Industry Briefs

May 1, 2012

S&P revises NGL price assumptions

Standard & Poor's Ratings Services has revised its natural gas liquids (NGL) pricing assumptions for 2012, 2013 and 2014, according to a report published March 30. S&P believes oil prices in 2012 will remain at or near current levels, in particular due to decreased non-OPEC supply, ongoing unrest in the Middle East, and limited spare capacity. The firm also expects natural gas prices to remain low due to an increasing supply and weak growth in demand. Furthermore, NGL prices are expected to continue to be fairly robust in 2012.

Capstone to send 30 more microturbines to Eagle Ford

Capstone Turbine Corp. has received orders for 30 additional C65 microturbines from producers in the Eagle Ford shale play. Capstone distributor Horizon Power Systems (Pumps & Service) secured this follow-on order to support multiple users' growing power needs. The latest order for 30 low-emission C65 microturbines brings the total sold in excess of 150 units in the last nine months. The majority of the 150 microturbines will operate on natural gas to generate clean-and-green prime power for Lease Automatic Custody Transfer (LACT) units and transfer stations at remote well sites in the Eagle Ford shale play.

NorTex Midstream launches new gas trading point

Houston-based NorTex Midstream Partners LLC, in cooperation with Atlanta's Intercontinental Exchange (ICE), has launched a natural gas trading point in the Dallas-Fort Worth area. More than 60% of installed capacity in that area is now being fueled by natural gas. As an active and liquid physical gas trading point, the Tolar Hub directly connects NorTex's Worsham-Steed gas storage facility to five Texas intrastate pipelines with more than 2 bcfd of pipeline take-away capacity and 1 bcfd of metering capacity. Worsham-Steed has 23 bcf of storage capacity and 450,000 Mcfd of maximum withdrawal capability.

OFS Energy Fund invests in waste disposal provider

Houston-based OFS Energy Fund II has completed a growth equity investment in Buckhorn Energy Services LLC, a recently formed provider of oil-field waste disposal in North Dakota. Buckhorn's headquarters will be located in Denver, Colo. Buckhorn was established in mid-2011 to capitalize on the growth of oil-focused drilling and production and resulting waste disposal needs in the region. OFS specializes in acquisitions and recapitalizations of middle-market companies with enterprise values between $10 million and $50 million in the energy service industry. The OFS management team previously managed Dorado Energy Partners.

Vision Oil Tools recapitalized by OFS

OFS Energy Fund has completed a majority recapitalization of Vision Oil Tools LLC, a Wyoming- and North Dakota-based oil-field rental tool and fishing services provider that operates in the Bakken and Niobrara shale plays. Vision Oil Tools was established in 2000 and currently has sales of about $35 million. Gary Roberts, Vision's CEO and prior majority owner, joined the company in early 2010 and grew the company from one location and eight employees to three locations and 54 employees in over two years. The company recently hired Gay Mayeux, former vice president and controller of Weatherford International, as CFO and added Chris Rivers, former CEO of M-I SWACO, to the company's board of directors. Ross will serve as Vision's chairman of the board. Transaction and bridge financing were provided by Cadence Bank NA of Houston. The corporate insurance program was provided by the Lockton Companies, also in Houston.

STW Resources completes water reclamation pilot

Certified lab testing results conducted on reclaimed oil-field-produced water in the Permian Basin meet industry standards for reuse in oil and gas drilling operations. That's good news for Midland, Texas-based STW Resources Holding Corp., which deployed a proprietary mobile water processing system there in partnership with Bob J. Johnson & Associates of Houston. STW is conducting demonstrations for several major oil and gas producers in the Permian Basin with the intent to deploy fixed and/or mobile systems to process and reclaim produced, brackish, and/or frac water. Volumes range from 5,000 to 60,000 barrels per day per producer.

Terra Energy divesting Canadian assets

Terra Energy has engaged Macquarie Tristone and Scotiabank to seek proposals for divesting up to 100% of its share of assets of NorAm Energy Worx Inc. This represents approximately 140,000 net acres of Montney lands in northeastern British Columbia in the form of a sale or joint venture. Terra Energy is operator for most of its land base and holds approximately 75% working interest through its wholly owned subsidiary, NorAm Energy Worx Inc. Lands include the areas of Farrell Creek/Attachie, Monias, Groundbirch, Hudson, Mica, Inga/Boudreau and Stoddart/Eagle. Montney petroleum and natural gas rights are included for all NorAm lands plus Doig and other rights offered on some of the lands.

A resource assessment for NorAm Montney lands conducted in 2010 resulted in an estimate of 11.9 Tcf net of Total Petroleum Initially-in-place (PIIP) based on only a portion of current acreage and assuming (predominately) only one Montney interval. The Total PIIP consists of discovered PIIP of 5.4 Tcf net and undiscovered PIIP of 6.4 Tcf net.

ONEOK Partners to build Bakken pipeline

Tulsa, Okla.-based ONEOK Partners, LP is entering the crude-oil transportation business with plans to invest $1.5 billion to $1.8 billion to build a 1,300-mile crude-oil pipeline from the Bakken shale in the Williston Basin in North Dakota to the Cushing, Okla., crude-oil market hub. The Bakken Crude Express Pipeline will have the capacity to transport 200,000 barrels per day (bpd) of light-sweet crude oil. It is expected to parallel more than 80 percent of the partnership's existing and planned natural gas liquids pipelines, and will be positioned to transport crude-oil production from the Niobrara shale. Construction is expected to begin in late 2013 or early 2014 and be completed by early 2015.

Redline brings wireless connectivity to Shell wells in Oman

Toronto-based Redline Communications Group Inc., a provider of broadband wireless solutions for machine-to-machine (M2M) communications, has completed the first phase and launch of a larger second phase of a major wireless project for Shell Oil joint venture Petroleum Development Oman LLC (PDO). Over 2,000 of the 5,000 oil wells in their Oman location are connected wirelessly to corporate offices. In addition, rigs and semi-mobile units are also wirelessly connected, allowing person-to-person communications and access to corporate systems regardless of location. Redline Communications has an office in Dubai and has increased staffing in the region to support PDO and other oil and gas customers.

Heckmann prices $250M senior notes due 2018

Pittsburgh-based Heckmann Corp. has priced its previously announced offering of $250 million in aggregate principal amount of 9.875% senior notes due 2018 to be sold in a private placement to qualified institutional buyers within the US and to non-US persons outside of the country. The sale of the senior notes was expected to be completed on April 10, subject to customary closing conditions. Net proceeds will finance the $227.5 million cash portion of the acquisition of TFI Holdings, Inc. and Thermo Fluids Inc. (collectively, TFI); the remaining net proceeds will be used to repay debt under its existing credit facility. Jefferies acted as lead left bookrunner on Heckmann's $250 million senior notes offering. Just recently, Jefferies acted as joint bookrunner on Heckmann's $80 million common stock offering. So far in 2012, Jefferies' energy group has raised around $4.3 billion in debt and equity capital and has completed strategic advisory assignments with aggregate value of approximately $10.8 billion. Heckmann Corp. is a services-based company focused on total water solutions for shale or unconventional oil and gas exploration. Heckmann's water solutions segment, Heckmann Water Resources, or HWR, includes water disposal, trucking, fluids handling, treatment and pipeline transport facilities, and water infrastructure services for oil and gas exploration and production companies.

Cardinal Midstream brings third plant online in Woodford shale

Cardinal Midstream, LLC has brought its third cryogenic processing plant online in the Arkoma Woodford shale. With 220 million cubic feet of natural gas per day (MMcf/d) of operated cryogenic processing capacity, Cardinal is reported to be the largest natural gas processor in Oklahoma's Arkoma Woodford shale. The new cryogenic processing facility, the Tupelo Plant in Coal County, Okla., is capable of processing 120 MMcf/d. The Tupelo Plant complements the two additional cryogenic processing plants Cardinal operates in the play - the Coalgate Plant, an 80 MMcf/d facility adjacent to the Tupelo Plant, and the Atoka Plant, with a capacity of 20 MMcf/d, located 13 miles to the south in Atoka County, Okla. An NGL pipeline connects the Atoka Plant with the Coalgate and Tupelo facilities, where NGLs are delivered to the ONEOK NGL Pipeline system. The Coalgate and Atoka plants are owned in a joint venture with MarkWest Energy Partners, LP. Dallas-based Cardinal is the sole owner of the Tupelo Plant.

Denham Capital closes $3B private equity fund

Denham Capital Management, LP, an energy- and resources-focused global private equity firm, has closed its sixth fund, Denham Commodity Partners Fund VI LP. Launched in July 2011, Denham Capital raised $3 billion in total third-party commitments for Fund VI from a variety of institutional investors. Fund VI was oversubscribed, exceeding the targeted cover amount of $2.5 billion. Consistent with its prior funds, Fund VI will focus on identifying value dislocations in the energy and resources sectors, and applying Denham's operational and commercial expertise and risk management strategies to create value. The Fund will invest in the oil and gas, metals and minerals, and power and renewables sectors, and pursue investments across all stages of the corporate and asset life cycle and all segments of the capital structure. Fund VI's closing brings the amount of invested and committed capital under Denham Capital to roughly $7.3 billion. Latham & Watkins LLP served as legal counsel and Park Hill Group LLC acted as placement agent.

EGPI Firecreek, Cubo Energy to drill in Barnett

Scottsdale, Ariz.-based EGPI Firecreek, Inc. will prepare and conduct drilling programs aimed at the Barnett Formation in West Central Texas with UK-based Cubo Energy, PLC. Initial plans are to prepare and conduct a 3-D Seismic study for 240 acres covering the Boyette property in Shackelford County, Texas. The seismic study will focus on specific Barnett shale formation characteristics that will assist in the drilling of one and possibly two horizontal wells or an equivalent eight vertical wells. Proposed depth of future drilling is expected to be approximately 5,200 feet to 5,500 feet. On March 1, EGPI Firecreek signed an agreement to sell off a portion of its oil and gas interests to Cubo Energy.

Continental to enrich Bakken position

Continental Resources Inc. is looking to boost its position in the oil-rich Bakken with the purchase of Enid, Okla.-based Wheatland Oil Inc. assets for $340 million. Continental recently moved its headquarters from Enid to Oklahoma City as part of an "aggressive growth strategy" in the Bakken shale and the Williston Basin. Privately-held Wheatland's principal assets are an ownership of approximately 5% of the interest acquired by Continental Resources in all leases and wells in a defined portion of the Bakken play pursuant to a participation agreement effective January 1, 2002. The purchase price of $340 million is anticipated to result in the issuance of between 3.90 million and 4.25 million shares of Continental Resources' common stock, about 2.2% of total shares outstanding at the midpoint, according to Stifel Nicolaus analysts. The number of shares will be determined based on a 20-day average of the daily sale prices prior to closing of the transaction. Evercore Partners served as independent financial advisor and Weil, Gotshal & Manges LLP served as independent counsel for the committee.

ZaZa Energy drilling in Texas Eaglebine

ZaZa Energy Corp. has expanded its position in the Eaglebine trend in eastern Texas to a nearly contiguous total holding of approximately 144,123 gross acres through a transaction with Range Texas Production LLC, a subsidiary of Range Resources Corp. ZaZa will commence a six-well continuous drilling program in May that will comprise both vertical and horizontal wells. Under the terms of the transaction with Range, ZaZa will obtain a 75% working interest in the acquired acreage, be the designated operator, commit to drilling a well on the newly acquired acreage (as part of its six-well program), and make two undisclosed payments.

Aker Solutions secures contract with BP Norway

BP has extended its maintenance and modification contract with Aker Solutions, exercising an option in the existing agreement for the Ula, Valhall, Skarv, Hod and Tambar fields. Work under the extended contract will last until April 2014, and the contract value is estimated to be in the range of $139,334,000 to $209,001,000. Scope of work under the contract includes maintenance support services and brownfield modification projects covering engineering, procurement, fabrication and offshore installation. BP Norway's largest field, Valhall, which came on stream in 1982, is expected to produce until 2050, even though it is one of the oldest fields on the Norwegian continental shelf. Contract parties are Aker Solutions MMO AS and BP Norway AS.

Encana seeks partnerships

Encana Corp. is executing its plan to leverage the exploration and development of certain of its oil- and liquids-rich assets through partnership opportunities. In the US, Encana is seeking partnerships to accelerate the commercialization of about 1.2 million net acres within the Tuscaloosa Marine shale straddling the Mississippi and Louisiana border; the Utica/Collingwood formations in Michigan; the Eaglebine play in East Texas; and the Mississippian Lime in Oklahoma and Kansas. In Canada, it plans to market partnership opportunities covering approximately 375,000 net acres in the Alberta Duvernay.

LINN Energy, Anadarko sign JV for oil recovery

LINN Energy LLC and Anadarko Petroleum Corp. entered a joint-venture agreement April 3, whereby LINN will participate as a partner in the CO2 enhanced oil recovery development of the Salt Creek field in the Powder River Basin of Wyoming. Anadarko assigned LINN 23% of its interest in the field in exchange for future funding of $400 million of Anadarko's development costs. Over the next three to six years, LINN expects to invest $600 million, which includes the $400 million of Anadarko's costs and $200 million net to LINN's assigned interest. Anadarko gained access to the acreage in 2002 with the acquisition of Howell Corp., and has been utilizing CO2 to develop the field since 2004. It has spent roughly $65 million per year in its efforts, according to Global Hunter Securities' calculations.

Schlumberger opens lab

Schlumberger recently opened its Houston Geoengineering Laboratory. The 30,000-square-foot facility includes a conventional core analysis laboratory for measuring porosity, saturation and permeability, and a special core analysis lab for tests covering capillary pressure, relative permeability, electrical properties, nuclear magnetic resonance, enhanced oil recovery evaluations, and more.

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