OGJ Newsletter

General Interest - Quick Takes

Survey gauges oil-price effects on US firms

High oil prices are taking a toll on US-based multinational companies, making senior executives less optimistic and more uncertain about the future, said analysts at PricewaterhouseCoopers LLP, New York.

“Many-particularly the 36% that see their companies as vulnerable to rising oil prices-are scaling back expectations for revenue growth, new jobs, and investments,” they said in the report of a recent survey. Although 82% of the surveyed senior executives still believed that the US economy is growing, only 62% were optimistic in the second quarter about prospects over the next 12 months-“a sharp 15-point drop from the prior quarter,” the report said. “One-third now counts itself uncertain, a 13-point increase.”

The decline of optimism is most prevalent among 36% of executives citing rising oil prices as a potential barrier to corporate growth. Only 56% of this group remains optimistic; 42% is uncertain, according to the survey.

The report noted flagging optimism among companies that see themselves as vulnerable to oil price increases. Currently, 66% of this group continues to be optimistic, down from 80% in the prior quarter. The survey indicates 59% remaining optimistic about the world economy-off 8 points-with one-third uncertain.

Meanwhile, surveyed executives said revenue growth is slowing, and growth targets have been reduced for the third consecutive quarter. The latest 12-month goal is a 7.2% increase, off from 8.1% in the prior quarter.

Costs are up, but pricing is not keeping pace, and gross margins are softer. Increased costs are reported by 45% of the respondents, but only 37% mentioned increased pricing. “And, although improving margins are reported by 36% (consistent with the prior quarter), there has recently been a narrowing from their strong showing in late 2004,” the report said. “Purse strings are tightening. Fewer executives are planning major new investments (47%, off 12 points from the prior quarter) and net new hiring (46%, off 11 points).”

Agencies to resist Equilon antitrust ruling

The US Federal Trade Commission authorized the staff of its general counsel’s office to file a joint amicus brief with the Department of Justice asking the Supreme Court to reverse a lower court’s finding that Texaco Inc. and Shell Oil Co.’s refining and marketing joint venture violated the Sherman Antitrust Act.

The federal departments are challenging a Ninth Circuit Court of Appeals ruling that federal antitrust laws were violated when the two parent companies of Equilon Enterprises LLC directed it to equalize prices for both brands of gasoline after merging downstream operations and effectively terminating their prior competition.

The appeals court reversed a federal district court’s finding that Equilon’s decision to unify Texaco and Shell gasoline prices did not constitute horizontal price fixing. The FTC and Justice Department’s joint brief argues that this reversal improperly extended an antitrust analysis to unified product pricing under the joint venture.

The FTC voted 3-0 to authorize the staff’s filing of the joint brief, with Chairman Deborah Platt Majoras recused. ✦

Exploration & Development - Quick Takes

Southwestern Energy to hike budget, add rigs

Southwestern Energy Co., Houston, budgeted a 13.6% hike in 2005 capital outlays to $499.5 million with implications mostly for its eastern Arkoma basin shale gas play.

The increase, contingent on the subscription of a common stock offering, is mostly earmarked for more drilling in the Arkansas Fayetteville shale play and in East Texas and the Permian basin, future gathering systems for shale gas, and fabrication of five land rigs to drill shale gas wells in addition to the five ordered earlier. Monthly rig deliveries are to start in November.

The new budget has the company spending $137.5 million on Fayetteville this year, about twice its outlays on conventional Arkoma projects.

The gathering systems will be needed as the play expands into areas beyond existing infrastructure.

Gas from the company’s first three named Fayetteville fields is delivered into the Ozark Gas Transmission system. They are Griffin Mountain field in Conway County, Gravel Hill field in Van Buren and Conway counties, and Scotland field in Van Buren County (OGJ, July 18, 2005, p. 35).

Hydrocarbons found in Miocene off India

The P1-A deepwater well on Block D6 in the Krishna-Godavari basin off eastern India became the first hydrocarbon discovery in the Miocene interval, said participant Niko Resources Ltd., Calgary.

The well, operated by Reliance Industries Ltd., Mumbai, is the 15th straight successful exploration well drilled on the block (see map, OGJ, July 18, 2005, p. 34).

Log analysis at the well, the first drilled on newly acquired 3D seismic data, indicated several hydrocarbon bearing zones over a 600-m interval, Niko said.

The partners already have discovered several trillion cubic feet of recoverable gas on the block, and the well results “have a significant impact on the future exploration potential of the D6 block,” Niko said.

“Hydrocarbons were found in the Pliocene/Pleistocene section, which confirms extension into the deeper water of the geologic environment, which contains all the hydrocarbons discovered to date in D6,” Niko said.

“Further, the deepest discovered hydrocarbons were found in the older Miocene interval and marks the first time hydrocarbons have been discovered in this time period. This opens up significant additional new exploration potential in the deeper water portions of D6.”

Premier, Shell plan wildcat off Pakistan

A consortium led by operator Shell Development & Offshore Pakistan BV plans to invest more than $40 million to drill an exploratory well on Block 2365-1 on the Indus E deepwater oil exploration license off Pakistan. The license area is in the Indus basin 150 km south of Karachi.

Shell will drill the well by the next weather window, according to Premier Oil Pakistan Offshore BV. Shell holds a 47.5% interest in the license and Premier, 23.75%. Other partners are Islamabad-based Kufpec Pakistan BV, 23.75%, and Government Holdings (Pvt.) Ltd., 5%.

Premier Oil’s Chief Executive Simon Lockett said the Shell group’s extensive 3D seismic survey helped delineate a number of prospects on the block (OGJ Online, Oct. 4, 2004). Shell has invested $12-15 million in the project.

Petrobras, Statoil win block off Nigeria

The Nigerian government has awarded an offshore production license to Petroleo Brasileiro SA (Petrobras) and Statoil ASA for deepwater OPL 315 off Nigeria.

The block, in 1,000-2,000 m of water, covers 1,030 sq km in the northeastern region of the Niger River Delta basin near Lagos. Its geological environment is similar to that of giant oil fields such as Bonga and Erha and to conditions found in Abo field, which is on production.

Petrobras will serve as operator. The two partners each received 45% in the acreage, with Nigerian Ask Petroleum System receiving the balance in line with the government’s policy to grant a 10% interest in each block to local companies.

Petrobras and Statoil offered a signature bonus of $180 million. They are committed to drilling four exploration wells.

Total taps FMC for subsea systems off Congo

Total SA let a $115 million contract to FMC Technologies Inc., Houston, for supply of subsea systems for Moho Bilondo field off Congo-Brazzaville. The field, just north of the Angolan border, lies 80 km offshore in 540-740 m of water. FMC will deliver 12 subsea trees and associated structures, manifolds, production control, and intervention systems beginning early in 2007 and completing deliveries by yearend.

“This will be the first deepwater project in this area of West Africa,” said FMC Technologies Executive Vice-Pres. Peter D. Kinnear.

Total is operator of the field, holding a 53.5% interest in a production-sharing contract with the Republic of Congo.

Oklahoma’s Postle field due EOR expansion

Whiting Petroleum Corp. has completed its $343 million acquisition of Postle oil and gas field in the Oklahoma Panhandle, setting the stage for a large carbon dioxide enhanced oil recovery project expansion.

Whiting has signed a 10-year CO2 purchase agreement to support the expansion.

Seller of the field, in Texas County, Okla., 120 miles north of Amarillo, Tex., is Celero Energy LP, Midland. Effective date was July 1.

Postle’s five producing units and one lease cover 25,600 gross acres with 88 producing and 78 injection wells. The field averaged 4,350 b/d of oil and natural gas liquids and 400 Mcfd of gas in the first quarter from Pennsylvanian Morrow sand at 6,100 ft. Two rotaries and 6 workover rigs are at work.

Considered one of Oklahoma’s smaller major fields, Postle was discovered in 1968. The former Mobil Oil Corp. developed it in the early 1960s and unitized it for waterflood in 1967.

CO2 injection started in 1996 in three units on roughly the eastern half of the field, boosting output by 8,000 b/d to more than 11,000 b/d by 1999. Mobil deferred expansion to the other units, partly because of throughput limits at a third party gas processing plant.

Whiting acquired the Dry Trails gas plant in the Celero transaction and is expanding it to 60 MMcfd from 40 MMcfd. Another addition to 80 MMcfd will take place as CO2 projects are expanded.

Whiting also acquired a 60% interest in the 128-mile TransPetco pipeline, which delivers CO2 to Postle from Bravo Dome field in Northeast New Mexico.

Postle, the fifth largest oil-producing field in Oklahoma in 2004, is the only major oil field in the state to have increased production in the last 10 years, notes the Oklahoma Geological Survey. Output has dropped sharply since 1999 but in 2004 was still double the rate of 10 years earlier, according to IHS Energy figures.

South Korean firms make entry into Gippsland basin

Nexus Energy Ltd., Melbourne, has completed its farmout deal with Korea National Oil Corp. (KNOC) and Seoul City Gas Co. Ltd. for the companies’ entry into Nexus Energy’s Gippsland basin permits Vic/P56 and Vic/P49 off Victoria.

The two South Korean companies are earning a total 50% interest in both permits in return for funding the bulk of exploration drilling costs-a total of $15 million (Aus.).

The program will begin with the drilling of a well in November on the Culverin-Scimitar prospect in Vic/P56.

Culverin is a large structure at the top of the Tertiary Latrobe formation, while Scimitar lies directly underneath in deeper Intra Latrobe sediments, analogous to Anzon Australia Ltd.’s Basker and Manta oil and gas discoveries 12 km to the north.

There is potential for the Culverin-Scimitar prospects to spill over the border into Vic/P49. Nexus will serve as the operator.

SOCO wildcat strikes oil off Vietnam

SOCO International PLC, London, said its wildcat well TGT-1X confirmed the presence of oil in sedimentary clastic reservoirs on eastern Block 16-1 off Vietnam.

Drilled on the Te Giac Trang structure, the well was the first on the H prospect, SOCO said. On a drillstem test of Miocene Lower Bach Ho at 2,701-2,760 m, TGT-1X flowed 8,566 b/d of 37o gravity crude oil and 4.86 MMcfd of gas through an 80⁄64-in. choke. An additional 33 m of net pay was not perforated due to limited equipment and time constraints.

A brief test over a deeper Oligocene interval indicated oil shows, but the formation was tight and deemed noncommercial. ✦

Drilling & Production - Industry Scoreboard