Dominion enters agreement to sell most US onshore E&P ops for $6.5B; closes sale of Canadian E&P ops for $624M

In the recent transactions, Loews Corp., a diversified holding company, has agreed to purchase some of Dominion’s operations for $4.025 billion. The primary properties being acquired are located in the Permian basin in Texas, the Antrim Shale in Michigan, and the Black Warrior basin in Alabama, and are predominantly natural gas, characterized by long reserve lives and high completion success rates.

With estimated proved reserves totaling approximately 2.5 tcfe, this transaction results in sale metrics of $1.61/ Mcfe for proved reserves.

Additionally, XTO Energy Inc. will purchase Dominion’s operations in the Rocky Mountains, Gulf Coast, San Juan basin, and South Louisiana for $2.5 billion. These operations include proved reserves of roughly 1 tcfe on Dec. 31, 2006.

Dominion now has agreements to sell 85% of the properties it planned to sell. A process to sell operations in the Mid-Continent basin is in the works, and is expected to be completed by the end of 2007. As of Dec. 31, 2006, these operations, located primarily in Oklahoma, had proved, probable and possible reserves of 780 bcfe, 435 bcfe, and 966 bcfe respectively, with average daily production of 120 MMcfe in 2006.

Dominion will retain its Appalachian operations including roughly 1 tcfe of proved reserves as of Dec. 31, 2006. Those operations are lower risk and fit well strategically with Dominion’s natural gas gathering, pipeline, and storage system.

For this transaction, Dominion was advised by JPMorgan, Lehman Brothers, and Juniper Advisory LP. Baker- Botts LLP and McGuireWoods LLP acted as the company’s legal advisers.

Following Dominion’s divestiture announcement, Standard & Poor’s Ratings Services affi rmed its ‘BBB’ corporate credit ratings on the company and its subsidiaries. The outlook remains positive.

Dominion had about $18.7 billion of debt and debt equivalents, including off-balance-sheet obligations, as of March 31, 2007.

“The sale of the E&P assets is favorable as it significantly reduces exposure to the higher risk E&P segment to less than 5% of overall cash flow,” said Standard & Poor’s credit analyst Aneesh Prabhu.

“We expect the company’s E&P production to be hedged at a level consistent with past practices even after its E&P portfolio shrinks to the Appalachian assets,” said Prabhu.

The company has also recently closed the sale of its Canadian natural gas and oil exploration and production operations. The Canadian operations were sold to Paramount Energy Trust and Baytex Energy Trust, both of Calgary for roughly $624 million.

The operations include nearly 267 bcfe of proved natural gas and oil reserves in western Canada as of Dec. 31, 2006, with 2006 average daily production of about 60 million MMcfe.

Scotia Waterous and Juniper Advisory LP acted as Dominion’s financial advisers and Stikeman Elliott LLP acted as legal adviser for the sale.

Additionally, Dominion has recently sold its offshore Gulf of Mexico assets to Italian exploration and production company Eni. See page 4 for more details.

Roxar sells flare business to Fluenta; CorrOcean acquires remainder

Roxar has divested its flare metering and measurement business to newly-independent, Norwegian-based technology company, Fluenta. Dag Johansen, previously Roxar sales director, is now the managing director of Fluenta and the entire business and research and development team behind the Roxar Flaregas meter (10 employees) has followed. Fluenta will make use of Roxar’s production facilities in Bergen, Norway until the end of 2007.

Through the measurement of molecular weights, the meter helps operators accurately measure the composition of fl aring emissions and level of CO2 gases and enables them to comply with government and international regulations for pollution control.

The meter measures very low to very high velocity, density, volume and mass flow as well as the average composition of all gases. It is currently used by all major Norwegian oil and gas companies to help calculate taxes payable on CO2 emissions.

After the divestiture, Roxar signed an agreement with CorrOcean ASA whereby CorrOcean will acquire Stavanger-based Roxar AS from Arcapita Bank and its affiliates and subsidiaries for NOK 2,220 million.

The acquisition will be funded by a pre-subscribed private placement of NOK 781 million at a subscription price of NOK 6.0 per share, a guaranteed offering of NOK 319 million directed to current shareholders in CorrOcean at NOK 6.0 per share, a pre-subscribed convertible debt of NOK 200 million and senior bank debt of NOK 1,100 million provided by DnB NOR and Fokus Bank.

Fondsfinans acted as financial advisor and manager for CorrOcean, and Pareto Securities acted as co-manager in the placement.

Since it hasn’t been that long since Arcapita acquired the company, OGFJ wondered what the deal effects the transaction will have on Roxar. When asked about Arcapita’s decision to sell Roxar after just a couple of years, a Roxar spokesperson explained. When the opportunity arose for Arcapita to help create the world’s largest provider of subsea instrumentation by bringing Roxar and CorrOcean together, they recognized the numerous commercial and technical synergies for both companies and decided that it made good sense for all parties involved – customers, shareholders and owners.”

It has also been determined that Sandy Esslemont will not retain his CEO title. “Roxar’s current CEO, Sandy Esslemont, will continue to serve the company in the role of senior advisor. It has been preliminarily determined that a new joint management team will be formed consisting of Roxar’s Gunnar Hviding as the new CEO and Corrocean’s managing director, Øystein Narvhus, as deputy CEO,” the spokesperson said. Once complete, the company will grow to 800 staff with offices in 19 countries.

Noble Energy Inc. has recently made two new discoveries. The most recent, on Block “I” offshore Equatorial Guinea. Well “I-1”, which was testing the Benita prospect, encountered an extremely high quality Miocene reservoir containing 135 feet of net hydrocarbon pay. Production tests from the well yielded flow rates of 1,038 b/d of condensate and 34.3 MMcf/d of natural gas, or about 6,755 boe/d, with production rates limited by test facilities.

The “I-1” well, located in 2,880 feet of water and nearly 25 miles east of Bioko Island, was drilled to a total depth of 10,460 feet. It is about 13 miles south of the Belinda discovery, located in Block “O”, which was announced in late 2005. As expected, the reservoir section at the Benita discovery location is significantly thicker than at Belinda, which is also Miocene in age.

Additional appraisal work will be necessary to verify the areal extent of the Benita discovery. The company is currently carrying out a multi-well exploration and appraisal program designed to test a number of prospects in the region. The Songa Saturn drillship will next move back to Block “O” where it will drill a Belinda appraisal well located about 4.5 miles from the “O-1” discovery well. Current plans are to return to Block “I” in the third quarter of 2007 to drill the second exploration well.

Noble is the technical operator of Block “I” with a 40% participating interest. Its partners on the block include Atlas Petroleum International Ltd. (54% participating interest), who is the administrative operator, and Osborne Resources Ltd. (6% participating interest). GEPetrol has a 5% carried interest once commerciality has been determined.

Charles D. Davidson, Noble’s chairman, president, and CEO, said, “Benita represents the fi rst well ever drilled in Block “I” and complements our Belinda discovery in Block “O”. While more drilling is needed to fully understand our resource potential in the area, we are encouraged by this new discovery and the potential commercial aspects of both blocks.”

The Minister of Mines, Industry, and Energy, H.E. Atanasio Ela Ntugu Nsa stated, “The government believes that this new discovery further confirms the signifi cant hydrocarbon potential of the Douala basin and highlights the positive investment climate which currently exists within the Republic of Equatorial Guinea.”

The company also made a discovery on Mississippi Canyon Block 562 (Isabela prospect) in the Gulf of Mexico, located roughly 150 miles southeast of New Orleans in 6,500 feet of water. The Isabela well was spud on February 28, 2007, and drilled to a total depth of approximately 19,100 feet. Noble has a 33.33% working interest in the Isabela discovery. BP is the operator and holds 66.67%.

Davidson stated, “Isabela is the newest addition to Noble Energy’s growing and successful deepwater program, which currently represents about 15% of our production.”

Baker Hughes Centrilift ESP system pumps 22,000 b/d to Petrobras FPSO

Petrobras and Baker Hughes Centrilift have started a subsea pressure boosting system in the deepwater Jubarte field offshore Brazil in the Campos basin. The one megawatt electrical submersible pumping (ESP) system was installed at Jubarte in November 2005, but was not brought on line until recently, following hook up of the floating production storage and offloading vessel. The system is producing nearly 22,000 b/d in 4,600 feet of water. Petrobras plans to install an additional 8 vertical booster stations using ESP technology at Jubarte in the coming months.

Baker Hughes Centrilift also has supplied 7 multi-phase ESP systems to Petrobras for subsea pressure boosting in the Espadarte and Golfinho fields offshore Brazil. Installation is currently under way with start up due this summer. The Espadarte Field is a subsea development in 4,600 feet of water in the Campos basin. Flow rates are expected to total about 19,000 b/d per well. The subsea Golfinho field is in 4,800 feet of water offshore southeast Brazil and estimated flow rates from the field will be 28,000 b/d per well.

Peter Lawson, Baker Hughes Centrilift subsea development manager, noted, “The successful start up of the ESP at Jubarte, after 17 months in the well, validates the trust Petrobras has shown in the use of ESP systems for deepwater pressure boost applications.”

McMoRan to purchase Gulf of Mexico shelf properties from Newfield for $1.1B

McMoRan Exploration Co. has agreed to purchase the Gulf of Mexico shelf oil and gas properties of Newfield Exploration Co. along with exploration rights for cash consideration of $1.1 billion.

The properties include 125 fields on 146 offshore blocks currently producing about 270 MMcfe/d. Proved reserves as of July 1, 2007, are estimated to be 327 bcfe. Almost 90% of the reserve estimates for the acquired properties were based on proved reserves estimated by Ryder Scott Co. LP. Nearly 70% of the proved reserves are natural gas. Offshore leases included in the purchase agreement total roughly 1.3 million gross acres.

McMoRan is also acquiring a 50% interest in New- field’s non-producing exploration leases on the shelf and certain of Newfield’s interests in leases associated with its Treasure Island ultra deep prospect inventory. Upon closing, McMoRan will assume operatorship of the Treasure Island leasehold, subject to customary approvals.

McMoRan expects to retain technical and operating personnel and contractors that have supported Newfield’s management of the acquired properties. In addition, the exploration teams of McMoRan and Newfield will jointly pursue exploration activities.

James R. Moffett and Richard C. Adkerson, co-chairmen of McMoRan, said, “This acquisition is a strategic fi t for McMoRan. It is financially compelling, provides signifi cant current production and cash flows, and offers substantial exploration and exploitation upside in an area that our team knows well. Newfield has built an attractive Gulf of Mexico portfolio. We look forward to combining the strengths of our teams in future exploration and development efforts. We will strive to maximize the values from our expanded resource base while continuing to pursue aggressively the potential from our deep gas exploration program.”

The transaction is expected to close in the third quarter of 2007. McMoRan has received $1.6 billion in fi nancing commitments from JPMorgan and Merrill Lynch & Co., which will be used to fund the transaction, repay McMo- Ran’s existing $100 million term loan, and provide working capital. The financing will include an $800 million secured revolving bank credit facility and an $800 million interim bridge loan facility.

McMoRan expects to issue long-term notes and equity and equity-linked securities to replace the bridge loan facility. McMoRan also expects to hedge a substantial portion of its production over the next 2-3 years. Merrill Lynch & Co. and JPMorgan acted as financial advisors to McMoRan in the acquisition.

McMoRan Exploration Co. is an independent public company engaged in the exploration, development, and production of oil and natural gas offshore in the Gulf of Mexico and onshore in the Gulf Coast area.