Upstream News

July 1, 2012

Apache provides details about its liquids-rich portfolio

Houston-based Apache Corp. on June 14 released a new, detailed resource estimate of its oil- and liquids-rich portfolio, including substantial holdings in the Permian Basin and Anadarko Basin, recently acquired acreage in the liquids-rich Mississippian Lime and Williston Basin resource plays, and significant new plays and oil exploration prospects in Canada, Argentina, Alaska, and Kenya.

"For Apache, this is the time to drill more wells: We have captured a vast, liquids-rich resource base and drilling costs are declining," said G. Steven Farris, Apache's chairman and chief executive officer. "By remaining committed to Apache's historical focus on returns and preserving our conservative financial structure — which means living within our cash flow — our portfolio is positioned to continue to deliver long-term growth and value for our shareholders."

Apache, the second-largest producer and acreage owner in the Permian Basin of West Texas and eastern New Mexico, has identified approximately 34,500 drillable locations with an estimated net resource of 3.8 billion barrels of oil equivalent (boe).

In the Anadarko Basin in western Oklahoma and the Texas Panhandle, Apache has identified approximately 32,500 drillable locations primarily in the Granite Wash, Cleveland, Tonkawa and Marmaton formations with an estimated net resource of 5.4 billion boe.

In northern British Columbia, Canada, Apache has validated an outstanding new shale play in the Liard Basin with net estimated sales gas of 48 trillion cubic feet of natural gas (8 billion boe) across 430,000 acres held with a 100% working interest.

The resource estimate at Liard is based on recent drilling, test results and earlier well control points. "The D-34-K well is one of the best shale wells we've seen in any play," Farris said. "Our analysis indicates that the formation characteristics are remarkably consistent across this large basin."

In Argentina, Apache estimated that its 450,000-acre position in the Vaca Muerta oil shale has a net potential recoverable resource of 800 million boe.

New exploratory oil prospects

Apache has built a 580,000-acre (net) position in the Mississippian Lime play in Kansas and Nebraska with an inventory of 7,200 potential locations and an estimated resource potential of 2 billion barrels of oil.

Apache assembled a 300,000-acre position (net) in the Williston Basin in Daniels County, Montana, with more than 1,900 potential locations and potential resource of 1 billion barrels of oil.

In Alaska — where this year Apache plans to drill its first well — the company has identified 1.3 billion barrels of oil of yet-to-be-found potential.

In Block L-8 offshore Kenya, Apache has identified eight prospects with net potential of 1.4 billion barrels of oil. Apache expects to commence drilling its first well in the deepwater block in the third quarter.

"Apache has captured the largest inventory of liquids-rich drillable locations in our history, including additional upside potential from exploration activities in the deepwater Gulf of Mexico, Egypt and Australia," Farris said. "We are well-positioned to deliver long-term profitable growth with our balanced portfolio, focus on rate of return, and prudent financial structure."

"Overall, we view the incremental information provided as slightly positive," said Stifel Nicolaus analysts in a note to investors June 15 following Apache's announcement.

"The details on rig counts and inventory in the Permian/Granite Wash area are a slight positive. The new play announcements are also only marginally positive. While Liard economics look good, the timing to properly monetize the asset is a 2017+ timeframe, in our view, given that it is Canadian gas. The Williston acreage needs to be proven up given that it is a meaningful stepout from the known core spots of the play. The Miss Lime acreage is also not where current horizontal industry activity has occurred and would need to be proved up. Therefore, while the overall near-term impact is only slightly positive from the new information provided, the Miss Lime and Williston acreage provide additional running room for US growth if the economics of these play extensions are firmed up with 2H12 test wells," the analysts continued.

The key near-term driver will be the Granite Wash, with additional upside from the Canyon Wash, the analysts concluded.

Rosneft, ExxonMobil to develop tight oil reserves in Western Siberia

Russia's Rosneft and ExxonMobil signed an agreement on June 15 to jointly develop tight oil reserves in Western Siberia and establish a joint Arctic Research Center for Offshore Developments.

The agreements, which support implementation of the companies' August 2011 long-term strategic cooperation agreement, were signed by Rosneft President Igor Sechin and Stephen M. Greenlee, president of ExxonMobil Exploration Co. Vladimir Putin, president of the Russian Federation, Rex W. Tillerson, chairman and CEO of ExxonMobil, and other top managers of the companies were present at the signing ceremony.

Rosneft and ExxonMobil agreed to expand and expedite joint efforts to develop oil reserves in tight low-permeability formations in Western Siberia using advanced technologies that ExxonMobil has successfully employed in North America.

The agreement establishes a pilot program to determine the technical feasibility of developing the reserves and is an extension of a technical research program, which Rosneft and ExxonMobil signed in April 2012.

In the near future, Rosneft and ExxonMobil will approve a work program for selected Rosneft license blocks which will include geological studies and drilling of Bazhenov and Achimov reservoirs. Drilling is scheduled to begin in 2013.

ExxonMobil will finance the geological studies and exploratory drilling. Participating interests in a potential development phase will be 66.67% for Rosneft and 33.33% for ExxonMobil.

"We are not only looking at new geographical regions of operation but are also studying the potential of difficult to produce reserves in traditional oil producing regions," said Rosneft President Sechin.

"In Western Siberia, an extremely promising area in this respect is the Yuganskneftegaz Region. Development of these reservoirs will require a combination of state-of-the-art technologies, expertise in developing tight reservoirs, and appropriate fiscal terms, which the government of Russia started preparing this year. This will both help meet the growing need for energy in Russia itself and maintain stability in global markets."

Tillerson said the Western Siberia area presents a good opportunity for ExxonMobil and Rosneft.

"This agreement combines the strengths of our two companies," said Tillerson. "ExxonMobil has technology leadership in tight oil and unconventional resource development and Rosneft brings direct knowledge and experience of Western Siberia's geology and conventional production."

With the signing, ExxonMobil joins the new Arctic Research Center, which will provide a full range of services to support all stages of oil and gas development on the Arctic shelf, including ice monitoring and management, design of ice resistant offshore vessels, structures and Arctic pipelines, logistics and safety.

Second high-impact discovery for Statoil offshore Tanzania

Statoil and partner ExxonMobil have made a large gas discovery in the Statoil-operated Block 2 license in Tanzania.

The logging results from the Lavani well confirm a new high-impact discovery for Statoil, with a preliminary resource estimate of 3 trillion cubic feet (tcf) of gas in place. The Lavani well has encountered 95 meters of excellent quality reservoir sandstone with high porosity and high permeability.

"The result from Lavani, which is only 16 kilometers south of our recent Zafarani discovery, confirms the high potential in Block 2. We are also pleased to announce that the recently drilled Zafarani sidetrack added another 1 tcf of gas in place. This is in addition to the up to 5 tcf announced in February. The results so far mark an important step towards a possible natural gas development in Tanzania," says executive vice president for Exploration in Statoil, Tim Dodson.

The Lavani well, drilled in 2,400-meter water depth, is the second exploration well in Block 2 – which covers an area of approximately 5,500 square kilometers. The well is drilled by Ocean Rig Poseidon with operations still ongoing.

The Lavani discovery is the seventh high-impact discovery made by Statoil over the last 14 months. The other high-impact discoveries are Zafarani in Tanzania, Skrugard and Havis in the Barents Sea, Johan Sverdrup (formerly Aldous/Avaldsnes) in the North Sea, and Peregrino South and Pão de Açúcar (non-operated) in Brazil.

Statoil operates the licence on Block 2 on behalf of Tanzania Petroleum Development Corporation (TPDC) and has a 65% working interest, with ExxonMobil Exploration and Production Tanzania Ltd. holding the remaining 35%. Statoil has been in Tanzania since 2007, when it was awarded the license for Block 2.

IHS: Nearly 1.5M jobs to be supported by shale, unconventional natural gas by 2015

Natural gas production from shale, coal bed methane and tight sands is expected to generate significant job creation, economic growth, and revenue for federal, state and local treasuries throughout the US in gas "producing" and "non-producing" states alike, according to a new IHS Global Insight study.

The economic contributions are realized throughout the lower 48 states and the District of Columbia in both the twenty producing states and the twenty-eight non-producing states. Unconventional gas activity supported more than one million jobs in 2010, and it will grow to support nearly 1.5 million by 2015, says the study, which is the second in a series.

The new report, The Economic and Employment Contributions of Unconventional Gas Development in State Economies, examines unconventional gas activity – a growing subset of the total natural gas industry. The report found substantial growth in jobs and economic activity in unconventional plays over the past decade. The report is a companion to an IHS Global Insight study on shale gas economic and employment contribution released in December.

"At a time when the US economy is slowly recovering from the Great Recession and struggling to create enough jobs to sharply reduce the unemployment rate, the growth in shale and other unconventional natural gas production is a major contributor to employment prospects and the US economy," said IHS vice president John Larson, the lead author of the study. "As this report makes clear, these benefits spread beyond producing states to deliver positive impacts across the country."

The dramatic impact on employment and the economy from unconventional gas activity reflects its significant capital intensity requirements, the ability to source capital equipment and services from US sources, the coast-to-coast structure of the supply chain and the quality of jobs created by the industry.

Between 2010 and 2015, the Top 10 producing states (as ranked by unconventional gas-related employment) – Texas, Louisiana, Colorado, Pennsylvania, Arkansas, Wyoming, Ohio, Utah, Oklahoma and Michigan –will experience a compound annual job growth rate of nearly 8%, with Pennsylvania and Colorado leading with expected compound annual growth rates of 14% and 10%, respectively. Meanwhile, total US employment is expected to grow at a significantly lower average rate of 1.6% during the same period.

Of the nearly 1.5 million unconventional gas activity jobs contributing to the economy by 2015, nearly one-fifth are projected for non-producing states. The Top 10 non-producing states (as ranked by jobs growth due to unconventional gas development) in 2015 are projected to be California, Florida, Georgia, Missouri, North Carolina, Indiana, Wisconsin, Minnesota, Tennessee and Maryland, supporting the industry through the extensive supply chain and service jobs necessary to support development.

"When it comes to unconventional natural gas, a state does not need to have a gas play to benefit economically" Larson added.

Among the study's other key findings:

  • Unconventional gas activity accounted for 53% of total US natural gas production in 2010 and is projected to rise to 79% of total US natural gas production by 2035.
  • Nearly $3.2 trillion in cumulative investments in the development of unconventional gas are expected to fuel the increase in production between 2010 and 2035.
  • By 2015, the annual contribution of unconventional gas activity to US gross domestic product is projected to reach nearly $197 billion, more than $22 billion of which will be from non-producing states. In total, the annual contribution is expected to more than double by 2035 to almost $332 billion.
  • Government revenue from unconventional gas activity is projected to reach more than $49 billion annually by 2015 and will continue to rise, to just over $85 billion by 2035. Over the study's entire 25-year horizon, unconventional gas is expected to generate nearly $1.5 trillion in total government revenue.

The earlier IHS shale gas study, The Economic and Employment Contributions of Shale Gas in the United States, presented the economic contributions of shale gas specifically in terms of jobs, economic value and government revenues through 2035, as well as the broader macroeconomic impacts on households and businesses. Whereas the original report examined the contributions at a national level, this report builds upon the original work by adding analysis of the other unconventional natural gas activities (coal bed methane and tight sands) and further distributes the results to the state level.

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