GENERAL INTEREST Quick Takes
ConocoPhillips reports decrease in Q4 earnings Y-o-Y
ConocoPhillips reported fourth-quarter 2019 earnings of $700 million compared with fourth-quarter 2018 earnings of $1.9 billion. Excluding special items, fourth-quarter 2019 adjusted earnings were $800 million compared with fourth-quarter 2018 adjusted earnings of $1.3 billion. Special items for the current quarter included primarily a non-cash impairment related to a planned Lower 48 disposition, partially offset by an unrealized gain on Cenovus Energy equity.
Full-year 2019 earnings were $7.2 billion compared with full-year 2018 earnings of $6.3 billion. Excluding special items, full-year 2019 adjusted earnings were $4.0 billion compared with full-year 2018 adjusted earnings of $5.3 billion.
Cash provided by operating activities for 2019 was $11.1 billion. Excluding working capital, cash from operations (CFO) of $11.7 billion exceeded capital expenditures and investments, generating free cash flow of more than $5 billion.
For the quarter, cash provided by operating activities was $3 billion.
Production, excluding Libya, for fourth-quarter 2019 was 1.289 million boe/d, a decrease of 24,000 boe/d from the same period a year ago. Adjusting for closed dispositions and acquisitions, the production increase was primarily due to production growth from the Big 3 unconventionals, development programs, and major projects in Alaska, Europe, and Asia Pacific. The growth more than offset normal field decline. Production from Libya averaged 45,000 boe/d.
In the Lower 48, production from the Big 3 averaged 387,000 boe/d in the quarter, including Eagle Ford of 221,000 boe/d, Bakken of 96,000 boe/d, and Permian unconventional of 70,000 boe/d.
The company’s 2020 operating plan capital guidance is $6.5-$6.7 billion. The plan includes funding for ongoing development drilling programs, major projects, exploration and appraisal activities, as well as base maintenance. Capital spend is expected to be higher in the first quarter largely from winter construction and exploration and appraisal drilling in Alaska. Guidance does not include capital for acquisitions.
The company’s 2020 production guidance is 1.23-1.27 million boe/d, including the impact of a recent third-party pipeline outage on Kebabangan field in Malaysia.
Abendschein to head operations at Talos
Talos Energy Inc. has appointed Robert Abendschein as executive vice-president and head of operations, succeeding Stephen E. Heitzman, executive vice-president and chief operating officer. The appointment is effective Feb. 17.
Abendschein has over 35 years of energy industry experience spanning roles in engineering, operations, offshore projects, business development, and senior management. He served 33 years with Anadarko Petroleum Corp. and predecessor companies, including as the vice-president of worldwide deepwater. Most recently, Abendschein was the chief executive officer of Venari Resources LLC.
Heitzman, a founder of Talos and 45-year industry veteran, will continue to provide services to Talos as a senior advisor on an as-needed basis for about 6 months to assist with the transition.
Talos has operations across a range of deepwater and shallow water assets in both the United States and Mexico. In December 2019, the company acquired US Gulf of Mexico producing assets, exploration prospects, and acreage from affiliates of ILX Holdings, Castex Energy, and Venari Resources for $640 million (OGJ Online, Dec. 11, 2019). The acquired assets produced 19,000 boe/d (65% oil, 72% liquids) in third-quarter 2019.
Stephens named Panhandle Oil and Gas CEO
Panhandle Oil and Gas Inc., Oklahoma City, has named Chad Stephens chief executive officer. Stephens has served as a member of Panhandle’s board of directors since 2017 and was interim chief executive officer since August 2019 following the departure of Paul Blanchard Jr. (OGJ Online, Aug. 27, 2019). Stephens has nearly 40 years of experience in the oil and gas industry. He was the senior vice-president of corporate development at Range Resources from 2002 until his retirement on Dec. 31, 2018.
Tullow Oil expects $1.5 billion impairment charge
Tullow Oil expects to book an impairment charge of $1.5 billion, or $1.3 billion post-tax, primarily due to a $10/bbl reduction in long-term accounting oil price assumption and a reduction in reserves estimates, the company said Jan. 15.
The news was issued as part of a company update and guidance in advance of the group’s 2019 full year results.
Proven and probable reserves at the end of 2019 stood at 245 MMboe, down from 280 million boe a year earlier, the company said. Group working interest oil production averaged 86,700 b/d of oil in 2019.
Full year 2019 total revenue is expected to be $1.7 billion with gross profit of $700 million. Capital expenditure in 2019 was $490 million.
Capital expenditure in 2020 is expected to be $350 million, with an additional $100 million expected to be spent on decommissioning. The company said it expects to generate underlying free cash flow of at least $150 million from 75,000 b/d of oil at $60/bbl.
Group average production guidance for 2020 remains unchanged at 70,000-80,000 b/d of oil.
Exploration & Development Quick Takes
SNOC, Eni make UAE gas, condensate discovery
Sharjah National Oil Corp. (SNOC) and Eni SPA have begun studies to fast track exploitation of a gas and condensate discovery in the onshore Mahani exploration prospect in the Area B concession of Sharjah (UAE). The discovery comes one year after the concession award as part of the first International Competitive Exploration Licensing Round conducted by the Petroleum Council of Sharjah (OGJ Online, Jan 14, 2019).
Mahani-1 was drilled to 14,597 ft MD and encountered a thick gas-bearing limestone reservoir in the Thamama of Lower Cretaceous age. The well was tested with flow rates up to 50 MMscfd lean gas and associated condensate. Additional appraisal drilling will further assess the size of the discovery. The next phase of exploration will include the subthrust Jurassic and Cretaceous plays of the Arabian carbonate platform in the inner thrust zone of the Oman fold belt and will require seismic imaging.
Sharjah National Oil Corp. (SNOC) is operator with a 50% interest. Eni holds the remainder.
Eni’s presence in the Middle East includes current exploration acreage in the UAE alone amounting to more than 12,000 sq km gross, comprising the onshore of Sharjah and offshore areas of Abu Dhabi and Ras Al Khaimah. Eni holds three offshore development and production concessions and two offshore exploration concessions in Abu Dhabi with current equity production of around 50,000 b/d. Eni is also a shareholder with a 20% equity interest in ADNOC Refining.
Total lets FEED contract for North Platte field
Total E&P USA Inc. has let a front-end engineering and design (FEED) contract to Worley for North Platte field development in the Gulf of Mexico (OGJ Online, Dec. 12, 2019). A final investment decision is expected in 2021.
North Platte field straddles four blocks of the Garden Banks area, 275 km off the coast of Louisiana in 1,300 m of water. The reservoir is of high quality, both in porosity and permeability, with thickness in places exceeding 1,200 m. The field development plan is based on eight subsea wells and two subsea drilling bases connected via two production loops to a newbuild, lightweight floating production unit (FPU). Production will be exported through existing oil and gas subsea networks. Oil production from the field is expected to average 75,000 b/d at plateau level.
Having completed the pre-FEED phase in August 2019, the award extends Worley’s involvement in Total’s deepwater Gulf of Mexico project.
The FEED component of the project is being led by Worley’s Houston office with support from its Hyderabad office in India.
Consortium lets contract for steel tube umbilicals in Brazil
A consortium led by Petroleo Brasileiro SA (Petrobras) has let a contract to Prysmian Group for steel tube umbilicals to be installed in Mero oil field offshore Brazil in the northwestern Libra area of the Santos basin presalt.
The award refers to Mero 1, an ultra-deepwater project, which will consist of up to 17 wells and one floating production, storage, and offloading vessel (FPSO), situated some 180 km offshore Rio de Janeiro at a water depth of 2,000 m subsea (OGJ Online, Dec. 18, 2017). The Mero 1 project is the first project in the region to use steel tube umbilicals. Oil production is expected to begin in 2021.
The contract includes the supply of some 60 km of steel tube umbilicals consisting of 9 and 12 functions 1/2-in diameter 10 kpsi super duplex steel tubes that will be manufactured in the group’s production unit in Vila Velha, Brazil.
The Libra Consortium is led by Petrobras as operator with 40% interest. Partners are Shell and Total, 20% each; and China National Petroleum Corp. and CNOOC Ltd., 10% each. State-owned Pre-Sal Petroleo is contract manager.
BHP lets contract for Trion work offshore Mexico
BHP Petroleum has let an engineering services contract to Doris Inc., Paris, for the subsea umbilicals, risers, and flowlines (SURF) and export pipeline scopes of work of the Trion project in the Mexican sector of the Gulf of Mexico.
Trion field encompasses an area of 1,285 sq km in the Perdido belt at a water depth of 2,570 m with an estimated 222 MMboe net 2C resources. Acquired in 2016 in Mexico’s first-ever deepwater bid round, BHP is operator with 60% interest. Petroleos Mexicanos (Pemex) holds 40% interest.
Resource uncertainty at the greenfield development project was reduced with the successful appraisal drilling of 2DEL and 3DEL wells, BHP noted in a November 2019 investor presentation. The company encountered oil with the Trion-2DEL appraisal well in 2018. This was followed by a downdip sidetrack that encountered oil and water, further appraising the field and delineating the resource. A final investment decision is expected early this year, the presentation showed, with additional exploration drilling in the block expected in 2021. First potential production is currently expected in 2025.
Drilling & Production Quick Takes
Diamondback Q4 production up 65% y-o-y
Diamondback Energy Inc., Midland, Tex., reported average daily production of 301,300 boe/d (195,000 bo/d), a 5% increase from third-quarter 2019 and up 65% from fourth-quarter 2018.
Average daily production for the full year was 283,000 boe/d (187,700 bo/d), a 27% increase from 2018 average daily volumes, with oil volumes increasing 26% year-on-year after adjusting for the Energen transaction, which closed Nov. 29, 2018.
Viper Energy Partners LP, a subsidiary of Diamondback, reported fourth-quarter 2019 average daily production of 26,100 boe/d (16,500 bo/d), a 23% increase from third-quarter 2019 and up 29% from fourth-quarter 2018.
Cub Energy resumes drilling in eastern Ukraine
KUB-Gas LLC, a 35%-owned subsidiary of Houston-based Cub Energy Inc., has started drilling the Makeevskoye-30 (M-30) well in Donets basin in eastern Ukraine. The well is expected to be drilled to 1,985 m TD to evaluate several prospective horizons, Cub Energy Inc. said in a press release Jan. 28. Cub Energy has 35% interests in six licenses in the Dnieper Donets basin through KUB-Gas.
Makeevskoye field has a 20-year production permit with six producing wells from four producing zones, according to Cub Energy’s web site. The recent Serpukhovian discovery has added follow on appraisal/development opportunities as well as further stratigraphic plays. There are numerous prospective areas for further exploration and development as well as frac and dual completion opportunities, the company said.
“The M-30 well will be the first well drilled on the producing M field in over 3 years after recent successful recompletions on the M [Makeevskoye] and O [Olgovskoye] fields at Kub-Gas,” said Mikhail Afendikov, chairman and chief executive officer of Cub Energy.
Pine Cliff places third Pekisko well on production
Pine Cliff Energy Ltd., Calgary, placed its third well targeting the Pekisko formation in Central Alberta on production Jan. 18 following encouraging results from two additional wells placed on production in fourth-quarter 2019, the company said in a program update.
The company’s first horizontal oil well (13-33) targeting the formation came on production on Jan. 18, 2019, and has averaged 249 boe/d (111 bbl/d oil, 27 bbl/d natural gas liquids, and 666 Mcf/d natural gas) through the first 365 days of production. Historically, horizontal wells in the area were completed with acid, etching a small area in a single pay zone, but Pine Cliff’s 13-33 well employed a multi-stage, crosslinked gel stimulation, creating a more complex fracture with higher conductivity, the company reported in a November 2019 investor presentation.
Two additional Pekisko wells (100% working interest) were drilled in fourth-quarter 2019. Well 4-21 was placed on production Dec. 19, 2019, with IP30 rates averaging 308 boe/d (150 bbl/d oil, 31 bbl/d natural gas liquids, and 761 Mcf/d natural gas). Well 1-15 was placed on production Jan. 18.
Pay in the Pekisko development is associated with three zones, the lower two containing oil. Porosity is post depositional and highly complex.
Twining Pekisko oil field—135 km northeast of Calgary—was discovered in 1952 through vertical well development. The first horizontal (>2300 m measured depth) well was drilled in 1991. Oil and gas are trapped in the reservoir close to the subcrop edge (pinch-out).
The company’s development plan is targeting a volumetric recovery of 10%.
Shell leases unit from for deepwater GOM drilling
Shell Exploración and Extraction de México has let a contract to Grupo R for lease of the La Muralla IV semisubmersible drilling unit to operate in deepwater Gulf of Mexico.
In addition to the drilling rig, the contract provides Shell with a support team to drill three wells (with the option of extensions) starting in this year’s third quarter.
The contract is part of Shell Mexico’s strategy to accelerate deep sea exploration in Mexican territory, strengthening the national oil industry with competitive, efficient and shared risk contracts, the company said.
PROCESSING Quick Takes
Enterprise starts up Mentone gas processing plant
Enterprise Products Partners LP has commissioned its Mentone cryogenic natural gas processing plant in Loving County, Tex., in the Delaware basin (OGJ Online, Oct. 31, 2018).
Equipped to process 300 MMcfd of gas and extract more than 40,000 b/d of NGLs, the Mentone plant—which is supported by a long-term acreage dedication agreement—recently entered service, Enterprise said on Jan. 21.
While the operator did not disclose a specific timeframe for when Mentone reached startup, Enterprise said commissioning of this seventh gas plant in the Delaware basin brings the company’s total capacity in the Permian basin to more than 1.6 bcfd of natural gas processing and more than 250,000 b/d of NGL extraction, according to its two most recent presentations to investors.
Alongside the new plant, Enterprise also built 66 miles of large-diameter gathering and residue pipelines, as well as expanded compression capabilities linking Mentone to the partnership’s NGL and Texas Intrastate natural gas pipeline networks.
“These assets provide critical infrastructure to facilitate growing natural gas and NGL production in the region, which is expected to increase by more than 60% over the next 5 years,” said Brent Secrest, executive vice-president and chief commercial officer of Enterprise’s general partner.
To accommodate the increase in NGLs, Enterprise also confirmed it remains in the process of adding 300,000-b/d of fractionation capacity at its Mont Belvieu, Tex. Complex in two 150,000-b/d projects (OGJ Online, Nov. 6, 2018; Oct. 31, 2018; Sept. 5, 2018).
In a December 2019 presentation to investors, Enterprise said the Mont Belvieu fractionation units, named Frac 10 and Frac 11, were scheduled for startup in fourth-quarter 2019 and second-quarter 2020, respectively.
Cooper basin JV partners renew ethane contract
Cooper basin joint venture partners Santos Ltd. and Beach Energy Ltd., Adelaide, have extended an ethane gas supply contract to Qenos, Australia’s only manufacturer of polyethylene at its Botany Bay plant in Sydney.
The new sales agreement runs from Jan. 1 to Dec. 31, 2025, and is expected to supply 15 petajoules of ethane/year.
The ethane required by Qenos is processed via a dedicated facility at the Moomba gas plant in South Australia and sent by pipeline across New South Wales to Botany Bay on the Australian east coast, Santos said.
The Qenos site covers 87 hectares in a major chemical and plastics manufacturing area adjacent to the Botany Bay shipping terminal.
Samref’s Yanbu refinery receives new hydrogen supplies
Air Liquide SA subsidiary Air Liquide Arabia (ALAR) has started deliveries of hydrogen along its newly commissioned 16-km regional pipeline system to Saudi Aramco-Mobil Refinery Co. Ltd.’s (Samref)—a 50-50 joint venture of Saudi Aramco and ExxonMobil Corp. subsidiary Mobil Yanbu Refining Co. Inc.—400,000-b/d Samref refinery in Yanbu, Saudi Arabia.
Hydrogen is moving to the Samref refinery along ALAR’s Yanbu pipeline network from the service provider’s hydrogen production site located on the premises of the Saudi Aramco-China Petrochemical Corp. joint venture Yanbu Aramco Sinopec Refining Co. Ltd.’s (Yasref) 400,000-b/d refinery along the Red Sea in Yanbu Industrial City (YIC), Air Liquide said.
While Samref is the first customer on the pipeline network to receive hydrogen supplies from the Yasref production site, ALAR will also start supplying three other major industrial companies in YIC in the coming months, the service provider said.
Startup of the pipeline network and hydrogen deliveries comes as part of ALAR’s commitment to Saudi Arabia’s Vision 2030 via its hydrogen infrastructure on both coasts of Saudi Arabia, including Yanbu and Jubail, according to Air Liquide.
The service provider did not disclose a volume of hydrogen delivering to Samref.
Air Liquide began producing hydrogen at the more than €350-million Yanbu site in 2015 as part of a long-term agreement to supply processing units at the Yasref refinery aimed at reducing sulfur content of fuel products to help meet environmental standards for cleaner transportation fuels, the service provider said in June 23, 2015, release.
With two hydrogen production units and one purification unit, Air Liquide’s Yanbu production site has a total nameplate hydrogen capacity of 340,000 cu m/hr, which was to ramp up in the future depending on demand.
Startup of Air Liquide’s Yanbu hydrogen production site preceded Yasref’s commissioning of a 124,000-b/sd, fresh-feed hydrocracker equipped with Chevron Lummus Global’s proprietary maximum-conversion Isocracking technology and two-stage recycle configuration design to enable the refinery’s production of high-quality middle distillates, Euro 5-quality diesel, and aviation kerosine (OGJ Online, Oct. 13, 2016).
Samref previously completed modifications and renovations related to a two-phased clean-fuels project at its Yanbu refinery in 2014-15, which involved installation and revamps of major desulfurization units as part of the refinery’s strategy to comply with Saudi Arabia’s 2013 mandatory specifications for gasoline and diesel with 10 ppm sulfur (OGJ Online, Dec. 11, 2014).
TRANSPORTATION Quick Takes
Noble Midstream buys in on Saddlehorn pipeline
Noble Midstream Partners LP and Greenfield Midstream, through affiliate Black Diamond Gathering LLC, exercised an option to acquire an additional 20% membership interest in Saddlehorn Pipeline Co. LLC for $155 million, effective Feb. 1, 2020.
The option was previously granted to Black Diamond in conjunction with recent volume commitments to the pipeline.
The Saddlehorn pipeline is currently capable of transporting 190,000 b/d of crude oil and condensate from the DJ and Powder River basins to storage facilities in Cushing, Okla. Supported by increased volume commitments from shippers, the pipeline’s capacity is being increased by 100,000 b/d to a new total capacity of 290,000 b/d (OGJ Online, Aug. 29, 2019). The extra capacity is expected to be available later this year following the addition of incremental pumping and storage capabilities.
After Black Diamond’s purchase, with Magellan Midstream Partners LP and Plains All American Pipeline LP each selling a 10% interest, Magellan and Plains each own a 30% membership interest in Saddlehorn. Black Diamond and Western Midstream Partners LP each own a 20% membership interest. Magellan continues as operator.
Eni inks long-term LNG agreement with Nigeria LNG
Nigeria Liquefied Natural Gas (NLNG) signed a long-term contract with Eni SPA for the supply of 1.5 million tonnes/year of liquefied natural gas (LNG) for 10 years from Trains 1, 2, and 3 in Bonny Island, Nigeria.
Eni, through its local affiliate Nigerian Agip Oil Co. (NAOC), is one of the suppliers of the liquefaction plant (OGJ Online, Aug 27, 2019).
The deal, together with a 1.1-million-tonne deal executed in December 2019 between Eni and NLNG, allows Eni to increase its global LNG portfolio starting in 2021.
Shareholders in NLNG are Nigerian National Petroleum Corp. 49%, Shell Gas BV 25.6%, Total LNG Nigeria Ltd. 15%, and ENI International (NA) NV 10.4%.
