UPSTREAM NEWS
Hercules Offshore to sell Hercules 267 for $3.16M
Hercules Offshore Inc. subsidiary, Hercules International Drilling Ltd., entered into an agreement to sell the Hercules 267 to an undisclosed buyer for $3.16 million. The sale is expected to close imminently, subject to the satisfaction of customary closing conditions.
IHS Markit: Significant potential for operators to apply unconventional technologies to boost recoveries
A new study indicates there is significant upside potential for US oil and gas operators to apply lower-cost unconventional drilling and completion technologies to boost production from tight conventional reservoirs, according to analysis from IHS Markit, a provider of information, analytics and solutions.
The new IHS Markit Energy study, Horizontal Drilling in US Tight Conventional Plays, is based on the assessment of nearly 46,000 US horizontal wells completed between 2010 and 2015. It studies how the unconventional drilling and completion technologies could be applied to the redevelopment of conventional wells in the top 39 established US tight conventional plays where the major shale plays are also being developed.
The key plays identified in the IHS Markit study that have potential to better leverage the horizontal technologies include the Rocky Mountain region (Williston, Powder River and Denver basins), the Permian basin and Eagle Ford play fairways in Texas, and the mid-continent region, including the Anadarko basin.
According to IHS Markit, the average global recovery factor for a conventional oil reservoir is 34%, with two-thirds of the oil still left behind in the ground. Many tight conventional oil reservoirs, however, demonstrate recovery factors of only 15% or less, which is substantially lower than the average recovery factor for conventional reservoirs. (IHS Markit defines tight conventional reservoirs as those with permeabilities of 0.01 to 2.0 millidarcies (md) range that have tended to be sub-commercial in the conventional domain in the past).
"Our IHS Markit research indicates that there are significant potential benefits of applying some of the same drilling and completion techniques that have been used so successfully in the U.S. shale oil plays to increase recovery in these tight, US conventional plays," said Steve Trammel, director of North America well and production content at IHS Markit Energy. "We identified tight conventional plays that were tested with horizontal wells during the last five years, and in our study, which analyzed nearly 46,000 U.S. horizontal wells completed between 2010 and 2015, average initial potential (IP) test rates for the leading tight conventional plays compare favorably with the IPs of established shale oil plays. However, of the horizontal wells we analyzed, just 10% of the horizontal wells drilled were in tight US conventional plays, so there is considerable potential here for operators."
In addition, Trammel said, leveraging these technologies is attractive to operators because the overall break-even costs to develop these projects are much lower and delivery infrastructure is already in place.
"These tight conventional resources are in reservoirs with older vertical wells that can be re-entered by horizontal drilling. The rock properties do not require the size and cost of a hydraulic frack job needed for an unconventional zone, and therefore these are much more economic for operators in the current low oil price environment," Trammel said.
Additionally, Trammel said, leveraging horizontal wells to further test tight conventional plays in these areas has led to the establishment of stacked plays with huge resource potential. "The plays in the Rocky Mountain region, in particular," he said, "have the majority of the highest-ranking tight conventional plays of those we studied in our IHS Markit Energy report, but tight conventional plays in Texas, including the Permian Basin and Eagle Ford fairway, also fared well, in terms of potential for redevelopment."
The IHS Markit Energy report includes an unexpected bonus for operators, Trammel said. "Our analysis identified 25 tight conventional 'sleeper' plays that have been tested with only a few horizontal wells, but have average IP rates greater than 200 barrels of oil equivalent (BOE) per day. In addition, shallow conventional plays may also offer opportunities for operators to leverage these unconventional technologies in the current oil price environment."
ExxonMobil confirms oil discovery offshore Guyana
Drilling results from the Liza-2 well, the second exploration well in the Stabroek block offshore Guyana, confirm a discovery with a recoverable resource of between 800 million and 1.4 billion oil-equivalent barrels, noted Exxon Mobil Corp.
The Liza wells are located in the Stabroek block approximately 120 miles offshore Guyana. Data from the successful Liza-2 well test is being assessed.
The Liza-2 well was drilled by ExxonMobil affiliate Esso Exploration and Production Guyana Ltd., approximately 2 miles from the Liza-1 well. The Liza-2 well encountered more than 190 feet of oil-bearing sandstone reservoirs in Upper Cretaceous formations. The well was drilled to 17,963 feet in 5,551 feet of water.
The Stabroek block is 6.6 million acres. Esso Exploration and Production Guyana Ltd. is operator and holds 45% interest in the Stabroek block. Hess Guyana Exploration Ltd. holds 30% interest and CNOOC Nexen Petroleum Guyana Ltd. holds 25% interest.
Noble Energy commences production at Gunflint in GOM
Noble Energy Inc. has recently commenced production at the company's Gunflint oil development in the deepwater Gulf of Mexico. The two-well field is ramping up and is anticipated to reach a minimum gross production of 20 thousand barrels of oil equivalent per day (MBoe/d), with oil representing approximately 75% of the volumes produced. The net amount to Noble Energy is expected to be at least 5 MBoe/d, with potential for additional volumes dependent upon available capacity at the third-party host facility. The Gunflint development, located at Mississippi Canyon Block 948, is a subsea tie-back to the Gulfstar One facility owned by Williams Partners LP and Marubeni Corp.
Hodge Walker, Noble Energy's vice president, Gulf of Mexico and West Africa, stated, "The Gunflint project marks our fourth successful offshore major project completed within the past nine months, including the start-up of Big Bend and Dantzler in the Gulf of Mexico as well as the non-operated Alba B3 compression platform in Equatorial Guinea. The project was completed on time and under budget and will provide significant impact to Noble Energy as we progress through the rest of the year and into 2017."
Noble Energy operates the Gunflint field with a 31.14% working interest. Other working interest owners include Ecopetrol America Inc. with 31.50%, Samson Offshore Mapleleaf LLC with 19.13%, and Marathon Oil Corp. with 18.23%.
Marathon Oil sees First Gas from Alba B3 Compression Platform
Marathon Oil Corp. achieved first gas production through its new Alba B3 offshore compression platform off Equatorial Guinea. Production from the B3 platform allows Marathon Oil to convert approximately 130 million barrels of oil equivalent of proved undeveloped reserves, more than doubling the company's remaining proved developed reserve base in EG.
Execution of the Alba B3 compression project involved engineering and construction in four countries with Heerema Fabrication Group (HFG) serving as the general contractor.
Marathon Oil's wholly owned subsidiary Marathon EG Production Ltd. holds an approximately 65% working interest in the Alba Field and is the operator, while Noble Energy Inc. owns approximately 35%.
J-W Energy exits upstream, midstream businesses
On July 1, 2016, J-W Energy Company closed on the sale of substantially all of the oil and gas assets owned by J-W Operating Company and substantially all of the midstream assets owned by J-W Midstream Company to affiliates of Aethon United LP.
The assets included in the transaction are located mainly in the North Louisiana and North Texas areas and are comprised of approximately 95,000 net acres and 380 miles of associated gathering and processing infrastructure.
The sale is an exit from the upstream and midstream business by J-W Energy Company, which will continue to own the largest privately-held compression fleet in the US through its wholly-owned subsidiary, J-W Power Company.
In the July 2016 issue of Oil & Gas Financial Journal, J-W Operating ranked No. 14 on the OGFJ100P list of privately-held E&P companies ranked by operated production within the US.
Wells Fargo Securities LLC served as the exclusive financial advisor to J-W Energy on the transaction.
Chevron Approves Next Tengiz Expansion Project
Chevron Corp.'s 50% owned affiliate, Tengizchevroil (TCO), will proceed with the development of its Future Growth and Wellhead Pressure Management Project (FGP-WPMP), which will increase crude oil production at the Tengiz oil field in Kazakhstan by about 260,000 barrels per day. FGP-WPMP is estimated to cost $36.8 billion, which includes $27.1 billion for facilities, $3.5 billion for wells and $6.2 billion for contingency and escalation. The project will raise TCO's total production to approximately 1MMboe/d. WPMP maximizes the value of existing TCO facilities by extending the production plateau and keeping existing plants producing at full capacity. FGP will use sour gas injection technology to enhance oil recovery. First oil is planned for 2022.
Texas E&P highlights
The Texas Petro Index, a service of the Texas Alliance of Energy Producers, recently published statistics from the Texas E&P industry from the first half of 2016.
The statewide working rig count averaged 222, 55.9% less than in the first six months of 2015.
The Texas Railroad Commission issued 3,539 drilling permits, 36.4% fewer than in first-half 2015. Producers recovered an estimated 603.9 million barrels of crude oil, a 5% YoY decline compared to the 635.4 million barrels recovered in first-half 2015.
With crude oil wellhead prices declining 27.6% to average $36.08/bbl, the estimated value of Texas-produced crude oil declined to nearly $21.8 billion. In first half 2015, wellhead prices averaged $49.81/bbl and the value of Texas oil production was estimated at nearly $31.7 billion.