UPSTREAM NEWS
Eagle Ford mineral owners sue ChK
Members of South Texas' Dilworth family and related owners of mineral rights located on three of the family's Texas ranches are suing Chesapeake Energy Corp. and the other working interest owners for more than $9.4 million in alleged unpaid or underpaid royalties. The plaintiffs have also sought a declaration as to the termination of the three leases in question.
The lawsuit filed in state district court in McMullen County accuses Chesapeake of breach of contract and other claims involving oil and gas leases on Dilworth family ranches covering about 15,900 acres and including 85 producing wells in the heart of the Eagle Ford shale play.
Rex Energy enters $175M exploration and development agreement
Rex Energy Corp. has entered into a new $175 million joint exploration and development agreement in the Moraine East and Warrior North operated areas. The company has agreed to jointly develop 58 specifically designated wells in its Moraine East and Warrior North operated areas with an affiliate of Benefit Street Partners LLC (BSP). Under the agreement, BSP has committed to fund 15% of the first 16 wells in Moraine East, 12 of which have already been drilled and completed, and 65% of six wells in Warrior North, three of which have already been drilled and completed. BSP will also have the option to participate in the next 36 wells within the joint development area for a 65% working interest. In addition, BSP will earn a 15% - 20% assignment in Moraine East and Warrior North for all acreage within each unit they participate in.
The agreement with BSP allows Rex Energy to complete 15 additional wells in 2016, while lowering the company's net operational capital guidance to a range of $30 million - $40 million. Total consideration for the transaction is expected to be $175 million, with $37 million committed at closing for the first 22 wells. Once the first 15 wells within the joint development area are flowing into sales, the company will receive reimbursement of approximately $20 million, as these wells were drilled and completed in 2015. After the initial commitment of 22 wells, the company will have approximately 30% of its Moraine East acreage held by production / held by operations. Upon completion of the 58 well program, the company will have HBP approximately 42,000 acres in Moraine East and approximately 10,400 acres in Warrior North.
In the Moraine East Area, the company has commenced the free flow of gas into the gathering and transportation system. Final commissioning of the system's high pressure phase is expected in April 2016.
Cyberhawk completes offshore ROAV inspection
Cyberhawk Innovations, a provider of aerial inspection using Remotely Operated Aerial Vehicles (ROAV), has completed an offshore ROAV inspection in North America for a large oil and gas supermajor. The project was completed over the course of two weeks in Newfoundland, Canada.
Cyberhawk used ROAVs to inspect the live flare, the platform underdeck and the roof of the giant concrete gravity base, and conduct numerous thermal surveys in order to maximize the mobilization. A back log of complex inspection and survey work was competed while the Cyberhawk team was on the platform. Headquartered in Livingston, Scotland, and with bases in the Middle East and SE Asia, Cyberhawk carried out the very first ROAV industrial inspection in 2009. In the oil and gas sector, Cyberhawk has completed more than 200 live flare inspections for oil and gas supermajors across Europe, Middle East, Africa, North America and Asia.
West Africa: The Deepwater Bubble Bursts
A year ago, Douglas-Westwood (DW) commented that E&P companies within West Africa were focusing reduced Capex plans on high-quality deepwater assets in the region. At the time, Brent crude was rebounding towards a mid-2015 peak of over $60 per barrel. However, in the months since this peak, oil prices plummeted once more, with Brent reaching lows of $26 per barrel in January 2016. DW has since revised its outlook considerably for West Africa's deepwater prospects. With Brent on the rise last year and operators reiterating their commitment to deepwater assets in the region, DW foresaw the drilling of 483 deepwater development wells over 2016-2021 with deepwater production to continually increase to 4.0 MMboe/d by the end of this period.
After a myriad of project delays and cancellations, DW's deepwater drilling forecast for 2016-2021 is 44% lower - production is now anticipated to peak at 2.8 MMboe/d in 2019 before declining to 2.5 MMboe/d by 2021. Many of these slippages have been high-profile developments for their respective operators. First oil from Shell's Bonga South West-Aparo in Nigeria is now not expected until well into next decade as a result of cost overruns - further difficulties are likely should issues with extending the production license continue. ENI's long-mooted Etan project struggled to pick up momentum during the market upcycle, therefore, DW do not expect development to start until the early 2020s. Further down Africa's Atlantic coast in Angola, Maersk Oil's ambitious Chissonga development has been put on hold indefinitely - with the project office closed - as the Danish operator focuses on developments already in progress - notably Culzean in the UK North Sea.
The short term outlook for West Africa's deepwater sector is still positive due to projects sanctioned before the market downturn. Large projects in Angola and Nigeria - including Egina (Total) and Kaombo (Total) will see deepwater production increase to 2019. However, once these developments are completed, a significant lull in activity is expected - just 23 deepwater wells will be drilled in 2020 compared with 89 in 2016. Should low oil prices persist in the medium term, DW do not expect to see a recovery to activity levels similar to that of recent years until well into the next decade.
Chevron ships LNG from Gorgon
Chevron Corp.'s first shipment of liquefied natural gas from the Gorgon Project departed Barrow Island off the northwest coast of Western Australia in late March. The cargo will be delivered to one of Chevron's foundation buyers, Chubu Electric Power, for delivery into Japan. The Gorgon Project is supplied from the Gorgon and Jansz-Io gas fields, between 80 miles and 136 miles off the northwest coast of Western Australia. It includes a 15.6 MTPA LNG plant on Barrow Island, a carbon dioxide injection project and a domestic gas plant with the capacity to supply 300 terajoules of gas per day to Western Australia. The Chevron-operated Gorgon Project is a JV between the Australian subsidiaries of Chevron (47.3%), ExxonMobil (25%), Shell (25%), Osaka Gas (1.25%), Tokyo Gas (1%) and Chubu Electric Power (0.417%).
DW: North Sea decommissioning industry to boom after false starts
Douglas-Westwood's North Sea Decommissioning Market Forecast 2016-2040 predicts that between 2016 and 2040 $70-$82 billion will be spent on decommissioning activity in Denmark, Germany, Norway and the UK; a marked increase on any past work that has been completed, as the region enters a permanent decline.
Decommissioning activity is expected to grow over the next few years, driven by the sustained low oil price, the maturity of North Sea fields and the age of infrastructure that has pushed maintenance costs up, leading to a high breakeven price.
The forecast includes two different scenarios, one assumes that decommissioning methods will remain the same, with reverse installations utilizing Heavy Lift Vessels as the most common method. The other scenario considers the impact the Single Lift Vessel Pioneering Spirit and others that follow it could have on the market. Scenario 2 will see cost reductions of around $12B on Scenario 1, demonstrating this impact. It has to be stressed however, that this is contingent on E&P operators embracing this method of removal over the more established method. As a result, a huge amount will depend on the success of early removal projects Yme and Brent.
As the country with the largest amount of installed infrastructure, as well as the oldest platforms, the UK will make up over half of all expenditure, with a total cost of over $50B in Scenario 1 or $43B in Scenario 2. Unlike the other countries in the report, the UK will see reasonably high levels of activity throughout the forecast period. From 2030 onwards, however, Norway will grow to become an incredibly important part of the decommissioning market. It is expected to account for 32% of the total spend 2016-2040, with 79% of this coming in the last ten years, as the large hubs finally begin to lose commerciality.
Shell delivers more Brazil deepwater production
Shell and its joint venture have started oil production from the third phase of the deepwater Parque das Conchas (BC-10) development in Brazil's Campos Basin. Production for this final phase of the project is expected to add up to 20,000 boe/d at peak production from fields that have already produced more than 100-million barrels since 2009.
Operated by Shell (50%) and owned together with ONGC (27%) and QPI (23%), Parque das Conchas Phase 3 comprises five producing wells in two Campos Basin fields (Massa and O-South) and two water-injection wells. The subsea wells sit in water depths greater than 5,900-feet and connect to a floating production, storage and offloading vessel, the Espirito Santo, located more than 90-miles offshore Brazil.
BNK to shut down Poland operations
BNK Petroleum Inc. has filed the paperwork necessary to relinquish the Slupsk concession in the Baltic Basin of Poland, and intends to shut down all operations in Poland.
BNK's efforts to find a joint venture partner for the Slupsk concession were extensive but unsuccessful, and the relinquishment of the concession and shut down of the company's remaining operations in Poland is consistent with BNK's other cost reduction measures. The discontinuation of the company's operations in Poland, which cost about US$1.7 million last year, is expected to result in savings after accounting for shut-down costs.