Industry Briefs

Bill Barrett Sells Natural Gas Uinta Basin assets for $371M

Bill Barrett Corp. is selling its West Tavaputs natural gas property located in the Uinta Basin, Utah to an undisclosed buyer for $371 million. The price includes roughly $46 million for the purchaser's assumption of the lease financing obligation for compressor units on the property. Cash proceeds of approximately $325 million will be adjusted at closing for an effective date of August 1, 2013 and for transaction costs. Proceeds will be applied to reducing outstanding debt under the company's revolving credit facility. The transaction includes approximately 35,000 net acres, 300 producing wells, 265 billion cubic feet equivalent net proved reserves (based on year-end 2012) and 68 MMcfe/d net production (based on the second quarter of 2013). Analysts at Global Hunter Securities outlined transaction metrics as $5.5k per flowing Mcf, $10.7k/acre, and $1.22 per Mcfe of 1P reserves. The company's long-term debt now stands at $877 million pro-forma, from $1,248 million at the end of the second quarter, the analysts continued. With the sale of these 100% gas assets, the deal puts Bill Barrett Corp. on pace to exit the year at a 40% oil cut, plugs its funding gap through 2014, and puts the company on the path to becoming a Niobrara pure-play, the analysts concluded. The transaction is expected to close before year-end.

Ring, Torchlight to Develop KS Leasehold

Ring Energy Inc. has entered into a joint development agreement with Plano, TX-based Torchlight Energy Resources Inc. to develop all of Ring's existing Kansas leasehold of approximately 17,000 acres. Operations are scheduled to begin before year-end 2013. Per the agreement, Ring will serve as operator and Torchlight will pay 100% of all drilling and completion costs until an amount equal to Ring's total costs related to the Kansas leases has been met (approximately $6.2 million). After Torchlight has matched $6.2 million, all drilling and development costs related to the continued ongoing development of the Kansas leases will be shared equally under the joint operating agreement. Production and revenue will be shared equally from commencement of the first well. Under this arrangement, Ring is expected to drill an estimated 10 vertical wells with such $6.2 million. After the $6.2 million is spent, Torchlight and Ring will share any additional expenses on an equal basis. The leasehold is located in Gray, Haskell, and Finney counties. Based on both vertical and horizontal drilling activity by other operators in the vicinity, Ring CEO Kelly Hoffman expects production from the Mississippian-prospective leasehold to contain "a significantly greater percentage of oil; in some cases exceeding 80%."

Chevron Acquires Acreage Offshore Australia

Chevron Corp.'s Australian subsidiary has acquired exploration interests in two offshore blocks located in the Bight Basin, a deepwater frontier basin similar in size to the Gulf of Mexico. Blocks S12-2 and S12-3, which span more than 8 million acres (32,375 square kilometers), are located approximately 275 miles (443 kilometers) west of Port Lincoln off the South Australia coast. Chevron Australia is the operator with a 100% interest.

Cabot Sells Marmaton Acreage to Chaparral

Chaparral Energy Inc. has agreed to purchase net production of roughly 2,000 boe/d and 66,000 net acres in the Panhandle Marmaton Play for $160.1 million from Cabot Oil & Gas Corp. Located in Beaver and Texas Counties, Oklahoma, and Ochiltree County, Texas, production from the purchased assets is approximately 81% oil with proved reserves estimated to be 8.4 million barrels of oil equivalent (MMboe) and unproven reserves estimated to be 24 MMboe as of the effective date of October 1, 2013.

At a price tag of $160 million for 2,000 boe/d of current production and 2.1 MMboe/d of proved reserves, Stifel analysts write up the implied transaction metrics at $80,000 per flowing barrel of production and approximately $2,400/acre. The Cabot acquisition increases Chaparral's growth potential through the addition of approximately 450 drilling locations targeting the Marmaton Lime formation which typically generate Rates of Return (ROR) in the 40 to 70% range. In addition, the area offers upside associated with drilling numerous horizons in this stacked-pay environment. The purchase includes infrastructure, including saltwater disposal wells and electricity. The acquisition of Cabot's Marmaton assets is scheduled to close on Dec. 18, 2013. To help fund an increased drilling program associated with the acquisition, Chaparral has engaged an investment banker to divest non-core assets in its Ark-La-Tex and Permian Basin areas.

Anadarko Makes Wattenberg Exchange

Anadarko Petroleum Corp. has exchanged northeastern Colorado Wattenberg field assets with Noble Energy Inc., effective Jan. 1, 2013. Under the terms of the trade, each party will exchange approximately 50,000 net acres. For Anadarko, this acreage exchange will enhance its core development area, while retaining the benefits of its Land Grant mineral ownership on approximately 21,000 acres of the lands to be conveyed to Noble. The trade also will increase Anadarko's daily production by approximately 8,000 barrels of oil equivalent based on current production levels. The trade is subject to customary post-closing adjustments.

Newfield to Sell Offshore Malaysian Business

As part of its intent to exit the international business and focus on domestic resource plays, Newfield Exploration Co. has agreed to sell all of its equity interests in Newfield Malaysia Holdings to SapuraKencana Petroleum Berhad for a total cash consideration of $898 million, which is expected to close in early 2014. The agreement is subject to the approval of Petroliam Nasional Berhad (PETRONAS) under the applicable Production Sharing Contracts, the purchaser's shareholder approval and customary closing conditions. Newfield intends to offer preferential rights to its partners under the Joint Operating Agreements. Newfield plans to use the proceeds from the sale of its Malaysian assets to pay down existing debt and general corporate purposes. Goldman, Sachs & Co. is acting as financial advisor on the sale of Newfield's international businesses.

KrisEnergy Begins Drilling Ca Ngu-1 Offshore Vietnam

KrisEnergy Ltd.'s Songa Mercur semisubmersible rig recently began drilling the Ca Ngu-1 exploration well in Block 120 offshore central Vietnam. The Ca Ngu-1 exploration well is planned to reach approximately 1,500 meters total vertical depth subsea and is intended to test the Ca Ngu oil and/or gas prospect. Water depth at the Ca Ngu-1 location is approximately 270 meters. The company acquired an interest in Block 120 in 2010 and following 2D and 3D seismic acquisition and interpretation. "The single well to have been drilled in the current boundaries of Block 120 was in the early 1990s and encountered oil," said Chris Gibson-Robinson, KrisEnergy's Director Exploration & Production. Block 120 covers an area of 8,574 sq km overlying the Quang Ngai Graben and the Tri Ton Horst where water depths range from 50 meters to 1,100 meters. KrisEnergy holds a 25% working interest in Block 120 and is partnered by Eni Vietnam BV as the operator with 50% working interest and Neon Energy (Song Hong) Pty Ltd with 25%.

Sunshine Oilsands Signs Agreement for Muskwa, Godin Areas

Sunshine Oilsands Ltd. has signed its previously announced joint operating agreement (JOA) with Renergy Petroleum (Canada) Co. Ltd., an affiliate of Changjiang Investment Group Co. Ltd. with respect to the corporation's Muskwa and Godin area oil sands leases. Excluded from the JOA are all of Sunshine's oil sands rights within the carbonate formations contained within the leases. Renergy will operate the assets under the JOA as the operator. In return for a 50% working interest, Renergy has agreed to fund 100% of the initial joint operations conducted on the lands up to a maximum of CAD $250 million, which funding shall be deployed at the discretion of Renergy, as operator, until either the sum contributed equals CAD $250 million, or average daily production from the lands over any 20 consecutive days period equals or exceeds 5,000 barrels per day. The working interest transfer is not expected to result in any accounting gain or loss due to the accounting treatment of the transaction.

Tullow Awards $340M Subsea Contract to FMC

FMC Technologies Inc. has received an order from Tullow Ghana Limited to supply subsea systems for its Tweneboa-Enyenra-Ntomme Development (TEN Project) offshore Ghana. The order has an estimated value of $340 million in revenue. FMC Technologies' scope of supply includes subsea trees, manifolds, tooling, associated subsea control systems and systems integration. FMC Technologies has been operating in Ghana since 2008 and has recently completed the assembly and testing of the first Ghanaian-built subsea trees at its support base in Takoradi. The deal is positive, but expected, noted Global Hunter Securities analysts after the announcement. "The scale of the award bodes well for further capacity absorption, helping to cover fixed costs and improve margins (assuming pricing is attractive - we'll know whether that's the case in 2015). No change to our $6.0B 2013 Subsea order forecast, which takes into account ~$3.76B of awards inbounded in 1H:13, ~$1.27B in Q3 and another ~$970MM in Q4," the analysts noted.

Ultra Petroleum Takes Big Step to Diversify into Oil

Ultra Petroleum Corp. has signed a definitive purchase and sale agreement to acquire oil-producing properties located in the Uinta Basin in northeast Utah for $650 million. The Houston-based company hinted earlier this year that it would take steps to diversify into oil, noted Sterne Agee analysts who view the deal with a private seller as "a big step in that direction." Ultra expects to finance the acquisition through debt at the subsidiary and parent level. "Ultra had $680 million in unused borrowing capacity on its $1 billion facility as of June 30th, but will likely term out some of the debt," said the analysts, who expect that the deal will result in an upsizing of the company's credit facility. "With 4 mb/d of current production, the acquisition will be immediately accretive to FCF (free cash flow), which should allow the assets to fund their own development going forward," they continued. The deal is expected to close December 2013.

CNOOC Wins First Bidding Round of Brazil's Pre-Salt Auctions

CNOOC Ltd., as part of a consortium comprising Petrobras, Shell, Total, and CNPC, has been awarded a 35-year production sharing contract to develop the Libra pre-salt oil discovery in the Santos Basin, offshore Brazil. CNOOC holds 10% percent in the winning consortium, with the operator Petrobras (40%), Shell (20%), Total (20%) and CNPC (10%). The winning bidder was determined by the highest amount of "profit oil" offered (the percentage of oil produced after development costs, which companies agree to give the Brazilian government). The consortium offered a profit oil rate of 41.65%. Petrobras, which will operate the Libra oil field, added a 10% stake to the winning consortium (in addition to the minimum mandated 30% it already owned). As part of the winning bid, the consortium will be required to pay a signing bonus of R$15 billion (Brazilian Reais ) and a minimum of approximately R$610 million in investments in the exploration program and has agreed to conduct a minimum work program no later than the end of 2017. The Libra field is located in the Santos Basin, approximately 170 km off the coast of Rio de Janeiro. The block covers approximately 1,550 sq km, with water depths of around 2,000 m. The Brazilian regulator, Agência Nacional do Petróleo (ANP) estimates that the recoverable resources of Libra field is between 8 billion to 12 billion barrels of oil and a total gross peak oil production could reach 1.4 million barrels per day. The auction of the Libra block was Brazil's first experience under a new production-sharing policy.

Noble Closer to Moving HQ to UK

At a shareholder meeting held on October 11, shareholders of Zug, Switzerland-based Noble Corp. approved the proposed change in place of incorporation of the publicly traded parent company of the Noble group of companies from Switzerland to the United Kingdom. Subject to the completion of certain closing requirements, Noble expects the change in place of incorporation to be effective by the end of October. Upon completion of the transaction, the Noble parent company will continue to be subject to US Securities and Exchange Commission reporting requirements, and its ordinary shares will continue to be listed exclusively on the New York Stock Exchange under the symbol "NE", the company's current trading symbol.

Angola Intends to Impose a Consumption Tax on Oil Companies

Angola plans to impose a consumption tax on oil companies, reported Global Hunter Securities. The tax potentially adds 5% to most services and supplies and 10% for equipment rentals. "Angola is one of the most active deepwater markets, with 17 floaters working, four more expected by early Q2:14, and there's open demand for another 22 rig years, nearly all of which will likely require additional rig supply. Also, nearly one-third of the 18 major subsea projects worth >$150MM expected to be let over the next 15 months are for Angola, including the two largest projects thought to go in 2014 — Block 32 (FTI or AKSO most likely) and Block 31 (CAM is the favorite)," the analysts noted.

Dril-Quip Signs Agreement with BP

Dril-Quip Inc. has entered into a five year global frame agreement with BP International Ltd. for the supply of subsea wellhead equipment and related services. The contract provides the terms and conditions for worldwide call off orders placed by BP for Dril-Quip's Big Bore II-H series subsea wellhead systems. Orders previously placed by BP during 2013 will also be governed by the terms of this contract. Additional orders will be included as part of Dril-Quip's backlog as subsequent orders may be received under the agreement. BP also has an option to extend the contract for an additional five year period.

BNY Mellon, CIBC Mellon to Merge Securities Lending

BNY Mellon, a provider of investment management and investment services, and CIBC Mellon, its long-established Canadian joint venture with Canadian Imperial Bank of Commerce, have integrated their respective securities lending desks. The integration establishes BNY Mellon's Securities Finance business as one of the largest providers of securities lending services in the world, with trading offices in New York, Pittsburgh Toronto, London and Hong Kong. Part of BNY Mellon's Global Collateral Services division, the Securities Finance business encompasses more than $2.5 trillion USD in lendable assets and outstanding loan balances of approximately USD$250 billion. CIBC Mellon's program represents more than 120 clients with approximately CAD$500 billion in lendable assets and CAD$60 billion on loan, making it the largest such securities lending program in Canada.