Upstream News
Low natural gas prices in 2012 reduced returns for some oil and gas producers
Low natural gas prices contributed to reduced returns on equity (ROE), a measure of profitability, for oil and natural gas producers in 2012, according to EIA analysis. Producers with lower proportions of liquids in their total oil and gas production generally had lower ROE in 2012 compared to 2011, and compared to producers with higher proportions of liquids.
Wide differences in natural gas and oil prices affected the bottom line for upstream operators and shaped their decision-making about where and how to deploy capital. In 2012, wholesale natural gas prices in the United States and Canada fell to their lowest levels in a decade. Crude oil prices, on the other hand, remained at historically high levels.
Some key findings from the analysis show that:
- Among US and Canadian oil and natural gas producers whose primary business is in North America, producers with less than 40% of their production in liquids averaged negative ROEs in 2012. Producers with liquids making up more than 40% of their production averaged positive ROEs.
- During 2011, when natural gas spot prices at the Henry Hub averaged $4.00 per million btu, 45% above their average level in 2012, producers in all quintiles of the distribution of liquids share of total production averaged positive ROEs.
- The group of oil and natural gas producers with liquids accounting for more than 80% of their oil and gas production had the highest ROEs in both 2011 and 2012.
These data were calculated by EIA using the Evaluate Energy database.
Brazil’s first oil and gas auction in 5 years receives record bids
The 11th Bidding Round for Oil and Gas Exploration Blocks held in mid-May by the Brazilian National Agency of Petroleum, Natural Gas and Biofuels (ANP) in Rio de Janeiro received a record R$2.8 billion (US$1.4 billion) in bids for exploration rights. The 797.81% premium achieved over the auction’s starting price is also record-breaking, as is the forecast for investments to be made by the winning companies under the Minimum Exploration Program of R$6.9 billion (US$3.45 billion). In all, 100,300 km2 of the 155,800 km2 of exploration area offered for bids were successfully auctioned, with 39 companies from 12 countries participating in the auctions. Thirty bidders had winning bids, including 12 Brazilian and 18 foreign companies from Australia (1), Bermuda (1), Canada (4), Colombia (2), Spain (1), United States (2), France (1) Guernsey (1), Norway (1), Portugal (1) and the United Kingdom (3).
"With the completion of this round, we resume investment in the oil and gas sector in Brazil. The findings from the blocks auctioned are expected to contribute to the development of our supply chain and the elevation of the country’s future oil and gas production," said Edison Lobão, Brazil’s Minister of Mines and Energy.
The general-director of the ANP, Magda Chambriard, pointed out the success of the auction, which was Brazil’s first for oil and gas rights offering in five years: "The amount raised was an absolute record in ANP bidding rounds. Investments of R$7 billion (US$3.5 billion) are expected."
The 142 blocks successfully auctioned are located in 11 States of Brazil covering 11 sedimentary basins: Barreirinhas, Ceará, Espírito Santo, Foz do Amazonas, Pará-Maranhão, Parnaíba, Pernambuco-Paraíba, Potiguar, Recôncavo, Sergipe-Alagoas and Tucano Sul. The biggest concession auctioned, with a winning bid of R$345.95 million (US$172.9 million), was offered for block FZA-M-57 (Foz do Amazonas Basin) by Total E&P Brasil, a Brazilian operator with a 40% stake in a consortium that also includes Petrobras (30%) and BP EOC (30%).
The average percentage of nationally owned/produced technology and assets for the 11th Bidding Round was 62.32% for the Exploration Phase and 75.96% for the Development Phase of the concession agreement.
Express Energy offers new technology for offshore P&A, decommissioning
Express Energy Services has introduced a newly developed, integrated work station for offshore plug and abandonment (P&A) and decommissioning operations along with new mechanical cutting tool technologies. The system is currently operational in the Gulf of Mexico.
The new integrated modular work station unit, named the Dual Stage Work Station (DSWS), is a structure comprised of two main working decks and two trolley systems for hydraulically moving the platform from well to well and for adapting multiple service equipment modules required in P&A operations.
The total DSWS system is compact, modular, can be integrated into specific packages as needed, and is operated by one man in an automated control cabin. All discrete modular systems are controlled and operated by one main hydraulic power unit. All components of the system have redundancy. The system employs a series of remote cameras for observation of the work modules which are continuously monitored by the control operator in the control cabin.
Statoil, partners discover oil in Grane area
Statoil and its partners are in the process of concluding drilling operations in exploration well 25/11-27 in the Grane Unit.
Drilled by the rig Songa Trym the well proved an oil column of 20 meters in the Heimdal Formation. The estimated volume of the discovery is in the range of 18-33 million barrels of recoverable oil.
"Near-field exploration is an important contribution in Statoil’s exploration portfolio on the NCS," said Tore Løseth, vice president for exploration in the North Sea.
"Even though volumes in these discoveries are moderate compared with the big finds over the last few years, these are fast, high-value barrels that are important for extending the production life of existing installations."
In 2013, about 40% of Statoil’s exploration wells on the NCS will be near-field exploration. In addition to the Grane area, this includes the Oseberg, Fram/Gjøa and Tampen areas.
Exploration well 25/11-27 is situated in the Grane Unit in the North Sea. The well was drilled within license 169 B2 about seven kilometers north of the Grane field in the central part of the North Sea, and about 150 kilometers west of Stavanger.
Statoil is operator with an interest of 36.66%. The partners are Petoro AS (28.94%), ExxonMobil Exploration & Production Norway AS (28.22%) and ConocoPhillips Skandinavia AS (6.17%).
Chevron set to invest $36.7B in 2013
Chevron Corp. reported May 29 the company’s 2012 operational and social performance and future growth plans at its 2013 Annual Meeting of Stockholders.
John Watson, chairman of the board and CEO discussed Chevron’s 2012 financial and operational performance, with earnings exceeding $26 billion and return on capital employed (ROCE) approaching 19%. In 2012, the company marked its 25th consecutive year of annual dividend payment increases, which included last year’s annual dividend increase of 13.6%. Chevron announced another quarterly dividend increase of 11.1% in April 2013. For the fourth consecutive year, Chevron led its peers in five-year total stockholder return.
George Kirkland, Chevron vice chairman and executive vice president for Upstream and Gas, discussed investment plans. The company plans to invest $36.7 billion in 2013, with 90% expected to fund upstream activities. The company has invested nearly $111 billion over the past five years to develop crude oil and natural gas resources around the world.
The company’s earnings per barrel have averaged almost seven dollars per barrel higher than the average of the company’s peer group over the past three years. Cash margins also have been the highest of its peers for three years and ROCE for the last two years. Chevron is on track to deliver on its commitment to produce 3.3 MMboe/d by 2017, more than 98% of which will come from fields that are online today or from projects under construction or in detailed design. Over the next five years, 50 projects with a Chevron investment of more than $250 million each are scheduled to start production, 16 of which have a net Chevron investment exceeding $1 billion.