CANADA
Cenovus sells Shaunavon tight oil asset
Cenovus Energy Inc. and Surge Energy Inc. have entered into an agreement for the sale Cenovus' Shaunavon tight oil asset in southern Saskatchewan. Surge will pay $240 million for the property. The deal, which has an effective transaction date of July 1, 2013, is expected to close by mid-month. The Shaunoven property consists of 54 sections of land currently producing 3,600 b/d of oil. Cenovus originally identified its Bakken and Shaunoven assets as candidates for sale after a portfolio review in February 2013. The company's Bakken asset remains on the market.
BUDA
Crimson reports Buda oil success
On the cusp of an announcement that Contango Oil & Gas and Crimson Exploration had agreed to merge in late April, Crimson has attracted more interest with its Buda activity in Dimmitt County, Tex.
The company announced in April that its Nevill-Mosley #1H was successfully completed, resulting in a gross production rate of 1,164 boe/d on a 42⁄64-in choke. The well was drilled to a total measured depth of 15,192 ft, which included a 6,041-ft lateral, and it was completed with 22 stages of fracture stimulation. The company, which holds an 82% working interest in the well, reported it was its first Woodbine oil well in the 2013 capital program.
In Dimmit County, Crimson drilled the Beeler #2H well targeting the Buda formation. In June, it announced that the well had been successfully completed with a gross 24-hr initial production rate 859 boe/d on a 25⁄64-in. choke. The gross 30-day production rate was 797 boe/d. The Beeler #2H is Crimson's first well in Dimmitt County targeting the Buda formation.
As of late June, the merger was still in process. Contango said in a press release that it had submitted its registration statement on Form S-4 to the U.S. Securities and Exchange Commission and is awaiting a decision on whether to review the document. However, there is some speculation that Crimson may undergo a bidding war in light of its recent success.
Mississippi Lime
Northcote completes Oklahoma producer
Northcote Energy Ltd. has reported that its Big Hill #1 well at the Horizon Project in Osage County, Okla., has tested with an open flow rate of up to 1.21 MMcfd of natural gas on the first of its four to six frac stage program. This represented a 1,200% increase on the 3 month average production for the well prior to stimulation, the company said. It owns a 51.75% working interest in the well. Since completion, the well has produced an average of 16 b/d oil. At open flow, the company stated that the well demonstrated potential to produce up to 231.5 boe/d. The company has targeted 2013 production to equate to 100 boe/d. It is currently awaiting repairs to complete testing on its Big Hill #2.
NEW ALBANY
Illinois passes hydraulic fracturing regulation
Illinois Gov. Pat Quinn has signed into law regulation for high-volume hydraulic fracturing in the state.
Companies will now be required to disclose chemicals used in fracturing and to test water before and after drilling. The rules also include strong provisions to protect water quality and to assure transparency.
The Environmental Law & Policy Center touts Illinois' Hydraulic Fracturing Regulatory Act (HB 2615) as one of the strongest protections against water pollution in the nation. The bill was the result of extensive negotiations among industry groups, an environmental coalition, legislators, and state agencies.
The Illinois House approved the bill to regulate high-volume fracing and impose a tax on oil and gas produced from wells permitted under the act. The measure was adopted by the House 108-9 and passed the Senate 52-3 just one day later. Gov. Pat Quinn was quoted as saying the law would be a shot in the arm for many communities.
A number of energy companies have acquired leases to explore New Albany potential in southeastern Illinois. Companies will now be required to provide certain disclosures, insurance, and to gain necessary permits. Speaking on behalf of the bill in the premiere issue of UOGR, Brad Richards, executive vice president of the Illinois Oil and Gas Association said, "The bill has been negotiated with compromises on both sides of the issues." He added that passage would provide the best possible scenario to fully develop Illinois' resource potential.
MONTEREY
California postpones fracing regulations
California's legislative session has closed without adopting proposed regulations for hydraulic fracturing in the state. The proposed laws regarding oil and gas activity were targeting future development of the emerging Monterey shale in the San Joaquin basin, home to Kern County oil production.
Bill SB4, authored by Sen. Fran Pavley, D-Agoura Hills, would have required a scientific study on the environmental impacts of hydraulic fracturing. The bill also called for disclosure of constituents in frac fluids, testing of nearby groundwater before and after drilling, and the creation of a state website for compiling data. Pavley also had called for a moratorium on hydraulic fracturing in the event a scientific study was not completed by January 2015. The bill passed in the Senate on May 29, 2013, but it failed to gain enough votes to finalize in June.
AB288 called for a 30-day notice to the state before a well could be stimulated, and it required the State Oil and Gas Supervisor to oversee drilling, operation, maintenance, and abandonment of wells. Despite several amendments, including removing the 30-day notice clause, the bill was defeated on May 30, 2013. Another bill, AB1323, called for an outright moratorium on hydraulic fracturing until a new study could be conducted on the environmental and public safety impacts of the technique. It also was defeated in May.
AB7, authored by Assemblyman Bob Wieckowski, D-Fremont, called for operating companies to provide lists of every chemical used in hydraulic fracturing operations along with justifications for each trade secret claim. The bill would have required details concerning maximum concentrations and purposes of chemicals used, amount and type of water used, and disposition of fluid used in fracturing once the process is complete. It included provisions for baseline groundwater monitoring, prenotification to regulators and landowners within 1,500 ft of a wellhead, and wastewater discharge reporting. The bill was amended to include provisions from SB4, but it failed to clear the Assembly's Natural Resources committee with the required five votes on June 12, 2013. AB 669 called for regulation of the use and disposal of fresh water in fracturing operations, but it also was defeated in June.
Two other antifracturing bills, AB1301 and AB649, which called for further studies of the environmental impact and potential hazards of hydraulic fracturing, were held back in the Appropriations Committee until 2014.
While California is known to have a Democratic supermajority and an extensive arm for grassroots environmentalism, the failure of the California Legislature to pass several bills to ban or heavily restrict hydraulic fracturing in the state has come to the surprise of analysts.
According to the California Energy Commission, the state's crude oil production fell by 47% between 1985 and 2010. The state's regulators are now looking at other states like Texas and North Dakota as examples of increasing oil production through unconventional development.
According to a study published by the University of Southern California, titled "Powering California: The Monterey Shale & California's Economic Future," development of the state's unconventional resources could create 512,000 to 2.8 million new jobs. The report estimates that total economic activity in the state could increase by 2.6% to 14.3% on a per capita basis. In addition, tax revenue collected by California state and local governments could grow by $4.5 billion to $24.6 billion.
WOLFCAMP
Sinochem acquires $1.7 billion Wolfcamp stake
Sinochem Group has closed its previously announced $1.7 billion purchase of Wolfcamp assets in Texas from Pioneer Natural Resources Co. Pioneer of Dallas sold 40% of its interest in 207,000 net acres in the horizontal Wolfcamp shale in the southern portion of the Spraberry trend.
At closing, Sinochem paid $631 million in cash of which $109 million was Sinochem's 40% share of net expenditures in the joint interest area. Sinochem will pay the remaining $1.2 billion by carrying 75% of Pioneer's share of future drilling costs until the drilling carry is fully utilized.
Production from the joint interest area is approaching 10,000 boe/d, and Sinochem will commence receiving its share effective immediately, Pioneer said in a press release. The company added that it retains a 60% interest in the Wolfcamp assets and will continue as operator.
The assets are in portions of Upton, Reagan, Irion, Crockett, and Tom Green counties in Texas. Pioneer retains its current working interests in all horizons shallower than the Wolfcamp horizon.
Sinochem is a Chinese business conglomerate that spans globally over energy, agriculture, chemicals, real estate, and financial services.
COLLINGWOOD
Pipeline construction targeted in Michigan
The Committee to Ban Fracking in Michigan (CBFM) attempted to challenge the approval of two natural gas pipeline applications for northern Michigan in May.
The petitions stemmed from an application for regulatory approval from Encana Oil & Gas in January to construct and operate the pipelines to connect two of the company's wells to gas sales lines. The company noted in the application its plans to drill a significant number of wells near the two pipelines within the next few years. The Michigan Public Service Commission (MPSC) approved the applications on Jan. 13, 2013.
In March, CBFM Advisory Boardmember, attorney Ellis Boal, filed petitions on behalf of two northern Michigan residents to intervene and request evidentiary hearings regarding MPSC approval. The petitions were based on the residents' estimations that inadequate environmental impact assessments were filed with Encana's applications. In addition, the petitions claim that cumulative effects from drilling and pipeline construction operations stand to industrialize the state forests and wetlands located in the northern portion of Michigan's Lower Peninsula.
Encana objected to the petitions on procedural grounds. The company currently holds leases for 429,000 acres in northern Michigan's Collingwood shale with more than 500 net well locations. The company's drilling activity to date has primarily focused on retaining its leasehold. Encana drilled one Collingwood well in 2012 and has drilled one joint-venture well this year, the company said.
The MPSC denied the petitions and has scheduled regular information sessions on the safe development of oil and gas resources to defend itself against future challenges. The CBFM also announced it has a ballot initiative to ban hydraulic fracturing in the state of Michigan, for which the organization is seeking endorsements.
"In Michigan we have the constitutional power to write our own laws through a ballot initiative and put them before the voters. Other states threatened by fracing, such as New York and Pennsylvania, do not have this option," said LuAnne Kozma, campaign director. Michigan had 52 wells slated for hydraulic fracturing as of April.
