Plains Exploration & Production Co. agreed to acquire a 20% interest in Chesapeake Energy Corp.’s Jurassic Haynesville shale play leasehold for $1.65 billion in a new joint venture.
Plains also agreed to fund 50% of Chesapeake’s 80% share of drilling and completion costs for future JV wells over several years until another $1.65 billion has been paid.
As a result of the transaction, Plains will hold 110,000 net acres of this leasehold and Chesapeake will hold 440,000 net acres.
In other recent company news:
- Quicksilver Resources Inc. entered into purchase and sale agreements with various private parties to acquire a number of Barnett shale assets for $1.3 billion. Sellers include Chief Resources LLC, Hillwood Oil & Gas LP, and Collins & Young LLC.
- Berry Petroleum Co. agreed to acquire interest in East Texas natural gas production from a consortium of private sellers for $620 million.
- Pacific Rubiales Energy Corp., Toronto, will buy Kappa Energy Holdings Ltd. of Colombia for $168 million.
- Endeavour International Corp. has offered to buy Ithaca Energy Inc. for as much as $150 million in cash and shares to bolster its North Sea assets.
- Oklahoma City-based Quest Resources Corp. plans to buy private PetroEdge Resources LLC for $140 million, closing by mid-July.
- A Talisman Energy Inc. unit plans to invest as much as $125 million within 18 months to earn working interest in properties owned by Hallwood Energy LP.
- Arrow Energy, Brisbane, has signed a major agreement with Shell Exploration Co. BV under which Shell will pay up to $776 million (Aus.) for interests in Arrow’s Australian and international coal seam methane (CSM) projects.
- Australian power retailer Origin Energy Ltd., Sydney, has formally rejected the unsolicited $13.8 billion (Aus.) takeover bid from BG Group.
- Dutch energy firm Nuon announced a €476.7 million deal to acquire the Norwegian North Sea energy assets of ConocoPhillips.
- Canadian Imperial Venture Corp. has agreed to acquire 100% of the assets of Encore Investments Ltd., including 25 sections of land in southern Alberta and interests in a number of producing oil and gas wells.
- ATP Oil & Gas Corp. acquired a 55% working interest in the Gulf of Mexico’s Green Canyon Blocks 299 and 300, collectively known as Clipper.
- InterOil, the Canadian company working in Papua New Guinea, sold its retention leases in the western sector of the country to concentrate on its potentially high yielding Elk-Antelope field in eastern Papua New Guinea.
- ExxonMobil Corp. reported June 12 it will sell its 820 company-owned stations and 1,400 dealer-operated retail outlets due to tightening profits.
- Wholly owned subsidiaries of Ute Energy LLC and Anadarko Petroleum Corp. formed Chipeta Processing LLC in the Unita basin of Utah.
- Eni SPA and Petroleo Brasileiro SA (Petrobras) renewed their commitment to work closely together on upstream and downstream operations, plus feasibility studies on renewables in Brazil and elsewhere.
- OAO Gazprom opened an office in Algeria, aimed at developing opportunities in Africa and in particular with Sonatrach, the nation’s state owned oil company.
Plains-Chesapeake
Chesapeake said it plans to continue acquiring leasehold in the Haynesville shale, and Plains will have the right to 20% participation in any additional leasehold.
The core area of the play spans 3.5 million acres in Texas and Louisiana, Chesapeake told analysts in a conference call.
Acreage on the Texas side may be harder to lease, Chesapeake said. It did not disclose the core area’s location but expects core and noncore areas to develop.
Chesapeake said average estimated ultimate reserves in the core area are estimated to average 4.5-8.5 bcf of gas equivalent for each well.
A well in the play now costs $6.5 million. As with other shale plays, these results are likely to improve over time.
The companies currently plan to develop the Haynesville shale using 80-acre spacing, which could support the drilling of as many as 6,875 horizontal wells on the leasehold.
Chesapeake is running five operated rigs in the Haynesville shale play and anticipates operating at least 12 rigs by yearend 2008, at least 30 rigs by yearend 2009, and as many as 60 rigs by yearend 2010. Under this plan, the companies anticipate drilling at least 600 wells in 3 years.
Quicksilver Resources
Quicksilver is acquiring production, leaseholds, royalties, and midstream assets in Tarrant and Denton counties of Texas.
The properties have net production of 45 MMcfd of gas. Quicksilver estimates that these properties hold 350 bcf of proved gas reserves, of which 40% are proved developed. Quicksilver is paying $1 billion in cash and $307 million in common stock. The acquisitions are scheduled to close in August.
Upon closing, Quicksilver estimates that its total average 2008 production volume will increase to 275 MMcfd of gas equivalent, an 8% increase from earlier estimates.
Berry Petroleum
Berry Petroleum’s transaction involves 4,500 net acres in Limestone and Harrison counties. The acquisition, which includes a $20 million gathering system, marks Berry Petroleum’s entry into the East Texas basin.
Berry Petroleum of Bakersfield, Calif., will operate the properties upon closing, expected by July 15. The acquisition will add 32 MMcfd of gas equivalent to Berry’s production from 100 producing wells.
Estimated proved reserves associated with the properties are 335 bcf of gas equivalent, with 29% being proved developed reserves.
Berry identified more than 100 drilling locations targeting stacked pay in various productive zones including the Pettit, Travis Peak, Cotton Valley Sands, Cotton Valley Lime, and Bossier sands.
Pacific Rubiales
Kappa Energy, operating since 1997, holds 747,000 gross acres in nine operating blocks in the Catatumbo, Llanos, and Lower, Middle, and Upper Magdalena basins.
Kappa Energy holds the following net working interests: Abanico block, 22.5% in the production area, 23.8% and 14.8%, respectively, in the Santana and Casablanca exploration areas, and 30.5% in the remaining exploration areas, Alhucema 50%, Arrendajo 32.5%, Cerrito average 75%, Chipalo 50%, Cicuco 100% for gas and oil, Guasimo 100%, Buganviles 49%, and Las Quinchas 50%.
The Abanico contract area includes the main oil producing field, Abanico, making 4,100 b/d, and Ventilador gas field making 4.3 MMcfd. Guasimo, Alhucema, and Arrendajo are in the drilling phase.
Kappa Energy had 9.3 million boe of proved and probable reserves as of May 31.
Pacific Rubiales operates numerous blocks in Colombia and three blocks in Peru.
Endeavour-Ithaca Energy
Endeavour sent a nonbinding letter to the Ithaca Energy board, setting out its proposal, which represents a premium of 44.2% on Ithaca’s closing price on June 18. Endeavour, which already holds a 2.4% of Ithaca’s current issued share capital, has offered an indicative price of $3.25/Ithaca share.
William Transier, Endeavour’s president and chief executive, said: “Our two companies have similar strategic focus on the upstream business in the North Sea. With Endeavour’s current cash flow and growing production profile, the risk of timely execution of Ithaca’s development projects is reduced, and the ability to realize total value for shareholders is significantly increased.”
Ithaca said it would review the unsolicited offer in light of its long-term strategic plan. It has interests in 30 blocks or partial blocks under 16 licenses covering more than 514,000 acres.
Endeavour estimates that its production in 2008 will average 8,600-9,000 boe/d. It plans to drill and appraise 15 North Sea exploration and appraisal wells later in 2008 and 2009.
Quest
PetroEdge owns 78,000 net acres of gas and oil producing properties in West Virginia, Pennsylvania, and New York. The properties, 100% operated and 99% gas, produce 3.3 MMcfd of gas equivalent from 99.6 bcf of gas equivalent of proved reserves.
Some 67,000 acres are in the Devonian Marcellus shale play fairway, including 41,000 net acres in Ritchie, Wetzel, and Lewis counties, WVa., 22,000 net acres in Lycoming County, Pa., and 3,000 net acres in Steuben County, NY. The acquisition will bring Quest’s Marcellus play holding to 119,000 net acres.
PetroEdge had drilled and completed 112 wells on its properties since the end of 2004, all of which were productive. The properties have 700 potential drilling locations assuming vertical development on 80-acre spacing.
The first two horizontal Marcellus wells are drilling in Wetzel County, and drilling is to start in Lycoming County by yearend.
Talisman-Hallwood
Talisman Pres. and Chief Executive Officer John Manzoni said, “This agreement gives us exposure in a number of areas where we have not been active, including the deep Barnett and Fayetteville shales.”
Previously, Manzoni said Talisman would spend $1.1-1.3 billion through 2009 evaluating its unconventional assets in Canada and the US (OGJ Online, May 22, 2008).
Fortuna Energy Inc. Shale LP, a wholly owned limited partnership of Calgary’s Talisman, agreed to invest in Hallwood Energy in exchange for a stake in Hallwood’s assets in Texas, Arkansas, and Louisiana.
Privately owned Hallwood Group Inc., a diversified holding company, owns 25% of Hallwood Energy of Dallas. Hallwood Energy’s 2008 drilling program calls for 11 wells.
The Talisman agreement involves Hallwood’s 40% working interest in more than 43,000 acres in the Barnett and Woodford shales in the West Texas counties of Reeves and Culberson.
The agreement also involves Hallwood’s 24,500 net acres in the Fayetteville shale in White and Faulkner counties in Arkansas.
In addition to the assets, the agreement includes a technical-services arrangement in which Hallwood’s technical staff would assist Talisman for a year.
Manzoni said, “Hallwood has a proven track record in the early-stage development of shale programs, and we will use this to augment our experience in the piloting and development of our unconventional plays.”
Shell-Arrow Energy
The preliminary agreement specifies that Shell will acquire 30% of Arrow’s Australian upstream permits for an initial sum of $435 million (Aus.). An additional $209 million is payable when a final investment decision has been made and production begun from an LNG project in Gladstone, Queensland, proposed by LNG Ltd. (LNGL), Perth.
LNGL and Arrow already have a cooperation agreement for Arrow to supply CSM feedstock from its Surat basin fields to LNGL’s Gladstone project. The two companies have discussions in progress to increase capacity of the first proposed LNG train to 1.5 million tonnes/year from 1.3 million. A potential second train in Gladstone to be added as further gas reserves are proved would have a similar capacity.
In a rider to the Shell-Arrow agreement, Shell also will pay another $132 million (Aus.) to buy a 10% share in Arrow International, which holds all of Arrow’s overseas assets.
In addition, Shell will have a 5-year option to back into any Arrow International project for 50% of Arrow’s interest by paying 50% of past costs, although this excludes three CSM licenses in India.
Shell will transfer senior management personnel into the projects, establish a research and development program, and reserve the right to offtake LNG produced from CSM feedstock sourced from the Arrow-Shell permits.
Under the deal, Arrow will remain operator of the upstream assets.
News of the Shell move comes on the heels of the recent announced agreement between Santos and Malaysia’s Petronas in which Petronas will take a 40% interest in Santos’ proposed Gladstone CSM-LNG project for $2 billion (OGJ, May 19, 2008, p. 32).
Origin-BG
BG launched its bid of $15.50 (Aus.)/share in cash in late June only a month after Origin rejected the UK firm’s original unsolicited proposal at the same price.
Origin said it rejected the original proposal after careful consideration of all relevant information including the fact that there appeared to be an increasing appreciation of the value of coal seam methane (CSM) assets.
Subsequent to this rejection the company maintains it has seen a continued strong interest in the coal seam methane sector and a further 10% increase in the West Texas Intermediate oil spot price to levels above $140/bbl.
Origin Chairman Kevin McCann said the company had now undergone a formal tender process and the time for submitting expressions of interest closed on July 4.
McCann said Origin reaffirms its 3P CSM reserves of 10,122 petajoules (notwithstanding BG’s scepticism). These resources have been certified by an independent expert and are consistent with the methodology used for other Queensland CSM operators.
He added that Origin has prime acreage in Queensland in terms of quality and quantity of CSM resources.
Nuon acquisitions
Nuon will acquire Burlington Resources Nederland Petroleum BV, giving the company stakes in 35 gas fields in the Norwegian North Sea, gas pipelines, and processing facilities.
The transaction is key to Nuon’s determination to become an integrated company across the gas and power value chain. It also adds the essential gas production capabilities to Nuon’s existing gas trading, wholesale, and retail activities.
About 28 of the 35 fields are in the joint development area of the Dutch North Sea and Burlington holds interests in the Westgastransport Pipeline and Pipeline Extension, the onshore Den Helder facility with HiCal and LoCal gas processing plants, and the JDA LoCal pipeline. The assets are operated either by NAM or by Wintershall.
Nuon is keen to partner with a foreign company to strengthen its position in the European energy market and continue to acquire interests in gas fields or power plants. The search for a partner is expected to take at least 6 months.
Canadian Imperial
The lands include developed and undeveloped acreage predominantly in Alberta at Black Butte, Coutts, Etzikom, Foremost, Forty Mile, Manyberries, Pakowki, Sapphire, Warner, and Yellow Lake. Working interests of the acquired company average 22% in developed lands and 19% in undeveloped lands. For the most part, Canadian Imperial owns the majority interest and will be operator of the undeveloped lands.
Some of the lands to be acquired are held jointly by Encore and Canadian Imperial through Canadian Imperial’s subsidiary, USG Energy Corp. Encore is a former shareholder of USG. Since Canadian Imperial’s acquisition of USG in May 2007, Encore has held 17.5 million warrants of Canadian Imperial exercisable at 10¢/share until May 2009.
The warrants will be cancelled on closing of this deal, and Canadian Imperial will issue 17.5 million shares to Encore in exchange for all of the issued and outstanding shares of an Encore subsidiary, transferring title to 100% of the assets of Encore to Canadian Imperial.
ATP-Green Canyon blocks
ATP, which acquired the ownership interest from two independents, will operate both blocks. The value of the transaction was not disclosed.
ATP plans to complete one existing well and sidetrack and complete a second well first production scheduled for late 2009. Four wells drilled in 2005-06 in 3,400 ft of water.
InterOil
The company sold 43.13% of retention lease PRL4, which contains the undeveloped Stanley gas and condensate field, and 28.576% of PRL5, which contains the undeveloped Elevara and Ketu gas and condensate fields, to Horizon Oil Ltd. in Sydney.
InterOil retained first right of refusal to buy any condensate produced from both areas, which will be used as feedstock for the company’s oil refinery in Port Moresby.
Horizon has increased its interests in both retention leases in recent few years and sees opportunity for commercial gas development as early as 2009, particularly in PRL4 at Stanley where the company will now have 100% interest.
Horizon’s interest in PRL5 will become 49.647% if the transaction is approved.
The PRL4 deal is subject to government approval, while PRL5 is subject to pre-emptive rights from operator and major interest holder Santos Ltd of Adelaide.
InterOil said its move will allow it to concentrate on development of its potentially huge gas discoveries at Elk-Antelope in the eastern highlands. The recent Elk-4 well flowed at 14 MMcfd. The company said the structure is potentially 13km long and 5km wide with gross reservoir thickness of 500m.
The Antelope-1 appraisal will be drilled later this year.
The company is a member of the Liquid Niugini Gas group with Merrill Lynch and Clarion Finanz AG and plans a 2-train LNG plant in Port Moresby capable of producing up to 9 million tonnes of LNG/year from 2012 using the Elk-Antelope gas as feedstock.
ExxonMobil
The major did not disclose financial details but said the transition will take place over a “multiyear period.”
US motorists, however, will continue to see Exxon and Mobil-labeled outlets throughout the country. About 75% of ExxonMobil’s roughly 12,000 stations in the US are owned by branded distributors. ExxonMobil will still sell gasoline to those stations and get paid for the use of its name.
Ute Energy, Anadarko joint venture
Chipeta will operate a gas processing and delivery hub in the Greater Natural Buttes area.
Ute Energy is an investment of Quantum Energy Partners, Quantum Resources Management, and the Ute Indian Tribe of the Uintah and Ouray reservation.
Anadarko is the operator and has 75% interest in Chipeta, which owns an existing 250 MMcfd refrigeration processing plant.
Chipeta is constructing a second 250 MMcfd cryogenic processing plant. It’s scheduled for completion during the first quarter 2009.
Eni, Petrobras partnership
The Italian major will offer its exclusive slurry technology to convert residues and heavy oils, typical of those produced in Brazil.
Eni Chief Executive Paolo Scaroni and Josè Sergio Gabrielli, chief executive of Petrobras, signed the latest agreements at the World Petroleum Congress in Madrid. The first memorandum of understanding was signed in Brazil in early 2007 (OGJ, Mar. 30, 2008, Newsletter).
Both companies will study the valorisation of the natural gas reserves recently discovered by Eni off Brazil, particularly in the Santos oil basin.
Brazil has proven oil reserves of 11.5 billion bbl and proven natural gas reserves of 320 billion cu m. Hydrocarbon production, currently 2 million b/d and about 12 billion cu m/year of natural gas, will continue to grow due to encouraging exploration results, particularly offshore.
Eni has four offshore exploration blocks in Brazil along with a 30-year concession granted in 1999 to distribute natural gas in the northwest area of São Paulo state. Over the years, Saipem and Snamprogetti have jointly contributed to the building of numerous facilities in the oil sector, such as the refineries in Belo Horizonte, Porto Alegre, and São José dos Campos and some floating production systems.
Gazprom
Under a memorandum of understanding signed in 2006, both parties are committed to jointly developing oil and gas projects in Algeria, Russia, and third countries, including probable swaps of assets and operations, with exchanges of LNG and pipeline gas, for efficiency.
“Possibilities for cooperation in the area of joint acquisition of energy assets in the territory of third countries, engineering and construction of facilities of pipeline infrastructure were considered as well,” Gazprom said.
This is the first time that Gazprom has established a representative in Africa. Deputy Chairman of the Management Committee of OAO Gazprom Alexander Medvedev added that cooperation would cover all parts of the oil and gas chain across Africa, including exploration and production, processing, sales, environmental protection, and energy efficiency. He said the office would help Gazprom raise its profile in becoming a global energy company.