GENERAL INTEREST Quick Takes
Bonanza Creek, Extraction to merge as Civitas Resources
Bonanza Creek Energy Inc. and Extraction Oil & Gas Inc. have agreed to merge. The all-stock deal would create a pure-play Colorado Denver-Julesburg (DJ) basin producer—Civitas Resources Inc.—with an aggregate enterprise value of about $2.6 billion based on May 7 closing share prices.
The combine will operate across 425,000 net acres with a production base of 117,000 boe/d (on a pro forma first-quarter 2021 production basis). These operations are geographically diversified across rural, less regulatory-intensive areas, as well as more prospective suburban acreage, Bonanza Creek said in a release May 10.
Civitas expects to achieve annual expense and capital savings of $25 million.
Bonanza Creek president and chief executive officer, Eric Greager, will serve as president and chief executive officer of the newly-combined company. Matt Owens will serve as executive vice-president and chief operating officer, and Marianella Foschi will serve as executive vice-president and chief financial officer.
Upon completion of the deal, Bonanza Creek and Extraction shareholders will each own about 50% of Civitas, both on a fully diluted basis.
The deal is expected to close in third-quarter 2021, subject to customary closing conditions and approval by shareholders of both companies. Funds managed by Kimmeridge Energy own about 38% of the outstanding shares of Extraction and have entered into a support agreement to vote in favor of the transaction.
As of Apr. 1, 2021, Bonanza Creek and Extraction had combined cash on hand of $127 million and combined undrawn capacity under their credit facilities of $651 million.
Extraction emerged from bankruptcy in January of this year (OGJ Online, Jan. 20, 2021).
Laredo adds oil-weighted Midland basin leasehold, divests gas-weighted reserves
Laredo Petroleum Inc., Tulsa, Okla., agreed to acquire the assets of Sabalo Energy LLC—an EnCap Investments LP portfolio company—and a non-operating partner for $715 million ($625 million cash, 2.5 million Laredo common equity shares).
Upon closing, the company expects to hold over 30,000 productive, contiguous net acres in Howard County and a “near-term pathway [yearend 2021] to increasing our oil cut to more than 50% from the current 30%,” said Jason Pigott, president and chief executive officer, in a May 9 release.
The acquisition includes 21,000 contiguous net acres (86% operated, 100% held by production) directly offsetting Laredo’s existing Howard County leasehold with 120 operated oil-weighted locations (91% WI) and 150 non-operated locations (12% WI). The assets are currently producing 14,500 boe/d (83% oil, three stream) of low-decline production with an estimated next 12-month oil decline of 35%. PDP reserves are estimated at 30 MMboe (73% oil, three stream).
Additionally, Laredo agreed to sell 37.5% of its operated proved developed producing (PDP) reserves in Reagan and Glasscock counties to a Sixth Street Partners LLC affiliate for proceeds of $405 million and additional potential cashflow based earn-out payments over the next 6 years. None of the PDP reserves are in Howard or Western Glasscock counties.
Laredo is divesting reserves of about 94 MMboe (18% oil) with associated production of about 25,000 boe/d (23% oil). The sale is wellbore working interest only and Laredo retains all undeveloped locations.
Both transactions are expected to close July 1, 2021.
Eni awarded Block 7, onshore UAE
Eni SPA, through subsidiary Eni RAK, has been awarded Block 7 onshore Ras Al Khaimah, United Arab Emirates, by the Ras Al Khaimah Petroleum Authority.
The 430-sq km block is underexplored acreage in a complex thrust belt geological setting similar to the Mahani discovery in the adjacent Sharjah Emirate, Eni said in a release Apr. 19 (OGJ Online, Jan. 27, 2021).
Newly acquired 3D seismic will allow the joint venture to assess the setting, and existing gas processing facilities in the Emirate would allow a rapid development of any discoveries, the operator said.
Eni RAK will act as operator (90%) with Ras Al Khaimah’s National Oil Co. RAK Gas as partner (10%).
Eni also operates Emirate of Ras Al Khaimah offshore Block A where, after an initial geological and geophysical study period, preparations for drilling operations have started.
Exploration & Development Quick Takes
Vintage Energy finds gas in Vali-2 appraisal
Vintage Energy Ltd., Adelaide, found gas in both key Permian-age reservoirs in its appraisal of the Vali gas discovery in the Cooper basin of southwest Queensland.
Logging data from the Vali-2 appraisal well confirmed gas in the Toolachee and Patchawarra formations. The well has been cased as a future producer.
One of the main objectives for Vali-2 was to assess the potential for gas in the Toolachee four-way dip closure, which was not tested in the Vali-1 ST1 discovery well.
Successful recovery of a wireline gas sample bodes well for an increase in the certified Vali field reserves which currently only reflect gas in the Patchawarra, the company said.
The Toolachee in Vali-2 is 6 m up-dip of Vali-1 ST1 while the Patchawarra was intersected 7 m high to prognosis. Based on the log response, the Patchawarra appears to have a greater amount of sand throughout, the company said.
Vali lies in permit ATP 2021. Vintage is operator with 50% interest. Partners are Metgasco Ltd. and Bridgeport (Cooper Basin) Pty Ltd. with 25% each.
The rig is being mobilized to the Odin-1 wildcat in permit PRL 211 in South Australia, which is expected to spud by end-May.
The Odin structure is a large fault-bound Patchawarra formation closure derisked by the success at Vali.
Carnarvon Petroleum plans Buffalo-10 drilling by yearend
Carnarvon Petroleum Ltd., Perth, will drill its Buffalo-10 appraisal well in the East Timor sector of the Timor Sea during this year’s fourth quarter.
The company received $20 million from British farminee Advance Energy PLC to fund the well and earn 50% interest. Carnarvon will only be required to pay if well costs exceed that amount.
Procurement of long-lead equipment has begun which should be available before the end of the third quarter.
A tender process for a jack up drilling rig is nearing completion.
Buffalo field, originally in Australian waters prior to the redrawing of the international boundary with East Timor, was discovered by BHP in 1996. First oil was produced in 1999. The field passed to Nexen who terminated production in 2004.
Total production from the Jurassic-age Elang formation reservoir to that point was 20.5 million bbl of oil.
Carnarvon has since done extensive 3D seismic work and found there is potentially a significant volume of attic oil yet to be produced because of the suboptimal positioning of the original wells.
Buffalo-10 is aimed at appraisal, redevelopment, and production of remaining oil.
Petrobras lets contract for seventh Buzios field FPSO
Petróleo Brasileiro SA (Petrobras) signed a contract with Keppel Shipyard Ltd. to build the P-78, the seventh floating, production, storage and offloading (FPSO) unit to be installed in Búzios field, in the Santos basin presalt area offshore Brazil.
The unit will have a processing capacity of 180,000 b/d of oil and 7.2 million cu m/d of gas and is scheduled for delivery in 2024.
The project foresees the interconnection of 13 wells to the FPSO, 6 of them producers and 7 injectors, through a subsea infrastructure composed of rigid production and injection pipelines and flexible service pipelines, Petrobras said May 10.
Búzios field, discovered in 2010, is expected to reach the end of the decade with daily production above 2 MMboe/d, the company said.
Currently, there are four units operating in Búzios which account for more than 20% of Petrobras’s total production. The fifth and sixth platforms (FPSOs Almirante Barroso and Almirante Tamandaré) are under construction, and the eighth and ninth units (FPSOs P-79 and P-80) are in the contracting process.
Drilling & Production Quick Takes
Reliance Industries starts Satellite cluster gas production
Reliance Industries Ltd. (RIL) and BP PLC started production from Satellite Cluster gas field in Block KG D6 off the east coast of India (OGJ Online, June 12, 2019). The field lies 60 km from the existing onshore terminal at Kakinada in water depths up to 1,850 m.
Satellite cluster, originally scheduled for production start mid-2021, is the second of three developments to come onstream following the start of R-cluster in December 2020 (OGJ Online, Dec. 2, 2020). The field will produce gas from four reservoirs using five wells. It is expected to produce up to 6 million standard cu m/day (MMscmd).
Combined with MJ, the third deepwater gas development in the block, about 30 MMscmd total production is expected by 2023, meeting up to 15% of India’s gas demand. The developments will each use the block’s existing hub infrastructure. MJ is expected to come onstream towards second-half 2022.
RIL is operator of KG D6 with 66.67% interest. BP holds the remainder.
OKEA signs rig frame agreement with COSL Drilling Europe
OKEA ASA has awarded a 4-year frame contract to COSL Drilling Europe AS for use of COSL drilling units for development and exploration drilling on the Norwegian continental shelf (NCS). The agreement has four 1-year extension options for a potential total contract length of 8 years.
The first well commitment under the agreement is expected to be in conjunction with the final investment decision on the 2 billion-kroner Hasselmus project, a gas tie-in to Draugen field. Hasselmus lies 7 km northwest of Draugen. The reservoir contains gas in sandstone of early Jurassic age in the Ile and Ror formations. The company is working toward a 2023 production start.
COSL will be the exclusive provider of semisubmersible drilling rigs the operations, with flexibility over which of COSL’s identical and energy-efficient rigs are to be used.
Empyrean lets contract for Jade well design
Empyrean Energy PLC advanced work to drill its first well in China with a contract let to AGR for well planning and engineering on the Jade prospect in Block 29/11.
AGR, owned by Akastor ASA, will provide offset analysis and detailed well design engineering. Initial work on well design is expected to be completed in the coming weeks.
Block 29/11 is a 1,806-sq km block in the Pearl River Mouth basin, offshore China, some 200 km southeast of Hong Kong and southeast of the Liuhua oil field complex. Empyrean is operator with 100% of the exploration rights during the exploration phase (OGJ Online, Oct. 2, 2018). China National Offshore Oil Corp. (CNOOC) granted a 12-month extension to Empyrean for the first phase of exploration drilling on the block in 2020 due to the COVID-19 pandemic and the resultant global control policies (OGJ Online, June 3, 2020).
In the event of a commercial discovery, CNOOC has a back in right to 51%.
PROCESSING Quick Takes
Hanwha Total’s Daesan complex expands ethylene, PP capacities
Hanwha Total Petrochemicals Co. Ltd. (HTPCL), a 50-50 joint venture of Hanwha Group, Seoul, and Total SE, Paris, has completed projects to further expand ethylene and polypropylene (PP) production capacities at its Daesan refining and petrochemicals integrated complex in Chungnam Province, South Korea, about 145 km from Seoul.
Alongside startup of a fourth propane furnace designed to increase the complex’s ethylene production capacity by 10% to 1.5 million tonnes/year, HTPCL also has commissioned a new PP unit that expands overall PP production capacity at the site by 60% to 1.1 million tpy, Total said.
With a design capacity of 400,000 tpy, the new PP line enables the Daesan complex to supply both the Korean market and export markets—particularly China—with additional PP for manufacturing of durable goods used in specialty applications such as underfloor heating pipes and automotive parts that will help reduce the weight of vehicles, according to Total.
Completed on time and on budget, HTPCL’s PP and ethylene projects wrap up a total $1.3 billion in investments by the JV since 2017 at the Daesan complex on projects aimed at expanding the site’s petrochemicals production capacities based on competitively priced and abundantly available propane feedstock resulting from rising US shale gas production.
In second-half 2019, HTPCL completed a $450-million project that increased ethylene production at Daesan by 30% to 1.4 million tpy (OGJ Online, Sept. 17, 2019).
BUA Group lets contract for Nigerian refining-petrochemicals complex
Privately held BUA Group, Lagos, has let a contract to Lummus Novolen Technology GMBH to provide technology licensing for a new petrochemical unit to be built at subsidiary BUA Refinery’s 200,000-b/d grassroots integrated refining and petrochemical complex under development in Nigeria’s state of Akwa Ibom (OGJ Online, Sept. 2, 2020).
As part of the contract, Lummus will license its proprietary Novolen gas-phase polypropylene (PP) technology for a new 285,000-tonnes/year PP unit at the refinery, as well as deliver basic design engineering, training, services, and catalyst supply for the project, the service provider said on Apr. 29.
Scheduled for startup in 2024, the new PP unit will solve increasing demand for high-performance grade PP in Nigeria, the Gulf of Guinea, and Sub-Saharan Africa, said Abdul Samad Rabiu, BUA Group’s chairman and chief executive officer.
This latest contract for the integrated complex follows BUA Group’s September 2020 award to Axens Group to deliver basic engineering, proprietary equipment, catalysts, adsorbents, as well as training and technical services, for the planned multibillion-dollar RFCC-based complex that—alongside propylene, an essential component for the petrochemical industry used in PP-based plastics and packaging—will produce high-quality gasoline, diesel, and jet fuel meeting Euro 5-quality specifications for the Nigerian and regional markets.
Sited in Akwa Ibom to take advantage of the location’s proximity to raw feedstocks and export routes to regional countries, BUA Refinery’s integrated complex—slated for commissioning in 2024—will help reduce Nigeria’s dependence on imported fuels and petrochemicals, as well as reduce the country’s costs of shipping its domestic crude production abroad for refining by other operators, Rabiu said.
Contract let for proposed petrochemicals complex in Egypt
Anchorage Investments Ltd. has let a contract to Honeywell UOP LLC to provide its proprietary C3 Oleflex technology for a propane dehydrogenation (PDH) plant to be built at subsidiary Anchor Benitoite’s proposed grassroots petrochemical complex in Suez, Egypt, near the southern boundary of the Suez Canal.
As part of the contract, Honeywell UOP will deliver licensing for the Oleflex technology, in addition to basic engineering design, equipment, catalysts, adsorbents, and other unidentified services for the plant, which will use a feedstock of propane to produce 750,000 tonnes/year of on-purpose, polymer-grade propylene to help meet growing regional demand for plastic products, the service provider said.
Anchor Benitoite will use on-purpose propylene production from the PDH unit as feedstock for the planned complex’s additional downstream units, said Ahmed M. A. Moharram, Anchorage Investment’s founder and managing director.
UOP disclosed neither a value of the contract nor a timeframe for the project’s targeted completion.
Anchor Benitoite’s $2-billion proposed petrochemical complex at Suez will house five major installations with various production units equipped to produce a total of 1.75 million tpy of petrochemical products, including propylene, polypropylene, crude acrylic acid, n-butanol, and butyl acrylate, according to Anchorage Investment’s website.
Intended to help Egypt increase its competitiveness and position as a petrochemical hub, as well as attract new investments into the country, the grassroots complex will have deep-sea access to the port and connection to multiple nearby pipelines, enabling product distribution to both domestic and global markets, according to the company.
TRANSPORTATION Quick Takes
Cheniere Sabine Pass LNG Train 6 83% complete
Cheniere Energy Inc.’s 5-million tonne/year (tpy) Sabine Pass LNG Train 6 is 83% complete, with work expected to continue until first-half 2022. Engineering is 99.6% complete, procurement 99.9% and construction 61.7%, according to the company’s first-quarter 2021 earnings report. The additional train will bring Sabine Pass’s total capacity to 30 million tpy.
The company’s 10-million tpy Corpus Christi Stage 3 expansion, meanwhile, awaits an engineering, procurement, and construction contract, additional commercial agreements, and adequate financing before construction can begin. Corpus Christi LNG’s current capacity is 15 million tpy. The Stage 3 expansion would add as many as seven midscale liquefaction trains to the three 5-million tpy trains already in operation. Train 3 of the plant’s current configuration entered commercial service earlier this year (OGJ Online, Mar. 29, 2021).
Cheniere’s first-quarter net income increased 5% from first-quarter 2020, reaching $393 million as increased total margins excluding non-cash impacts from derivatives, decreased income tax provision, and decreased net income attributable to non-controlling interest were substantially offset by a $450-million decrease in non-cash net gains from changes in fair value of commodity, foreign exchange, and interest rate derivatives.
Increases in total margins excluding non-cash impacts from derivatives were primarily related to increased margins per MMbtu of LNG delivered to customers, as well as a higher-than-normal contribution from LNG and natural gas portfolio optimization activities due to significant volatility in LNG and natural gas markets during first-quarter 2021, partially offset by a slight decrease in LNG volumes recognized in income.
Sempra delays FID on Port Arthur LNG to 2022
Sempra Energy will delay final investment decision (FID) on its 11-million tonne/year (tpy) Port Arthur LNG plant into 2022. The company’s most recent plans expected FID this year.
The company said it needs production from the plant to be fully contracted before taking FID. The only firm deal reached so far is for 2 million tpy to Poland’ PGNiG.
Sempra and Saudi Aramco reached a tentative agreement in 2019 for the latter to take a 25% stake in the project and lift 5 million tpy, but it has yet to be finalized.
Bechtel Oil, Gas, and Chemicals Inc. has a fixed-price engineering, procurement, and construction contract to build the plant on a site in Jefferson County, Tex.
First Gen awards Jacobs LNG terminal EPC contract
FGEN LNG Corp. has named Jacobs owner’s engineer for the engineering, procurement, and construction of FGEN’s interim offshore terminal project at the First Gen Corp. clean energy complex in Batangas City, Philippines. As owner’s engineer, Jacobs will undertake design review, project management, and supervision of the construction of the project
Work comprises modification of an existing liquid fuels jetty to accommodate a floating storage and regasification unit (FSRU) as well as LNG carriers. Scope includes modifications to the jetty head, berthing, and mooring; a trestle bridge with high-pressure gas pipeline and utilities; and a jetty monitoring building and control room.
The modified terminal will supply existing gas-fired power plants, which in 2019 were responsible for delivering 13,876 Gw/hr into the Luzon grid, according to Jacobs.
FGEN in April leased the terminal’s FSRU from BW Gas (OGJ Online, Apr. 5, 2021).
Petronas charters carriers for LNG Canada
Petronas LNG Ltd. has chartered three newbuild 174,000-cu m LNG carriers from shipowner Hyundai LNG Shipping (HLS). The vessels will primarily be used to lift cargoes from the 14-million tonne/year LNG Canada liquefaction plant under construction in Kitimat, BC.
Hyundai Heavy Industries will build the LNG-powered vessels under contract with HLS, with staggered delivery starting second-quarter 2024. Petronas’s LNG fleet will total 27 with the addition of these carriers.
LNG Canada completed driving Phase 1 plant piles in April. Driving of the 6,483 now-installed piles started in January 2020. JGC Fluor is the project’s engineering, procurement, and construction contractor.
Partners in LNG Canada are Royal Dutch Shell, Petronas, PetroChina Co. Ltd., Mitsubishi Corp., and Korea Gas Corp.