The Department of Energy has launched a process to sell its interest in Elk Hills oil and gas field, one of the largest government assets ever to be offered.
It will accept offers for the field, formerly a U.S. Naval Petroleum Reserve, until Oct. 1. A sale would be concluded by Feb. 10, 1998.
Patricia Fry Godley, Assistant Energy Sec. for fossil energy, said, "After nearly a decade of discussing and debating the divestiture of the Naval Petroleum Reserves, it is now time to hear what the market has to say. The next 4 months will tell us who is truly interested in this asset and the value they place on it."
Meanwhile, Sen. Dale Bumpers (D-Ark.) said he will make a last-ditch effort to stop the sale, because he fears the government will not get a fair value.
But Energy Sec. Federico Peña told reporters, "If we discover the government will not get a good deal, we will not proceed with the sale."
Background
Elk Hills field, 35 miles west of Bakersfield, Kern County, Calif., is among the 11 largest oil and gas fields in the Lower 48.
Originally set aside in the early 1900s as a future source of crude oil for the U.S. Navy, it has been in production since 1976.
Current output is nearly 60,000 b/d of oil and more than 350 MMcfd of gas. The U.S. owns or controls about 80% of the field and Chevron U.S.A. Production Co. has the balance.
DOE's financial advisors, CS First Boston of New York and Petrie Parkman & Co. of Houston, are handling the sale and all inquiries.
Sale terms
Interested bidders who sign a standard non-collusion agreement and pay a $200 preparation and copying charge will receive a two-volume sales brochure and can attend technical data presentations in Bakersfield June 9-12 and in Houston June 16-19.
An extensive package of printed and electronic data will be available at the technical briefings for a preparation and copying charge of $5,000. Included will be an independently prepared reserve analysis and an "upside study" that describes the potential value of enhancements that could be made to improve the field's current operations.
DOE said purchasers who meet certain financial qualification requirements (a tangible net worth of at least $10 million) can submit written requests for further information, discussions with the engineering firm that conducted the independent reserve report, and site visits to the field. All such requests will be handled by CS First Boston and Petrie Parkman & Co. throughout the summer.
Offers will be accepted only on an all-cash basis, payable at closing. DOE said it would sell the field only if bids exceed a minimum sales price, which it will set this fall after five independent assessors complete valuation analyses.
DOE is offering two types of interests in the field: a single operating working interest that will give the purchaser clear right to at least 51% of each of the field's productive zones; and multiple non-operating working interests, each equal to 2% of the federal interest in the field. Prospective purchasers may bid on one, some, or all of the interests being sold.
The offering includes specified percentage shares of production from the field's four unitized producing zones. The final sales percentages are the result of an agreement between DOE and Chevron for purposes of the sale, in which Chevron has waived any right to challenge the final sale participating percentage shares.
Successful bidders must submit earnest money deposits with executed purchase and sale agreements. DOE then will report to Congress on the contract terms and whether the sale is in the government's best interests. Congress then has 31 days to review the report prior to DOE's execution of the sales contracts.
Copyright 1997 Oil & Gas Journal. All Rights Reserved.
