Traffic towards Marcellus is high!! Seneca Resources divests GoM assets and focuses on Marcellus assets

Seneca Resources agreed to sell its Gulf of Mexico oil and natural gas producing properties for $70 million.

David F. Smith, Chairman and Chief Executive Officer of Seneca says, “We look forward to redeploying these proceeds to Seneca’s long-term growth opportunities in the Marcellus Shale. While our well costs have increased as a result of additional frac stages and increased service company charges, this has been offset by higher anticipated estimated ultimate recovery (EUR) factors. We are now anticipating well costs of $5.0 - $6.4 million for wells with up to 20 frac stages and lateral lengths reaching over 6,000 feet. Taking these factors into account, we expect to see results continue to improve over time, with some of our best wells achieving EURs of 8 Bcf. At a natural gas price of $4.00 per MMBtu, the pre-tax internal rates of return are still exceptional, ranging from 20 percent to better than 65 percent.”

As a result of the above, Seneca’s capital spending in the Exploration and Production segment for fiscal 2011 is now expected to be in the range of $600 to $655 million, up from the previously announced range of $485 to $560 million.

Traffic towards Marcellus!!!

There has been a vigorous traffic towards Marcellus area in 2010 with around $17 billion worth transactions as against ~$1.4 billion worth transactions in 2009. Huge difference!!!

In 2009.... 

In 2010....

Seneca’s divestiture of GoM assets and focus on Marcellus is in a way similar to the recent Range’s divestiture of Barnett assets and diversion of maximum capital towards Marcellus. Read more on the Range deal: http://mergersandacquisitionreviewcom.blogspot.com/2011/03/range-drops-barnett-for-900-million-and.html.

Also, Bob Ramsey, an analyst at FBR Capital said, "Marcellus Shale gas will bring an estimated $250 billion in payments to Pennsylvania land owners (more than four times the entire state's deposits) and drive $8 billion to $15 billion of annual spending in the state, based on 2,000 to 3,000 wells drilled per year.”

See more publications on Marcellus: http://docsearch.derrickpetroleum.com/research/q/Marcellus.html

Apache to divest certain Canadian conventional assets worth $1B as part of their debt reduction efforts in 2011 - Was the BP bite more than what it could chew?

Apache Corporation is currently planning to divest approximately $1.0 billion worth of legacy conventional properties in Canada to optimize and high-grade the company’s existing portfolio of assets.

Apache’s Canadian conventional operations:
-- Apache has 6.3 million net acres across the provinces of British Columbia, Alberta and Saskatchewan, including approximately 1.3 million net mineral and leasehold acres in Western Alberta and British Columbia acquired from BP in 2010; These acreage includes both conventional and unconventional plays.
-- Conventional assets are focused on oil projects located primarily in Alberta and Saskatchewan.
-- Apache is utilizing horizontal well technology to develop waterflood and enhanced oil recovery projects in the Midale and Provost fields located in southeast Saskatchewan, and the Zama and House Mountain fields located in Alberta.
-- The company will also continue intermediate-depth gas development drilling in Kaybob and West 5 areas in Alberta.
-- During 2011, Apache will run 2-4 rigs in the company’s oil, EOR and liquid-rich areas.

Apache to sell assets as part of the debt reduction effort
During the Q42010 result announcement Apache CEO asserted company will be pursuing debt reduction efforts by pursuing $1 bn worth property sales



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

Light oil fever continues in Canada.. Whitecap Resources acquires light oil focused-Spry Energy for $223 million

Whitecap Resources agreed to acquire Spry Energy Ltd, an oil weighted company, for total consideration of C$223 million including Spry’s net debt of C$36 million. Through the Transaction, Whitecap is acquiring operated, high working interest light oil assets located pre-dominantly in the Pembina area of west central Alberta focused in the Cardium formation, and very complementary to Whitecap’s existing operations in Pembina including an extensive development inventory of 52 gross locations.

The Transaction has the following characteristics:

Current production - 2,600 boe/d (71% light oil and NGLs)

Proved reserves - 5,832 mboe (71% light oil and NGLs)

Proved plus probable reserves - 9,930 mboe (70% light oil and NGLs)

Proved plus probable RLI - 10.5 years

Annualized cash flow - C$50 million

Operating netback - C$48/boe

Net of undeveloped land value of C$11.5 million (internally estimated), the associated transaction metrics are as follows:

Current production - C$81,300/boe/d

Proved reserves - C$36.26/boe

Proved plus probable reserves - C$21.29/boe

Proved plus probable reserves recycle ratio - 2.3x

The Transaction represents a continuation of Whitecap’s strategy of becoming a premier oil weighted intermediate producer through a combination of organic growth and accretive transactions that are oil focused, with high netbacks and provide significant Company operated drilling upside.

See the latest publications of Whitecap Resources: http://docsearch.derrickpetroleum.com/research/pubDate/month/q/Whitecap%20Resources.html

International Companies’ affinity towards Canadian shale is aggressive!! Sasol acquires additional Montney package from Talisman for C$1.05 billion

South Africa's largest petrochemical company, Sasol signed a second agreement with Talisman Energy to acquire a 50% stake in their Cypress A shale gas asset located in the Montney basin of British Columbia, for a total consideration of C$1,050 million. Consistent with the recent Farrell Creek shale gas acquisition, announced in December 2010, this second acquisition will see Talisman Energy retain the remaining 50% interest and continue to operate the Cypress A gas asset. Assets included in the transaction cover over 57,000 acres of land and represent an estimated contingent resource of 11.2 TCF. Goldman, Sachs & Co and Jefferies & Company acted as advisors for Talisman on this transaction.

Sasol and Talisman have agreed to conduct a feasibility study on the economic viability of a facility in western Canada to convert natural gas to liquid fuels using Sasol's GTL technology. This could provide a strategic alternative to traditional North American pipeline or liquefied natural gas marketing.

International Companies’ affinity towards Canadian/US shale is aggressive!!

This second Montney JV by Sasol marks the latest investments by international interests on Canada’s shale gas bounty, as the industry explores new markets and non-traditional uses for the huge deposits. Here are the few examples..

• In February 2011, Encana Corp established a joint venture with PetroChina through the sale of 50% interest in its Cutbank Ridge business assets for C$5.4 billion. The business assets in the JV included the majority of Encana’s Montney, Cadomin and other natural gas assets on a portion of its British Columbia and Alberta lands. Read more: http://mergersandacquisitionreviewcom.blogspot.com/2011/02/chinese-juggernaut-rolls-on-north.html
• In September 2010, Penn West Energy Trust formed a 50-50 joint venture with Mitsubishi to develop Penn West's shale gas assets in the Cordova Embayment area and certain of its conventional gas assets in the Wildboy area of northeastern British Columbia. Mitsubishi’s total acquisition cost with respect to this JV was approximately C$450 million.

• In addition to these, CNOOC recently formed back-to-back JVs with Chesapeake for the Eagle Ford and Niobrara shales in the United States.

Recently, Progress Energy and Trident Resources have initiated a sale process with regards to their Montney assets. With the trend of international companies entering North American Shale, who will end up buying these packages? 

Click here to see more publications on Montney: http://docsearch.derrickpetroleum.com/research/q/montney.html

Shell postpones Alaskan exploration program to 2012 but Repsol steps in with $768 million kit to explore Alaskan leases!!!

Repsol agreed to acquire 70% interest in the leasehold held by 70 & 148 LLC and GMT Exploration LLC on the North Slope of Alaska. The blocks are located close to large producing fields and cover an area of 2,000 sq km. Repsol has agreed to carry out the investment necessary to explore and evaluate the economic viability of the resources contained in these blocks. The estimated minimum exposure of this investment for Repsol, including amount to be paid to its partners and the cost of exploration to be carried out over several years, amounts to $768 million. The start of exploratory work is scheduled for next winter.

Hurdles in exploring Alaskan leases:

A lengthy US regulatory process has forced Shell to postpone offshore drilling plans in Alaska to 2012 from 2011, although the company expects it will eventually obtain the permits it needs to proceed, a company executive said in February. Shell has invested $3.5 billion in exploration programs in Beaufort and Chukchi Seas of Alaska, but the company's plans have been held up amid legal challenges by environmental groups and native villagers concerned that oil exploration could hurt wildlife and habitat without adequate safeguards.

In addition, last week the US Interior Department had 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. Read more: http://mergersandacquisitionreviewcom.blogspot.com/2011/03/companies-showed-less-interest-in.html

Alaska North Slope - has rooms to grow:

The North Slope of Alaska, holding North America’s largest oil field Prudhoe Bay, is an especially promising area for Repsol as it has already shown to be oil-rich and carries low exploratory risk. This acreage also helps increase the company’s presence in OECD countries.

In the last decade, the smaller oil companies leased hundreds of thousands of acres across the North Slope and drilled dozens of exploratory wells, leading to the first independently operated oil production in the history of the North Slope. If that trend continues, Alaska will become home to many smaller oil companies this decade.

"When we can produce a barrel, and prove to everybody else that we can produce a barrel, I think there's going to be a flood of independents coming to the North Slope," said Jim Winegarner, vice president of land for Brooks Range Petroleum Corp., an independent operator leading a joint venture of small companies on the North Slope. Repsol believes so!!

BP backs off from Algeria Asset sale - What makes BP stay back "Government intervention or Algerian gas potential"???

BP has backed off from plans to sell assets in Algeria, The surprise announcement also comes after Russian joint venture TNK-BP Ltd., which is half-owned by BP, said Tuesday it was still interested in buying the assets owned by the British company--the largest foreign oil and gas investor in the North African nation.

Earlier this year, BP agreed to sell its stake in the two fields, which each have production of up to nine billion cubic metres, for $3 billion, but the government's decision to withhold the data has led to speculation that it is interested in snapping up the assets for itself.

It is not the first time the Algerian government has intervened - in 2000, it blocked BP's proposed sale of a 40% share in the Rhourde El-Baguel field to energy giant Elf, opting to exercise its pre-emptive right of purchase.

A major blow to the potential Russian buyer TNK BP

While confirming its interest in the BP Algerian assets, TNK-BP had cautioned it didn't expect a breakthrough in negotiations soon. Algeria's state energy firm, Sonatrach, had signaled an interest in exercising a right of first refusal to the BP assets. Separately, TNK-BP's Russian shareholders are in a dispute with BP over the possible participation in an Arctic deal signed by the U.K. company with Russian oil company OAO Rosneft. It is unclear if the spat affected the Algerian considerations.

Asset portfolio in Algeria

In Algeria, BP has two large natural-gas projects, In Salah, which covers seven fields in the southern Sahara desert, and In Amenas. BP also participates in the Rhourde El Baguel oil project, and is exploring for oil in the Bourarhet block next to In Amenas. 

For more on BP Algeria: visit: http://docsearch.derrickpetroleum.com/research/q/BP%20+%20Algeria.html

Apache reported 2010 annual results; Production up 13% over 2009; Projected annual growth rate of 13%-15% in 2011

Apache reported annual average production of nearly 658,000 boepd, up 13% from the last year. Liquids production increased 18%, and this, combined with higher oil prices, drove Apache to record earnings of $3.0 billion for 2010. The company added 827 MMboe or 344% of production, through discoveries, extensions and acquisitions. Approximately 245 MMboe, or 102% of 2010 production, in reserve additions came through drilling.

2010 Highlights:

-- 125% reserve growth, replacing 344% of production; 102% through drilling; Record annual production for North America and international

-- Van Gogh and Pyrenees, two oil fields offshore Western Australia, commenced production in February 2010, reaching payout by October and December, respectively

-- Established new regions in the deepwater Gulf of Mexico, Gulf Onshore and Permian Basin, and expanded in Egypt, Canada, and the Gulf of Mexico Shelf.

-- Plan to invest $7.5 billion for 2011 annual year