OGJ Newsletter

GENERAL INTEREST Quick Takes

Earthstone expands in Delaware basin with Titus acquisition

Earthstone Energy Inc. has agreed to acquire the New Mexico assets of Titus Oil & Gas Production LLC, Titus Oil & Gas Production II LLC, and their affiliates in the Permian basin’s northern Delaware basin.

The aggregate purchase price of the deal is about $627 million consisting of $575 million in cash and some 3.9 million shares of Earthstone’s Class A common stock, the companies said.

Titus is privately held with sponsorship by funds managed by NGP Energy Capital Management LLC.

With the deal, Earthstone’s Delaware basin acreage position increases to about 44,000 net acres, while its broader Permian basin acreage position increases to about 256,000 net acres. Titus’s assets include about 7,900 net acres (65% operated, 78% WI, 93% HBP) in the Delaware basin in Lea and Eddy Counties, NM.

In June 2022, net production from Titus assets averaged about 31,800 boe/d (65% oil, 83% liquids) from 44 gross/37 net operated wells and is inclusive of about 1,200 boe/d from non-operated interests. Earthstone said it expects the deal to increase its net production by 18,000-23,000 boe/d (65% oil) in fourth-quarter 2022.

Titus is currently using three rigs to drill six wells (93% WI) in Lea County, with completions due late in third-quarter 2022. Earthstone plans to maintain two rigs in the Delaware basin and two rigs in the Midland basin, with an additional rig being considered for the Delaware basin after deal closing.

The deal includes derisked drilling inventory with 114 gross/86 net locations comprised of 61 gross/46 net operated high-graded locations focused on second and third Bone Spring and Wolfcamp A /XY formations, with an additional 53 gross/40 net operated locations from secondary targets, Earthstone said.

Related to the deal, Earthstone expects to increase capital expenditures in fourth-quarter 2022 by $25-50 million.

The transaction is scheduled to close in this year’s third quarter.

Whiting, Oasis merger completion creates Chord Energy

The deal to merge Whiting Petroleum Corp. and Oasis Petroleum Inc. into a larger US unconventional oil producer with a Williston basin focus has closed, creating Chord Energy Corp., Houston (OGJ Online, Mar. 7, 2022).

With the combine, Chord Energy holds a 972,000 net acre position across North Dakota and Montana and first-quarter production of 171,100 boe/d (historical Oasis has been adjusted for three stream reporting), Chord said as part of a July 1 release.

Pro forma capital expenditure for second-quarter 2022 is $165-188 million.

The company expects to return 60% of its free cash flow to shareholders in second-half 2022 through its base dividend, variable dividends, and share buybacks, and as previously announced, has a $150 million share repurchase program in place.

As noted in the March 2022 merger agreement, Chord’s executive leadership team includes Danny Brown, president and chief executive officer (formerly CEO, Oasis); Chip Rimer, executive vice-president, chief operating officer (formerly COO, Whiting); Michael Lou, executive vice-president, chief financial officer (formerly CFO, Oasis); and Scott Regan, executive vice-president, general counsel, secretary (formerly GC, Whiting).

Equinor to develop CO₂ trunkline

Equinor ASA and Fluxys Co. will develop a 1,000 km CO₂ export trunkline, operated by Equinor, which will transport CO₂ for storage under the seabed on the Norwegian continental shelf.

The offshore trunkline will connect in Zeebrugge to an onshore CO2 transmission infrastructure built and operated by Fluxys.

The open-access CO₂ transmission system will give emitters in Belgium and surrounding countries connectivity to CO₂ storage in Norway. Liquefied CO₂ shipped from neighboring hubs could be connected to the Zeebrugge facility, further increasing the geographical reach. A pipeline branch to the port of Dunkirk is also envisaged and additional connections to other North-West European countries will be assessed.

The project will be ready for commissioning before the end of this decade. An offshore pipeline with transport capacity of 20-40 million tonnes/year of CO₂ is planned.

Whitecap acquires XTO Energy Canada in all-cash deal

Whitecap Resources Inc. has agreed to acquire XTO Energy Canada, adding to its Montney inventory and entering the liquids rich Duvernay play at Kaybob, Whitecap said in a release June 28.

XTO Energy Canada is jointly owned by ExxonMobil Canadian affiliates Imperial and ExxonMobil Canada.

Total cash consideration is about $1.9 billion and the assumption of estimated positive working capital on closing for a net purchase price of $1.7 billion, Whitecap said.

Operating areas to be acquired include 567,000 net acres in Montney shale, 72,000 net acres in Duvernay shale, and additional acreage in other areas of Alberta. Net production from the operating areas is about 140 MMcfd of natural gas and about 9,000 b/d of crude oil, condensates, and natural gas liquids, ExxonMobil and Imperial said in separate releases.

The acreage contains over 20 years of tier one drilling locations and an operated 165 MMcfd shallow cut gas processing facility servicing owned and third-party Duvernay volumes, Whitecap said.

The deal increases Whitecap’s total acreage in the Montney by over 500% and adds 1,772 (1,693 net) Montney drilling locations. The deal also consolidates certain working interests at Kakwa, Alta., to 100% from an average of 66% on about 22,000 gross acres.

The transaction is expected to close before the end of third-quarter 2022, subject to customary closing conditions, including the receipt of necessary regulatory approvals.

 Exploration & Development Quick Takes

Shell to become operator of renamed GoM development

Shell will become operator of the North Platte deepwater development project in the US Gulf of Mexico following acquisition of 51% of Equinor’s interest in the project, Equinor said in a release June 29.

Equinor will retain 49% interest in the project, which will be renamed Sparta.

Sparta straddles four blocks (915, 916, 958, and 959) of the Garden Banks area, 275 km off the coast of Louisiana in about 1,300 m of water depth.

Sparta, then North Platte, was discovered in 2012 by Cobalt International Energy. The subsalt Paleogene reservoir is of high quality, both in porosity and permeability, with thickness in places exceeding 1,200 m, TotalEnergies said in 2019 following positive final investment decision.

Oil production at plateau level was expected by TotalEnergies at the time to average 75,000 b/d with output that would include associated gas. Its field development plan was based on eight subsea wells and two subsea drilling bases connected via two production loops to a newbuild, lightweight floating production unit (FPU).

Front-end engineering and design (FEED) has been matured for the project, Equinor said in the June 29 release, and Equinor and Shell will review the work that has been completed and update the development plan.

In February 2022, TotalEnergies withdrew from the project, releasing its equity to Equinor (OGJ Online, Feb. 10, 2022).

The transaction between Shell and Equinor is subject to customary conditions and authority approval.

Galp to drill exploration well offshore Namibia

Galp Energy SGPS SA will drill an exploration well in petroleum exploration license 83 (PEL 83) in Orange basin, offshore Namibia, according to a release by Sintana Energy Inc.

The well is part of an extension to the first renewal exploration period for the license granted by the Ministry of Mines and Energy in Namibia. Drilling of the well is expected in 2023.

PEL 83 sits directly above Block 2913A where Shell plc made its Graff-1 light oil discovery, and directly to the west of Kudu gas field being developed by BW Energy. PEL 83 is also contiguous to Block 2913B where TotalEnergies made its Venus-1 discovery.

Galp is operator of PEL 83 (80%) with partners the National Petroleum Corp. of Namibia (NAMCOR) (10%), and Custos Energy (10%). Sintana has 4.9% carried interest through its indirect investment in Custos Energy.

SEG discovers large Uzbekistan oil, bitumen field

Sanoat Energetika Guruhi (SEG) and Kontiki-Exploration discovered Yangi Uzbekistan ultra-viscous oil and bitumen field in the Zerafshan depression, Uzbekistan.

Bituminous oil reserves of the field are estimated at about 100 million tons, making it the largest bitumen field in Uzbekistan, the company said. Maximum annual bituminous oil production is projected at 1 million tons by 2025 and 1.6 million tons by 2030. Up to 1,500 wells are planned per year to meet this level of production, the company said.

The first exploration well was spudded May 15, 2021 with drilling operations on the regional border of Samarkand and Navoi. Appraisal and development wells were drilled to 400-750 m. While drilling, layers of gravel stones and sandstones of Albian, Cenomanian, and Turonian ages were uncovered. All were saturated with oil, extra-viscous oil, and bitumen, the company said.

For development, O’NEILL Industries (USA) will generate and inject steam with CO2, nitrogen, and surfactants. GenOil (Canada) and Energy and Engineering (Russia) will provide technology for processing bituminous oil into synthetic oil. Veraton ITC (Russia) will develop hydrogen thermobarochemical impact technology, and Kazan Federal University (Russia) will perform petrophysical studies of cores and development of in situ combustion technology.

Field development over the next 12 years is estimated to cost $2.5 billion.

CGX to spud second exploration well offshore Guyana

CGX Energy Inc. and joint venture partner Frontera Energy Corp. are preparing to drill their second exploration well, Wei-1, in the Corentyne block, about 200 km offshore from Georgetown, Guyana, and about 14 km northwest of the Kawa-1 exploration well.

Wei-1 will be drilled in about 583 m of water to a targeted total depth of 6,248 m and will target Maastrichtian, Campanian, and Santonian aged stacked channels in a western channel complex in the northern section of the block.

The well will spud third-quarter 2022.

Frontera has, in principle, reached an agreement with the government of Guynana to relinquish Demerara block through a mutual termination agreement. Terms are yet to be defined and documented. The agreement will allow Frontera to focus on Corentyne and let the government find a party to develop the block, the company said in a June 17 release.

 Drilling & Production Quick Takes

Wintershall prepares Nova field for July start-up

Wintershall Dea Norge is preparing to startup Nova field in the North Sea following consent from Norwegian authorities to begin production, the Norwegian Petroleum Directorate said in a release June 30. The operator expects oil production to begin around July 31, while a water injection system will be completed in September.

Nova, in PL 418, lies about 120 km northwest of Bergen and 17 km southwest of the Neptune Energy-operated Gjøa platform in the Norwegian North Sea in 370 m of water. It was developed with two seabed templates, one for oil production and one for water injection to increase oil recovery. The field will be tied back to Gjøa for processing and export. Estimated reserves are about 90 MMboe.

The discovery well—35/9-7 on the Skarfjell prospect on the Ryggsteinen Ridge—was drilled in 2012. The reservoir contains oil with a gas cap in sandstone of Late Jurassic age in the Heather formation in the Viking Group at a depth of 2,500 m. The plan for development and operation was submitted in July 2018.

Wintershall, as operator, holds 45% interest in the license. Partners are Sval Energi AS (45%) and ONE-Dyas Norge AS (10%).

PDC adds to Colorado drilling inventory with permit approval

PDC Energy Inc., Denver, received approval from the Colorado Oil and Gas Conservation Commission (COGCC) for its Broe Oil & Gas Development Plan (OGDP) permit, which encompasses 30 wells in rural Weld County, Colo.

The Broe OGDP was initiated by Great Western Petroleum LLC—which was acquired by PDC in May 2022 for $543 million and about 4 million shares of PDC common stock—and represents PDC’s first OGDP approval on Great Western acreage, PDC said in a release June 29. 

Combined with its Kenosha OGDP approval earlier in June, PDC added 99 new wells to its inventory in June and will soon have over 675 permits and drilled and uncompleted wells.Operationally, the new permits add to the company’s established inventory of projects in the Denver-Julesburg basin, giving the company “good visibility well into 2024 at current activity levels,” said David Lillo, senior vice-president of operations.

The company is looking to gain approval of its Guanella Comprehensive Area Plan and future OGDPs.

PDC Energy’s operations in Wattenberg field in Colorado are focused in the horizontal Niobrara and Codell plays.

Neptune spuds new well at Adorf Carboniferous development

Neptune Energy spudded the Adorf Z17 gas appraisal well in the municipality of Georgsdorf, northwestern Germany.

The well is being drilled with a rig operated by KCA Deutag, with final depth of around 4,600 m expected to be reached in October this year, Neptune said in a release June 30.

The rig will be operated with power from the grid instead of diesel-driven generators, reducing emissions during drilling operations, Neptune said.

Neptune plans to drill a fourth well, Adorf Z18, from the same well pad in fourth-quarter 2022. Construction of a modern processing plant for treatment of natural gas at the site in Georgsdorf will begin in this year’s second half. 

Adorf Carboniferous gas field was discovered in 2020 and the first well, Adorf Z15, was brought into production in October the same year. The second well, Adorf Z16, increased Neptune’s production from the license to around 4,500 boe/d earlier this year (OGJ Online, Jan. 14, 2022).

Neptune Energy is operator and 100% owner of the field.

OMV, Longboat close farm-out ahead of drilling start

OMV (Norge) AS completed a farm-out deal with Longboat Energy PLC for two near-term, gas weighted exploration prospects on the Norwegian continental shelf, Longboat said in a release July 1.

The first well, Oswig in license PL1100, is expected to spud in July. The second well, Velocette in license PL1016, is expected to spud second-quarter 2023. Additionally, and separate to the OMV farm-out, a further exploration well in which Longboat holds interest (10%), PGNiG-operated Copernicus is expected to spud before the end of this quarter. 

Oswig consists of a high pressure, high temperature Jurassic rotated fault block nearby the producing Tune and Oseberg fields in the Norwegian North Sea. The well is targeting two separate intervals, the Tarbert and Ness formations. The prospect lies close to existing infrastructure with tie back potential to Oseberg and Tune fields.

Velocette is a gas-condensate prospect targeting Cretaceous Nise turbidite sands on the eastern flank of the Utgard High in the Norwegian Sea. The prospect was identified following seismic reprocessing and benefits from seismic amplitude anomalies indicative of gas-filled sands. It lies within tieback distance from Equinor-operated Aasta Hansteen field.  

Targeted combined gross unrisked mean prospective resources for Oswig and Copernicus are 223 MMboe (45 MMboe net to Longboat). 

OMV is operator of Oswig and Velocette (40%). Longboat holds 20% interest. Other partners in Oswig are Wintershall Dea (20%) and Source Energy (20%). The remaining partner in Velocette is INPEX (40%).

 PROCESSING Quick Takes

Fire hits Equinor’s Mongstad refinery

Equinor AS put out a fire that broke out the first weekend in July at its 9.3-million tonne/year refinery in Mongstad, Norway, near Bergen.

The fire, which occurred early on the morning of July 3 at an unidentified unit, was extinguished later that day by the refinery’s emergency response team, Equinor said in a release.

The operator confirmed carrying out controlled combustion of trapped gaseous volumes via pressure relief, with continuous cooling of the surrounding equipment executed simultaneously.

While work to maintain and secure “the affected system” remains ongoing, the operator said it will still have to undertake further examinations and necessary repairs ahead of restarting the impacted part of the processing plant.

The main refining plant continues to operate, but portions of “the plant involved in production of some refined products” presumably are shuttered, Equinor said.

The company said it continues to cooperate with authorities to uncover the cause of the incident.

In its latest annual report to investors, Equinor said a project to decommission and redesign a part of the refinery’s combined heat and power plant (CHP) to a new heater for process heat was scheduled to become operational during second-quarter 2022. The CHP was due to remain in operation until the new heater entered service.

Neste takes FID on Rotterdam renewables refinery expansion

Neste Corp. is moving forward with its previously proposed expansion of the operator’s renewable fuels production platform in Rotterdam, the Netherlands.

The €1.9-billion refinery expansion, for which Neste reached final investment decision (FID) on June 27, will increase Neste’s current 1.4-million tonnes/year (tpy) renewable product capacity at its Port of Rotterdam refinery by 1.3 million tpy to 2.7 million tpy, of which 1.2 million tpy will be sustainable aviation fuel (SAF) production, the company said.

The Rotterdam expansion will include implementation of Neste’s proprietary NEXBTL technology to enable flexible refining of a wide range of lower-quality renewable waste and residues into finished renewable diesel, SAF, as well as renewable feedstock for polymers and chemicals, the company said.

Scheduled for startup during first-half 2026, Neste said the Rotterdam expansion—together with the company’s ongoing €1.4-billion, 1-million tpy SAF expansion at its 1.3-million tpy renewable diesel refinery in Singapore, as well as its pending joint venture with Marathon Petroleum Corp. at Martinez, Calif.—by yearend 2023 will enable the company to produce 5.5 million tpy of renewable products.        

Chinese operator starts up new CATOFIN PDH unit

Shandong Ruize Chemical Technology Co. Ltd. has commissioned a new propane dehydrogenation unit (PDH) at its refining complex in Zibo City, Shandong Province, China.

Equipped with Lummus Technology LLC’s proprietary CATOFIN PDH technology for production of propylene, the new 300,000-tonnes/year unit comes as part of Shandon Ruize’s plan to transition the refinery into a petrochemical complex, Lummus said on June 29.

Startup of the unit follows Shandong Ruize’s award in 2018 to Lummus for delivery of technology licensing, basic engineering design, training, and commissioning services on the new PDH unit, which officially began in May, the service provider said.

Further details regarding the unit and Shandong Ruize’s broader plan to transition the complex from refining to petrochemicals production were not disclosed.

Consortium to develop CCS in China

ExxonMobil, Shell plc, China National Offshore Oil Corp., and Guangdong Provincial Development & Reform Commission have signed a memorandum of understanding to evaluate the potential for a carbon capture and storage (CCS) project to reduce greenhouse gas emissions at the Dayawan Petrochemical Industrial Park in Huizhou, Guangdong Province, China.

The agreement initiates a joint study to capture up to 10 million metric tons of CO₂/yr from Dayawan’s industrial sector.

 TRANSPORTATION Quick Takes

Shell to participate in Qatar’s LNG expansion

QatarEnergy has partnered with Shell plc to further develop Qatar’s North Field East project, which will expand Qatar’s annual LNG capacity to 110 million tpy from 77 million tpy by 2026.

Shell will hold a 25% share in a joint venture company which will own 25% of the North Field East expansion project, including the four mega LNG trains with a combined nameplate LNG capacity of 32 million tonnes/year.

The deal is the fifth and final in a series of partnerships in the $28.75-billion project, QatarEnergy said in a separate release. Previous deals were signed with TotalEnergies, Eni, ConocoPhillips, and ExxonMobil.

Sempra to supply US Gulf Coast LNG to INEOS

Sempra Infrastructure and INEOS Energy Trading Ltd. have entered into a heads of agreement (HOA) for a 20-year supply of LNG from Sempra’s 13.5-million tonne/year (tpy) Port Arthur LNG and 6.75-million tpy Cameron LNG Phase 2 projects. An expected total of 1.4 million tpy would be sold to INEOS on a free-on-board basis from the two plants, in Jefferson County, Tex., and Hackberry, La.

INEOS said it will market the LNG globally as well as supplying its own industrial needs in Europe.

In June Sempra announced an HOA with the Polish Oil & Gas Co. (PGNiG) for 2 million tpy from Cameron LNG Phase 2 and 1 million tpy from Port Arthur LNG, with an option for PGNiG to reallocate the Cameron LNG Phase 2 volumes to Port Arthur LNG. Sempra also recently announced an HOA with RWE Supply & Trading for 2.25 million tpy from the Port Arthur LNG project (OGJ Online, May 25, 2022).

The two-train Port Arthur LNG Phase 1 project has received all major permits. The proposed Cameron LNG Phase 2 project, expected to include a single LNG train, has launched a front-end engineering and design tender.

Tellurian awards Baker Hughes pipeline compression contract

Tellurian Inc. has awarded Baker Hughes Co. a contract to provide electric-powered integrated compressor line (ICL) technology and turbomachinery equipment for Lines 200 and 300, a 37-mile, dual 42-in. OD natural gas pipeline project, proposed to run through Beauregard and Calcasieu Parishes, La., to supply Tellurian’s 27.6-million tonne/year Driftwood LNG plant.

The 5.7-bcfd project will initially include four 19-Mw ICL compressors and other turbomachinery equipment for a total of four compressor trains, as well as a LM6000PF+ gas turbine for backup power for the initial phase of the pipeline project at Driftwood’s newbuild 211,200-hp Indian Bayou compressor station in Beauregard Parish.

The equipment will cost $240 million.

Tellurian earlier this year received a positive draft environmental impact statement from the US Federal Energy Regulatory Commission (OGJ Online, May 18, 2022). The company expects first LNG from Driftwood in 2026.

Permian Highway Pipeline makes positive FID for expansion

Permian Highway Pipeline LLC (PHP) made a positive final investment decision (FID) to proceed with expansion after securing binding firm transportation agreements for all available capacity, Kinder Morgan Inc. said in a release June 29.

The project, which will increase PHP’s capacity by about 550 MMcfd, will involve primarily additional compression on PHP to increase natural gas deliveries from the Waha area to multiple mainline connections, Katy, Tex., and various US Gulf Coast markets.

Pending the timely receipt of required approvals, the target in-service date is Nov. 1, 2023.

The expansion will not only foster future natural gas production growth in West Texas and provide liquefaction plants along the Texas Gulf Coast with supply, it will provide access to premium priced markets and transportation flow assurance, which are critical to minimizing flared volumes, said Jamie Welch, president and chief executive officer, Kinetik.

PHP is jointly owned by subsidiaries of Kinder Morgan Inc., Kinetik Holdings Inc., and ExxonMobil, with ownership interests of 26.7%, 53.3%, and 20%, respectively.