Royal Dutch Shell PLC announced plans to buy the shares that it does not already own in Shell Canada Ltd. in a move aimed at boosting the parent company’s stake in oil sands. Shell currently owns 78% interest in Shell Canada.
In other recent company news:
- A group led by BHP Billiton agreed to buy Anadarko Petroleum Corp.’s Genghis Khan oil and gas development in the deepwater Gulf of Mexico for $1.35 billion, Anadarko reported.
- Separately, Statoil ASA agreed to pay $901 million to acquire two of Anadarko’s Gulf of Mexico oil discoveries and one prospect. Closing, subject to regulatory approvals, is expected during first quarter 2007.
- Dominion plans to pursue the sale of most of its oil and gas assets to concentrate more on its electric generation and distribution business and its transmission, storage, and retail business, said the utility, based in Richmond, Va.
- Devon Energy Corp. intends to sell its Egyptian oil and gas assets and terminate its operations there.
- Pogo Producing Co., Houston, plans to divest nonstrategic oil and gas properties in the Gulf of Mexico, South and East Texas, South Louisiana, the Permian Basin and Texas Panhandle areas, and Western Canada.
- Talisman Energy Inc. plans to sell noncore properties in North America. The predominantly nonoperated assets produce 17,000 boe/d, of which 60% is gas and 40% is oil and liquids.
- Separately, Talisman Energy (UK) Ltd. has agreed to pay an undisclosed sum to Shell UK Ltd. and Esso Exploration & Production UK Ltd. to acquire the companies’ combined 85.81% interest in Fulmar oil field and a 100% interest in Auk oil field in the central North Sea.
- Private gas company Dana Gas PJSC of Sharjah, UAE, will acquire Centurion Energy International Inc., Calgary, for $1.15 billion (Can.), or $12/share.
- Unit Petroleum Co., Tulsa, plans to acquire privately owned Brighton Energy LLC for $67 million. The acquisition includes proved reserves of 27 bcf of gas equivalent and 5 MMcfd of production.
- Encore Oil PLC, London, announced a sales and purchase agreement to acquire four oil and gas companies having blocks in the UK North Sea. The four firms are privately held Virgo Oil & Gas PLC and Virgo Energy Ltd., Nido Petroleum (UK) Ltd., and Grove Energy (UK).
- Pluris Energy Group Inc., Houston, has agreed to acquire San Enrique Petrolera SA of Buenos Aires for an undisclosed amount.
- Calgary independents Pearl Exploration & Production Ltd. and Atlas Energy Ltd. signed a merger agreement worth $340 million (Can.). Closing is expected in December.
- Energy Partners Ltd. (EPL) of New Orleans has terminated plans to buy Stone Energy Corp., Lafayette, La.
- ConocoPhillips and EnCana Corp. agreed to create an integrated heavy oil joint venture that will involve two 50-50 operating partnerships: one Canadian upstream and one US downstream.
- Chaparral Energy Inc. plans to acquire Calumet Oil Co. and certain affiliates for $510 million. The transaction involves production of 4,600 boe/d and proved reserves of 309 bcf of gas equivalent.
- Sierra Pacific Resources (SPR) has agreed to sell its 50% interest in its subsidiary Tuscarora Gas Transmission Co. (TGT) to TC PipeLines LP for $100 million, subject to customary closing conditions.
- OAO Lukoil Overseas said it intends to buy a 50% interest in Turgai Petroleum Inc., a Kazakhstan company, now that the Arbitration Institute of the Stockholm Chamber of Commerce (Sweden) has ruled in its favor.
- Duke Energy, which earlier announced plans to separate its natural gas business into an independent, publicly traded company, said the spin-off will be called Spectra Energy Corp.
- Forest Oil Corp., Denver, has transferred the majority of its Alaska business unit to a new subsidiary, Forest Alaska Operating LLC (Alaska), which will hold and operate the parent’s oil and gas interests in Cook Inlet.
Shell-Shell Canada
Shell Canada has a substantial position in Canada’s oil sands and is embarking on a major expansion of production and upgrading capacity.
“Canada is an important growth area for the group, and the group will be a major investor in Canada for many years to come,” Shell said.
The group offered $40/share (Can.) or $7.7 billion. The proposal follows corporate structural changes Shell took after a series of reserves reclassifications. Once Shell Canada is fully combined with the group, the business will have a more simplified organization, the group said.
Structural changes came after the company reclassified reserves five times in a little over a year (OGJ Online, Feb. 4, 2005). Royal Dutch Petroleum Co. and Shell Transport & Trading Co. were merged into a single parent, Royal Dutch Shell, the stock of which began trading July 20, 2005.
Shareholders approved the unification formally combining the former Royal Dutch/Shell Group’s British and Dutch parent companies under a single board and a single executive (OGJ Online, Oct. 28, 2004). Investors had said the old structure hindered transparency and financial accountability.
In July, Shell Canada announced plans to increase production in the Athabasca tar sands project in Alberta to 550,000 b/d from 150,000 b/d.
Alberta’s oil sands contain an estimated 1.69 trillion bbl of bitumen and the produced 5 trillion bbl through 2005. Shell Canada intends to announce a final investment decision for this expansion project in the fourth quarter pending regulatory approvals. Bitumen production is expected in late 2009 followed by upgrader production in late 2010.
The group asked Shell Canada to establish a special independent committee to supervise preparation of a formal independent valuation and to review and make a recommendation regarding the proposed offer. The group reserves the right not to proceed with the making of an offer if it is unable to obtain this support. A formal offer will be conditional on more than 50% of Shell Canada’s outstanding shares, calculated on a fully diluted basis, being tendered.
Genghis Khan sale
BHP Billiton leads the Shenzi group with 44% interest and will be the operator. Partners are Hess Corp. and Repsol YPF SA, each with 28%. These three companies already own adjacent Shenzi field.
The Genghis Khan sale involves a 100% stake in Green Canyon Block 652 and certain deep rights in Green Canyon Block 608. The sale is expected to close in the fourth quarter.
The development has gross hydrocarbon reserves of 65-170 million boe, BHP said Nov. 13. Development may include as many as seven production wells, and production is scheduled for mid-2007 with continued drilling to follow.
The Genghis Khan well, drilled to 26,000 ft TD in 4,300 ft of water, tested 110 ft of high-quality net oil pay in the Lower Miocene and additional pay in the Middle Miocene. Production plans call for a subsea tieback to the Marco Polo platform, 2.4 miles away (OGJ, May 5, 2005, Newsletter).
The divestiture is part of Anadarko’s efforts to help raise $15 billion to reduce debt from its $21 billion purchases of Kerr-McGee Corp., Oklahoma City, and Western Gas Resources Inc., Denver (OGJ, July 10, 2006, p. 27).
Statoil buys GOM prospects
Statoil plans to acquire 25% interest in the Knotty Head discovery, operated by Nexen Inc., Calgary, and 15% interest in the Big Foot discovery, operated by Chevron Corp. Statoil already had 12.5% interest in Big Foot.
In addition, Statoil is acquiring a 15% stake in the Big Foot North prospect from Anadarko. Chevron operates Big Foot North, in which Statoil already has a 12.5% stake.
Earlier this year Statoil acquired interests in Big Foot and Big Foot North from Plains Exploration & Production Co. (OGJ Online, Sept. 18, 2006).
The Big Foot discovery, on Walker Ridge Block 29, lies in 5,000 ft of water about 225 miles south of New Orleans (OGJ, Aug. 7, 2006, Newsletter).
The Knotty Head oil discovery is on Green Canyon Block 512 and found about 600 ft of net oil pay in multiple zones (OGJ, Jan. 2, 2006, Newsletter).
Pending field development, Big Foot and Knotty Head are expected to be in production after 2010, Statoil said.
Dominion divestiture
Dominion plans to keep its Appalachian basin properties, which account for 17% of its proved reserves and 8% of its average daily production as of Sept. 30. About 76% of the reserves are developed, and about 76% of the reserves are gas.
A formal sales process is scheduled to begin in February 2007 after completion of the 2006 reserve audit. Closing is expected by mid-2007, Dominion said. The E&P assets are managed by Dominion Exploration & Production Inc., Houston.
Excluding the Appalachian basin, Dominion has proved reserves of 5.5 tcf equivalent of gas spread across the deepwater Gulf of Mexico, West Texas, the Midcontinent and Rockies, and the Western Canadian Sedimentary Basin.
Devon divestiture
Devon did not announce an expected sale price. It plans to open data rooms in Houston and London during December. Acceptance of bids and completion of a purchase and sale agreement are anticipated during first quarter 2007.
The company’s Egyptian production is 5,000 boe/d, less than 1% of both the company’s total production and proved reserves.
The assets to be offered include interests in eight concessions, four in the Western Desert and four in the Gulf of Suez. Four of the concessions are producing. The concessions comprise 3.7 million gross (1.8 million net) acres.
The Oklahoma City-based independent obtained the assets through the $5.3 billion acquisition of Ocean Energy Inc., Houston (OGJ, Mar. 3, 2003, p. 31).
Pogo divestiture
Pogo expects $700-800 million in proceeds from the asset sales, and the company plans to use the proceeds to reduce debt. The divestitures are slated for completion in two phases.
The first phase, including the Gulf of Mexico, South and East Texas, and South Louisiana, is expected to close by the end of first quarter 2007. Production from these properties is estimated at 37 MMcfd of gas equivalent.
The second phase, covering properties in the Permian basin, the Texas Panhandle, and western Canada, is expected to be completed by midyear.
Talisman divestiture
Talisman’s properties up for divestment are grouped into five areas: Greater Lloydminster, Central Alberta, Pembina-Brazeau, Wapiti-North Deep basin, and Cranberry-Chinchaga.
Talisman anticipates the sales program will be completed early in second quarter 2007. The Calgary independent will use proceeds to repurchase shares.
Talisman buys N. Sea assets
Subject to government and other approvals, Talisman is expected to become operator of the fields later this year.
Fulmar, on Blocks 30/11b and 30/16s, and Auk, which lies on Blocks 30/16n and 30/16t, produces about 8,000 b/d of oil (OGJ Online, Feb. 22, 2006). Auk has remaining about 675 million bbl of oil.
Talisman also has agreed to acquire Hess Ltd.’s 1.48% interest in Fulmar field. Pending completion of both transactions, Talisman will hold a 100% interest in this field.
Dana-Centurion deal
Dana Gas also will assume Centurion’s net debt of $99 million, giving the transaction a total value of $1.25 billion.
Centurion Energy has oil and gas exploration and production with properties in Egypt, Tunisia, and off West Africa. Centurion’s board will recommend that shareholders accept the Dana Gas offer.
The acquisition requires the approval of two thirds of shareholders voting at a special meeting to be scheduled in early January 2007.
Dana Gas said Centurion’s assets complement Dana Gas’s existing activities in gas transportation, processing, and marketing and represent the entry by Dana Gas into the upstream sector.
Unit-Brighton deal
Unit has identified 27 proved undeveloped locations that can be drilled in addition to numerous probable and possible locations.
The reserves are 78% gas and 67% proved developed. Most of the acquired reserves are in the Anadarko and Gulf Coast basins of Oklahoma, Texas, and Louisiana, with additional reserves in Arkansas, Kansas, Montana, North Dakota, and Wyoming.
Encore in N. Sea
EnCore said it plans to issue 37 million shares to the sellers of the acquired companies, and that share issue will represent 15% of the resulting EnCore. Closing, subject to regulatory consents, is expected before Dec. 31.
Nido Petroleum Ltd. of Vancouver and Grove Energy Ltd., Perth, will continue to exist as independent companies.
Last year, Grove Energy, Virgo Energy, and Nido Petroleum merged their North Sea operations under Virgo Oil & Gas. The sale of those holdings to EnCore completes that consolidation strategy, Grove said Oct. 24.
Pluris-San Enrique
Pluris Energy, formerly Petrogen Corp., is placing a $65 million convertible bond instrument to finance the San Enrique purchase as well as other acquisitions.
San Enrique’s assets includes 251,376 net acres in the Neuquén, Austral, and Golfo de San Jorge basins-the three most prolific basins in Argentina, holding 49 million bbl of oil equivalent, with estimated proved, probable, and possible reserves of 25 million bbl of oil and 142 bcf of gas.
Also, its current production exceeds 1,000 boe/d, which is expected to grow rapidly through an aggressive development program being carried out by Roch SA, operator. And it has three gas processing plants and pipeline infrastructure.
The transaction is expected to close around the beginning of 2007.
Upon closing the San Enrique acquisition, Pluris plans to file a prospectus for initial public offering on the Oslo Bors main market, while maintaining a dual listing and quotation in the US.
Pearl E&P-Atlas merger
Atlas is a heavy oil and natural gas exploration and development company that produces a net 5,800 boe/d. Both boards approved the combination, and Atlas shareholders will vote on the merger.
Key projects of the combined company include: Mooney (heavy oil, 74% working interest), Druid (heavy oil, 100%), Unity (shallow gas, 100%), Salt Lake (heavy oil and gas, 100%), Ear Lake (heavy oil and gas, 100%), Pikes Peak (heavy oil, 100%), Onion Lake (heavy oil, 87.5%), and southern Alberta (shallow and medium gas, 88%).
Atlas has more than 260,000 net undeveloped acres (average 83.6% working interest). Other key projects include San Miguel, Tex. (heavy oil), Palo Duro, Tex. (shale gas), and Gulf of Mexico shallow-water offshore (natural gas).
The transaction is synergistic with Pearl’s core assets around Onion Lake in northeastern Alberta and northwestern Saskatchewan and will allow the combined company to focus on optimizing value through low cost development, operating, and product marketing.
EPL-Stone deal off
EPL has agreed to pay Stone $8 million in exchange for Stone’s agreeing to release all claims against it. The sum represents a $17.6 million discount from the fee EPL would have been obligated to pay Stone under certain circumstances.
In September Woodside Petroleum Ltd.’s wholly owned subsidiary ATS Inc. began an $880 million tender offer for EPL in a takeover bid.
The offer from ATS, Covington, La., is conditional upon EPL shareholders’ voting down the Stone transaction. EPL has proposed to buy Stone for $2 billion, which includes $1.43 billion in a cash-stock offer, plus $563 million in debt (OGJ, June 12, 2006, p. 34).
In an Oct. 12 statement, however, EPL said its board has decided to explore strategic alternatives, and it recommends that EPL stockholders reject the unsolicited tender offer of ATS, saying the offer is “inadequate and not in the best interests of EPL’s stockholders.”
ConocoPhillips-EnCana JV
ConocoPhillips and EnCana will contribute equally in assets and equity. The transaction, subject to final agreements and regulatory approval, is expected to close Jan. 2, 2007.
Both companies’ boards already approved the transaction. Each partnership will have a management committee with three ConocoPhillips and three EnCana representatives. Each parent company will hold equal voting rights.
“With this strategic alliance, ConocoPhillips strengthens its presence in North America by repositioning 10% of its US downstream business to access a large upstream resource base,” said Jim Mulva, ConocoPhillips chairman and chief executive officer.
Randy Eresman, EnCana’s president and chief executive officer, said his company had been looking for a partner to maximize the value of EnCana’s in-situ oil sands.
“These innovative partnerships achieve this objective by strategically aligning about two thirds of our industry-leading oil sands projects with an industry-leading refiner,” Eresman said. “ConocoPhillips brings a wealth of heavy oil refining expertise and widely adopted coking technology to our integrated heavy oil business.”
The upstream partnership involves EnCana’s Foster Creek and Christina Lake projects in the eastern flank of the Athabasca oil sands in northeast Alberta, having recoverable bitumen of more than 6.5 billion bbl. EnCana will operate and be the managing partner of the upstream partnership, to be based in Calgary.
The partnership plans to increase production to 400,000 b/d of bitumen by 2015 from current production of 50,000 b/d. A blend of 50-50 bitumen and synthetic oil will be sold at major Alberta trading hubs.
The downstream partnership involves ConocoPhillips’s 306,000 b/cd Wood River refinery in Roxana, Ill., and its 146,000 b/cd refinery in Borger, Tex. ConocoPhillips will operate and be managing partner of the downstream partnership, to be based in Houston.The partnership plans to expand heavy oil processing capacity at these facilities to 550,000 b/d by 2015 from 60,000 b/d. Total throughput at the two facilities is expected to increase to 600,000 b/d from the current 450,000 b/d during the same period.
In addition, the partnership might additionally expand heavy oil processing capacity at these locations or in Alberta to match bitumen production.
ConocoPhillips and EnCana each will own 50% of the partnership; however, ConocoPhillips will hold a disproportionate economic interest in the Borger refinery for 2 years: 85% in 2007 and 65% in 2008.
Chaparral-Calumet deal
Chaparral of Oklahoma City said the acquisition fits with its existing enhanced oil recovery program. Calumet’s properties are mainly in Oklahoma and Texas, including assets in the North Burbank oil field.
North Burbank is in the early phases of an EOR polymer flood. Chaparral plans to include carbon dioxide injection, return more than 400 wells to production, and perform horizontal infill drilling in the tighter portion of the Bartlesville reservoir.
The transaction is expected to close in the fourth quarter.
TCPL buys TGT stake
TC PipeLines already holds a 49% interest in TGT, which owns a 240-mile interstate natural gas pipeline extending from Malin, Ore., to Reno, Nev. TC PipeLines is managed by general partner TC PipeLines GP Inc., an indirect wholly owned subsidiary of TransCanada Corp.
Once the sale is closed, expected by yearend, TransCanada will operate the TGT system.
Sierra Pacific Power Co., the utility unit in northern Nevada for SPR, is currently the primary customer for gas transportation on the TGT system and will continue this role following the sale.
Earlier this year, SPR had announced plans to sell its interest in TGT to concentrate more fully on its rapidly growing utility businesses.
Lukoil-Turgai deal
Turgai Petroleum’s primary asset is Kumkol field in the Kyzylorda region.
Arbitrators ruled in Lukoil’s favor in a counter-claim it filed following PetroKazakhstan Inc.’s July 2004 claim against Lukoil.
Previously, Chinese National Petroleum Corp. acquired 100% of PetroKazakhstan Inc., which owns a stake in Turgai Petroleum. A shareholders agreement was violated because Lukoil was not asked whether it wanted to exercise its pre-emptive right to a stake in Turgai before CNPC bought PetroKazakhstan.
An independent expert will determine the price, which then must be approved by both CNPC and Lukoil. Failing an agreement on the price, the Stockholm Arbitration will appoint a price.
Duke’s gas spin-off
Once Duke’s spin-off transaction is complete, expected Jan. 1, 2007, Spectra Energy will consist of the business unit now known as Duke Energy Gas Transmission and Duke Energy’s 50% interest in Duke Energy Field Services, which recently was renamed DCP Midstream.
Spectra Energy will operate primarily in transmission and storage, distribution, and gathering and processing.
Fred Fowler, president of Duke Energy Gas, will become chief executive officer of Spectra Energy.
The Spectra Energy name replaces Gas SpinCo Inc. (GasCo), the temporary name given the natural gas business. The stock is expected to be traded on the New York Stock Exchange.
Forest forms subsidiary
As of Sept. 30 Forest Alaska has 32 million boe of proved reserves and production of 6,000 boe/d. The company plans to focus on development of McArthur River field.
The subsidiary owns 186,000 net acres of developed and undeveloped land and interests in production and drilling infrastructure.
