GENERAL INTEREST — Quick Takes
Range Resources to acquire MRD for $4.4 billion
Range Resources Corp., Ft. Worth, has agreed to acquire Memorial Resource Development Corp. (MRD), Houston, in an all-stock deal valued at $4.4 billion, including the assumption of MRD's net debt of $1.1 billion as of Mar. 31.
MRD's assets are concentrated in North Louisiana, where the firm recorded first-quarter natural gas production of 420 MMcfd from 561 gross producing wells. The 241,130 gross acres-219,654 net-have proved reserves of 1,378 bcf of gas equivalent and 4,132 gross horizontal locations. MRD currently has 105 horizontal wells producing from its four primary zones in Terryville field in Lincoln Parish, La.
Range's operations are focused in stacked-pay projects in the Appalachian basin. "This acquisition will give Range strategic positioning in both the Appalachian and Gulf Coast regions, providing greater marketing capabilities and opportunities, with added beneficial exposure to growing natural gas demand," explained Range Resources CEO Jeff Ventura.
MRD CEO Jay Graham said, "This transaction combines two complementary companies with a deep, stacked pay portfolio of assets in two leading unconventional resource basins."
As part of the deal, MRD shareholders will receive 0.375 of a share of Range common stock for each share of MRD common stock held. Based on the Range closing price on May 13, the deal has an implied value to MRD shareholders of $15.75/share, representing a 17% premium to the closing price of MRD stock. Following completion, shareholders of MRD are expected to own 31% of the outstanding shares of Range.
EnerVest acquires Eagle Ford shale assets
EnerVest Ltd. said it and its institutional partners have closed or entered agreements to acquire Eagle Ford shale assets totaling $1.3 billion in three deals since last September. The properties, in Karnes County, Tex., produce more than 17,000 boe/d.
Most recently, EnerVest agreed to acquire 7,056 net acres with 5,170 boe/d of production, 85% liquids, from BlackBrush Oil & Gas LP, San Antonio. The seller is a portfolio company of funds managed by Ares Management LP.
The acquired properties, 75% operated, include 341 drilling locations. BlackBrush retains a minority stake.
On Apr. 29, EnerVest closed the acquisition of 4,198 net acres adjacent to the BlackBrush properties from affiliates of GulfTex Energy, San Antonio.
The acquired properties produce 8,568 boe/d, 85% liquids and include 256 drilling locations. They are 60% operated.
Late last year EnerVest acquired a nonoperated position adjacent to the two new acquisitions from an undisclosed seller (OGJ Online, Nov. 5, 2015). That acquisition involved 2,200 boe/d of production, 7.8 million boe of reserves, and 1,760 net acres with 278 drilling locations.
EnerVest Chief Executive Officer John B. Walker said about $1.7 billion remains in its latest fund for acquisitions.
SandRidge files petitions under Chapter 11
SandRidge Energy Inc., Oklahoma City, has filed petitions under Chapter 11 in the US Bankruptcy Court for the Southern District of Texas. The firm said it will consummate a "prearranged" reorganization through a restructuring support agreement that includes the conversion of $3.7 billion in debt.
Sandridge projects that it will have "ample liquidity to fund its ongoing operations and its capital programs throughout the Chapter 11 and upon emergence thereafter, without the need for debtor-in-possession financing or other additional capital."
James Bennett, SandRidge president and chief executive officer, commented, "The new capital structure will allow the company to concentrate on oil and gas exploration and development in our active Oklahoma and Colorado project areas."
Sandridge's primary focus is on the Niobrara shale and the US Midcontinent, where it holds 1.85 million acres in the Mississippian oil play.
Exploration & Development — Quick Takes
Oklahoma STACK well flows 3,339 boe/d
Continental Resources Inc.'s Verona 1-23-14XH flowed 2,345 bo/d and 6 MMcfd of natural gas in an initial 24-hr test, the company reported. The Verona well is producing from the Meramec reservoir through a 9,700-ft lateral at a casing pressure of 2,400 psi on a 34/64-in. choke.
Continental CEO Harold Hamm cited the well as another example of positive results from the overpressured oil window of STACK. The well cost about $9 million, which is $500,000 less than Continental's yearend 2016 target cost for 2-mile lateral wells in STACK. The Verona well was drilled in Blaine County, Okla., east of Continental's Ludwig unit.
The Verona well is the independent's ninth well in STACK's overpressured oil window, and the company is completing four additional Meramac wells. It has 11 operated rigs drilling in STACK, with six targeting the Meramec and five drilling in Woodford, the company said.
In February, Continental slashed its budget by 66%, reporting capital expenditures for 2016 down to $920 million from its previously planned $2.7 billion for 2015 (OGJ Online, Feb. 8, 2016).
Continental has 171,000 net acres of leasehold in the STACK play, 95% of which is in the overpressured window.
Statoil farms into licenses on Turkey's Thrace basin
Statoil Holding Netherlands BV, a wholly owned unit of Statoil ASA, has agreed to take 50% interest in two licenses in the Thrace region of the European northwestern portion of Turkey from Calgary-based Valeura Energy Inc.
The deal encompasses the exploration of deeper formations below 2,500 m where overpressure is expected on Valeura's two wholly owned and operated Banarli licenses. Valeura will keep the remaining 50%, and retain 100% of shallow formations above 2,500 m.
The work program in the licenses consists of several phases, the first of which includes the commitment of drilling one exploration well, with planned spudding late this year or in early 2017. The exploration phase will test unconventional gas potential in the deep parts of the basin.
The licenses cover an area of 540 sq km in proximity to existing infrastructure in a region where gas has been produced since the 1920s. Earlier this year, Valeura brought on stream its Bati Gurgen-1 well from the Osmancik formation on the Banarli license (OGJ Online, May 16, 2016).
"Entry into the northwestern part of Turkey is in accordance with our exploration strategy to build a diverse portfolio of low commitment frontier opportunities with impact potential," said Erling Vagnes, senior vice-president for Statoil's exploration activities in the Northern Hemisphere.
The agreement is pending governmental approval, which is expected by the end of September.
BP's Bight exploration plans fall short for second time
BP Australia's plans for an exploration drilling program in the Great Australian Bight offshore South Australia have fallen short of the regulator's environmental requirements for a second time.
BP originally applied to the National Offshore Petroleum Safety & Environmental Management Authority (NOPSEMA) in 2015 for permission to drill four exploration wells in its Bight acreage.
NOPSEMA sent it back and BP resubmitted a revised plan earlier this year. The regulatory authority sent it back to BP this week and it will now need to be submitted again by July 15.
NOPSEMA said typically it will provide two opportunities to modify and resubmit drilling applications, but this is not a hard and fast rule.
The regulator added, however, that if a titleholder has been given a reasonable opportunity to modify its plan and NOPSEMA decides that it still does not meet the regulatory requirements for acceptance, then the application will be refused.
For its part, BP says it is still on track to begin its drilling program late this year. The company said it had allowed sufficient time for the regulatory process to be carried out and it will resubmit by the due date in July.
Drilling & Production — Quick Takes
Shell resumes some production at Brutus in gulf
Shell Exploration & Production Co. and the US Coast Guard agreed to conclude skimming operations in their joint response to an estimated oil discharge of 2,100 bbl from a subsea flow line at Glider field in the Gulf of Mexico off Louisiana, Shell E&P said May 16.
The nearby Brutus tension-leg platform has resumed production from Shell's direct vertical access wells. But Glider and other subsea fields remain shut-in. Some 150 people worked on the response using five recovery vessels for skimming (OGJ Online, May 13, 2016).
Shell and the USCG recovered an estimated 2,012 bbl of an oil-water mixture. One vessel remained in the area to assess potential environmental consequences. No oil reached the coast.
The US Bureau of Safety and Environmental Enforcement approved Shell's plans to remove and secure the damaged segment of the subsea flow line at Glider, and work is under way. BSEE is leading the investigation of the incident. There have been no reported injuries throughout the response.
Eni increases gas, condensate output at Nooros field
Eni SPA reported reaching production of 65,000 boe/d from Nooros field offshore northern Egypt. Plans are to increase production to 140,000 boe/d by yearend.
The natural gas and condensate field, discovered in July 2015, produced 15,000 boe/d late last year (OGJ Online, Oct. 29, 2015).
Exploration activities continue. Current production includes wells drilled under the sea from the onshore Abu Madi West concession in the Nile Delta.
Eni sends Noorso gas and condensate to the Abu Madi treatment plant. Eni's subsidiary IEOC has a 75% stake in the license. BP PLC holds the rest. Petrobel, a joint venture of IEOC and Egyptian General Petroleum Corp., is the operator.
BP doubles interest in North Sea's Culzean development
BP PLC has acquired another 16% interest in the Culzean development of the UK central North Sea from JX Nippon Oil & Energy Co., bringing the British multinational firm's total stake in the project to 32%.
The Maersk Oil North Sea UK Ltd.-operated development, sanctioned at the end of August last year (OGJ Online, Aug. 31, 2015), is expected to produce enough gas to meet 5% of total UK demand at peak production in 2020-21.
Discovered in 2008 (OGJ Online, Jan. 30, 2009), the gas-condensate field has resources estimated at 250-300 million boe. Production is expected to start in 2019 and continue into the 2030s, plateauing at 60,000-90,000 boe/d.
Fabrication of the Culzean wellhead jacket and access deck have been completed and departed in April for the Central North Sea (OGJ Online, Apr. 13, 2016). The development involves bridge-linked wellhead, central processing, and utilities and quarters platforms.
PROCESSING — Quick Takes
Argentinian refinery plans expansion, upgrades
Axion Energy Argentina SA has secured partial financing from World Bank Group member International Finance Corp. (IFC) for a project to expand and upgrade its 87,000-b/d refinery near the town of Campana in Argentina's Buenos Aires province.
Signed with Axion in early May, the $378-million financing package involves an 8-year, $78-million loan from IFC and a $300-million loan raised by IFC from several commercial banks and other financial institutions, including ICBC, Santander, BBVA, Credit Agricole, and Citibank, with tenors ranging from 5-6 years, IFC said.
Alongside a project to boost crude oil processing at the refinery, Axion will use IFC's financing to increase the plant's production of refined products, including ultralow-sulfur diesel; reduce its sulfur emissions; and expand customer access to cleaner fuels by extending its distribution network, IFC said.
The proposed refinery overhaul comes as part of Axion's plan to help increase Argentina's domestic production of cleaner-burning fuels that meet more stringent environmental standards as well as reduce the country's reliance on imports, Axion said.
IFC's long-term loan comes alongside Axion's investments of more than $600 million since 2013 on a series of other projects designed to increase the Campana refinery's efficiency and quality of fuel production, said Adrian Suarez, Axion's chief executive officer.
Due to be completed this year at a total cost of $1.5 billion, the Campana expansion and upgrading program will result in increased capacities of the refinery's crude, catalytic cracking, and diesel hydrotreating units, as well as enhance the plant's overall operational flexibility, Axion said in its 2015 annual report issued in March.
ExxonMobil plans upgrade at Australian refinery
ExxonMobil Corp. subsidiary Mobil Refining Australia Pty. Ltd. is planning a multimillion-dollar (Aus.) investment to execute projects to expand capacity and improve efficiency at its 80,000-b/d Altona refinery in Victoria, 13 km west of Melbourne.
Alongside work on the refinery's crude unit that will increase its processing capacity by 10,000 b/d to 90,000 b/d, the investment will cover technical projects designed to boost the refinery's production of diesel and jet fuel as well as enable recovery of an additional 3 Mw of waste heat, Lily D'Ambrosio, Victoria's minister of industry and energy and resources, said.
The planned investment follows the more than $370 million (Aus.) that ExxonMobil has spent during the previous 5 years on maintenance and other improvements at refinery, said Andrew Warrell, Mobil Refining Australia's manager.
The Altona refinery produces as much as 13 million l./day of refined products (60% gasoline, 30% diesel, 10% jet fuel) and supplies LPG feedstock to Qenos Pty. Ltd.'s petrochemical plants at the Altona Chemical Complex (ACC), which in turn supply feedstock to ACC manufacturing plants operated by BASF SE and Dow Chemical Co.
ExxonMobil previously shut down its 74,000-b/cd refinery in Adelaide in 2003 amid overcapacity in Asia refining and stagnant economic growth (OGJ, Dec. 22, 2003, p. 64).
Ineos approves unit for Chocolate Bayou complex
Ineos Oligomers, a division of Ineos AG, Rolle, Switzerland, is adding a new linear alpha olefin (LAO) unit at Ineos Olefins & Polymers USA's Chocolate Bayou petrochemical complex in Alvin, Tex.
Ineos, which took final investment decision on the project on May 16, will build the 420,000-tonne/year LAO unit to complement its existing LAO units in Joffre, Alta., and Feluy, Belgium, as part of an aggressive plan to expand its international LAO business, the company said.
The new unit will be based on Ineos Oligomers' proprietary and differentiated LAO technology and include process technology improvements designed to reduce variable operating costs, according to Joe Walton, business director for Ineos Oligomers.
Originally planned as a 350,000-tpy unit, the larger LAO unit approved for Chocolate Bayou results, in part, from the company's access to favorable US Gulf Coast ethylene economics, which enables it to fully exploit available economies of scale for the project, added Walton.
The new LAO unit at Ineos' Chocolate Bayou site-which already houses two ethylene crackers and provides ready access to the USGC ethylene pipeline network-also will be well placed to supply growing USGC polyethylene capacity, as well as provide feedstock to enable the company's long-term polyalphaolefin (PAO) capacity growth to support demand for high-performance synthetic lubricants, according to Ineos.
With preliminary work to accommodate the new installation already under way at Chocolate Bayou, Ineos said the LAO unit should be ready for startup in November 2018.
TRANSPORTATION — Quick Takes
Plains to fight California spill charges
Plains All American Pipeline LP said it will fight criminal charges related to the release of 500 bbl of crude oil from its 24-in. OD Coastal Line 901 near Santa Barbara, Calif., last year (OGJ Online, May 20, 2015).
Oil escaped through a 6-in., longitudinally oriented opening in a section of pipe found to have suffered WT thinning due to corrosion (OGJ Online, June 4, 2015). The oil flowed through a culvert into the Pacific. A state grand jury indictment names Plains and one of its employees. It includes 46 counts, 10 related to release of the crude or reporting and 36 related to effects on wildlife.
In a statement, Plains expressed disappointment over decisions by the California attorney general and Santa Barbara district attorney to pursue criminal charges.
"Plains believes that neither the company nor any of its employees engaged in any criminal behavior at any time in connection with this accident and that criminal charges are unwarranted," the company said in a statement. "We will vigorously defend ourselves against these charges and are confident we will demonstrate that the charges have no merit and represent an inappropriate attempt to criminalize an unfortunate accident."
Petronas's first FLNG vessel sails for Sarawak field
Malaysia's state-owned Petronas has reported that its first floating LNG (FLNG) facility, PFLNG Satu, has sailed from South Korea for its location on the Kanowit gas field offshore Sarawak.
The 365-m, 132,000-tonne vessel was towed from the Daewoo Shipbuilding & Marine Engineering Co. Ltd. shipyard in Okpo at the weekend to begin its 2,120 nautical mile journey to Malaysia.
Once there it will be moored at Kanowit, 180 km offshore Sarawak, hooked up, and commissioned.
Construction began on the project in June 2013. The vessel hull was launched in April 2014 after which some 22 modular systems were installed within on the topside of the facility.
The vessel is designed to operate in water depths of 70-200 m and has a processing capacity of 1.2 million tonnes/year of LNG. It has a crew of 145.
News of the PFLNG Satu's voyage comes just 2 weeks after Petronas launched the hull of its second FLNG vessel (PFLNG2) at Samsung Heavy Industries shipyard in Geoje Island, South Korea, at the end of April (OGJ Online, Mar. 1, 2016).
Williams holding Transco expansion open season
Williams Partners LP is holding a binding open season for the Northeast Supply Enhancement project, an expansion of the Transco interstate pipeline, to provide 400 MMcfd of incremental firm natural gas to the US Northeast. Transco plans to place the project into service for the 2019-20 winter heating season.
Subject to approval by the US Federal Energy Regulatory Commission, the Northeast Supply Enhancement project will add looping and compression to portions of Transco's system between Compressor Station 195 in York County, Pa., and the Rockaway Transfer Point, an existing interconnection between the Lower New York Bay lateral and the Rockaway Delivery lateral offshore New York.
Williams does not anticipate that the project's scope will change based on the outcome of the open season.
Precedent agreements with subsidiaries of National Grid for firm transportation service support the project. New York's appetite for gas is increasing as consumers continue to phase out the use of heavy fuel oils. In April 2015, New York City Mayor Bill de Blasio announced sweeping goals to curb city emissions by 80% by 2050, including phasing out the use of No. 4 fuel oil by 2030.
NOPSEMA rejects Wheatstone start-up plan
Australia's National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) has sent back Chevron Australia's start-up and operations environment plan for the Wheatstone domestic gas-LNG project off Western Australia saying the plan is not sufficiently robust.
The plan includes the offshore platform at Wheatstone, its subsea facilities, and the subsea pipeline to the gas and LNG plant at Ashburton North near Onslow.
NOPSEMA says Chevron has not outlined an appropriate implementation strategy, including monitoring, recording and reporting arrangements, for bringing the offshore facilities on stream.
The federal regulator says the proposal was not appropriate for the nature and scale of start-up of the project, which lies 50 km from the Montebello Islands National Park and Barrow Island (a Class A reserve). It added that the proposal did not demonstrate that the environmental risks of the start-up will be reduced to as low as reasonably practicable.
The offshore Wheatstone facilities will produce, gather, and dewater the field's hydrocarbons before sending the dry gas and condensate via pipeline to the shore plant.
For its part, Chevron says it will respond to NOPSEMA's comments and address the outstanding matters before submitting a revised plan for bringing Wheatstone on stream.
Chevron says this decision will not impact the critical path of the Wheatstone project.
The Chevron knock-back follows a similar rejection of Woodside Petroleum Ltd.'s operations environment plan for Julimar-Brunello field operations earlier this year. Julimar and Brunello will supply gas to the Wheatstone project.
Woodside submitted a revised plan to NOPSEMA this week and is awaiting a response.
Chevron has requested approval to purchase gas from the Dampier-Bunbury gas trunkline to aid commissioning of the Wheatstone shore facilities before offshore production begins. There will be further testing of all systems once the wells and offshore facilities are brought on stream.
Following completion of full commissioning, Wheatstone production will be gradually ramped up to capacity over a 6-24 month period. Production is scheduled to begin during the second half of 2016 with first LNG expected in mid-2017.