Companies showed less interest in Alaska Cook Inlet lease sale; “Oil depleted only natural gas available” - Is this the impact of low gas prices globally???

The US Interior Department has cancelled leasing offshore tracts in Alaska's Cook Inlet that was tentatively scheduled for later this year. So-called lease sale 219 was called off because of lack of sufficient interest by energy companies to search for oil or natural gas in the area. Cook Inlet sale 219 was scheduled to occur under the government's revised 5-year offshore drilling plan for the 2007-2012 period. The last oil and gas lease sale in federal waters of the Cook Inlet was held in 2004, and no qualifying bids were received.

There are currently no active federal leases in the Cook Inlet. The only federal leases that were the subject of recent development activity were those in Pioneer Natural Resources' Cosmopolitan field, located near the city of Homer. The site has oil reserves that were discovered in the 1960s, and has been drilled in recent years from shore. But Pioneer in January announced that it was abandoning Cosmopolitan.

Cook Inlet, the channel that runs from the Anchorage area south to the Gulf of Alaska, is home to Alaska's oldest producing oil and gas basin. With oil reserves mostly depleted, development in Cook Inlet in recent years has focused on natural gas. 

Only LNG facility in the region getting closed

ConocoPhillips and Marathon Oil in February announced that they will close their liquefied natural gas plant in Kenai, which has been the single largest user of Cook Inlet natural gas. The plant, scheduled to close this spring, is the only LNG export facility in the United States, and has been operating since 1969, shipping product to utilities in Tokyo. ConocoPhillips and Marathon said they were unable to win renewal of their contract with Japanese customers.

Gazprom finally grabs Kovykta for $771 million!!! Is Kovykta there in Gazprom’s near term development list??

Gazprom has acquired the assets of RUSIA Petroleum for about 22.6 billion rubles ($771 million), or 50% more than the auction starting price. RUSIA Petroleum, 62.7% owned by TNK-BP, is the operator and the license holder for development of the giant East Siberian Kovykta gas field. Gazprom outbid Vostokgazinvest, a subsidiary of the Rosneftegaz, which holds the Russian government's stake in Rosneft.


Kovykta Overview
The Kovykta field, discovered in 1987, is one of the largest undeveloped gas fields and situated 450 km from Irkutsk, in the northern part of the Irkutsk Region. The reserves of this field amount to 2 trillion cubic meters of gas and more than 83 million tons of gas condensate. TNK-BP controlled the Kovykta gas field for some 15 years and intended to supply gas from the field to China. However, the Russian authorities started asserting greater control over natural resources and dropped their previous plans to liberalize access to Gazprom's pipelines, which would have provided an outlet for Kovykta's gas to market.

The government threatened to revoke the Kovykta license from TNK-BP for low production levels, and the firm finally decided to quit the project in 2007. In 2007, Gazprom signed an agreement to buy a 62.8% stake in RUSIA Petroleum to take over the Kovykta field, but the deal was remained uncompleted until now over the price. In October 2010, a Russian regional court declared RUSIA Petroleum bankrupt since it had failed to adhere to the terms of the license agreement, under which it should produce nine billion cubic meters of gas annually. TNK-BP has invested $675 million in Kovykta field till date.

Is development of Kovykta possible in the near future?

Rusia Petroleum began pilot commercial exploitation and construction of infrastructure for commercial development of the field in 2001. During 2008 the company produced 38.6 million cubic meters of gas at the field. The gas it produces is being consumed by residents and businesses in Irkutsk Oblast as part of the first phase of a program to extend gas supply to the region. Commercial development of the Kovykta field will make it possible to realize the program for gas service to Irkutsk Oblast and export gas to countries of the Asia Pacific Region. Once Kovykta enters full exploitation, the field is expected to produce more than 30 billion cubic meters of gas per year.

However, in October 2010 Gazprom chief Alexei Miller said “Gazprom wouldn't want to develop the Kovykta field until 2018”. Analysts comment on the deal saying, "Gazprom could tap the field as a source for its own supply agreement with China as Gazprom faces mounting pressure to reach a deal after years of failed talks. China had made clear they wanted Russia to supply via an eastern route and Kovykta is in the best position to supply."

To meet this China gas demand, will Gazprom go in for an early development of Kovykta or stick to its 2018 development plan??

Goodrich Petroleum reported annual year 2010 results; Production up 13% over 2009; Plans to invest $235 million in 2011 with 62% of CAPEX allocated to Eagle Ford Shale Trend

Goodrich reported 13% increase in 2010 production over the last year to 8.9 bcf, or an average of 97,100 Mcfepd. Production from the Haynesville Shale comprised 51% of 2010 production for the year. Oil production increased approximately 4% of total production on an Mcfe basis.

Production volumes in 2011, after factoring in the recent divestiture of Cotton Valley Taylor Sand, are now expected to grow by 10 - 20%. Oil volumes are expected to grow in excess of 400% over 2010, comprise 12 - 17% of total volumes, and exit the year in excess of 3,000 barrels per day.

Keypoints:
2010 year-end reserves up 10% to 464 Bcfe compared to 2009. Production up 13% Year-Over-Year to an average of 97,100 Mcfepd.

2011 budget of $235 million with 62% of capex allocated to Eagle Ford Shale trend

Vertex to shell out $120M for Shell's Niger Delta block

Vertex Energy made Shell an offer it could not refuse for the acquisition of swamp Block OML 40, effectively removing the licence from a list of four currently under auction in the supermajor’s second divestment programme. OMLs 30, 34, 40 and 42, all in Delta State, were offered by Shell in one of the most volatile areas of Nigeria’s oilpatch, attracting 18 consortia comprising Nigerian and international companies. OML 40 was one of the least prospective and it is understood a bid of more than $120 million swung the Vertex deal. For the remaining blocks bids have been received and   a bids qualification round was scheduled later this week in which suitors would have an opportunity to tweak their bids and convince Shell of their financial capacity and corporate social responsibility commitment before formal sales and purchase awards expected at the weekend.

Probable winners for the remaining blocks

OML34- Niger Delta Petroleum’s $600 million bid for OML 34 easily outshone the $290 million bid by the Seven Energy and Petrofac consortium and, barring technical considerations, will likely clinch it for the independent.

OML 42- India’s Essar Group in league with Nigerian-owned Energy Equity Resources remains the front-runner for OML 42 at $400 million, ahead of the Oando Group’s $300 million.

OML 30- OML 30 attracted an $800 million bid from Essar, $755 million from Afren, $750 from PanOcean, $650 million from Conoil, $600 million from Camac, $522 million from local independent EMO E&P, $515 million from African petroleum (Forte Oil) and $450 million from Oando.

The deals represent the latest in a series of Niger Delta farm-outs in which operator Shell and partners (Total and Agip) are selling a combined equity of 45% in sensitive swamp and creekside acreage.

To read more on Shell: http://docsearch.derrickpetroleum.com/research/q/Shell.html

Linn Energy enters Bakken Shale and adds Permian oil assets to its portfolio in a $434 million deal

Linn Energy agreed to acquire oil properties for a total combined contract price of $434 million in three separate deals. One acquisition of non-operated properties for $196 million from Concho Resources marks Linn's entry into the Williston Basin Bakken play. The additional two are bolt-on acquisitions, which further expand the company's position in the Permian Basin of Texas and New Mexico.

Combined Statistics of three acquisitions totalling $434 Million:

• Current net production of approximately 3,000 Boe/d
• Current net production is approximately 90% oil and NGLs
• Significant organic growth expected, with an estimated 2011 exit rate of approximately 4,000 Boe/d
• Combined purchase price represents an EBITDA multiple of approximately 6x
• Proved reserves of approximately 22 MMBoe (approximately 40% proved developed)
• Reserve life of more than 20 years and approximately 600 oil drilling locations

Mark E. Ellis, President and Chief Executive Officer, said, “The deal positions us in another oil basin with numerous mature producing assets providing Linn with the opportunity for further consolidation. All of these properties generate high cash margins in the current oil environment and meaningfully add to our inventory of oil drilling locations."

North American shale plays by location and maturity

Key US shale plays:

•       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

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

•       Bakken Shale, hybrid shale system with mainly oil production, also exploiting underlying Three Forks tight sands formation.

Emerging plays:

•       Eagle Ford in South Texas, oil and wet gas in addition to dry gas

•       Niobrara in the Rockies, mostly oil

•       Avalon in the Permian, mostly oil

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

•       Canadian plays, notably Montney and Horn River in British Columbia, Utica in Quebec currently put on hold by Talisman.

For more on US shale Plays: http://docsearch.derrickpetroleum.com/research/q/Shale%20Plays.html

PDC Energy announced 2010 year-end results; Production down 9.6%; Plan to invest $233 million in 2011

PDC’s annual 2010 production from continuing operations was 37.6 Bcfe down 9.6% compared to 41.6 Bcfe of production from continuing operations in 2009. The company reported 861 Bcfe of proved reserves, up 20% over 2009. PDC’s CAPEX budget for 2011 is expected to be approximately $233 million, including $206 million of development CAPEX, which represents a 46% increase over the 2010 development CAPEX of $141 million. The 2011 CAPEX budget does not include the previously announced offer to repurchase the Company’s three 2005 partnerships for $36.4 million


Keypoints:

861 Bcfe of 1P reserves, up 20% for the year, or 585% on a reserve replacement basis

Estimated 2011 production growth from 37.6 Bcfe to 44.9 Bcfe, 19% over 2010; with 2005 partnership buyback, growth over 20%

CAPEX budget for 2011 is expected to be approximately $233 million