Industry Briefs

Milbank, Tweed represents lenders in $1.5 billion financing for Cheniere

Houston-based Cheniere Energy Inc., through its wholly-owned limited partnership Sabine Pass LNG LP, has closed an amended and restated $1.5 billion senior secured credit facility to construct Sabine Pass LNG’s liquefied natural gas receiving terminal in Cameron Parish, La. The $1.5 billion credit facility was arranged by HSBC Securities Inc. and Société Générale Corporate & Investment Banking and syndicated to 31 financial institutions. Milbank, Tweed, Hadley & McCloy LLP represented the lenders. Construction on the terminal began in March 2005, with initial start-up anticipated in early 2008. Cheniere was granted authorization by the FERC to expand the terminal’s capacity by 1.4 bcf/d to 4.0 bcf/d. The expansion is expected to be completed in 2009.

Noble Energy closes on sale of GoM assets to Coldren

Noble Energy Inc. has closed on the previously announced $625 million sale of its Gulf of Mexico shelf assets to Coldren Resources LP. The sales price is subject to adjustments from the effective date of March 1, 2006 to the closing date. After-tax cash proceeds from the sale are expected to total $504 million, including proceeds to be received from parties who exercised preferential rights to purchase certain minor properties. For the full year 2006, the company expects to record an after-tax loss of $155 million, which includes a pretax gain of approximately $215 million offset by the following non-cash items:

• Pretax charge of approximately $400 million related to cash flow hedges associated with shelf production that are currently included in equity as accumulated other comprehensive losses (AOCL); and
• A net tax benefit of about $30 million.

During the second quarter of 2006, Noble Energy expects to recognize the non-cash charge of $400 million pretax, or $250 million after tax. By recognizing the AOCL during the second quarter, future North America revenues will be positively impacted from the closing date until the end of 2008, estimated as follows:

As a result of the sales of the Gulf of Mexico properties, Noble Energy expects to recognize pretax gains of $215 million, $95 million after tax, during the third quarter of this year. The effective tax rate of 56 percent on the gain on sale reflects the write-off of approximately $100 million of goodwill that cannot be deducted for tax purposes.

The above discussion of the after-tax cash proceeds and loss associated with the Gulf of Mexico shelf sale may be subject to change due to customary post-closing adjustments and final analysis of assets and liabilities associated with the sale.

Plains All American expands credit facility; enters acquisition bridge facility

Plains All American Pipeline LP has increased the committed borrowing capacity on its principal revolving credit facility from $1.0 billion to $1.6 billion. The credit facility includes a sub-facility for Canadian borrowing that was increased from $400 million to $600 million. The amendment increased the aggregate capacity of the facility to $2.0 billion at the option of the partnership, subject to obtaining additional commitments from lenders. The amended facility has a final maturity of July 2011. Banc of America Securities LLC and Wachovia Capital Markets LLC acted as Joint Lead Arrangers and Joint Book Managers on this facility.

In addition, the Partnership entered into a separate $1.0 billion acquisition bridge facility to finance the cash portion of the Pacific Energy acquisition. The bridge facility is a 364-day facility with a one-year term-out provision and funding will occur commensurate with the closing of the acquisition. JPMorgan Securities Inc. and Citigroup Corporate and Investment Banking acted as Joint Bookrunners and Co-Lead Arrangers. Other agents in the bridge facility include Bank of America NA, Wachovia Bank, National Association, and UBS Securities LLC.

Shell Canada completes BlackRock acquisition

BR Oil Sands Corp., a wholly-owned subsidiary of Shell Canada Ltd., has acquired an additional 257,968 common shares of BlackRock to acquire all of the common shares of the company. These shares, together with those shares previously taken up, represent about 99.38% of the common shares of BlackRock on a fully-diluted basis. Upon completion of a compulsory acquisition, BR Oil Sands intends to de-list the BlackRock shares from the Toronto Stock Exchange and cause BlackRock to apply to securities regulatory authorities to cease to be a reporting issuer.

Abengoa Bioenergy uses Vogelbusch technology

Abengoa Bioenergy and Vogelbusch USA Inc., have entered into a long term agreement for the development of a series of 100 MMGPY plants in USA and Europe to be designed using the Vogelbusch “Continuous Fermentation Process Technology.” Currently one plant in Ravenna, Neb. is under construction and is scheduled to start up in spring of 2007. A second plant in the midwest has been released for the design stage and plans for additional plants are under way. Vogelbusch technology has 47 plants worldwide and 18 major plants in North America, producing over 750,000,000 gallons of fuel ethanol per year.

Storm Cat Energy secures revolving line of credit

Storm Cat Energy Corp. has closed a revolving line of credit facility led by JPMorgan Chase Bank NA for up to $250 million. Loans are secured by mortgages on the company’s oil and gas properties and guaranteed by Storm Cat’s Powder River basin assets.Each loan bears interest at a Eurodollar rate or a base rate, as requested by Storm Cat, plus an applicable percentage based on Storm Cat’s usage of the facility. The credit facility will provide funds for the exploration, development, and/or acquisition of oil and gas properties and for working capital and other general corporate purposes. Interest on funds drawn will be paid monthly with the principal due August 2010. The agreement provides for semi-annual evaluation of the borrowing base, which will be determined as a percentage of the discounted present value of the company’s oil and natural gas reserves.

Green Plains closes on $47MM equity financing

Green Plains Renewable Energy Inc. has closed on about $48 million dollars in equity financing. After the deduction of commissions and selling expenses, the company netted $47 million dollars. The company placed $32.8 million of the offering, on which no commissions were paid. Placement Agents assisted the Company in placing approximately $15.2 million of the offering, on which commissions totaling approximately 6% were paid.

The money raised in the recently closed offering will finance part of the construction and start-up costs of GPRE’s second 50MM gallon name plate facility to be built near Superior, Iowa. GPRE is currently building a 50MM gallon name plate ethanol facility in Shenandoah, Iowa. That plant is fully funded and expected to commence operations in the spring or summer of 2007. Start-up of the Superior plant is anticipated in the late summer to fall of 2007.

Galaxy Energy to sell properties in Piceance basin for $50MM

Galaxy Energy Corp. has entered into a non-binding letter of intent with Exxel Energy Corp. to purchase Galaxy’s interest in its unconventional natural gas properties in the Piceance basin of Colorado. The agreement would provide for Exxel’s wholly-owned subsidiary, Exxel Energy USA Inc., to pay $50 million to acquire Galaxy’s undivided 25% working interest in the Garfield County, Colorado project known as Rifle Creek. Exxel USA owns the other 75% working interest in Rifle Creek. The project consists of about 6,000 net acres, including three producing wells.

Samson implements Vertabase Pro to manage technology group

Samson Investment Co. has implemented Vertabase Pro software from Oak Park, Mich.-based Vertabase. The software organizes people and projects by simplifying, centralizing and accelerating access to critical up-to-date information. Vertabase Pro facilitates management by providing a framework for increased productivity. Headquartered in Tulsa, Okla., Samson is a privately-held company engaged in oil and gas exploration, acquisition and production operations in the US, Canada, and the North Sea.

JP Kenny wins BP contract

JP Kenny Caledonia Ltd., a subsidiary of John Wood Group PLC, has been awarded a significant contract in support of BP’s operations in the North Sea. The 3-year contract, worth approximately £10 million, includes both engineering and operational support and follows on from the previous contract held by JPK since 2001. JPK has recently begun work on a number of engineering workscopes for the Machar field, along with a feasibility study for a new development in the Central North Sea.

Sempra Generation sells E&P subsidiary

Sempra Generation, a unit of Sempra Energy, sold its exploration and production subsidiary, Sempra Energy Production Co., to PEC Minerals LP for $225 million in cash. Sempra Energy expects to record an after-tax gain of about $110 million from the sale in the third quarter 2006 as part of discontinued operations. PEC Minerals LP is owned by a group consisting of Jetta Operating Co., Trevor Rees-Jones, and Providence Energy Corp. SEPCO’s assets include ownership of mineral rights over 570,000 net acres and executive rights to more than 190,000 net acres in 31 states. The cash proceeds will help fund Sempra’s other capital projects, such as liquefied natural gas receipt terminals, new interstate natural gas transmission pipelines, and natural gas storage facilities. Petrie Parkman & Co. acted as financial advisor to Sempra.

Expro completes PWS acquisition

Following up on its June release, Expro International Group has acquired PowerWell Services (PWS), a supplier of well testing and flow management products and services, for $674.5 million. PWS’s operations include a global well testing service and a regional fluids analysis business, and a severe service choke equipment supply and related services to the land well market in the USA. PWS also owns Petrotech ASA, a provider of specialized fluids sampling, analysis, metering, and interpretation services.

Harvest to buy Louisiana properties from Hess

Harvest Oil and Gas LLC has entered into a transaction to buy all of Hess Corp.’s oil and gas producing properties in Plaquemines and St. Bernard parishes, La. These assets are adjacent to Harvest’s core Grand Bay field. They include wells and facilities located in 8 fields currently producing at a combined net rate of over 7.5 MMcfe/d.

DFW airport clears Chesapeake for drilling

The Dallas-Fort Worth International Airport board of directors approved a lease with Oklahoma City-based Chesapeake Energy Corp. to begin natural gas exploration in the Barnett shale that lies below the airport’s 18,000 acres. Chesapeake will pay DFW $181 million in initial bonus and a royalty of 25% on all gas produced after the lease is approved by the Dallas and Fort Worth city councils. The deal is expected to set new industry standards for minority contractor and investor participation while opening a new revenue stream for DFW that will bolster the airport’s growth for decades. The drilling will have no impact on airfield operations. The board-approved lease also features minority investor and contracting participation that is unprecedented in the industry. Minority and Women-Owned Business equity participation will be greater than 20%; M/WBE subcontractor participation will be greater than 39%.

Petrobank closes $120MM credit facility

Petrobank Energy and Resources Ltd. has closed a $120 million credit facility underwritten by the Toronto-Dominion Bank. The facility consists of a $40 million committed reserve-based revolver, a $10 million revolving demand loan, and a 9 month $70 million bridge loan. It will be used to fund ongoing development and exploration expenditures in Canada, drilling additional delineation wells, and to replace existing debt. It bears interest at rates between LIBOR plus 110 and 215 basis points.

Lagasco to acquire Alberta acreage

Lagasco Corp. has entered into a letter of intent to acquire the rights to explore and develop the oil, natural gas, and bitumen resources underlying two contiguous blocks of approximately 40,000 acres of the reserve and certain off-reserve lands of the Woodland Cree First Nation and the oil and natural gas rights to an additional 10,000 acres of the Swan River First Nation. Both blocks are in northwestern Alberta. Lagasco will proceed immediately with geological and geophysical assessments toward developing drilling opportunities. Lagasco will enter into formal agreements with Calgary-based Black Horn Resources Ltd. and its two wholly-owned subsidiaries to acquire BH’s 100% working interest in existing farmout agreements with the Woodland and Swan River bands. On or before closing, the company will pay $1.85 million to Indian Oil and Gas Canada on behalf of BHR in connection with the issuance of permits to explore and develop the Woodland and Swan River reserve lands. Additionally at closing, Lagasco will pay and issue to BHR approximately $4.1 million in a combination of cash and common shares in the capital stock of the company, representing sunk costs on acquiring the acreage. Closing is expected on or before Sept. 30, and will be subject to certain conditions.

Oxy to purchase California and Permian basin properties

Occidental Petroleum Corp. will acquire oil and gas assets from Plains Exploration and Production Co. for $865 million. The acquisition will add proved reserves of approximately 56 MMboe. The principal properties being acquired are adjacent to Occidental’s existing operations in California and the Permian Basin in West Texas.

The transaction, which is accretive to earnings and cash flow and will be financed from cash on hand, is expected to close on or about October 1, 2006.

M-I SWACO acquires SPS International

M-I SWACO has acquired Aberdeen, Scotland-based Specialised Petroleum Services Group Ltd. (SPS), a global supplier of wellbore clean-up solutions. SPS has a comprehensive line of products and services designed to minimize damage to the reservoir face and deliver a clean, unobstructed well bore for maximized completion efficiency. The operations will be joined under the newly-formed well bore assurance and productivity business unit. Based in Houston, M-I SWACO, is jointly owned 60% by Smith International Inc. and 40% by Schlumberger Ltd. The company supplies drilling, reservoir drill-in, completion and production fluids products/systems and solids control, and drilling waste management services for the global petroleum industry.

Habanero earns interest in Alberta oil sands leases through private company

Habanero Resources Inc. has been informed by Andora Energy Corp., a private company, that Pan Orient Energy Corp. now owns about 36% of the outstanding Andora Energy Corp. shares. Upon completion of the remaining transaction, Pan Orient will own a minimum 515 interest in Andora. Under the terms of the agreements, three of the five Andora directors and the Andora chief executive officer will be nominees of Pan Orient. Habanero owns 700,000 shares of Andora. Andora is a private oil and gas company with a 100% working interest in petroleum licenses and related assets covering 16 sections of land located immediately south of, and adjacent to, Pan Orient’s Sawn Lake property.

In addition, Pan Orient’s wholly-owned subsidiary Pan Orient Energy Ltd. transferred its 10% working interest in oil sands leases in the Sawn Lake area of Alberta to Andora for consideration of 10 million Andora shares. This will now give Andora an interest in 85.5 square miles of undeveloped Alberta Oil Sands.

The Andersons, Marathon to build ethanol plants

Marathon Oil Corp. and The Andersons Inc. have signed a letter of intent that could lead to the formation of a 50/50 joint venture to construct and operate a number of ethanol plants. The Andersons will provide day-to-day management of the plants. The initial plant is expected to have a nameplate annual production capacity of 110 million gallons of ethanol.

Provident Energy Trust closes $226 MM financing

Provident Energy Trust closed the previously announced bought deal financing for gross proceeds of $226.1 million (net proceeds of approximately $214.8 million). The net proceeds of the financing will be used to partially fund Provident’s previously announced acquisition of oil and natural gas properties in northwestern Alberta for a purchase price of $475.9 million. The remaining portion of the purchase price will be funded through Provident’s credit facilities. The financing consisted of 16,325,000 subscription receipts at a price of $13.85 each. The offering of subscription receipts was sold to a syndicate of underwriters led by National Bank Financial Inc. and TD Securities Inc.

Aurora sells Louisiana production; will acquire Bach Enterprises

Aurora Oil & Gas Corp. has completed the sale of its working interests in all producing and non-producing properties in DeSoto Parish, La. The interests, ranging from 22.5% to 45%, are being sold for $4.75 million to the operator and majority partner, BEUSA Energy Inc. The sale includes 1,657 net acres with 14 gross wells, 12 of which produce approximately 400 net mcfe of natural gas per day. Total net proven reserves have been estimated at 1.464 bcfe of natural gas.

The company has also signed a letter of intent to acquire Bach Enterprises Inc., an oilfield services and manufacturing company located outside Traverse City, Mich.

It is expected that Bach will join Aurora as a wholly-owned and independently operated subsidiary.

Leor Energy sells East Texas acreage

Leor Energy has sold about 7,400 net acres in its holding in the Amoruso field to EnCana Oil and Gas Inc. in exchange for $242.9 million in cash and 4,039 net acres adjacent to its existing Amoruso field leasehold. Leor used a portion of the proceeds to retire the $30 million 10% senior secured note, due in 2008, provided by Amaranth Partners LLC. Leor no longer has outstanding debt on its balance sheet.

PetroQuest acquires interest in oil and gas wells in Ohio

PetroQuest Resources Inc.’s wholly-owned gas and oil production subsidiary, Mountaineer Gas Transmission Inc., recently acquired 100% of the working interest in 16 gas and oil wells in Vinton County, Ohio. The production from these wells will be fed into a portion of the 215 miles of natural gas pipeline and gathering system owned by Tyr Energy Inc., another one of PetroQuest’s wholly-owned subsidiaries. The company’s Vinton County, Ohio properties, including these 16 wells, are presently being evaluated by a certified petroleum geologist for their oil and gas production potential.

FMC Technologies wins Petrobras contract

FMC Technologies has signed a frame agreement with Petrobras. The multi-year frame agreement covers the supply of 30 subsea trees and related equipment designed for a water depth of 2,000 meters, for offshore Brazil. FMC Technologies estimates that the total revenue will reach about $80 million over a three-year period if all the subsea trees that are ordered. FMC has received the initial order of five trees which will be engineered and manufactured at FMC’s facility in Rio De Janeiro, Brazil.

Equator Exploration inks two year, $65 MM loan

Equator Exploration has signed a two year loan agreement with certain of its shareholders for $65 million. The loan, which is secured on Equator’s shares in its wholly-owned subsidiary, Equator Exploration Ltd., is repayable in full within 24 months of first drawing, carries an interest rate, payable semi-annually, commencing at 10% per annum and increasing to 11% on 1st January 2007 and 12% 1st July 2007, to a maximum of 14% on any balance outstanding at 1st January 2008. In addition the The Loan provides the company with additional cash resources for funding the ongoing development of the Bilabri oil field offshore Nigeria within Block OML122.

Petrofac to manage facilities for Dubai’s offshore assets

Petrofac will take over responsibility for well and facilities management of Dubai’s offshore oil and gas assets on behalf of Dubai Petroleum Establishment (DPE) under a new contract. Petrofac will employ the offshore staff and the onshore operations support group. Petrofac’s full responsibility for these operations will commence in early April 2007 and the contract has no time limit. The Dubai offshore assets comprise four offshore oil fields with around 70 platforms, and around 1,100 personnel are currently involved in running the operation. These staff will be employed by Petrofac from April 2007.

Keppel lands $270 MM rig contract for Brazil

Keppel Offshore & Marine Ltd, through Keppel FELS Ltd., has secured a contract to design and build its first drilling rig for deployment in Brazilian waters. The $270 million contract from Brazilian drilling contractor Queiroz Galvao Perfuracoes (QGP) is to build a semisubmersible drilling rig, with the owner supplying the drilling and subsea equipment. The rig will be built based on a fifth generation deepwater solution, the DSS 38. The rig, which will be delivered in third quarter 2009, is expected to support Petrobras’ plan to improve its hydrocarbons production and reserves in Brazil and elsewhere in the region. The DSS 38 semisubmersible drilling rig has been developed to meet operational requirements in the deepwater region, comprising Brazil, Africa, and the Gulf of Mexico. It is rated to drill to depths of 30,000 feet below mud line in just over 9,000 feet water depth

Escondido increases South Texas holdings

Escondido Resources LP has increased its presence in the Olmos trend in La Salle, Dimmit, and Webb counties in South Texas. Earlier, the company closed an acquisition of producing oil and gas properties in Webb and Dimmit counties for $13.2 million from an undisclosed private seller. The acquired properties have current net production of 1.2 million cubic feet of gas equivalent per day and 3,700 net acres. The company has acquired new leasehold acreage in Dimmit and La Salle counties totaling more than 60,000 net acres. This new acreage is near the company’s existing operations in the two counties. In total, Escondido has about 100,000 net acres of land under lease in the Olmos trend. The company drilled 50 wells in 2005 with 100% success, and plans to drill more than 100 wells in 2006. Escondido has 4 drilling rigs under contract and active in the area. EnCap Investments, LP, provides private equity to the company, and Wells Fargo Bank, N.A., provides banking and credit.

Baker Petrolite buys DBM Oil Chemicals BV

Baker Petrolite, a division of Baker Hughes In., has acquired DBM Oil Chemicals BV, based in Rotterdam, the Netherlands. This acquisition will support the growth of the Baker Petrolite fuel additives business, including the Prepared to Respond® Services business segment. This segment provides 24-hour, year-round worldwide chemical response service to cargo and tanker owners, and suppliers for onsite chemical treatment of fuel oil, crude oil, and distillate fuel cargo in order to meet the buyer’s specifications. Baker Petrolite is a world leader in providing chemical, engineering, and technology solutions to the global hydrocarbon recovery and processing.

Samurai Energy completes merger with ECCO Energy

Houston-based Samurai Energy Corp. has merged with ECCO Energy Corp., a Nevada corporation. Under the terms of the agreement, each three shares of ECCO common stock issued and outstanding immediately prior to the merger will be converted in the right to receive one fully paid, non-assessable share of Samurai common stock. ECCO Energy, the surviving company, will be a public Nevada corporation. Samuel Skipper is the newly elected president and CEO of ECCO Energy. ECCO has doubled the reserve base of the company with the merger.