increase its shale gas reserves to 1 trillion cubic metres by 2020. The government is also expected to introduce new policies to encourage shale gas exploration, including the reduction or exemption of royalties and import tariffs and value added tax for the import of key equipment needed for shale gas exploration, according to Zhang.

Zhang has revealed that more companies, such as Sinochem Group, Xinjiang Guanghui Group and Zhenhua Oil Co Ltd, that have experiences in overseas petroleum and gas exploration are added in the bidders list. The participation of these private companies will break up the monopoly of state-owned enterprises like PetroChina, Sinopec, CNPC and Shaanxi Yanchang Petroleum in this market.


Shell’s presence in China is marked by these transactions

Just a year ago, Shell and CNPC signed a 30-year deal to develop another tight gas block Jinqiu in Sichuan province. Shell recently started drilling two shale gas exploration wells in Fushun Block in Sichuan province. ConocoPhillips will soon finalise terms with PetroChina for a shale gas production sharing contract for a block close to Statoil’s acreage. Also, Sinopec is in talks with BP and Chevron about potential co-operation. Not only the local private companies are interested in exploiting these Chinese shales, but also industry majors like ConocoPhillips, Statoil, etc.,

Shell Australia to sell down its remaining 24.27% stake in Woodside Petroleum worth approximately $8 billion; Is Shell losing interest because it is unable to acquire Woodside completely???

SHELL Australia chairwoman Ann Pickard says “We hoped Woodside would be the vehicle (to develop projects in Australia)  but when it became clear Woodside couldn’t be the vehicle we decided to develop our own projects”.  

Woodside holds interests in oil and gas assets in Australia, the Gulf of Mexico, Korea, and Brazil. Woodside’s principal assets in Australia include: Pluto LNG, Browse LNG, Sunrise LNG, North Rankin Redevelopment and North West Shelf Oil FPSO Replacement Project. 

The key highlights of Woodside include:

-- Woodside’s share of production for the quarter ended 31 Dec 2010: 17.688 MMBOE (Oil 41%)
-- 2010 year end reserves: Proved - 1.308 MMBOE, Proved plus Probable (2P) - 1.680 MMBOE (Gas-84%) and contingent resources - 1.814 MMBOE
-- 99% of 2P Reserves are in Australia and remaining 1% in GoM and other international areas.