Noble adds $4B prospective revenue backlog with deepwater rigs in Brazil

Noble Corp. has secured a Memorandum of Understanding for contracts with a total revenue potential of roughly $4 billion over 29 rig years on its five deepwater rigs currently operating offshore Brazil for Petroleo Brasileiro SA (Petrobras).

Upon execution, these new contracts could increase Noble’s total backlog to more than $10 billion. Potential revenue includes a one-year option on the Noble Paul Wolff and paid shipyard time during upgrades on three drillships and assumes earning the full amount of all performance bonuses. The contracts are subject to the approval of Petrobras’ top management.

The five rigs’ contract terms and potential revenues are as described below.

Noble Paul Wolff is a fourth generation 9,200’ water depth, dynamically positioned semisubmersible, with a five-year primary term beginning in November 2009. Including the one-year option and an 18% performance bonus, the total revenue potential is $1.08 billion.

Noble Roger Eason is a 7,200’ water depth, dynamically positioned drillship, with a six-year term beginning March 2010 with revenue potential of $888 million including a 15% performance bonus.

Noble Leo Segerius is a 5,600’ water depth, dynamically positioned drillship, with a six-year term beginning in the second or third quarter of 2009 with revenue potential of $769 million including a 15% performance bonus.

Noble Muravlenko is a 4,900’ water depth, dynamically positioned drillship, with a six-year term beginning March 2009 with revenue potential of $744 million including a 15% performance bonus.

Noble Therald Martin is a 3,900’ water depth, conventionally moored semisubmersible, with a five-year term beginning October 2010 with revenue potential of $542 million including a 10% performance bonus.

David W. Williams, Chairman, CEO, and president, said, “With the award of these contracts, we will not only boost our overall fleet backlog to more than $10 billion, we will also be able to move forward with our planned upgrades on each of our three drillships.

These upgrades, which are designed to enhance the reliability and operational performance of the rigs, are estimated to cost approximately $175 million per ship and will take each rig out of service for about 150 days. We are also pleased that Petrobras saw the value in our upgrade plans and decided to support the program by paying $90,000 per day for up to 150 days for each rig’s scheduled shipyard stay.”

In addition to the five rigs mentioned above, Noble’s newbuild deepwater semisubmersible, the Noble Dave Beard, is scheduled to commence its five-year contract with Petrobras offshore Brazil in 2009.

Halliburton, WellDynamics win $900M in contracts from StatoilHydro

StatoilHydro has awarded Halliburton and WellDynamics nearly $900 million in contracts to provide completion equipment and services, tubing conveyed perforating services, and SmartWell completion technology for numerous oil and gas fields on the Norwegian continental shelf.

The contracts allow for the provision of other products and services, including multilateral completions, expandable completion systems, and zonal isolation and control systems. Work is scheduled to begin in September 2008 and will last up to nine years if all option periods are exercised.

Jorunn Saetre, Halliburton’s country vice president for Norway, said: “The size of this project, which involves the majority of StatoilHydro’s fields on the Norwegian continental shelf, will allow completion operations to be executed on a much more efficient scale, helping StatoilHydro increase its recovery rates.”

Ahmed Lotfy, Halliburton’s Eastern Hemisphere president said that the contract award “…is especially significant in that this is new work for us as we were not the incumbent service company, and the incremental nature of the project will help position us to take on additional work in Norway for years to come.”

MMS oil and gas lease sales in GoM attract $3.7 billion

Two federal sales of offshore oil and natural gas leases in the Eastern and Central Gulf of Mexico (GoM) attracted more than $3.7 billion in high bids March 19, inaugurating enhanced revenue sharing with oil and gas producing Gulf States and instituting higher royalty rates.

“Today’s lease sales mark an important milestone in sharing substantially increased revenue from offshore oil and gas development with states willing to support it,” said Secretary of the Interior Dirk Kempthorne.

“Beginning with Lease Sale 224, Louisiana, Mississippi, Alabama, and Texas will receive a greater share in all these revenues, including bids, rental payments, and royalties,” Kempthorne said. “These states will share in 37.5% of the high bids from today’s sale and all future revenues generated from the acreage leased today.”

For Central Gulf of Mexico Sale 206, Interior’s Minerals Management Service (MMS), which conducted the sales, received 1,057 bids from 85 companies on 615 tracts resulting in a record $3,677,688,245 in high bids.

For Eastern Gulf of Mexico Sale 224, MMS received 58 bids from 6 companies on 36 tracts resulting in $64,713,213 in high bids.

Lease Sale 224 encompasses 118 whole or partial unleased blocks covering 546,971 acres in the Eastern Planning Area. The acreage is located 125 statute miles and greater offshore, south of the Florida panhandle and west of the Military Mission Line in water depths ranging from 2,657 feet to 10,213 feet.

Eastern Sale 224 is the first sale where the revenue sharing provisions of the Gulf of Mexico Energy Security Act of 2006 start immediately.

The enhanced revenue sharing program was mandated by the Gulf of Mexico Energy Security Act of 2006. No royalty relief will be issued with these leases. With Central Gulf of Mexico Lease Sale 206, the royalty rate for blocks in all Gulf of Mexico water depths is increased to 18 3/4% from 16 2/3%.

In addition, 12.5% of revenues from the lease sales will be deposited into the Land and Water Conservation Fund for use by states to enhance parklands and for other conservation projects.

Lease Sale 224 is the only sale scheduled to be held in the Eastern Gulf of Mexico under the current Five Year Outer Continental Shelf Oil and Gas Leasing Program. The acreage included in this Eastern GoM Lease Sale 224 was last available for lease in 1988.

Sale highlights

Sale highlights for Central Sale 206 include Hess Corp., which submitted 25 high bids for a total of $437,541,152; Cobalt International Energy, which submitted 36 bids for a total of $389,056,079; and BP Exploration & Production, which submitted a total of 63 bids for a total of $336,575,445.

BP E&P submitted the highest number of high bids for Sale 206. Chevron submitted the second-highest number of high bids (49) for a total of $240,987,863.

Hess submitted the highest dollar amount of total bids (42) at $531,196,402.

The top five bids for Sale 206 were Anadarko and Murphy E&P for Green Canyon 432 at $105,600,789; Samson Offshore and Marathon Oil for Walker Ridge 226 at $93,024,910; Hess and Cobalt International for Green Canyon 858 at $85,418,889; Chevron for Green Canyon 945 at $81,063,073; and Cobalt for Keathley Canyon 163 at $74,418,889.

Further, Marathon Oil Corp. is the apparent high bidder on 15 blocks offered in the Central Gulf of Mexico Lease Sale No. 206. Representing a total investment of nearly $121 million, two blocks are 100% Marathon and the remaining 13 blocks were bid in conjunction with partners.

The blocks cover roughly 86,000 acres (gross) in the deepwater Gulf of Mexico, ranging in water depths from approximately 900 feet to 8,200 feet.

Energy XXI Ltd. is the apparent high bidder on all five blocks the company sought in OCS Lease Sale 206. Energy XXI bid a total of $1.9 million for 100% working interests in five blocks within an existing core operating region approximately 10 miles offshore Louisiana, in close proximity to the company’s South Pass 49 field. The subject blocks are South Pass 34, South Pass 50, South Pass 51, Mississippi Canyon 63 and Mississippi Canyon 107.

Anadarko’s $143 million worth of winning bids were primarily focused on targets in the Miocene play. The company, bidding alone and with partners, is the apparent high bidder on 20 deepwater tracts in Lease Sales 206 and 224. The blocks, which cover 115,200 gross acres, range in water depths up to 10,085 feet. Anadarko will be the operator of all leases with an average working interest of approximately 78%.

Noble Energy Inc. is the apparent high bidder on 15 deepwater lease blocks in Lease Sale 206. The company’s bids totaled $167 million. Noble bid alone on 10 and joined with partners on the remaining five with an average working interest of 43%. The high bid blocks cover in excess of 70,000 net acres in water depths ranging from 1,000 feet to 7,740 feet.

Charles D. Davidson, the company’s chairman, president, and CEO, said, “As a result of our high bids, we have increased our inventory of attractive prospects focusing in the Mississippi Canyon, Green Canyon, Walker Ridge, and Garden Banks areas, which we believe hold significant potential in the deepwater Gulf of Mexico.”

Petrobras has invested $178.9 million in bids for 22 blocks in Lease Sale 206. Petrobras secured 100% stakes for 11 blocks and will perform as the operator. The remaining blocks were acquired in a 50/50 partnership with Devon Energy. Petrobras will operate four of them, while Devon will operate seven. The company concentrated its bids on deep and ultradeep waters.

Petrobras’ 2008-2012 investment plan for the US foresees a total expenditure of $4.9 billion, to be invested in exploration, production, and refining activities.

Stone Energy Corp. submitted the apparent high bid on 25 offshore blocks for $43 million. The lease acquisitions will add nearly 140,511 gross acres and 79,338 net acres to Stone’s leasehold inventory.

W&T Offshore Inc. has invested roughly $3.255 million to have 100% working interest on four OCS blocks in Lease Sale 206. The four apparent high bids were on Ship Shoal 155 and 256, Grand Isle 108, and Ewing Bank 953. Ewing Bank 953 is in the deepwater, all others are on the conventional shelf.

Energy Partners Ltd. was the high bidder on eight leases in Lease Sale 206. The lease blocks cover a total of 37,448 gross acres, and include seven blocks on the GoM Shelf and one in deepwater located in the Missisippi Canyon area. The seven high bid blocks on the shelf are all located in EPL’s core focus area and include three South Timbalier, two Grand Isle, and two West Delta blocks. EPL’s share of the high bids totals $4.7 million.

Eni has been awarded 32 new exploration licenses in the US Gulf of Mexico (GoM) at Lease Sales 206 and 224. Eni’s winning bids totaled nearly $114 million. All are located in Eni’s core exploration areas (11 in the shelf and 21 in deepwater). Of the 32 leases, 17 were joint bids with various partners and the remaining 15 were bid for solely by Eni, who will be operator for all of the licenses.

Total E&P USA Inc. was the highest bidder in the Lease Sale 206 on 13 blocks. The blocks are situated in deep waters and are close to Total’s current, wholly-owned blocks in the area. Total E&P USA Inc. will operate and wholly own 12 blocks in the Garden Banks and Keathley Canyon areas. Total will own 50% of the thirteenth block in partnership with Cobalt International Energy LP.

All high bids are subject to approval by the Minerals Management Service.

Sale analysis

According to a recent Wood Mackenzie report, Lease Sale 206 saw a number of key themes emerge in the companies’ bidding activity in this record-breaking lease sale – a sharper focus on their target blocks; a greater hunger with more aggressive bidding, as well as increased partnering between companies to secure their desired blocks. The total amount spent on apparent high bids on deepwater blocks was US$3.36 billion, up by 26% on Sale 205.

Julie Wilson, lead Gulf of Mexico research analyst for Wood Mackenzie said, “Many companies had a sharper focus on key areas with higher bidding on players’ top target blocks. Our analysis shows the average bid per block increased by 60% compared to 205.”

Another feature of Sale 206 was a greater spread of targets and little overlap between companies’ unique focus areas; “This is illustrated most powerfully by the number of bids placed on the top ten tracts in each sale which in the case of Sale 205 was a total of 85 bids, dropping to 49 bids in Sale 206,” Wilson explained.

The wider spread of interest outlined above also resulted in more money being left on the table; “In total, winning companies bidding on the top 10 blocks in Sales 205 and 206 left $162 million more on the table in the 2008 sale,” said Wilson.

The increased proportion of bids that were made in partnership with other companies is believed to be a strategy employed to spread the high cost of bidding. “This trend appeared to ensure a higher degree of success for companies bidding together, since the proportion of apparent high bids in partnership was much higher than the proportion of total bids in partnership. Conversely, many of the highest bids were made alone by the top bidders, perhaps reflecting their confidence in the key prospects,” Wilson commented.

In terms of areas of most interest, the report showed Green Canyon attracted the most companies, the highest bid, and the largest proportion of value in this lease sale. Newly-shot wide-azimuth seismic data in the area is available to the industry, which likely spurred many of the companies bidding in the area.

Aker Kvaerner enters $223M subsea deal with Petrobras

Aker Kvaerner has signed a three-year frame agreement with Petrobras to supply subsea trees and related equipment in Brazil. The agreement is worth nearly $223 million.

Work for all equipment will be managed and completed from Aker Kvaerner’s manufacturing facility in Curitiba, Brazil. Delivery dates will start Q3 2009, with final deliveries targeted for the end of 2011.

“This order demonstrates our commitment to both Petrobras and the Brazilian market, and it provides predictable deliveries and long term focus. It also allows us greater flexibility with regards to making more investments in order to capitalize further on the expected market growth in Brazil,” says Marcelo Taulois, president for Aker Kvaerner’s subsea business area in Brazil.

The contract is booked as order intake for Aker Kvaerner in Q1 2008. The contract party is Aker Kvaerner’s subsidiary Aker Kvaerner Oil & Gas do Brasil Ltda.