Qatar Petroleum has offered participation in the Barzan gas project and rights for participation in all future phases of the project to ExxonMobil Middle East Marketing Ltd. In parallel with these discussions, the two entities have collectively decided not to progress the gas to liquids project and instead to pursue the development of the Barzan Project in the North field.
The initial phase of the Barzan project will supply domestic gas to meet the State of Qatar’s infrastructure and industry growth. Qatar Petroleum and ExxonMobil have agreed to form a joint venture to oversee the project development.
“The Barzan Project is a very important strategic project for Qatar,” said H.E. Abdullah bin Hamad Al-Attiyah, second deputy premier, minister of energy and industry and chairman of Qatar Petroleum. “We welcome ExxonMobil as our partner in the project.”
Stuart McGill, senior vice president of Exxon Mobil Corp., said, “We understand that the Barzan project is a priority for the State of Qatar. We are pleased to have been the only international oil company selected to participate in the Barzan project and look forward to continuing our successful partnership with Qatar Petroleum.”
Qatar Petroleum and ExxonMobil have signed a Statement of Participation Principles for the Barzan Project and a Heads of Agreement for all future phases of the Barzan project. It is expected that the initial phase of the Barzan project will yield about 1.5 billion cubic feet per day of sales gas with the startup anticipated in the year 2012.
ConocoPhillips expects Corocoro field output in mid-2007
The Corocoro field in Venezuela, in which Houston-based ConocoPhillips is a joint venture partner with state-owned Petroleos de Venezuela SA and Italy’s ENI Spa, is expected to begin oil production in mid-2007.
This is later than the early 2007 date originally predicted by Venezuelan officials. Offhore drilling began in mid-2006. Work is currently in progress on the floating storage and offloading vessel. That and the completion of pipeline infrastructure is expected to be completed in within the first quarter of 2007. With the installation of a central processing platform in 2008, the field is expected to be in full production.
ConocoPhillips also has stake in two other Orinoco belt projects, Petrozuata and Hamaca. The Venezuelan government is applying increasing tax pressure in hopes of maintaining a majority stake in the areas.
The 2002 tax audit report for Petrozuata from the Venezuelan government was $245 million, and $170 million for municipal sales taxes between 2000 and 2005.
Venezuela’s national oil company PDVSA has certified the nation’s Orinoco Petroliferos Strip holds close to 7 billion barrels of crude oil.
Source: ConocoPhillips
While another 235 billion barrels of heavy crude are expected to be certified, only 20% can be extracted due to technological limits.
PDVSA is seeking to produce 4 million b/d by 2012. It currently produces 3 million. There are 7 foreign companies in joint ventures in the Orinoco Strip, versus 10 in offshore fields.
Sitting next to the Orinoco River, the Orinoco Petroliferos Strip is said to have the world’s largest crude oil reserves, estimated at around 235 billion barrels. It is a 55,300-square-km piece of land on the east side of the nation, across the states of Guarico, Anzoategui, Monagas, and Delta Amacuro.
TXCO to acquire Output Exploration for $95.6 million; adds additional Maverick basin lease acreage
The Exploration Co. (TXCO) has entered into an agreement to acquire Output Exploration LLC, a privately-held, Houston-based exploration and production firm, for $91.6 million in cash, subject to certain adjustments, and $4 million of TXCO common stock.
The transaction, the largest in TXCO’s history, will double the company’s proved reserves and increase current oil and gas production by nearly two thirds. It includes:
- Proved reserves of 40 billion cubic feet equivalent (Bcfe). TXCO estimates an additional 51 Bcfe probable and possible (2P/3P) reserves.
- A proved reserves purchase price of $2.39 per thousand cubic feet equivalent (mcfe), or $2.85/mcfe fully developed; and $1.05/mcfe for 3P reserves, or $1.78/mcfe fully developed.
- Current net oil and gas production of about 8.4 MMcfe/d, representing a 62% increase in TXCO’s current daily oil and gas production.
- 31,000 net leasehold acres, of which 24% is undeveloped.
- Associated operating infrastructure.
- An expanded senior credit facility to fully finance the transaction.
“This acquisition is an excellent opportunity for TXCO because it allows us to leverage our existing strengths,” said chairman, president and CEO James E. Sigmon. “It is a good fit because the core of the Output properties is in the East Texas Fort Trinidad field, an area that is prospective for similar plays that we know very well in our Maverick basin area, such as the Glen Rose, Buda, Austin Chalk and Eagleford/Woodbine formations. This will allow TXCO’s technical and operations team to apply its knowledge of these formations to East Texas. In addition, the Output East Texas acreage position is situated in the prolific, down-dip Bossier play, which has the potential to develop as the play expands.
“Output also has been an innovator in employing advanced technology, such as 3-D seismic interpretation, to evaluate, acquire, explore and develop oil and gas properties - just as we do at TXCO,” Sigmon added. “With the drilling prospects identified on the Output acreage, we gain the potential to speed TXCO’s continuing growth in oil and gas production and reserves.”
The acquisition price of $95.6 million includes $91.6 million in cash plus TXCO common shares valued at $4 million at signing. BMO Capital Markets has agreed to underwrite a new, 4-year senior secured revolving credit facility and a new, 5-year senior secured second-lien term loan facility to fully finance the acquisition.
Bank of Montreal has agreed to act as administrative agent for the lenders under the new credit facilities. TXCO’s debt-to-asset ratio will rise to approximately 38%. The total price will include customary adjustments. The boards of directors of both companies have unanimously approved the agreement, which is subject to customary conditions and regulatory approvals. Output will be merged into a TXCO subsidiary. Output’s properties in California’s Sacramento Basin will be sold to another party before closing. BMO Capital Markets acted as financial advisor to TXCO.
Separately, TXCO has increased the size of its Maverick basin lease block under a new agreement with EnCana Oil & Gas Inc. TXCO acquired an interest in primarily shallow horizons under 85,681 acres, expanding the interest it holds on existing leases. The company now holds nearly 560,000 net acres in the Maverick basin. Under the new agreement, it now owns an interest in all rights from the surface through the Glen Rose formation under the entire 85,681 acres, plus a 50% interest in 16,810 acres of the block through the Sligo formation.
The Exploration Co. is an independent oil and gas enterprise with interests primarily in the Maverick basin of Southwest Texas and the Marfa basin in West Texas.
Anadarko to sell partial interest in K2 unit in the Gulf of Mexico
Woodlands, Tex.-based Anadarko Petroleum Corp. has agreed to sell a portion of its interest in the K2 Unit in the Gulf of Mexico to two undisclosed parties for $1.2 billion. The sale is effective Jan. 1, 2007.
The sale is another piece in the puzzle for Anadarko. The company has been continuously selling assets to reduce the $21 billion debt it incurred when it acquired Kerr-McGee and Western Gas Resources last August. To date, the company has sold $11 billion in oil and gas fields. The company’s goal is to sell $15 billion in assets.
Year to date, gross daily production averaged 37,100 barrels of oil equivalent per day from 6 wells within the K2 Unit, in which Anadarko currently has a 65% working interest and is operator. The sale represents a roughly 23% working interest. Following the transaction, Anadarko will remain the K2 Unit operator with a 41.8% working interest.
“This partial sale affirms our view of the value of this field and its contribution to our equity story, as well as keeping us ahead of schedule on debt reduction efforts,” Anadarko CFO Al Walker said.
“This transaction allows us to both diversify our risk profile and retain a meaningful working interest as the operator in the unit,” Anadarko chairman, president, and CEO Jim Hackett said. “We believe there is outstanding upside potential in this unit and are working with our partners to finalize plans to enhance the recovery of oil from this large reservoir.”
“We believe getting our debt reduced quickly and maintaining a solid investment grade credit rating are integral to the successful execution of our business model,” Hackett said. “We continue to be very pleased with the pace of, and values realized in, our divestiture program.”
The transaction is expected to close in the second quarter of 2007, subject to applicable pre-emption rights of co-owners in the subject leases and other closing conditions agreed to by the parties.
Scotia Waterous marketed the assets, while UBS and Credit Suisse served as Anadarko’s financial advisors.
Halliburton opens Dubai office; plans to add 13,000 new jobs
Halliburton Co. widened many eyes recently when it announced it will open a corporate headquarters office in the United Arab Emirates.
The company sees the change as the next step in a strategic plan announced in 2006 to focus on expanding its customer relations with national oil companies while concentrating more of the company’s investments and resources in growing its business in the Eastern Hemisphere.
Halliburton chairman, president, and CEO Dave Lesar will move to Dubai. He will work closely with Halliburton Eastern Hemisphere senior vice president Ahmed Lotfy. “The Eastern Hemisphere is a market that is more heavily weighted toward oil exploration and production opportunities and growing our business here will bring more balance to Halliburton’s overall portfolio.”
Halliburton’s energy services operations have recently celebrated key contract wins, expanded service offerings across the divisions, and experienced increased utilization of integrated services and technologies throughout the Eastern Hemisphere. During 2006, more than 38% of Halliburton’s $13 billion oil field services revenue was generated from the Eastern Hemisphere.
Just days after this announcement, the company released an internal memo stating that the company plans to add 13,000 new jobs in 2007. The memo from Andy Lane, Halliburton’s COO said, “It is our expectation that our planned growth for 2007 to 2009 will mean that we will hire more than 13,000 new employees in 2007. This will include growth in our Houston employment numbers.”
While soft words like “expectation” and “planned” don’t always hold weight (think “Forward Looking Statement”), they do seem to halt, at least for the time being, the speculation that the company’s opening of a UAE office is a precursor to the company’s US exit.
The news sparked criticism from some Capitol Hill Democrats who feel the move to the UAE is designed to side-step US taxes. Furthermore, some have seen it as a step to further business with nations accused by the US and other Western governments of sponsoring terrorism, such as Iran. Halliburton denies all accusations.
Halliburton is one of the world’s largest providers of products and services to the energy industry. The company will continue to maintain a corporate office in Houston.
- Mikaila Adams
