Industry Briefs: Noble Energy inks $411 million deal with United States Exploration

United States Exploration’s reserves and production are located on 65,000 net acres in the Denver-Julesburg (D-J) basin’s Wattenberg field. The majority of the acreage operated by United States Exploration lies within the scope of amendments to Rule 318A, which allow for increased density drilling in the field to 20-acre spacing. United States Exploration currently owns an interest in 512 active wells.

Production is expected to grow from the current rate of approximately 20 million cubic feet equivalent per day (MMcfed) to an average of 30 MMcfed for 2006, reaching approximately 70 MMcfed by the end of 2007. Peak production of about 90 MMcfed is expected to be reached by 2011.

Two drilling rigs are currently operating on United States Exploration’s Wattenberg acreage. Noble Energy plans to add four new drilling rigs to its newly acquired Wattenberg acreage, with two drilling rigs added by the end of this year and another two by the end of 2007.

Capital spending on the United States Exploration properties will be focused on accelerating production and developing reserves quickly. In 2006, capital expenditures are expected to be approximately $100 million. Total capital expenditures for the four year period of 2007 through 2010 are expected to be $550 million to $600 million.

Charles D. Davidson, Noble Energy’s chairman, president, and CEO, said, “United States Exploration’s position in Wattenberg is an extremely good fit with our operations in the field. Their acreage and production are in many instances directly offsetting Noble Energy’s and will add over 6,000 projects in the Wattenberg field. We expect significant technical and operational synergies by applying what we have learned to these properties, which are less developed than Noble Energy’s.”

The extensive project inventory on United States Exploration’s Wattenberg acreage is very similar to Noble Energy’s and includes nearly 1,200 drilling opportunities and nearly 5,000 behind-pipe opportunities. The drilling opportunities include new drills to the Niobrara/Codell sands (7,000 to 7,300 feet) and the deeper J sands (7,800 feet). Behind-pipe opportunities include refracs, recompletions, and trifracs, all of which have been successfully applied to Noble Energy’s current Wattenberg locations.

Noble Energy also has the opportunity to earn up to 350,000 net acres by drilling additional wells on acreage in the greater D-J basin currently under option to United States Exploration. Potential new projects and resource additions attributable to the option acreage would be accretive to this transaction. In January 2006, Noble Energy entered into an acreage earning agreement with Teton Energy covering 184,000 net acres in the greater D-J basin. In addition to the 534,000 net acres covered by earning agreements, Noble Energy will have ongoing production operations covering 367,000 net acres in the greater D-J basin.

Upon closing, Noble Energy will pay $411 million in cash for the common stock of United States Exploration. Prior to closing, United States Exploration will retire all company debt, terminate its commodity hedges, and make all severance payments.

Noble Energy has executed hedges on its own production volumes from March 2006 through 2010 that are equivalent to just over 50% of United States Exploration’s expected volumes. The hedges are in the form of collars. The average floors on the natural gas hedges and crude oil hedges are $6.23 per thousand cubic feet (Mcf) and $58.74 per barrel (bbl). The average ceilings on the natural gas hedges and crude oil hedges are $9.17 Mcf and $72.52 per bbl. The natural gas hedges are priced at the CIG index and thereby include basis differentials to Henry Hub.

United States Exploration’s significant shareholders include funds managed by Lime Rock Partners and Greenhill Capital & Co. United States Exploration was advised on this transaction by Petrie Parkman & Co.

Standard & Poor’s Rating Services said Noble Energy Inc.’s expected acquisition of United States Exploration Inc. does not affect the rating or outlook on the company. Noble will fund the acquisition with borrowings under its bank revolving credit facility. The increase in debt will reverse some of the progress that Noble has made in reducing financial leverage following its acquisition of Patina Oil and Gas in 2005. Although the increased leverage is unfavorable for credit quality, it is somewhat softened by Noble’s hedging a significant portion of expected production associated with the properties and the expectation that the company will refocus on debt reduction.

Baker Hughes acquires Nova Technology

Baker Hughes has acquired Nova Technology Corp. of Broussard, LA for about $70 million in cash and assumed debt. Nova supplies permanent monitoring, chemical injection systems, and multi-line services for deepwater and subsea oil and gas well applications and has contracts in the Gulf of Mexico, West Africa, Sakhalin Island, and Brazil.

“The acquisition of Nova supports our focus on providing the industry’s best-in-class production optimization technologies and services,” said Rod Clark, Baker Hughes president and COO. “Nova’s product lines are expected to complement the broad permanent monitoring capabilities of Baker Hughes’ QuantX Wellbore Instrumentation products and services and the fiber optic technologies provided by our Luna Energy unit. The installation of permanent monitoring and chemical injection systems will be used to assist operators in managing their production and reservoir systems to accelerate production and increase hydrocarbon recovery.”

Growth Capital Partners acted as exclusive financial advisor to Nova in the transaction.

Baker Hughes, headquartered in Houston, provides drilling, formation evaluation, completion, and production products and services to the worldwide oil and gas industry.

SolArc RiskCenter offers software to view physical and financial risk

Houston-based SolArc Inc., a provider of enterprise supply and trade management solutions for energy companies, has introduced SolArc RiskCenter, a risk management software solution that provides the integrated front-to-back physical and financial risk management capabilities.

“The ability to deconstruct the market risk associated with each component of a specific commodity’s or shipment’s value chain is the critical link for producers, traders and end users to have accurate, measurable information to manage their positions, and mitigate unwanted risk,” said SolArc’s director of Risk Products, Brian Busch. “With continually updated volumetric and economic analysis of physical and financial values, SolArc RiskCenter provides users with the mark-to-market and profit-and-loss information needed to optimally manage positions, avoid hidden exposures and assess strategic alternatives.”

Through tight integration with SolArc RightAngle, SolArc Risk Center combines risk exposure analysis with the energy industry standard for high fidelity physical and financial transaction management. This provides customers with a view of all market risk exposures created by physical operations as well as financial derivatives. Offered with RiskCenter are two add-on modules: CreditCenter, a credit management and exposure reporting tool; and VaRCenter, a mid-front office risk analysis tool that performs Value-at-Risk analysis, stress scenario analysis, forward point VaR evaluations, cash flow reporting, and more.

“Events, such as Hurricane Rita are pointed examples of why energy companies have realized the critical need to mitigate their exposures to changes in the market prices,” Busch said. “In energy transactions, when every ‘what,’ ‘when’ and ‘where’ has a unique price, RiskCenter enables users to build an accurate current and forward-looking ‘virtual reality’ view of a deal, effectively capturing their market exposures and any shifts in price, credit, product quality, and volume.”

Some of the functions in SolArc RightAngle and RiskCenter include: effective capture, accuracy and management of volumetrics; new industry benchmark in the management, accounting, and valuation of blended products - without losing price points; superior reporting flexibility - offering a variety of user-defined reports with multiple levels of exposure disaggregation, rather than mere “plug-in” data fields; an end-to-end view of deal capture - from a deal’s front-end input through risk management, the solution effectively captures, reports, controls, and accounts for each and every deal and exposure.

LNG Solutions Group launches first integrated service for stakeholders

Det Norske Veritas (DNV), Sutherland Asbill & Brennan LLP, and Ziff Energy Group have formed the LNG Solutions Group, an enterprise to provide services for LNG stakeholders facing the opportunities and challenges of bringing natural gas supply to North America.

LNG Solutions Group members have served numerous key natural gas and LNG stakeholders, such as AES, Alaska, BP, Chevron, Dominion, Duke, Enbridge, El Paso, ExxonMobil, Gas Metro, HydroQuebec, Iroquois Pipeline, Irving Marathon, Morgan Stanley, Rhode Island, Shell, Statoil, Tractebel, TransCanada, and Williams.

The LNG Solutions Group offers clients business solutions including gas supply and market assessment, gas price outlooks, safety and security, commercial and contracting, regulatory permitting, risk assessments, and marine and shipping.

“Our law firm often is asked to advise LNG clients about the business, market, operational, and risk management implications of regulatory and contractual issues,” said Jake Dweck, LNG Group chair of Sutherland Asbill & Brennan LLP. “With the LNG Solutions Group, we are now in a position to ensure that our clients receive the best integrated advice regarding every project or issue.”

“While the adequacy of LNG infrastructure here has been the focal point until recently, we now anticipate more than adequate North American regasification capacity, primarily in the Gulf of Mexico, supplemented by strategic facilities in Mexico and Canada feeding nearby US markets,” said Paul Ziff, CEO of the Ziff Energy Group. “The major challenge for the US today involves the timing and availability of liquefaction sources abroad, including the anticipated supply draw and price competition from European and Asia Pacific markets. Other factors affecting the US market include the newly announced deal for Alaskan gas, the fits and starts of the emerging global short-term and spot trade, and continuing interchangeability concerns.”

“LNG projects are capital intensive in all phases with a high likelihood of cost and schedule overruns as well as terminations caused by economical or political reasons,” said Ernst Meyer, DNV Consulting USA, of Det Norske Veritas. “An LNG facility’s operational phase is exposed to a broad range of business risks with direct bottom-line impacts. Detailed knowledge of what these risks are and how they can be managed will enable players to gain business advantages and higher profits from their LNG prospects, proactively reducing the cost of risk.”

Det Norske Veritas (DNV) is a foundation that focuses on LNG shipping and risk management. DNV has performed more than 50 LNG facility risk assessments, including threat vulnerabilities, consequence analyses, mitigation measures, and recommended response measures.

Sutherland Asbill & Brennan LLP is a US-based law firm with a broad energy practice that focuses on many industry segments. Sutherland’s LNG Group includes authorities on US regulatory processes for LNG facility siting, marine safety and security requirements, and contracting.

Ziff Energy Group is an international energy consulting firm that has performed in-depth analysis of the North American gas industry. The company covers regional gas market and gas supply, gas transportation, midstream, gas storage, regulatory affairs, and long-term natural gas pricing forecasts.

Chevron signs $1.7 billion in contracts to build new drillship and extend leases

Chevron Corp. has awarded Transocean Inc. a deepwater drilling contract that will prompt the construction of a new state-of-the-art drillship by Transocean that will be dedicated exclusively to Chevron for five years. The two companies also have signed multiyear contract extensions for two of Transocean’s deepwater drillships currently in use by Chevron. The three agreements total approximately $1.7 billion.

The contract for the new drillship is expected to commence during the second quarter of 2009. After an estimated 30-month shipyard construction phase and following sea trials, it will be mobilized to the US Gulf of Mexico for Chevron’s acceptance of the ship.

“The design of the new drill ship, to be named Discoverer Clear Leader, will include the most advanced drilling capabilities in the offshore drilling industry,” said George Kirkland, executive vice president, Chevron Upstream and Gas. “In the Gulf of Mexico, Chevron has drilled in the deepest water, and we have drilled the deepest well. The new drillship, coupled with our strong organizational capabilities, cutting edge technologies and partnerships, will help us maintain our leading position in deepwater exploration and production.”

Construction of the double-hull drillship is scheduled to take place at the Daewoo Shipbuilding and Marine Engineering Yard Co. Ltd., in Okpo, South Korea, with an estimated total capital expenditure of about $650 million. The drillship will feature a patented dual-activity drilling technology process that utilizes two drilling systems in a single derrick, allowing for parallel drilling operations designed to save time and money in deepwater well construction, compared with conventional rigs.

In addition to the dual-activity technology process, the top drive, or hoisting structure, will be larger, stronger and more efficient than existing top drives, so wells can be drilled deeper. There will also be an expanded high-pressure mud-pump system, expanded completions capabilities and other features of the drillship that target drilling wells up to 40,000 feet of total depth.

The drillship will have a variable deckload of more than 20,000 metric tons, and will be capable of drilling in water depths of up to 12,000 feet. It will be an enhanced version of Transocean’s three predecessor Enterprise-Class drillships, which have set deepwater drilling records in recent years, including the world water-depth drilling record of 10,011 feet.

To continue even more deepwater work, Chevron has exercised a final one-year option on Transocean’s deepwater drillship Discoverer Deep Seas, which is expected to commence in or near January 2008, and awarded a two-year contract extension for the rig with an expected commencement date of January 2009.

Chevron has also extended its contract for Transocean’s Cajun Express, a semisubmersible deepwater drilling rig. The two-and-a-half year contract extension has an expected commencement date near July 2007, following the rig’s current contract assignment with Chevron in the US Gulf of Mexico.

With more than 53,000 employees, San Ramon, Calif.-based Chevron subsidiaries conduct business in approximately 180 countries around the world, producing and transporting crude oil and natural gas, and refining, marketing, and distributing fuels and other energy products.

Statoil and Halliburton ink deal to develop new technology

A cooperation agreement has been concluded by Statoil with oil service company Halliburton on developing new technology. The deal covers several drilling and well technology projects.

“Collaborating on the development of new technology is very important if Statoil is to achieve its ambitions of improved oil and gas recovery,” says Sjur B. Talstad, senior vice president for subsurface technology in Statoil.

The agreement includes research, development, qualification, and implementation of technology in fluid systems, drilling, reservoir evaluation, completion, and production. The development of software in the reservoir disciplines also forms part of the agreement.

“Systematic cooperation with our suppliers enhances the development of new technology and provides greater opportunities to use it in drilling and well operations, both in Norway and internationally,” says Talstad.

Hydro establishes new fund for energy technology

Hydro is to establish a Hydro Technology Ventures Fund II, totaling NOK 400 million. The fund will invest in companies developing innovative technology within the energy sector.

“The intention behind the fund is to contribute to Hydro maintaining its leading position technologically, both within oil and gas and new forms of energy. By participating actively in the market for technology companies, and through investing in the companies with greatest potential, we speed up the pace of our own technology utilization. At the same time, we aim to ensure returns on our investments, just like other venture companies,” says Hydro’s head of projects, senior vice president Morten Ruud, who is chairman of the board for the new venture fund.

The aim is to invest in three to four promising companies annually, for the next four years. Within oil and gas, forms of technology which increase discovery rates and reduce drilling or operating costs will be prioritized, together with technological solutions that make possible more efficient operations, or operations in vulnerable areas, for instance in Arctic regions.

“The close relationship we have with our research and operating environments represents a unique opportunity for technology companies to have Hydro as their first user, thereby cutting the time it takes to develop a commercializable product,” says Richard Erskine, head of Hydro Technology Ventures.

Providence sets up credit facility with Macquarie Bank

Providence Resources plc has agreed to a €50 million revolving credit facility with Macquarie Bank Ltd. The facility will be used to fund the acquisition of new production and/or the development of both existing and new projects. The facility will have an initial duration of 48 months.

Under the terms of the facility, €5 million will be made available to fund general working capital and development opportunities. The balance will be made available to Providence, subject to the terms of the facility, to fund oil and gas acquisitions, investments and development opportunities.

As part of the agreement, the company has agreed to grant Macquarie warrants to purchase new ordinary shares in Providence at a subscription price of €0.045 per share. The number of warrants to be issued is linked to the funds available for drawdown under the facility, with an initial 35 million warrants to be granted in connection with the initial drawdown and a maximum of an aggregate 100 million warrants to be granted if the full €50 million facility becomes available for drawdown.

Tony O’Reilly Jr., chief executive of Providence Resources, said, “This facility is great news for Providence. It will allow us to move quickly on opportunities, thereby accelerating our plans to increase our daily oil production rates. Macquarie is a natural resources specialist with a proven track record in advising companies in the oil and gas business. We are very pleased that we have secured this flexible credit facility to help fund our stated strategy for growth.”

Samson licenses Quorum Land software

Samson Investment Co. has selected the Quorum Land software suite, provided by Quorum Business Solutions Inc., to manage the company’s land management activities.

Quorum Land offers a full lifecycle approach to land and lease management from field data capture through disposition; meeting all requirements of the landmen, lease administrators, and production and finance personnel.

Quorum Land captures, maintains, and distributes all land information, including leases, easements, fee property, and contracts. The web-enabled design distributes land related information across the organization and allows non-technical users to access real-time data and create ad-hoc reports.

Samson is a privately-held exploration and production company with headquarters in Tulsa, Okla. and operations in the United States, Canada, and Venezuela.

Quorum Business Solutions Inc. is a product-centered consulting company that develops, implements, and supports a suite of business software solutions for the energy industry. Founded in 1998, Quorum now has over 200 staff operating out of offices in Houston, Dallas, and Calgary. Quorum has over 45 clients, among which 25 Fortune 500 companies are represented.

Lime Rock makes first acquisition with $80.3 million purchase of Reklaw field

Lime Rock Resources has acquired oil and gas properties from a private seller for $80.3 million. The properties are all located in the Reklaw Field in Cherokee County in East Texas. Lime Rock will take over operations in the field immediately. The acquisition is Lime Rock Resources’ first transaction.

Lime Rock estimates that the Reklaw Field properties contain 35.1 billion cubic feet of natural gas equivalent (bcfe) of proved reserves and 6.8 bcfe of unrisked probable reserves. Approximately 97% of the reserves are natural gas reserves. Lime Rock estimates that the current reserve life of the properties is over 16 years.

Eric Mullins, managing director of Lime Rock Resources, noted, “Our first acquisition, the properties in the Reklaw Field, fits terrifically with our strategy. The field’s long-lived reserves consist mainly of proved developing producing reserves, and they offer a number of very attractive low-risk drilling opportunities and recompletion candidates.”

Charles Adcock, managing director of Lime Rock Resources, added, “We will embark on an immediate hundred-day plan as we assume operations of the Reklaw Field. We plan to invest a portion of our cash flow in the field over the next two to three years. With operations now established in East Texas, we will continue to analyze additional acquisitions in the area and other basins throughout the United States.”

Established in 1998, Houston-based Lime Rock manages $1.3 billion of private capital for investment in the energy industry through Lime Rock Resources, acquirers and operators of oil and gas properties, and Lime Rock Partners, investors of growth capital in energy companies in North America and Europe. With $450 million under management and an acquisition capacity of $700 million, Lime Rock Resources acquires, operates, and improves lower-risk oil and gas properties in the United States.

Wattenberg field located in the Colorado portion of the Denver-Julesburg basin.

NYSE/Archipelago Merger Gains Final SEC Approval

“We have received SEC approval of the rule filing which completes the NYSE/Archipelago merger. The merger will close on March 7, 2006 and we plan to trade the first shares of the NYSE Group on March 8, 2006,” said John A. Thain, CEO, New York Stock Exchange.

“As a for-profit, publicly held company, the NYSE Group will be better positioned to grow, create value and compete globally. We will provide customers with more choice in trading, an advanced technology platform, a broader product mix, and listing opportunities among a wider group of companies. This is an exciting and historic time for the entire Exchange community, our Archipelago partners, our customers, our future shareholders and America’s investing public.”

The SEC’s approval on the Exchange’s rule filing related to the merger, which was originally filed on Nov. 3, 2005 and subsequently amended, represents the final regulatory approval required for the merger, which will combine the world’s largest equities market and the first open, all-electronic stock market in the United States.

The merger of the New York Stock Exchange, Inc. and Archipelago Holdings, Inc. will be the largest ever among stock exchanges and will create a global multi-product, multi-asset class marketplace for the trading of listed and over-the-counter equities, fixed income products, options, and other derivative products.