UPSTREAM NEWS

Baker Hughes signs fullstream support agreement with Twinza

Baker Hughes, a GE company, has signed an agreement with Twinza Oil Ltd. to provide fullstream support on the Pasca A gas condensate field, located off Papua New Guinea (PNG) in the Gulf of Papua.

The Twinza-BHGE fullstream agreement-an industry first-covers services and equipment during Phase I of the Pasca A field Development, including drilling services, wellheads and pressure control equipment for the fourth and final appraisal well. The appraisal well will be drilled in 3Q 2017, which will be suspended as a future development well, and the final investment decision (FID) to proceed to development is expected in 2018. Post FID, BHGE expects to provide an integrated gas processing solution from the wells through to point of export. The fullstream offering includes a wide range of capabilities in drilling services, subsea equipment, gas processing topsides, gas compression and turbomachinery as well as installation and commissioning services. As part of the fullstream package, BHGE was also able to bring its expertise to offer a financial solution to enable Twinza to complete appraisal drilling and proceed to FID.

Pasca is the first offshore oil and gas development in PNG that will produce natural gas liquids (NGLs) in the form of condensate (a light crude oil) and LPG, and will also produce natural gas.

Twinza holds 100% of the Pasca A License and has submitted a development plan for the field that will produce the resource across two phases. Phase I consists of the initial production of NGLs, including condensate and LPG, with reinjection of dry gas ahead of Phase II. During Phase II, dry gas will be exported.

GeoPark, Wintershall make discovery in Argentina

GeoPark Limited, an independent Latin American oil and gas explorer, operator, and consolidator with operations and growth platforms in Colombia, Chile, Brazil, Argentina, and Peru, and Wintershall Energía SA, a subsidiary of the BASF group, discovered an oil field in the CN-V block (GeoPark 50% WI, Wintershall 50% WI) in the Neuquen Basin, Mendoza Province of Argentina.

The Rio Grande Oeste 1 exploration well - operated by GeoPark - was drilled and completed to a total depth of 5,500 feet targeting the Grupo Neuquen formation, where 15 different potential reservoir sands were identified - at depths that range from 1,800 to 5,500 feet - with a potential net pay of 400 feet. Preliminary logging information indicated hydrocarbons in the upper, middle, and lower zones. The complete testing program is still underway. To date, GeoPark has carried out production tests in four reservoir sands, with early results showing a production rate by natural flow of approximately 300 bopd of 28.0 degrees API, with a 7% water cut. Additional testing and production history will be required to determine stabilized flow rates of the well.

This discovery derisks other delineated and adjacent light oil prospects in the CN-V block for future drilling and will provide GeoPark with a reserve, production and cash flow base in Argentina. GeoPark and its partner Wintershall are currently evaluating subsequent activities in the CN-V block, including a development plan for the Rio Grande Oeste oil field.

GeoPark acquired an interest in the CN-V block in 2015 through a partnership with Wintershall. The block is located in the Mendoza Province and covers an area of 117,000 acres, with 3D seismic coverage of 180 sq km next to the producing Loma Alta Sur oil field operated by YPF. The 3D seismic survey was acquired by Wintershall in 2015. The CN-V block also has upside potential in the developing Vaca Muerta unconventional play. Wintershall has the right to take over operatorship pursuant to the terms and conditions of the farm-in agreement.

GeoPark's total work program for 2017 in Argentina includes 7 gross wells ($5-$7 million total) expected to be drilled in 2H2017, targeting shallow heavy oil exploration prospects in the Sierra del Nevado and Puelen blocks (Pluspetrol operated, GeoPark with a 18% WI) in the Neuquen Basin. The Puelen block is located north of the producing El Corcobo oil field, operated by Pluspetrol, and Sierra del Nevado is located east of the Llancanelo oil field, operated by YPF.

Lease Sale 249 yields more than $121M in high bids

The Bureau of Ocean Energy Management (BOEM) has reported that Lease Sale 249 garnered $121,143,055 in high bids for 90 tracts covering 508,096.16 acres in the Gulf of Mexico's Western, Central and Eastern planning areas.

Twenty-seven companies submitted 99 bids. The sum of all bids totaled $137,006,181.

• Shell Offshore Inc. submitted 19 high bids totaling $25,096,163. Its highest bid, $4,500,725, was for Keathley Canyon block 214.

• Chevron USA Inc. submitted 15 high bids totaling $27,917,668. Its highest bid, $5,683,116, was for Alaminos Canyon block 814.

• Exxon Mobil Corp. submitted seven high bids totaling $20,385,425. Its highest bid, $10,800,775, was for Mississippi Canyon block 779.

• TOTAL E&P USA Inc. submitted six high bids totaling $16,799,283. Its and the sale's highest bid, $12,100,717, was for Garden Banks block 1003.

• Anadarko US Offshore LLC submitted 10 high bids totaling $10,601,373. Its highest bid, $3,801,680, was for Mississippi Canyon block 40.

• Statoil Gulf of Mexico LLC submitted four high bids totaling $4,999,904.

• LLOG Bluewater Holdings LLC submitted six high bids totaling $2,649,279.

• Apache Deepwater LLC submitted one high bid totaling $1,1718,090.

• BP Exploration & Production Inc. submitted three high bids totaling $1,663,253.

• LLOG Exploration Offshore LLC submitted three high bids totaling $1,604,659.

• Houston Energy LP submitted seven high bids totaling $444,976.

• Ridgewood Energy Corp. submitted five high bids totaling $1,422,189.

• Ecopetrol America Inc. submitted four high bids totaling $460,000.

William Turner, senior research analyst at Wood Mackenzie, pointed out that 76 of the 90 blocks receiving bids were in deepwater (400+ m or 1,312 ft depth).

Turner said: "Deepwater blocks won the day today, with 76 blocks receiving 98% of high bid value at $118 million. The deepwater industry is emphasizing short-cycle, low-risk prospects above high-impact, wildcat drilling. Today we saw operators continue to focus on areas near existing infrastructure with a majority of bids close to existing hubs or appraised developments.

"However, bids from Chevron, Shell, and Total near pre-FID discoveries, Guadalupe and North Platte, were a vote of confidence in higher-risk, standalone developments with potential for higher rewards."

National Ocean Industries Association President Randall Luthi added: "While the results of today's Gulf of Mexico oil and gas lease sale reflect market realities, they also demonstrate the offshore oil and gas industry's commitment to the US Gulf of Mexico, even with extended low commodity prices and lingering regulatory dysfunction.

"Industry has continually demonstrated a commitment to providing tremendous economic and energy benefits for our nation, despite the fact that unwise energy policies have closed over 94% of US offshore areas to leasing and exploratory activities. Offshore lease sales in the Gulf of Mexico contributed $80 billion to the US Treasury between 2005 and 2014 alone..."

-Reporting from Offshore staff

Westwood: Conventional exploration can compete with US shale

Conventional exploration can be competitive versus US shale in full cycle breakeven costs. That is the analysis from a recent report from Westwood Global Energy Group's E&A Research team. The report examines five years of global high impact exploration as well as benchmarking the performance of 40 international E&P companies and 991 completed conventional wildcat wells at a total drilling cost of $43.5 billion.

Every exploration well drilled by these companies in 2012-16 has been analyzed, together with global frontier and high impact wells drilled by the wider industry, based on published company reports and Westwood's own assessments. Westwood Energy has judged the likelihood of a commercial development for each successful well and made estimates of the most likely recoverable volumes. Resource estimates for pre-2016 wells have been reviewed in the light of recent appraisal or development activity.

Amongst its key conclusions, it reveals that:

• Commercial oil and gas volumes discovered fell to a nine-year low in 2016, as the 'lower for longer' oil price scenario caused companies to reduce exploration programs further, with less exposure to frontier, especially deep water, and emerging play drilling.

• The diminished 19 well frontier program delivered only one commercial success, a modest sized gas discovery offshore India. Frontier oil exploration continues to fail to replenish the emerging play prospect inventory, which is acting as a break on future oil exploration performance.

• The commercial success rate was the highest in nine years at 35%, eight percentage points higher than 2015, with success rates improved on the lower well count in proven plays and proportionally fewer high risk frontier wells.

• Overall drilling finding costs increased to $2.0/boe in 2016 from $1.6/boe in 2015 due to the lack of large frontier and emerging play discoveries and much smaller average discovery sizes. Oil prospect finding costs averaged $3.1/bbl in 2016 - slightly down on the $3.4/bbl recorded in 2015.

• 88% of the gross 17.4 Bboe discovered by the 40 E&P peer group companies since the start of 2013 is still at an appraisal stage, reflecting a marked slowdown in resource progression to production due to the oil price fall.

• Exploration drilling plans for 2017 would suggest a slightly higher (~10%) drilling count than in 2016. Plans are still fluid, however, and the number of wells drilled in the first quarter of 2017 was down 35% on the same period in 2016, with a record high average commercial success rate of ~60%.

• 62 high impact wells are planned globally for 2017, targeting 19.5 Bboe (unrisked), 37% of which is oil. 24 of these wells are targeting frontier plays, 11 of which are in the Atlantic margins and the Norwegian Barents Sea.

Hyperdynamics updates drilling status of Fatala-1 well offshore Guinea

Hyperdynamics Corp. provided an additional update on the drilling status on the Fatala-1 exploration well offshore the Republic of Guinea. The BOP stack was lowered onto the sea floor and latched on to the 20-inch wellhead housing and was fully pressure and function tested before drilling out the 20-inch casing shoe. The casing shoe was drilled out and a formation integrity test was runThe drilling of the 17½ inch hole has progressed to 4,270 meters total depth, or about 1,370 meters below mudline on the way to an estimated depth of 4,545 meters, where the 13-3/8-inch casing will be set above the potentially hydrocarbon-bearing interval at a total depth of approximately 4,900 meters. Ray Leonard, president and CEO of Hyperdynamics, said "In the final drilling stage, we will drill the 12-1/4 inch hole through the interval that we believe holds the potential for a world-class hydrocarbon discovery."