ConocoPhillips to focus 2011 spending on upstream

ConocoPhillips has approved a 2011 capital program of $13.5 billion. Almost 90% of the capital program will be in support of exploration and production, while the refining and marketing segment represents about 9%. The 2011 capital program for E&P is approximately $12 billion, including capitalized interest of $0.4 billion and $0.7 billion for the company's contributions to the FCCL business venture and loans to other affiliates. This program also includes about $1.7 billion for worldwide exploration. In North America, the capital program is expected to total approximately $6 billion. Spending in North America is increased, compared with prior years, with emphasis on liquids-rich resource plays and highest-return investments. In the US Lower 48, funding will be focused on the Eagle Ford and other liquids-rich plays in the Permian, Bakken and Barnett Fields. Spending in Canada will focus on existing SAGD oil sands projects and selective programs in the Western Canada gas basins, primarily on high-graded resource plays and on maintaining a substantial position for future development. Spending in Alaska is expected to be directed toward development of the existing Prudhoe Bay and Kuparuk Fields, as well as the Western North Slope. In Europe, Asia Pacific and Africa, the E&P capital program is expected to total about $6 billion.

EnCap Investments LP has closed EnCap Energy Capital Fund VIII LP with $3.5 billion of limited partner capital commitments. Fund VIII provides growth capital to proven management teams focused primarily on the upstream sector of the oil and gas industry in North America. EnCap is led by the firm's four managing partners, David B. Miller, Gary R. Petersen, D. Martin Phillips and Robert L. Zorich. Since its inception in 1988, EnCap has managed approximately $11 billion of capital commitments. To date, EnCap has committed approximately $700 million to six portfolio companies in Fund VIII, including Common Resources II, Lone Star II, Caiman Energy, Talon Oil & Gas II, Eclipse Resources and Venado Oil & Gas.

International energy services company Wood Group has entered into a conditional agreement to sell its Well Support Division to GE for cash consideration of $2.8 billion. Following the sale, the board intends that Wood Group will return cash of not less than $1.7 billion to shareholders. For the year ended December 31, the Well Support Division had revenues of $947.1 million, EBITDA of $165.9 million and EBITA of $128.1 million. At December 31 it had gross assets of $604.7 million. The sale, coupled with the December 2010 acquisition of PSN Ltd. for an enterprise value of US$95 million, is part of Wood Group's strategy to focus on its core engineering and operations and maintenance activities in its Engineering & Production Facilities and Gas Turbine Services divisions. The transaction is expected to close by the end of Q211.

Calgary-based Encana Corp. has signed a cooperation agreement with PetroChina International Investment Co. Ltd. that would see PetroChina pay C$5.4 billion to acquire a 50% interest in Encana's Cutbank Ridge business assets in British Columbia and Alberta. Under the agreement, the two companies would establish a 50/50 joint venture that would ambitiously grow natural gas production from assets for years ahead. The 50% interest represents current daily production of about 255 MMcfe/d, proved reserves of about 1 tcfe, and about 635,000 net acres of land. The planned JV infrastructure, on a 100% basis, includes about 700 MMcfe/d of processing capacity, about 3,400 kilometres (about 2113 miles) of pipelines and the Hythe natural gas storage facility. Under the JV, each company would contribute 50/50 to future development capital requirements. Encana will initially operate the joint venture's assets and market the production. Following the completion of the transaction, the JV would operate under the direction of a joint management committee. The transaction is subject to regulatory approval by Canadian and Chinese authorities, due diligence, and the negotiation and execution of various transaction agreements. RBC Capital Markets and Jefferies & Co. Inc. are acting as financial advisors to Encana. Burnet, Duckworth & Palmer LLP is acting as legal advisor to Encana.

Transzap Inc., the parent company of Oildex, an energy industry provider of eRevenue, ePayables and eBudgeting, software-as-a-service (SaaS) solutions, has achieved SAS 70 Type II certification for the sixth consecutive year, for its design and execution of operational controls. Completing the SAS 70 Type II audit provides customers and auditors with the assurance that necessary controls and procedures are in place to manage and safeguard data.

Marathon Oil Corp. has set its 2011 capital, investment, and exploration budget at $5.267 billion for 2011, consistent with prior guidance and a 9% increase from 2010 capital spending. The company will focus on "more scalable and lower-risk activities, largely aimed at liquids rich opportunities such as the Bakken, Anadarko Woodford, Eagle Ford and Niobrara resource plays in the US," said Clarence P. Cazalot, Jr., Marathon president and CEO. Oil projects are expected to make up more than 80% of the upstream budget. Total planned capital spending in the upstream segments is roughly $3.7 billion or 71% of total spending for 2011. This upstream program includes spending of $1.3 billion on base assets ($1 billion on E&P base and $300 million on Oil Sands Mining and Integrated Gas), $1.9 billion on growth assets such as liquids resource plays in the US, and $465 million specifically for impact exploration. Marathon's 2011 worldwide E&P budget of approximately $3.4 billion reflects an increase of 29% over 2010 capital spending.

Billings, Montana-based Voyager Oil & Gas Inc. has priced a private placement pursuant to which certain accredited investors have agreed to purchase 12,500,000 units at a price of $4.00 per unit for gross proceeds of roughly $50 million. Each unit will consist of one common share and one-half warrant to purchase one common share. The warrants, which represent the right to acquire up to an aggregate of 6,250,000 common shares, will be exercisable within the 5-year anniversary of the closing date of the private placement. The warrant exercise price of $7.10 per share is 150% of the average closing price of the company's common shares for the five days ended January 31. Canaccord Genuity Inc. acted as the lead placement agent. Rodman & Renshaw LLC, Dougherty & Co. LLC, CK Cooper & Co. Inc., Wunderlich Securities Inc., Global Hunter Securities LLC, and Feltl and Co. acted as co-placement agents.

Eagle Ford Gathering LLC, a joint venture between Kinder Morgan Energy Partners LP and Copano Energy LLC, have executed a definitive long-term agreement to provide natural gas gathering, transportation, processing and fractionation services to Anadarko E&P Co. LP in the Eagle Ford Shale. In December, OGFJ spoke with Kinder Morgan's president, Park Shaper. Shaper noted the company's involvement in various shale plays. "We have a presence in the Haynesville, Eagle Ford, and Marcellus. We see opportunities in each one, but especially the Eagle Ford as it's on top of existing assets that we currently own that move natural gas out of South Texas. It's very attractively located for us." Eagle Ford Gathering's previously announced 30-inch pipeline in the western Eagle Ford Shale play is under construction and is expected to begin service in the 3Q11. After fully subscribing its initial capacity of 375,000 MMbtu per day, the JV recently announced plans to construct 74 miles of additional pipelines that will enable it to deliver natural gas to Formosa Hydrocarbons Co. for processing. The additional pipelines, which are expected to be completed by year end, will enable the joint venture to more fully utilize the 600 MMcf per day capacity of its 30-inch pipeline.

Oklahoma City-based Chesapeake Energy Corp. said Feb. 7 that it will sell all of its Fayetteville Shale assets, as well as its equity investments in Frac Tech Holdings LLC and Chaparral Energy Inc. If completed, Chesapeake anticipates that the combined pre-tax proceeds could exceed $5 billion. In the Fayetteville, the company is the second-largest producer of natural gas with current net production of roughly 415 million cubic feet of natural gas equivalent production per day. The company owns about 487,000 net acres of leasehold. Chesapeake owns 25.8% of Frac Tech and 20% of Chaparral. In light of Chesapeake's plan to reduce its long-term debt by 25% in 2011-12, the company plans to use the net proceeds from these sales and its previously announced Niobrara joint venture to retire nearly $2 billion to $3 billion of its shorter-dated senior notes and to also reduce borrowings under its revolving bank credit facility.

Hercules Offshore has agreed to purchase 20 rigs and related assets from Seahawk Drilling and its affiliates for roughly 22.3 million shares of Hercules common stock and cash consideration of $25 million, which will be used primarily to pay off Seahawk's Debtor-in-Possession loan, which it secured in connection with its bankruptcy filing to support the business and provide liquidity prior to the closing of the transaction. The amount of Hercules shares issued will be proportionally reduced at closing, based on a fixed price of $3.36 per share, if the outstanding amount of the DIP loan exceeds $25 million, with the total cash consideration not to exceed $45 million. The assets to be acquired will consist of 20 jackup rigs located in the US Gulf of Mexico and related equipment, accounts receivable, cash and contractual rights. Assumed liabilities will be limited to specific items, such as accounts payable, with all other liabilities retained by Seahawk. Closing is subject to bankruptcy court approval, Hercules Offshore lender approval, as well as regulatory approvals and other conditions. Jefferies & Co. provided a fairness opinion to Hercules, and Andrews Kurth LLP and Thompson & Knight LLP acted as legal advisers to Hercules for this transaction.

More Oil & Gas Financial Journal Current Issue Articles
More Oil & Gas Financial Journal Archives Issue Articles
View Oil and Gas Articles on PennEnergy.com