OGJ Newsletter

Nov. 16, 2015
International news for oil and gas professionals


Apache spurns takeover effort by Anadarko

Anadarko Petroleum Corp. has withdrawn a nonbinding offer to acquire Houston independent Apache Corp. after the target company "summarily rejected" its overture, Anadarko said.

The offer, which included "a modest premium," was for an all-stock transaction, Anadarko said in a press statement.

"Based on public information and Apache's historic financial and operating underperformance, the proposed transaction offered shareholders of both companies numerous value-creation opportunities given Anadarko's demonstrated success at building value through operational excellence, proven capital allocation, and active portfolio management," the statement said.

Anadarko said it sought a confidentiality agreement "for the purpose of exploring the merits of a potential transaction." Those efforts "were summarily rejected, and no discussions of substance occurred."

Lacking access to detailed nonpublic information and determining that Apache shares trade "at or near full value currently," Anadarko said, it withdrew the offer.

Apache reported third-quarter oil and gas production of 542,000 boe/d from the US, Canada, Egypt, and UK North Sea. It estimated global proved reserves at yearend 2014 of 2.396 billion bbl.

For the third quarter, Apache reported a net loss of $5.7 billion, which included a $3.7 billion ceiling-test write-down related to the decline in oil and gas prices and a $1.5 billion charge related to an increase in the valuation allowance on deferred tax assets.

Apache reported total assets of $27.812 billion and shareholders' equity of $9.809 billion as of Sept. 30.

Marathon Oil to divest Gulf of Mexico assets

Marathon Oil Corp. has agreed to sell its operated producing properties in the greater Ewing Bank area and nonoperated producing interests in Petronius and Neptune fields in the Gulf of Mexico for $205 million.

The undisclosed buyer will assume all future abandonment obligations for the acquired assets. The assets represent a majority of the Marathon's operated and nonoperated producing properties in the gulf. The deal is effective Jan. 1 and expected to close before yearend.

Marathon will retain its interests in certain other producing assets and acreage in the gulf, as well as its interests in the Gunflint development (OGJ Online, June 17, 2013); and Shenandoah discovery (OGJ Online, Mar. 19, 2013).

During the third quarter, the company closed noncore asset sales in East Texas, North Louisiana, and Wilburton, Okla., for $100 million, and exited East Africa by agreeing to sell Ethiopian and Kenyan exploration acreage. Following a reported net loss was $749 million in the quarter, Chief Executive Officer Lee M. Tillman said the company is planning "meaningful cost reductions." EnerVest to acquire Nora field, Eagle Ford assets

EnerVest Ltd., Houston, has agreed to acquire Nora field in Virginia from subsidiaries of Range Resources Corp., Ft. Worth, for $876 million, as well as nonoperated interest in the core of the Eagle Ford shale in Karnes County, Tex., from an undisclosed seller for $118 million.

The Nora deal, expected to close on or before Dec. 30, includes acreage and operated coalbed methane, tight gas, Berea, Big Lime, and Huron shale producing wells in Dickenson, Buchanan, Wise, and Russell counties in Virginia, and Nicholas and Clay counties in West Virginia.

The Virginia properties and production include:

• Current net production of 105 MMcfed expected for November, 100% of which is gas, from the 3,908 operated and nonoperated wells.

• 365,000 net acres, of which 220,000 includes all mineral rights in Virginia with an additional 100,000 acres in West Virginia, most of which includes all mineral rights.

• An inventory of about 9,000 undrilled locations.

• PDP base comprising 37% of proved reserves and 73% of proved value.

• A 1,500-mile gathering system.

"This acquisition adds to EnerVest's significant position in Appalachia, and includes additional drilling opportunities at today's commodity prices," said John B. Walker, EnerVest chief executive officer. "In addition, there are potential future exploration opportunities below the existing producing zones."

Jeff Ventura, Range chairman, president, and chief executive officer, said, "Using our consistent, return-focused capital allocation process, we will continue to review our portfolio for opportunities to bring value forward where other assets cannot compete for capital in comparison to our 1.6 million stacked-pay acreage position in the Marcellus, Utica, and Upper Devonian. We believe that Range can continue to drive down costs, improve capital efficiencies, and enhance netback pricing in our core Marcellus areas, all of which should further enhance our results in 2016."

The Eagle Ford properties to be acquired by EnerVest encompass 1,760 net acres, production of more than 2,200 boe/d, an active drilling program on an ongoing basis, and reserves of 7.8 million boe.

Exploration & DevelopmentQuick Takes

Maersk buys into Kenya, Ethiopia offshore discoveries

Maersk Oil, a wholly owned subsidiary of AP Moller-Maersk AS of Copenhagen, has agreed to acquire interest in three onshore exploration licenses in Kenya and two more in Ethiopia from Africa Oil Corp.

The licenses cover 100,000 sq km and include eight recent oil discoveries, with ongoing exploration and appraisal activities. Four of the blocks are operated by Tullow Oil PLC and the remaining by Africa Oil. The exploration areas cover the Turkana region of northern Kenya and southern Ethiopia.

In Kenya, Maersk will take 25% interest in exploration licenses 10BB, 10BA, and 13T. Each license is operated by Tullow with 50% interest alongside partner Africa Oil with 25% interest.

In Ethiopia, Maersk will take 25% interest in the Rift basin exploration license, joining operator and 25% interest-holder Africa Oil and 50% interest-holder Marathon Oil Corp.; and 15% interest in the South Omo exploration license, joining operator and 50% interest-holder Tullow, 20% interest-holder Marathon, and 15% interest-holder Africa Oil.

The value of the deal is split between an upfront farm-in payment of $365 million, including exploration costs. Future contingent payments of up to $480 million will be made by Maersk Oil for the Lokichar project, determined by the size of the resource after final appraisal and the agreed timetable for the start of production.

Eni makes gas, condensate find off Congo (Brazzaville)

Eni SPA has encountered a major gas and condensate buildup in the presalt clastic geological sequence of lower Cretaceous age, crossing a 240-m hydrocarbon column, in its Nkala Marine exploration prospect on the Marine XII block offshore Congo (Brazzaville).

The discovery could hold 250-350 million boe in place, Eni says. The Nkala Marine 1 well was drilled in 48 m of water, 20 km from the coast and 3 km from Nene Marine field, where Eni started production in January (OGJ Online, Jan. 5, 2015). It tested at 300,000 standard cu m/d of gas and associated condensate.

Eni says it will start evaluation of Nkala Marine through new delineation wells. The company and its joint venture partners in the meantime will launch studies for its commercial development.

Estimated oil and gas resources in place relating to discoveries made in the presalt Marine XII block is 5.8 billion boe, the company says. Production from the block, currently at 15,000 boe/d, is ramping up.

Eni subsidiary Eni Congo SA operates Marine XII with 65% interest. Partners are New Age Ltd. 25% and Congolese state-owned Societe Nationale des Petroles du Congo (SNPC) 10%. Eni has maintained a presence in Congo (Brazzaville) since 1968, with current production of 110,000 boe/d.

Jacket, wellhead platform installed in Madura BD field

Husky Energy Inc. reported installation of the jacket and wellhead platform for Madura BD gas-condensate field offshore Indonesia (OGJ Online, Oct. 29, 2010).

Development drilling in 35 m of water is expected to begin soon, with start of production expected in 2017.

Construction of a floating production, storage, and offloading vessel to process gas and liquids production is about 30% complete. Fixed price, set volume gas sales agreements are in place for Madura BD field.

Husky said other developments offshore Indonesia are expected to add production during 2017-19. They include the combined MDA-MBH fields and the MDK field, which is planned to be tied into the MDA-MBH field infrastructure.

A tendering process is under way for an FPSO for MDA-MBH, and a fixed price, set volume sales gas agreement is in place. A gas price/volume contract for MDK is being negotiated.

Husky has 40% interest in the Indonesia projects. CNOOC Ltd. is operator, and an affiliate of Samudra Energy Ltd. of Indonesia is a partner.

Drilling & ProductionQuick Takes

EIA: US shale oil output to fall in December

Crude oil production in December from seven major US shale plays is expected to drop 118,000 b/d to 4.95 million b/d, according to the US Energy Information Administration's latest Drilling Productivity Report (DPR). The agency projected a 93,000-b/d decline for November (OGJ Online, Oct. 13, 2015).

The DPR focuses on the Bakken, Eagle Ford, Haynesville, Marcellus, Niobrara, Permian, and Utica, which altogether accounted for 95% of US oil production increases and all US natural gas production increases during 2011-13.

The Eagle Ford has represented a bulk of the projected oil output losses since EIA began anticipating monthly declines from US shale during the spring. For December, EIA expects Eagle Ford production to fall 78,000 b/d to 1.28 million b/d. The Bakken is projected to drop 27,000 b/d to 1.11 million b/d, and the Niobrara is projected to fall 22,000 b/d to 356,000 b/d.

Continued growth is seen in the Permian, which is projected to rise 11,000 b/d to 2.02 million b/d.

December natural gas production from the seven plays is projected to drop 394 MMcfd to 44.29 bcfd, EIA says. The bulk of that decline is again expected to come in the Marcellus, which is seen losing 229 MMcfd to 15.66 bcfd. Substantial losses are also projected for the Eagle Ford, down 160 MMcfd to 6.53 bcfd; and Niobrara, down 61 MMcfd to 4.18 bcfd.

The Utica is expected to increase 66 MMcfd to 3.13 bcfd.

Shell reorganizing its upstream businesses

Royal Dutch Shell PLC is reorganizing its upstream businesses in a move the company says will continue when it completes its $70-billion acquisition of BG Group next year (OGJ Online, Sept. 3, 2015).

Shell also is slashing spending by the combined company.

"We are reshaping the company, and this will accelerate once this transaction is complete," said Chief Executive Officer Ben van Beurden at a meeting with shareholders in London.

Shell is making integrated gas a stand-alone organization and creating separate upstream and unconventional resources organizations.

Maarten Wetselaar, currently executive vice-president of integrated gas, will be director of the stand-alone integrated gas business. He also will become a member of the Shell executive committee.

Marvin Odum, now upstream Americas director, will be director of the unconventional resources organization, which will cover heavy oil and shale operations in the Americas.

Odum's work, according to a company statement, will include "ongoing reviews of portfolio and investment opportunities in these longer term themes" as well as Shell's withdrawal from offshore Alaska.

The company last month said it was halting construction of its Carmon Creek thermal bitumen project in Alberta (OGJ Online, Oct. 28, 2015). In September it said it would cease exploration off Alaska after disappointing results from its Burger J well in the Chukchi Sea (OGJ Online, Sept. 28, 2015).

The director of Shell's new upstream organization, covering worldwide conventional oil and gas, will be Andrew Brown, now upstream international director.

BP speeds Phase 1 development of Atoll field off Egypt

BP PLC has signed a heads of agreement with Egyptian Minister of Petroleum Tarek El Molla that's expected to accelerate development of BP's wholly owned Atoll natural gas discovery in the North Damietta offshore concession in the East Nile Delta (OGJ Online, Mar. 9, 2015).

The agreement is expected to enable the start of production to be expedited from an estimated 1.5 tcf of gas resources and 31 million bbl of condensates in Atoll to the Egyptian market. Production is expected to begin in 2018.

Full field development of Atoll is expected to consist of two phases, the first of which will consist of two development wells tied back to existing infrastructure, with production expected to start up in 2018. Success of this first phase is expected to trigger additional investment and further wells to increase production, BP says.

BP also expects to continue to invest in its existing oil operations led by its joint venture Gulf of Suez Petroleum Co. (Gupco), and gas operations led by the Pharaonic Petroleum Co. (PhPC) joint venture, as well as continuing to progress its exploration program in the Nile Delta.

BP expects to sustain its current oil production and double its gas production in Egypt before the end of the decade to reach 2.5 bcfd with partners, which represents more than 50% of Egypt's current gas production.

Development of Atoll will be executed and operated by PhPC, BP's JV with Egyptian Natural Gas Holding Co. (Egas) and Eni SPA.


Quest CCS project starts up in Alberta

The Quest carbon capture and storage (CCS) project in Alberta has begun commercial operations (OGJ Online, Apr. 21, 2014).

The project can capture 1 million tonnes/year of carbon dioxide at the Scotford upgrader operated by the Athabasca Oil Sands Project (AOSP) near Fort Saskatchewan for transport through a 65-km pipeline and injection below impermeable subsurface strata. The upgrader converts bitumen from the Muskeg River and Jackpine mines into synthetic crude oil.

During tests earlier this year, the project captured and stored more than 200,000 tonnes of CO2.

The governments of Canada and Alberta provided $865 million (Can.) in funding.

AOSP partners are Shell Canada Energy, 60%, and Chevron Canada Ltd. And Marathon Oil Canada Corp., 20% each.

Rail bypass paves way for Total's Donges revamp

Total SA has reached an agreement with the French government and local communities for a rail bypass project that will enable the company to move forward with the planned €400-million modernization and overhaul of its 220,000-b/d Donges refinery near Saint Nazaire, France (OGJ Online, Apr. 16, 2015).

Total signed a memorandum of intent with French government officials, authorities for the Pays de la Loire region, the Loire-Atlantique department, the municipality of Saint Nazaire, and SNCF Reseau, the railway system operator, to build a rail line that would bypass the Donges refinery, Total said.

As part of the MOI, the French government, local authorities, and Total have agreed to equally finance the bypass project, with each to contribute one third of the project's estimated overall cost of €150 million, the operator said.

The rail bypass line, which the parties expect will gain approval sometime in 2017 as a project in the best interest of the public, should be completed and carrying traffic by 2021, according to the MOI's timeline for project implementation.

Earlier in the year, Total said the planned modernization of Donges was intended to coincide with the rerouting of an existing rail line that runs through the production site, and which, if not rerouted, would prevent future development of refining units at the plant.

With the MOI now completed, the company intends to move forward with its full plan to upgrade and expand gasoline production capacity at the refinery, said Philippe Saquet, president of Total's refining and chemicals division.

Upon announcing the modernization plans, Total said that reaching an agreement on the rail line bypass in 2015 would result in completion of both the process design package and front-end engineering and design for the Donges upgrade in 2016, with contracts for construction of new units to follow in 2017. Under such a timeline, the refinery's new units would be due for startup sometime in 2019, according to Total.

MOL Group commissions petrochemical plant

MOL Group, Budapest, has commissioned a butadiene plant at subsidiary MOL Petrochemicals PLC's petrochemical plant in Tiszaujvaros, Hungary.

The 130,000-tonne/year butadiene extraction unit, which began operating on Nov. 10, is due to reach full commercial operations by yearend, MOL Group said.

At a final investment cost of $150 million, the butadiene plant will produce feedstock material for the S-SBR 60,000-tpy plant to be built adjacent to the butadiene unit that will manufacture synthetic rubbers for automotive tires, the company said.

A joint venture of MOL Group, 49%, and Japan Synthetic Rubber Co. Ltd., 51%, the S-SBR plant will begin construction by end-November, with mechanical completion due some time in 2017.

MOL Group also confirmed details regarding the planned startup of a recently completed 220,000-tpy low-density polyethylene production plant (LDPE 4) at subsidiary Slovnaft AS's 6.1 million-tpy integrated refinery and petrochemical production complex in Bratislava, Slovakia (OGJ Online, Sept. 10, 2015).

LDPE 4, which completed installation in September, is now scheduled to start commercial production during first-quarter 2016, MOL Group said.


OMV firms already-strong ties with Russia

OMV AG is firming its traditionally strong ties with Russia.

It recently agreed to participate with state-owned Gazprom in gas development in West Siberia and in a group led by Gazprom to expand the trans-Baltic Nord Stream gas pipeline.

This month it invited former German Chancellor Gerhard Schroeder, now chairman of the Nord Stream shareholder's committee, to meet with Chief Executive Officer Rainer Seele and 350 guests at the Hofburg Palace in Vienna.

"Russia plays a central role in the question of how we Europeans can secure our energy supply," Schroeder, whose friendship with Russian President Vladimir Putin has been controversial in Germany, said at the Nov. 9 event. "Norway and Russia are the most secure and reliable energy partners for Europe."

In September, OMV joined other signatories of a shareholders' agreement to form New European Pipeline AG, which plans to lay the twin Nord Stream 2 pipeline alongside the 1,224-km Nord Stream system between Vyborg, Russia, and Greifswald, Germany (OGJ Online, Oct. 9, 2012).

Gazprom is to own 51% of the new company. E.On AG, Shell, OMV, and BASF/Wintershall will own 10% interests each. ENGIE will own 9%.

Gazprom also owns 51% of Nord Stream AG, owner of the existing twin pipeline. Other interests are BASF/Wintershall and E.On, 15.5% each, and Gasunie and GDF Suez, 9% each.

OMV and Gazprom also signed an agreement on main terms and conditions of an asset swap under which OMV would acquire 24.98% interest in the development of Blocks 4A and 5A of the Lower Cretaceous Achimov deposit of Urengoy oil, gas, and condensate field "in exchange for Gazprom's participation in OMV assets," according to an OMV statement.

Gazprom entered a similar deal for Achimov development with Wintershall in September (OGJ Online, Oct. 2, 2015).

More recently, OMV and Gazprom have discussed the supply of oil to OMV from Gazprom companies.

Wisconsin oil train derailment forces evacuations

Federal, state, and local investigators worked through the day trying to determine what caused a Canadian Pacific (CP) freight train to derail the afternoon of Nov. 8 and spill less than 500 gal of crude oil.

The train originated in Newtown, ND, and was bound for Eddystone, Pa. The derailed tank cars were noninsolated/nonjacketed DOT-111s with CPC1232 modifications that included half-height headshields. Thirty-five families were evacuated on Nov. 8 under an order that was still in place late the following day. Twelve of the 13 derailed cars were back on track by that time, and were being moved carefully to another site to be evaluated, a CP spokesman said. The remaining car could not be rerailed safely and will be scrapped once its contents have been unloaded onto containers, he said.

"CP's environmental contractor has now devised a soil remediation plan," the spokesman said. "Once it's safe to do so, we will begin implementing that plan, which will involve hauling away contaminated soil."

Investigators from the US Environmental Protection Agency, US Coast Guard, DOT's Federal Railroad Administration, Wisconsin Department of Natural Resources, and City of Watertown were at the scene, OGJ has learned.

The CP train derailed a day after a BNSF train left its tracks near Alma, Wis., at about 8:45 a.m. CST on Nov. 8. Five tank cars leaked about 18,000 gal of ethanol into the Mississippi River before crews closed the punctures, place containment boom in the river, and removed the remaining product from the cars, a BNSF spokesman said.