UPSTREAM NEWS

Total E&P Norge discovers Gas Offshore Norway

Total E&P Norge made a gas/condensate discovery northeast of the Martin Linge field in the North Sea. The objective of the well was to prove petroleum in Middle Jurassic reservoir rocks (Brent group). The well encountered gas and condensate in the Tarbert, Ness, and Etive formations in the Brent group. Preliminary estimations of the size of the discovery are between 2 and 11 million standard cubic meters of recoverable oil equivalents.

The maximum production rate was 2.4 million standard cubic meters of gas/flow day through a 48/64-inch nozzle opening. 30/4-3 S is the fourth exploration well in production licence 043.

The well was drilled to a vertical and measured depth of 4134 meters and 4581 meters below the sea surface, respectively, and was terminated in the Dunlin group in the Early Jurassic. Water depth is 115 meters. The well was drilled with the Maersk Intrepid drilling facility.

Fitch: OPEC cuts might have biggest impact in North America

The following is commentary from Fitch Ratings.

OPEC's latest announcement may end up having the biggest regional impact in the US, given the high sensitivity the shale sector has to oil prices and any subsequent changes in oil pricing, according to Fitch Ratings. We believe that the recently announced oil production targets of 32.5m-33.0m b/d at a meeting last week in Algiers are largely symbolic and unlikely to result in a strong rebound in global oil prices.

However, it remains the case that the US is among the most price-sensitive regions for several reasons. These include its high percentage of fast-response shale production, estimated by the Energy Information Administration (EIA) at 52% of total US oil supply as of year-end 2015, and a healthy supply of drilled but uncompleted wells (DUCs), which also can be brought on quickly if conditions warrant. The EIA estimated the supply of DUCs in oil-rich shale plays (Bakken, Eagle Ford, Niobrara, Permian) at approximately 4,100 as of September 2016.

Efficiency gains and deflation in service costs have helped move US shale producers down the cost curve faster than other regions. While there is significant variability in full-cycle costs both across and within US plays, portions of the lower cost shale plays are economic in the $40/bbl WTI range. Fitch believes a more substantial amount of shale oil production could be 'turned on' at a sustained $55-$60 level.

This heightened sensitivity can be seen in the recent step-up in the rig count, with the Baker Hughes oil rig count having risen by +109 over the past 14 weeks to 425 despite near-term prices that averaged just $45/barrel. This is up 34% from the lows seen in May of this year, but remains far below the all-time high on the oil rig count of 1,609.

Fitch would note that the forward curve for oil for delivery two years out has been largely range-bound below the $55 level. However, if future developments or news flow around possible OPEC cuts were to push the forward prices for the next two years materially above this level, it would allow many US onshore producers to hedge their production forward at economic levels, potentially leading to an early ramp-up in US production.

While such a scenario might prolong the global price downturn, it could also offer a measure of near-term relief to onshore North American drillers and service providers, which have been among the hardest hit names in the space due to the drop off in drilling activity.

Norwegian subsea merger

Subsea technology company Optime Subsea Services AS is set to merge with engineering house Telemark Technologies AS. In addition to the merger, Norwegian industrial investment company Holta Invest AS will become a significant shareholder in Optime Subsea Services.

The merged company will be called Optime Subsea Services. Jan-Fredrik Carlsen will continue in his role as CEO, while the five other co-founders of Optime Subsea Services continue in senior management roles. The merged company will be located at the Telemark Technology Park at Notodden, which is part of the "Subsea Valley" industry cluster in Norway. The company also has an office in Houston, TX, USA.

Telemark Technologies is a specialized supplier of highly technical and optimized pressurized vessel systems for testing operations of subsea, marine, defence, aviation and similar type manufacturing technology. The company has also developed a subsea pump and it possesses considerable expertise in engineering, maintenance and assembly of subsea equipment.

The new Optime Subsea Services will also become the second biggest shareholder of fabrication company Berget AS.

Caelus confirms North Slope Alaska discovery

Caelus Energy Alaska LLC subsidiary Caelus Energy Alaska Smith Bay LLC, has made a light oil discovery on its Smith Bay state leases on the North Slope of Alaska.

Based on two wells drilled in early 2016, as well as 126 square miles of existing 3D seismic, Caelus estimates the oil in place under the current leasehold to be six billion barrels. Furthermore, the Smith Bay fan complex may contain upwards of 10 billion barrels of oil in place when the adjoining acreage is included. Due to the favorable fluids contained in the reservoir, Caelus expects to achieve recovery factors in the range of 30-40%.

The Smith Bay development has the potential to provide 200,000 barrels per day of light, highly mobile oil, which would both increase Trans-Alaska Pipeline System (TAPS) throughput volumes and reduce the average viscosity of oil in the pipeline, extending its long term viability.

The two exploration wells, Caelus-Tulimaniq #1 ("CT-1") and step-out Caelus-Tulimaniq #2 ("CT-2"), targeted a large Brookian submarine fan complex spanning over 300 square miles. The fan was successfully drilled and logged in both wells, encountering an extension of the accumulation 5.25 miles northwest of the CT-1 discovery at the CT-2 location. Gross hydrocarbon columns in excess of 1,000 feet were encountered in each well; with CT-1 and CT-2 logging 183 and 223 feet of net pay, respectively. Neither well was flow tested due to seasonal time constraints, but extensive sidewall coring and subsequent lab analyses confirm the presence of reservoir-quality sandstones containing light oil ranging from 40-45 degree API gravity.

Caelus is currently planning an appraisal, program which will include drilling an additional appraisal well and acquiring a new 3D seismic survey over outboard acreage. The appraisal program will enable Caelus to confirm reservoir continuity, optimize future drilling locations, and ultimately increase reserves. In parallel, Caelus is studying and planning the facilities' build-out which will process and transport the oil to TAPS.

Caelus Energy Alaska LLC, is a privately-held independent exploration and production company headquartered in Dallas with offices and operations in Alaska. Caelus is Operator of the Oooguruk Unit on Alaska's North Slope, and also holds a large portfolio of exploration acreage across the ANS region.

Caelus Energy Alaska Smith Bay is a 75% working interest owner in the State of Alaska oil leases at Smith Bay. Caelus indirectly owns 100% of the equity in Caelus Energy Alaska Smith Bay LLC, with Caelus Energy Alaska O3 LLC, a subsidiary of Caelus, indirectly owning 42% of the equity in Caelus Energy Smith Bay.

Caelus' partners in Smith Bay include NordAq Energy Inc. (17.5% working interest) and L71 Resources LLC (7.5% working interest).

Krewe Energy acquires additional interest at Lapeyrouse Field

Krewe Energy LLC, a privately held oil and gas company based in Covington, Louisiana, recently completed the acquisition of the remaining working interest in the Lapeyrouse Field, giving Krewe approximately 100% interest in the field.

The Lapeyrouse Field is a South Louisiana legacy property that has been actively producing since the early 1940s. The company made its initial entrance into the field at year-end 2015.

To date, Krewe's detailed field study has uncovered a variety of work-over and recompletion opportunities in the field. The company has initiated an ongoing work-over program and production in the field has increased from a rate of less than 100 barrels of oil equivalent per day (Boepd) at the date of acquisition, to the current rate of 500 Boepd.

Krewe Energy was formed by Houston, Texas-based Sage Road Capital together with Krewe Energy's founders, Tom De Brock and Barry Salsbury. The company engages in the acquisition, exploitation and development of oil and gas assets, with a specific focus on conventional production opportunities in South Louisiana.

Faroe Petroleum makes Norwegian sea Discovery

Faroe Petroleum has made an an oil and gas discovery at the Njord North Flank in the Norwegian Sea (Faroe 7.5%). The well and side-track (NF-2 and NF-3) are located approximately six kilometers to the north of the Njord production facility (Faroe 7.5%).

The NF-2 exploration well 6407/7-9 S was drilled to a total depth of 4,105 meters below sea level. The well encountered 102 meters of gross oil-bearing reservoir in Middle and Lower Jurassic sandstones of the Ile and 157 meters of a gross gas condensate-bearing column in Lower Jurassic sandstones in the Tilje formation.

The partnership drilled a side-track well 6407/7-9A to test a fault-block lying to the east which was drilled to a total depth of 4,127 meters below sea level. The well encountered 195 meters of gross gas-bearing column in the Tilje Formation. In addition 140 meters of gross gas-bearing column were encountered in Lower Jurassic sandstones in the Åre Formation. No hydrocarbons were encountered in the Ile Formation in NF3.

Data acquisition and sampling has been performed on both wells. Based on the data acquired, a preliminary estimate of the size of the NF-2 discovery is between 1.3 and 18.9 MMboe for NF-2 and between 0.6 and 9.4 MMboe for side-track NF-3. Collectively these discoveries are equivalent to a range of 1.9 MMboe to 28.3 MMboe (0.14 MMboe to 2.1 MMboe net to Faroe). These results are in line with pre-drill estimates.

The well has now been plugged and abandoned as planned and the partners will start work on assessing the commercial potential of the discovery.

NCS Multistage notes 92-Stage completion in BC Montney

NCS Multistage announces a record 92-stage completion in the Altares BC Montney Formation, executed using the Multistage Unlimited pinpoint frac system from NCS Multistage. The number of stages reflects the industry's continued movement toward tighter frac spacing as shown by a 100% increase in stage counts from 2013 to 2016 in the Montney Formation.

The job was completed in a single trip with more than 4100 MT (9 million lb) of proppant placed at an average pumping rate of 3.5 m3/min (22 bbl/min). Average time per stage was under two hours, with a minimum stage time of just over an hour. The well has a true vertical depth of approximately 7,500 ft and total measured depth of 17,300 ft.