GENERAL INTEREST Quick Takes
Barclays: US onshore upstream budgets up 9% in 2018
Preliminary upstream budgets from the top 40 US onshore producers show a 9% rise this year, according to an updated Barclays’ E&P spending survey. This is well below Barclays’ previous estimate of an increase of 21% for North America E&P spending in last December’s survey (OGJ online, Dec. 14, 2017).
“Based on only 10 companies had announced a 2018 budget for North American spending at the time of the December survey, we relied on estimates of reinvestment rates on discretionary cash flow at [West Texas Intermediate] strip oil prices ($55 WTI in December vs. $62 WTI currently),” Barclays said. “We do believe E&Ps will exhibit greater capital discipline this year, but also think most budgets have been set at conservative price decks, many at around $50/bbl.”
The updated survey also shows E&Ps increasing Permian spending by 19% compared to relatively flat in other oil basins.
Barclays also mentioned potential for upward budget revisions likely tempered several factors, despite that WTI has been solidly above $60/bbl since January.
“First, the potential for the recent $6 blow out in Permian differentials to linger into 2019 will weigh on E&Ps without committed takeaway capacity and/or differential hedges. Second, a number of E&Ps have accounted buyback/dividend programs, though market reaction has been mixed. Third, oil field inflation will limit purchasing power (steel, water, labor tightness, frac sand rail disruptions, etc.) with some E&Ps budgeting 10-15%, impairing D&C activity levels.”
Brazos Midstream sells units for $1.75 billion
Brazos Midstream Holdings LLC, Fort Worth, and its financial sponsor, Old Ironsides Energy, have entered into a definitive agreement to sell its Delaware basin subsidiary companies to North Haven Infrastructure Partners II (NHIP II), an investment fund managed by Morgan Stanley Infrastructure (MSI) and related funds for $1.75 billion in cash.
The transaction includes committed debt financing of $950 million ($900 million of term loan and $50 million of revolving credit facility).
Brazos is a large private natural gas and crude oil midstream company with assets in Reeves, Ward, and Pecos counties. Assets in include 350 miles of natural gas and crude oil gathering pipelines, a natural gas processing complex with 260 MMcfd of processing capacity in operation with an additional 200 MMcfd of capacity under construction, and 50,000 bbl of crude oil storage (OGJ Online, Jan. 23, 2018).
As part Brazos’ late-2017 acquisition of a natural gas gathering system in the southern Delaware basin from Callon Petroleum Co., the operator signed a long-term, fee-based agreement with Callon for gas gathering and processing services for acreage under development in the southern Delaware’s Ward and Pecos counties in Texas. Including the Callon dedication, Brazos’ midstream infrastructure is anchored by long-term acreage dedications with Permian operators covering 300,000 acres (OGJ Online, Oct. 10, 2017).
Closing is expected in this year’s second quarter and is subject to customary approvals and closing conditions. After closing, Brazos will retain its name and operate as a portfolio company of NHIP II. The members of the Brazos management team will remain in their current roles.
Cobalt asset auction nets $577.9 million
Total E&P USA Inc., alone and in a combine with Statoil Gulf of Mexico LLC, led successful bidders for Gulf of Mexico properties sold at auction in the bankruptcy of Cobalt International Energy Inc., according to a court filing.
Successful bids totaled $577.9 million.
Alone, the Total subsidiary submitted successful bids of $181 million for Cobalt’s Anchor prospect on Green Canyon Blocks 762, 763, 806, 807, 850, and 851 and of $25 million for various exploration assets.
With Statoil, Total E&P USA bid $339 million for the North Platte prospect on Garden Banks Blocks 915, 916, 958, and 959.
The back-up bidder for all the Total bids was GOM Offshore Holdings LLC, an entity formed by a steering of Cobalt’s second-lien notes.
W&T Offshore Inc. submitted another successful bid, $31.1 million for the Heidelberg prospect on Green Canyon Blocks 859, 903, and 904 (OGJ Online, Mar. 12, 2018).
And Navitas Petroleum US LLC submitted the successful bid of $1.8 million for the Shenandoah prospect on Walker Ridge Blocks 51, 52, and 53.
ConocoPhillips to cut 450 jobs in UK by 2020
A company spokesperson has confirmed that ConocoPhillips is cutting 450 jobs across its UK operations between this October and April 2020.
ConocoPhillips said it followed a voluntary redundancy program due to the end of Southern North Sea production through the Theddlethorpe Gas Terminal later this year.
ConocoPhillips currently has a total of 1,300 staff and contractors in the UK.
DNO acquires stake in Faroe Petroleum
DNO ASA, Oslo, agreed to acquire 15.37% of the share capital of Faroe Petroleum PLC from Delek Group Ltd.
The acquisition covers all Faroe Petroleum ordinary shares held by Delek, totaling 56,355,825, at a price of £1.25/share for an aggregate purchase price of £70.4 million.
DNO reentered the North Sea upstream business in 2017 through the acquisition of Origo Exploration Holding AS after a 6-year hiatus during which the company built its Middle East presence anchored by DNO-operated Tawke field in the Kurdistan region of Iraq (OGJ Online, Feb. 9, 2018, May 5, 2017).
Following Norway’s latest Awards in Predefined Areas (APA) 2017 licensing round, DNO holds interests in 19 exploration licenses offshore Norway and the UK (OGJ Online, Jan. 17, 2018). The company plans to also pursue additional investments and partnerships with established North Sea players.
Faroe Petroleum, focused on exploration, appraisal, and production activities in Norway and the UK, had stated 2P reserves at yearend 2017 of 97.7 million boe and 2C resources of 78.6 million boe. The company’s 2017 production averaged 14,300 boe/d.
At yearend 2017, on a company working interest basis, DNO’s 2P reserves stood at 384.1 million boe and 2C resources at 98.9 million boe, with 2017 average CWI production of 73,700 boe/d.
Linn closes sale of Uinta basin assets
Linn Energy Inc. has closed on the sale of certain Uinta basin assets to Silverpeak, a New York-based investment management firm, for $132 million. The sale, though not the buyer, was disclosed by Linn in January (OGJ Online, Jan. 16, 2018).
Located in Utah’s oil-rich Altamont Bluebell field, the assets are comprised of 36,000 net acres, including 27,000 undeveloped acres. The acreage includes 116 proved developed producing wells with work-over and development opportunities, Silverpeak said.
Silverpeak sees growth potential through operational and well maintenance improvements, said Harsh Rameshwar, a partner in Silverpeak’s energy business, “and an active development program using proven production technologies and methodical subsurface engineering.” The assets will be managed by Altamont Energy, a recently formed affiliate of Silverpeak.
In an investor presentation dated Feb. 27, Linn Energy noted closed or pending assets sales of $1.9 billion as part of its plan to separate into three standalone companies during 2018: Roan Resources LLC, Blue Mountain Midstream LLC, and NewCo (OGJ Online, June 28, 2017, July 14, 2017). Linn Energy Inc., the reorganized successor to Linn Energy LLC, and its affiliates emerged from Chapter 11 restructuring in March 2017 (OGJ Online, Mar. 1, 2017).
Exploration & DevelopmentQuick Takes
ADNOC launches its first licensing round
Abu Dhabi National Oil Co. has launched its first competitive oil and gas licensing round, offering four onshore and two offshore blocks that cover nearly 30,000 sq km.
The company has opened a web site dedicated to the round where interested bidders can register and begin what ADNOC describes as “a strict prequalification process.”
The web site provides details of a global roadshow of technical and commercial information on the blocks, to which prequalified bidders will be invited. After the roadshow, bidders will submit expressions of interest and be able to buy a data package that includes bidding instructions and geological information, with well and seismic data.
Successful bidders will enter agreements granting exploration rights and, if exploration-phase targets are achieved, the opportunity to develop discoveries “under terms that will be set out in the bidding package.”
Block sizes are 2,500-6,300 sq km.
ADNOC says some of the blocks have discoveries. The combined area, it says, has 310 “targeted reservoirs from 110 prospects and leads.” Some blocks have unconventional resource potential. ADNOC will accept bids until October and announce results by yearend.
Until now, ADNOC has worked with international oil and gas companies through negotiated joint ventures.
A press release said competitive licensing “is consistent with ADNOC’s approach to expanding its strategic partnerships across all areas of its business.”
Norway approves Repsol Norge’s Yme field plan
Norway’s Ministry of Petroleum and Energy has approved Repsol Norge AS’s revised development plan for Yme field in the southeastern Norwegian North Sea, said partner OKEA AS.
The development, which was proposed earlier but then delayed, is expected to add 65 million bbl of production with startup expected by Dec. 31, 2019. Repsol on Dec. 19, 2017, submitted a new plan for development and operation (PDO) for Yme using existing infrastructure (OGJ Online, Dec. 20, 2017).
Repsol leased the Maersk Inspirer jack up, which will be modified for Yme operations. The latest PDO calls for reusing nine existing wells with a plan to drill six more.
Repsol became operator after its 2015 acquisition of Talisman Energy Inc. Current partners include Repsol, 55% interest, Lotos Exploration & Production Norge AS 20%, Kufpec Norway AS 10%, and OKEA 15%.
OMV finds gas with HPHT well off Norway
In its first high pressure, high temperature well drilled on the Norwegian Continental Shelf, OMV (Norge) AS has completed discoveries in the Hades and Iris intervals in its 6506/11-10 well in PL 644 B.
The well is close to Morvin and Asgard fields, 244 km northwest of Kristiansund in 342 m of water.
OMV discovered gas and condensate in the primary Hades target and secondary Iris prospect. Preliminary results based on data gathered from both reservoir intervals indicates discovery sizes of 20-115 million boe for Hades and 20-130 million boe for Iris.
The 6506/11-10 well is OMV’s first in PL 644 B. It was drilled by Odfjell Drilling’s Deepsea Bergen semisubmersible drilling rig. OMV is operator with 30% interest. Partners are Statoil Petroleum AS 30%, Faroe Petroleum Norge AS 20%, and Spirit Energy Norge AS 20%.
The license was awarded in the Norwegian Petroleum Directorate’s Awards in Predefined Areas 2015.
OMV gets 20% stake in Abu Dhabi concession
OMV AG expects to sign by the end of April documents for its acquisition of a 20% interest in the concession for Satah Al Razboot (SARB) and Umm Lulu oil fields offshore Abu Dhabi.
The firm said it has entered an agreement for the $1.5-billion acquisition with Abu Dhabi National Oil Co., which has been signing new participation agreements with international operators for three concessions formed from old ADMA-OPCO and other concessions that have expired. ADMA-OPCO is now part of ADNOC Offshore.
SARB has two satellite fields: Bin Nasher and Al Bateel. Total peak production from SARB and Umm Lulu fields is to exceed 200,000 b/d.
ADNOC in February awarded Cepsa of Spain, a wholly owned subsidiary of Mubadala Investment Co. of Abu Dhabi, a 20% stake in the SARB-Umm Lulu concession for a $1.5-billion participation fee (OGJ Online, Feb. 19, 2018).
Mubadala gets Andaman I block off Indonesia
Mubadala Petroleum, Abu Dhabi, will conduct subsurface studies and acquire 3D seismic data in the first 3-year term of a production-sharing contract it has signed for the Andaman I block off Indonesia.
Mubadala is a 30% partner in the adjacent Andaman II block, which is operated by Premier Oil PLC.
The blocks are in the North Sumatra basin offshore Aceh. They were part of Indonesia’s 2017 licensing round.
Mubadala holds 100% interest in the Andaman I PSC.
Drilling & ProductionQuick Takes
Baker Hughes: US rig count climbs above 1,000
The US drilling rig count starts the month of April with a gain of 10 units to 1,003 during the week ended Apr. 6, data from Baker Hughes indicate. The report shows an overall increase of 164 units from year-ago levels.
Offshore units were unchanged at 12 units working in the Gulf of Mexico. A total of 987 rigs were drilling on land, up 10 units from the week before (OGJ Online, Mar. 29, 2018). The number of rigs drilling in inland waters remained at 4 units.
Rigs targeting oil were up 1 unit to 808, up 136 from the 672 rigs drilling for oil the same week a year ago. Gas-targeted rigs were unchanged at 194. This time a year ago, 165 units were drilling for gas.
Among the major oil and gas-producing states, Oklahoma saw the largest increase in rigs with 5 to reach 126. New Mexico added 3 units to end the week at 90. Texas and Kansas gained 2 rigs each, reaching respective counts of 498 and 2.
Four states gained 1 rig. These were North Dakota, 54; Ohio, 22; West Virginia, 17; and Utah, 8.
California and Arkansas remained unchanged from the week before at 14 and 1, respectively.
Louisiana saw the largest decrease in rigs from the week before, dropping 2 units to reach 56 rigs working. Four states dropped 1 unit, namely Pennsylvania, 41; Colorado, 30; Wyoming, 29; and Alaska, 8.
BP begins Ghazeer development drilling
BP PLC has started drilling the first of three development wells in Ghazeer natural gas and condensate field, the second phase of giant Khazzan gas field in Oman.
The firm said on Apr. 9 that it and partner Oman Oil Co. Exploration & Production had made the final investment decision to proceed. It let an engineering, procurement, construction, and commissioning contract to Petrofac Ltd. for a second-phase processing plant late last year (OGJ Online, Dec. 12, 2017).
Ghazeer, expected onstream in 2021, will be able to produce 500 MMcfd of gas and 15,000 b/d of condensate.
Khazzan began production last September. Flow rates recently reached design levels of 1 bcfd of gas and about 35,000 b/d of condensate.
Khazzan and Ghazeer are expected to yield 10.5 tcf of gas and 350 million bbl of condensate through the end of the exploration production sharing agreement in 2043.
A 2016 amendment to the agreement added 1,150 sq km to the south and west of the original 2,800-sq-km Block 61, allowing development of Ghazeer.
BP operates Block 61 with a 60% interest. Oman Oil Co. E&P holds 40%.
Statoil advances Johan Sverdrup Phase 2
Statoil AS has signed letters of intent for two projects in Phase 2 development of giant Johan Sverdrup oil field in the Norwegian North Sea (OGJ Online, Mar. 21, 2017).
One letter is with Aibel, Stavanger, covering engineering, procurement, and construction of the topside for the field’s second processing platform. At start-up planned for 2022, the platform will increase the field’s production capacity to 660,000 b/d of oil from 440,000 b/d. The contract value is $1.02 billion.
The other letter, with a 50-50 joint venture of Aker Solutions and Kvaerner, covers engineering, procurement, and construction of a utility module for the riser platform, field-center modifications, and installation and hook-up. Contract value is about $430 million.
Statoil expects to award the contracts later this year, subject to government approval of the Phase 2 development and operation plan to be submitted in this year’s second half.
Statoil operates the project with a 40.0267% interest.
PROCESSINGQuick Takes
CSV Midstream enters Alberta gas plant into service
CSV Midstream Solutions Corp., Calgary, has started up a natural gas processing plant in the Resthaven area of Alberta, about 80 km northeast of Grande Cache.
With an inlet capacity of 260 MMcfd, the Resthaven plant has a gas processing capacity of more than 100 MMcfd and is equipped with NGL-recovery equipment to produce C5+ condensate and future C3+ LPG products, CSV said.
Despite a nearly 2-month weather delay, CSV managed to commission the plant on an aggressive schedule, under budget, and with no material safety incidents by the end of March, the operator said.
Based on a repeatable modular design and designed to process sweet gas from the Resthaven area, the plant—which broke ground in August 2017—is underpinned by a long-term contract with an unidentified intermediate exploration and production company.
The processing site is connected to TransCanada Corp. subsidiary TC PipeLines LP’s NGL sales gas pipeline system with future opportunity to connect Pembina Pipeline Corp.’s liquids system for product egress, according to CSV’s web site.
Statoil lets contract for Mongstad refinery
Statoil ASA has let a contract to John Wood Group PLC to deliver front-end engineering design for a low-sulfur gasoline project at subsidiary Statoil Refining Norway AS’s 9.3 million-tonne/year in Mongstad, Norway, near Bergen.
As part of the new contract—which was secured under an existing framework agreement signed in 2015—Wood will provide design, engineering, and analysis for modifications to reduce sulfur content in gasoline produced at the refinery.
Wood’s engineering teams also will focus on the design to upgrade the refinery’s naphtha hydrotreating and storage systems to meet new fuel specs on sulfur content of gasoline.
While it did not confirm a specific value of the latest contract, Wood said it will begin work on the project effective immediately.
Petroecuador lets contract for Shushufindi refinery
Ecuador’s state-owned Petroecuador has let a contract to Germany’s Siemens AG to deliver gas-turbine equipment for the 20,000-b/d Shushufindi refinery in the northeastern Ecuadorian province of Sucumbios.
As part of the order, Siemens will supply one of its proprietary 8-Mw SGT-300 gas turbine for power generation at the refinery, the service provider said.
The new industrial gas turbine will replace an existing gas turbine installed at the refinery in 1984 manufactured by the Ruston Gas Turbines Co., which Siemens acquired in 2003 as part of a related transaction.
Scheduled for commissioning by yearend, the SGT-300 turbine will be manufactured in Siemens’ Lincoln, UK, factory and packaged and tested at the firms’s Houston complex.
TRANSPORTATIONQuick Takes
Nord Stream 2 acquires first of two Finnish permits
Nord Stream 2 natural gas pipeline has received one of the two required permits for construction and operation in the Finnish exclusive economic zone (EEZ). Finland’s Ministry of Economic Affairs and Employment issued the first permit for a 374-km offshore section extending through the Finnish EEZ outside the country’s territorial waters.
In Finland, Nord Stream 2 now needs to obtain a second permit to be granted under the Water Act. A decision is expected to be made within the next few weeks, Nord Stream said.
The company has already received all necessary permits in Germany (OGJ Online, Mar. 28, 2018). The national permitting procedures in the other three countries along the route—Sweden, Russia, and Denmark—are proceeding as planned, the company said.
Once completed, Nord Stream 2 will span the Baltic Sea and provide Russian gas to Europe. Nord Stream 2 will largely follow the route and technical concept of the Nord Stream pipeline. The new gas line will have the capacity of 55 billion cu m/year of gas.
AGDC selects banks for Alaska LNG terminal
The sponsor of an Alaska LNG export terminal at Nikiski and cross-state pipeline from Prudhoe Bay selected Bank of China and Goldman Sachs & Co. as global capital coordinators for the multibillion-dollar project. The two investment banks will assist Alaska Gasline Development Corp. (AGDC) in raising equity and debt financing, AGDC Pres. Keith Meyer said.
The announcement came more than 4 months after Chinese and Alaskan officials signed a five-party, $43-billion joint development agreement for the Alaska LNG project in Beijing (OGJ Online, Nov. 10, 2017). US President Donald Trump and Chinese President Xi Jinping were present for the signing ceremony at the Great Hall of the People, where other deals between the US and China were announced.
The integrated gas transportation system will consist of a treatment plant at Prudhoe Bay; an 807-mile pipeline to the south-central Alaska coast, with off-takes for in-state customers; and a Nikiski facility to liquefy the gas for export.
