Galp to sell $4.2bn stake - Opportunity for foreign oil companies looking to make inroads into Brazilian Presalt

Galp Energia is considering the sale of a 30% stake in its Brazilian assets to finance the company's investment plans. The sale of these assets could generate as much as 3 billion euros ($4.2 billion) for the company.

Galp Eenrgia’s Brazil operations overview:

-- Participation, in partnership with Petrobras, in 22 projects, 17 offshore and 5 onshore, totalling 36 blocks spread over seven basins covering area of 20,326 sq km

-- According to DGM 2010 year end reserves report, Galp’s net entitled Proved + Probable reserves - 397 MMBOE; Proved + Probable + Possible reserves - 574 MMBOE (Brazil's Lula and Cernambi fields responsible for over 90% of total reserves)

-- Santos Basin: Block BM-S-11 (10%), Block BM-S-8 (14%), Block BM-S-2 (20%), Block BM-S-24 (20%); BM-S-11 contains Lula and Cernambi fields (formerly Tupi and Iracema) with total recoverable volume of 8.3 billion BOE; 9 FPSOs sanctioned for the Lula and Cernambi development; FLNG FEEDs already concluded with final investment decision expected in 2011; In 4Q-2010, the field’s pilot net entitled production was 2,170 BO/d.

-- Espirito Santo Basin: Block ES-M-592 (20%) covering 722 sq km in the water depths of 2,000-2,200 metres.

-- Potiguar Basin: BM-POT-16 contract (20%) includes Blocks POT-M-663 and POT-M-760 covering 1,535 sq km in the water depths of 50-2,000 metres; BM-POT-17 contract (20%) includes Blocks POT-M-665, POT-M-853 and POT-M-855 covering 2,302 sq km in the water depths of 50-2,000 metres; In onshore, Galp has 14 blocks with eight appraisal wells drilled in 2009, which confirmed to light oil discoveries.

-- Campos Basin: Block C-M-593 (15%) covering 85 sq km in the water depths of 100-400 metres.

-- Pernambuco Basin: PEP B-M-783, PEP B-M-839 and PEP B-M-837 with 20% interest covering 1,713 sq km in the water depths of 1,000-2,000 metres; A 3D seismic programme was performed in 2009.

-- Sergipe Alagoas Basin: Blocks 412 and 429 with 50% interest covering 91 sq km; In 2009 four exploration wells were drilled, which led to two discoveries, and one appraisal well.

-- Amazonas Basin: Blocks AM-T-84, AM-T-85 and AM-T-62 with 40% interest covering 5,718 sq km.

Stake sales to generate intense interest from foreign oil companies

Galp, a smaller company focused mainly on refining for its domestic market, faces difficulties in raising the cash needed to finance its share of development and exploration costs for the Brazilian assets. The possible stake sale would generate intense interest from foreign oil companies looking to make inroads into Brazil, where a recent overhaul of the country's oil laws now places the pre-salt region under a production-sharing regime.

For more on Brazilian Presalt  http://docsearch.derrickpetroleum.com/research/q/presalt%20basin.html

Jordan to reduce its reliance on neighbours for oil & gas imports. Jordan, being explored by majors like BP, Shell, Total and Petrobras, signs $1.8 billion oil shale deal with Karak International.

An oil shale surface retort concession agreement in Al-Lajjun area (35 sq km) in the southern governorate of Karak was signed between the Jordanian Government and Karak International Oil which is wholly owned by the British Company Jordan Energy and Mining Ltd. Over a period of 5-7 years the production is planned to reach 15,000 bpd after which it may be increased to 60,000 bpd in phased expansions.

The Al Lajjun Oil Shale Deposit was discovered in the late 1960’s by a joint Jordanian-German geological study. In the decades following discovery intermittent exploration activity at Al Lajjun has resulted in 198 drill holes totaling in excess of 11 km of drilling. Recent estimates for the entire Al Lajjun deposit have identified approximately 1 billion tonnes of oil shale resources.

The deal defines a major non-conventional oil venture to be completed in the Al- Lajjun area with a capital investment of $1.8 billion and will put Jordan on track for self sufficiency in liquid hydrocarbons. On completion of the project and with oil prices remaining high the government will receive more than 65% of net operating profits and if oil prices reach the very high levels of 2008 (>$120/bbl) the Government will receive some $10 billion of revenues over the projected 30 year project life.

Jordan, a new pie to taste!!

Exploration in Jordan has already been initiated by majors like BP, Shell, Total and Petrobras in the yesteryears. According to the Natural Resources Authority data, the Jordan Kingdom has more than 40 billion tons of oil shale; this quantity is capable, if were exploited using cutting-edge technology, to meet the oil needs of the Kingdom estimated at 110,000 bpd and even may allow export of additional quantities over a span of hundreds of years.

"This major new oil shale venture with Karak will make a significant contribution to the Government declared Energy Strategy to increase energy from indigenous oil shale resources from 0 to 14% of the country’s energy requirements by 2020; and thereby reducing our reliance on imported oil and gas products from our neighbours", said Touqan, Minister of Energy and Mineral Resources.

With the signature of this agreement, Jordan follows the European countries like Poland, France, etc., to reduce relying on foreign countries for oil & gas imports, having robust belief on their shale resources. 

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!!