JSC KazMunaiGas Exploration Production (KMG EP) will buy a 50% stake in Citic Canada Energy Ltd. for $930 million, which will provide access to the Karazhanbas field in western Kazakhstan.
In other recent company news:
- Norway’s Pertra ASA announced plans to merge with DNO ASA’s Det Norske Oljeselskap ASA (NOIL) in a move that will create the second-largest operator in Norway after the newly formed StatoilHydro ASA.
- OMV AG plans to grow production to 500,000 boe/d by 2010 from a current 324,000 boe/d through acquisitions and organic growth, a senior company executive told reporters Oct. 9 in Vienna.
KMG EP acquisition
Citic Canada owns Citic Canada Petroleum Ltd., which has total control of JSC Karazhanbasmunai (KBM), a large oil and gas company developing that field. Total proved reserves of KBM as of Jan. 1 were 363.8 million bbl of oil according to a Miller & Lents Ltd. reserve report. In 2006, Karazhanbas produced 2.3 million tonnes of oil.
Askar Balzhanov, KMG EP chief executive, said the deal-approved by board members Oct. 3-would boost its production level by another 10%. “We are working closely with Citic with the goal to improve performance of Karazhanbas field,” he said.
KMG EP will pay $875.5 million for its interest in CCEL and spend $54.5 million on financing costs. “Management structure of CCEL and CCPL as well as underlying assets will include representatives of both shareholders. Important matters, including related party transactions, annual work plan, budget, significant financial commitments and significant supply contracts will require unanimous approval,” KMG EP said.
The transaction follows an option agreement KMG EP signed with JSC National Co., Kazakhstan’s state-owned oil company, to acquire interest in CCPL by yearend (OGJ Online, May 30, 2007).
KMG EP will spend $150 million from its own funds to finance the deal and will be entitled to a preferred return of $26.2 million/year from the project. CITIC will provide limited recourse financing to KMG EP to meet the shortfall and other financing charges at a cost comparable to KMG EP’s own cost of financing.
Closure of the 50% beneficial interest is expected to be completed before the end of the year once the parties have secured necessary regulatory approvals.
Pertra-NOIL merger
The transaction is expected to close in November pending approval by the companies’ shareholders and Norwegian authorities.
The new company will be called Det norske oljeselskap ASA. It will operate 17 licenses off Norway and expects as operator to drill 20 exploration wells over the next 3 years.
Pertra Chief Executive Erik Haugane and Chairman Kaare M. Gisvold will both continue in their respective roles with the new company.
The deal, structured as an exchange offer, requires Pertra to swap each one of its shares for three shares in NOIL. DNO will be the largest shareholder of the new company with a stake of 39.97%. Terms of the agreement requires DNO to reduce its stake to no more than 25% by yearend 2008.
OMV looks at acquisitions
Helmut Langange, OMV head of exploration and production, said, “Developing new fields will contribute more than 70,000 b/d in places like Pakistan and New Zealand. We are one of the few companies that can show organic production growth of 5-6%/year.” OMV expects 100,000 b/d from its 2010 target will come from acquisitions. Langange acknowledged that would be difficult with high prices now being paid for assets.
Romania is a key license area for the company with 65,000 sq km of acreage. It is applying modern seismic technology to help increase its exploration success.
OMV is focusing on drilling deep wells onshore and deepwater wells offshore in light of high oil prices. Its deep onshore wells are hitting 5,500 m in Austria. “The target has been gas, and we’ve been very successful with that,” Langange told OGJ.
OMV is drilling deepwater wells in the Atlantic margin, New Zealand, and Egypt, but the major problem is securing drilling equipment for which prices have soared. “This is driven by a scarcity of ships and the huge demand in Gulf of Mexico, Norway, and West Africa,” Langange added.
OMV is a partner with operator Chevron Corp. in Rosebank, which recently tested 6,600 b/d of oil in July (OGJ Online, July 18, 2007). However, it took the partners 2 years to acquire a drillship that could reach depths of 1,500 m. Hiring these vessels 2 years ago cost $150,000/day and now costs are $600,000/day, Langange said.
Presently OMV is able to recover about a third of its reserves but wants to improve recovery rates to 50% and expand into frontier areas. “Research should focus on how to recover more oil. Enhanced oil recovery is helping and we are using more sophisticated methods such as surfactant flooding, reducing tension pressure, and carbon dioxide flooding to get out more oil and gas.”
Langange is not optimistic that prices would ease in the short term. “I don’t think the extra capacity will come on stream in time. Projects are being affected by time delays and cost overruns. We see projects that were delayed to 2009-10 instead of starting in 2007-08, which is due to an overheated market and scarcity of skilled workers.”
