Company News: Shell, Total E&P units make in-kind asset exchange

Dec. 12, 2005
Shell Exploration & Production and Total E&P USA have agreed to an in-kind exchange.

Shell Exploration & Production and Total E&P USA have agreed to an in-kind exchange. Shell will exchange its 17% nonoperated interest in deepwater Tahiti field in the Gulf of Mexico for Total’s interests in natural gas assets in South Texas.

In other recent company news:

• Stone Energy Corp. said an independent review found that the company lacked adequate internal guidance or training on regulatory standards for estimating proved reserves.

• ConocoPhillips subsidiary Seagas Pipeline Co. has increased its stake to 100% in the 85,000 b/d Seaway products pipeline between Pasadena, Tex., and Cushing, Okla.

• Norsk Hydro ASA agreed to pay $350 million to EnCana Corp. for a 50% interest in the Chinook heavy oil discovery off Brazil.

• Energen Resources Corp. has signed an agreement to buy Permian basin oil properties from a private company for $168 million.

• Sonoran Energy Inc., Phoenix, Ariz., completed its acquisition of Baron Oil, a privately held Norwegian company with assets in the Middle East and oil and gas reserves in Texas.

Shell-Total exchange

Tahiti field, operated by Chevron Corp., lies on Green Canyon Blocks 596, 597, 640, and 641 in 4,100 ft of water, 190 miles southwest of New Orleans.

Shell, in turn will acquire Total’s operated interests in three natural gas fields and additional interests in a fourth field, currently operated by Shell. These fields increase Shell’s net South Texas gas production by 193 MMcfd of gas equivalent to 300 MMcfed.

The transaction is expected to close in January.

Stone Energy review

Stone Energy, a Lafayette, La., independent, announced a downward revision of 171 bcf of gas equivalent in its reverses on Oct. 6. The following month, it was notified that the US Securities and Exchange Commission was conducting an informal inquiry into its changes (OGJ Online, Nov. 23, 2005).

“There is evidence that some former members of Stone management failed to fully grasp the conservatism of the SEC’s ‘reasonable certainty’ standard of booking reserves,” Stone said in a news release. The law firm Davis Polk & Wardwell issued the independent review to Stone’s audit committee and board.

A full reserves report by an engineering firm is expected by yearend. On Dec. 5, Stone announced that D. Peter Canty resigned as a director. In addition, the board has directed management to request the resignations of an officer and a senior manager associated with reserves estimation.

Based on Stone’s internal review, a restatement of financial results will be required for 2001-04 and for the first half of 2005. Stone also said class-action lawsuits have been and are being filed concerning the reserves revisions.

In addition, Stone received an inquiry from the Philadelphia Stock Exchange related to matters including trading activity before the revision.

Seagas’s Seaway stake

Seagas acquired a 50% interest in the Seaway pipeline from BP Amoco Seaway Products Pipeline Co. Terms of the transaction were not disclosed.

ConocoPhillips Pipe Line Co. will operate the pipeline, which will remain a common carrier system.

Norsk Hydro in Brazil

Norsk Hydro will buy all shares of an EnCana subsidiary holding the stake in Block BM-C-7 in the Campos basin. The sale, subject to normal closing conditions and regulatory approvals, is expected to close in the first quarter of 2006.

EnCana, operator of the 133,000-acre block, has tested oil in two appraisal wells in the field (OGJ, Nov. 7, 2005, Newsletter). Kerr-McGee Oil & Gas Corp. holds the other 50% interest.

Randy Eresman, EnCana’s chief operating officer, said EnCana will continue to hold interests in eight deepwater exploration blocks off Brazil and is committed to evaluating those blocks.

EnCana and partners are being awarded two additional blocks in the Potiguar basin, Eresman said.

Energen’s Permian assets

The properties being acquired by Energen include the North Westbrook Unit in Mitchell County, Tex., and two smaller fields nearby. They cover about 15,000 acres. Energen Resources has a waterflood project in the contiguous South Westbrook Unit.

The acquired properties have reserves estimated at 21.8 million boe, about 80% undeveloped and mostly oil. Energen estimates the acquisition provides a drilling inventory of 470 wells over the next 6 years.

Sonoran-Baron Oil

Under the transaction terms, Baron Oil shareholders will receive 19 million shares of Sonoran Energy restricted common stock in exchange for their shares in Baron Oil.

Sonoran Energy is an independent expanding in North America, the Middle East, the Caspian region, and North Africa.