$2 - $3 Billion Worth of Eagle Ford Shale Assets Up For Sale as of July 2011

Derrick Petroleum's "Deals in Play' database has recorded $2 - $3 billion worth of Eagle Ford Shale assets for sale as on July 2011. The Eagle Ford Shale is becoming prized property for oil and gas companies in 2011. The shale play area starts at the Texas-Mexico border in Webb and Maverick counties and extends 400 miles toward East Texas. The play is 50 miles wide, an average of 250 feet thick at a depth between 4000 and 12,000 feet, and has high carbonate content making it easier to fracture than other shales. In addition, it is also more liquid rich than other shales. The $/acre of the shale has been increasing rapidly over the last few years due to increasing successes of companies exploring this play. The high present $/acre relative to previous years is also bringing capital to firms who want to sell non-core Eagle Ford assets to focus on their core assets.

The following table from Derrick Petroleum’s ‘Deals in Play’ database shows opportunities available with respect to Eagle Ford assets as on 4 July 2011.

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Table 1: Is an interactive chart/ table showing data recorded from Derrick Petroleum's 'Deals in Play' database. Only deals above $10 million are shown. Net undeveloped acres have been sorted from highest (up) to lowest (down). Subscribers can click on the relevant bar to view detailed information from the database. 

The following table shows recent transactions involving the Eagle Ford Shale for insight into its recent $/Acre.

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Table 2: X axis shows Buyer-Seller. Y axis is deal value. $/acre is given above the bar's in the chart. Data is sorted by month and quarter. Only deals above $100 million in Q1 and Q2 2011 have been shown. Click on the bars for more detail on individual deals.

Analyst Comments
1. Total deal value involving Eagle Ford shales has been among the highest relative to the other US shales.
2. Number of deals involving Eagle Ford shale have been the highest so far in 2011 as compared to other shales (~25 deals), as recorded in Derrick's Deals database.
3. Eagle Ford shale looks set to dominate the deals market for unconventionals in 2011. 

Malta Farm-In Extends Dominion

Dominion Petroleum Limited has entered into an Execution Agreement to acquire a 75% operated working interest in the production sharing contract for Blocks 4, 5, 6 and 7 of Area 4 Offshore Malta from Phoenicia Energy Company Limited, a wholly owned subsidiary of Mediterranean Oil & Gas plc (MOG), pursuant to a draft farm-in agreement. Closing of the acquisition is conditional upon Maltese government approvals and completion of the Placing of the subscription shares.

Under the terms of the farm-in agreement, Dominion will meet certain exploration costs up to a cap of US$1,260,000, on behalf of MOG in relation to its remaining 15% working interest. Dominion will also compensate MOG for a total amount of US$900,000 in certain historic costs, through the non-refundable sum of US$225,000 and a closing sum of US$675,000 under the farm-in agreement. The exploration costs to be paid by Dominion on behalf of MOG is US$0.189 million. The aggregate deal value including the historic costs is US$1.089 million.

The Maltese PSC is situated to the north of Libya, covering an area of 5,715 sq km in Maltese waters. It includes both the Cretaceous rift potential of the Melita-Median Graben and the confirmed Eocene carbonate play of North Africa. According to RPS Energy's report on Area 4, effective March 2006, there are number of prospects identified within the area, of particular interest is the Tarxien prospect, a lower Eocene carbonate build up. The reporat also estimated the prospect to have a gross recoverable un-risked P50 prospective oil resource of 115 MMbbl with an 18% chance of success.

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The work obligations of the current period of the Maltese PSC comprise the acquisition of 1,000 sq km of 3D seismic data and the drilling of one exploration well. The first exploration period is valid until January 2013 and there is a minimum spend requirement of US$5 million. The company anticipates that the 3D seismic survey will cost between approximately US$8 million and US$10 million gross to undertake, which will satisfy the minimum spend requirement. The results of the seismic survey will enable the JV partners to define and evaluate the Tarxien prospect and other identified opportunities within Area 4, prior to any drilling decision. The long-offset 3D will also allow for a clearer analysis of the pre-tertiary rift-fill below the Eocene carbonates and potential Cretaceous targets.

Post transaction the ownership structure in the blocks will be: Dominion Petroleum (75%, Operator), MOG (15%) and Leni Gas & Oil (10%).

SOURCE DOCUMENTS:

Malta-Dominion Farm-in Announcement

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Rosneft and Lukoil team up to jointly explore Arctic shelf

Rosneft will open its licencing zones to Lukoil off of Russia's oil-and-gas-rich Arctic Yamal peninsula.

Given the successful development of their mutual cooperation, and with the goal of raising the profitibility of existing projects, Rosneft and Lukoil have agreed to join forces in the following areas:

• Oil exploration & development, development and transportation of hydrocarbons in the license areas of the Nenets Autonomous District;
• Exploration in the areas licensed to Rosneft on Russia’s Arctic shelf and development of fields that are already open, within the framework of current Russian legislation;
• Development of the market for domestic petroleum products, petrochemicals, gas processing and base oils;
• Joint marketing of associated and natural gas from fields in the Bolshekhetskaya and Vankor zones;
• Joint deliveries of petroleum products, liquefied gas and petrochemical products to the distribution and production facilities of both companies;
• Development of solutions for improving production efficiency for petrochemical products, oil and gas, in Russia and abroad;
• Use of existing logistics infrastructure, including transshipping facilities for crude oil, refined pretroleum products and petrochemical products that are for export; and development and execution of transportation infrastructure projects for petroleum products, including the construction of a product pipeline interconnecting with the "Moscow product ring," and the "South” project.

This marks Lukoil's first offshore deal in Russia since launching the Korchagin oil field in the Caspian Sea last year, Lukoil is also venturing out of Russia, actively seeking US shale gas opportunities (Lukoil planning shale JVs in 2011). Rosneft has been aggressively partnering with foreign majors including BP, Chevron and ExxonMobil for developing its offshore fields.

Key projects of Rosneft and Lukoil:

1. Joint transportation of gas from the Vankor field and the Bolshekhetskaya Depression.
On 12 April 2011, Lukoil and Rosneft signed an agreement, under which Rosneft will independently transport gas from the Vankor field and adjoining license areas to Lukoil’s infrastructure. In turn, LUKOIL will transport gas through its facilities to Gazprom’s gas transportation system. At present, Lukoil and Rosneft are building their own gas pipeline sections and infrastructures.

2. Priazovneft
Rosneft and Lukoil each own a 42.5-percent stake in Priazoneft.  The Administration of the Krasnodar Territory owns the remaining 15 percent. Priazovneft is developing the Temryuksko-Akhtarsk license area on the shelf of the Azov Sea. In 2008, the “New” oil field was opened. The field’s recoverable reserves are: Oil: C1 - 0.87 million tonnes; C2 – 2.25 million tonnes; Gas: C1 – 319 million m3; C2 - 820 million m3. Seismic work is currently underway.

3. Caspian Oil Company
Rosneft and Lukoil each own 49.9 percent of the Caspian Oil Company; Gazprom owns the remaining 0.2 percent. In 2008, the West-Rakushechnaya field in the north-Caspian area was opened. In 2010, an assessment well was drilled at the Ukatnaya structure. Open non-industrial deposit.http://docsearch.derrickpetroleum.com/research/q/Rosneft.htmlhttp://docsearch.derrickpetroleum.com/research/q/Rosneft.htmlhttp://docsearch.derrickpetroleum.com/research/q/Lukoil.html

Parex acquires remaining interests in four Colombian blocks from Remora Energy for $255M

Parex Resources Inc has entered into a definitive agreement to acquire Columbus Energy Sucursal’s (a wholly owned subsidiary of Remora Energy) 50% share in four Llanos Basin blocks for total consideration of $255 million, subject to customary adjustments. Parex already holds the remaining 50% interest in the blocks. The acquisition is effective January 1, 2011 and is expected to close no later than June 29, 2011.

Acquisition Highlights :
-- Increases working interest from 50% to 100% in each of the four Llanos basin blocks namely, LLA-16, LLA-20, LLA-29 and LLA-30.
-- Block LLA-16: This block covers an area of 78,772 net acres and holds Kona multizone light oil discovery (35 degree API oil). In 2011, Parex expects to drill six appraisal/development wells on Block LLA-16 at the Kona discovery, of which two wells have been drilled and cased to date. Effective, March 31, 2011, it holds Proved Reserves of 1.066 MMbbl, 2P Reserves of 5.2 MMbbl and 3P Reserves of 9.6 MMbbl. Current production from the discovery is 1,160 BO/d. The block also holds few exploration prospects - Java, Sulawesi, Moragogi and Merida.
-- Exploartion activities are on going in Block LLA-20, LLA-29 and Block LLA-30.
-- The GLJ Report, effective March 31, 2011, included future development capital of $24.2 million for 2P reserves and $34.6 million for 3P reserves.
-- Acquisition metrics (excluding future development capital): 2P Reserves - $49.42/BOE and 3P Reserves - $26.48/BOE.
-- As of December 31, 2010, NPV-10 of 3P Reserves - $239.105 million and NPV-10 of 2P Reserves - $149.321 million.

Source: Derrick Petroleum E&P Transactions Database

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2011 dealmaking off to a good start in Q1

In Q1 2011 Global upstream M&A activity totalled $52.4 billion in 174 transactions. That was down 37% from the record set in Q4 2010 of $84 billion, but still sets the pace for a second straight year of more than $200 billion in deals. 


North America emerged as the most active region for deal making, followed by FSU                 North America again led the way with 112 transactions totalling $21.2 billion, for 41% of global deal value. The Former Soviet Union ranked second with 12 deals totalling $15.4 billion. Asia saw $7.5 billion and Africa $6.8 billion. Deal making was relatively quiet elsewhere with announcements for Australia, Middle East, Europe (and the North Sea) and totalling less than $1 billion. Transaction value in South America dropped to $1.1 billion in Q1 from a record $23.5 billion in the prior quarter.

Russia led all countries with $14.7 billion of value changing hands

Russia led all countries with $14.7 billion of value changing hands in six transactions, followed closely by the US at $12.8 billion in 67 deals. Canada was third with $8.3 billion in 45 transactions. Three fourths of the value was in the 10 largest transactions, which totaled $39.3 billion and involved 18 companies from 12 countries, reflecting the diversity and competitiveness in upstream M&A. 


BP shifts to growth mode in 2011, did two major acquisition
National oil companies continued to play a prominent role, active in five of the eight largest transactions. BP was in the two biggest deals, leveraging its expertise to work bold deals with India’s Reliance and Russia’s Rosneft for offshore exploration and development stakes. In India BP took a 30% interest in 23 Reliance-operated offshore PSCs for $7.2 billion and formed a 50:50 joint venture with Reliance to source and market natural gas in India.

Rosneft and BP announced a $7.2 billion share swap and an agreement to jointly develop three highly prospective arctic blocks covering 48,000 sq mi in the Kara Sea, roughly equivalent to the prospective area of the UK North Sea. Slighted TNK-BP shareholders sued to stop the deal, Stockholm TNK-BP ruling puts BP Rosneft deal on ice.

CNPC signed the largest shale gas JV till date

In the largest shale-gas JV to date, Chinese major CNPC committed $5.4 billion to a 50:50 venture with Encana to develop Encana’s Montney shale play and other assets in the Cutback Ridge area in western Alberta and eastern BC. That positions CNPC as a potential LNG exporter from Canada’s West Coast.

In other Canadian shale action, South African synfuels major Sasol doubled up on its $1.1 billion Montney JV with Talisman in late 2010, announcing a second $1.1 billion Montney JV with Talisman just 25 miles north of the first.

BHP made its first move into North American unconventional plays

In the US, BHP snatched up Chesapeake Energy’s Fayetteville shale assets for $4.7 billion in the Australian resource giant’s first move into North American unconventional plays. Until now BHP’s US focus has been almost entirely on the deepwater Gulf of Mexico. China’s CNOOC Ltd kicked off what could be a spate of Niobrara JVs with a $1.3 billion deal involving Chesapeake, at $4,700/acre. Korea’s KNOC closed out the quarter with a $1.5 billion Texas Eagle Ford JV with Anadarko for liquids-rich acreage, setting a new benchmark of ~$13,000/acre for that play. In corporate-level M&A, there was a continued brisk pace of equity sales or swaps. Abu Dhabi’s state-owned International Petroleum Investment Co bought an added 53% in Spain’s CEPSA from Total for $5 billion. Undeterred by Russian politics, Total moved to buy a 12% stake in Yamal LNG operator Novatek for $4.1 billion, with an option to go to 19% within 36 months. Total simultaneously announced the acquisition of a 20% stake in the Yamal LNG project, which targets first output in 2016 and a potential 15 MMmt/yr of LNG. In other Russian deals, ConocoPhillips sold its remaining $1.2 billion equity stake in LUKoil in an ongoing restructuring effort.

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Oil or gas?

Gas-related transactions in Q1 totaled $26.3 billion for half of transaction value. Oil deals were $22.6 billion for 43%. Deals with a mix of oil and gas were only 6%, their lowest share since 2009. This may reflect company efforts to rebalance portfolios from one commodity to the other.

Top 20 deals in Q1 2011

Source: Derrick E&P Transactions Database

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For more on 2010 M&A trends, look at Global E&P Transaction Review 2010