GENERAL INTEREST Quick Takes
PDC Energy to acquire SRC in $1.7-billion deal
PDC Energy Inc. has agreed to acquire SRC Energy Inc. in an all-stock transaction valued at $1.7 billion, including SRC’s net debt of $685 million.
With 182,000 net acres in Weld County, Colo., and pro forma second-quarter 2019 total production of 200,000 boe/d (166,000 boe/d in the Wattenberg), the combine would be the second-largest producer in the DJ basin, PDC said. In addition, PDC holds 36,000 net acres in the Delaware basin.
The consolidated footprint will enable a long-term development plan focused on long laterals and trucking elimination, PCD said. Over 95% of anticipated oil production will be transported via pipeline, it said.
Some 80% of the pro forma gross acreage position is in unincorporated rural Weld County, while the remaining 20% is within Weld County local municipal boundaries, with the city of Greeley accounting for half of that total. About half of municipal permits submitted have received local approval, with the remaining in process.
In 2020, PDC plans to invest $1.2-1.4 billion to operate three Wattenberg and two Delaware basin drilling rigs. The plan is expected to generate $275 million in free cash flow assuming $55/bbl and $2.70/Mcf NYMEX oil and gas prices, respectively, with full-year production averaging 200,000-220,000 boe/d.
The combine will be led by PDC’s executive management and will remain based in Denver. PDC’s board will expand to nine with two members from the SRC board expected to be included.
Concho divests New Mexico Shelf assets
Concho Resources Inc., Midland, Tex., has agreed to sell its assets in the New Mexico Shelf to an affiliate of KKR-backed Spur Energy Partners LLC for $925 million (OGJ Online, May 14, 2019). The assets include 100,000 gross (70,000 net) acres with current production of 25,000 boe/d and 2,500 operated wells (35% of total Concho-operated wells).
The sale focuses the portfolio, removes higher cost vertical wells, and will reduce debt, the company said. It will use 60% of the proceeds for debt reduction and the remaining 40% will go towards share repurchases.
Tullow Ugandan project farm-down deal to expire
Tullow Oil PLC said its final investment decision for the Lake Albert joint venture development in Uganda will likely be delayed as a farm-down agreement with Total SA and CNOOC expired Aug. 29 and the agreement terminated. FID was targeted by yearend.
In January 2017, Total and Tullow entered into an agreement whereby Total would acquire 21.57% out of Tullow’s 33.33% interest in the Lake Albert licenses. CNOOC exercised its right to preempt 50% of the transaction (OGJ Online, Jan. 9, 2017). As a result, Total and CNOOC would have each increased their interest to 44.1% while Tullow would have kept 11.8%.
The deadline for closing the transaction had been extended several times, but parties were unable to agree all aspects of the tax treatment of the transaction with Uganda, which was a condition to completing the sale agreements. Tullow’s capital gains tax position had been agreed as per the group’s disclosure in its 2018 full-year results, but the Ugandan Revenue Authority and the joint venture partners could not agree on the availability of tax relief for the consideration to be paid by Total and CNOOC.
“The project is technically mature, and we are committed to continuing to work with the government of Uganda to address the key outstanding issues required to reach an investment decision. A stable and suitable legal and fiscal framework remains a critical requirement for investors,” said Arnaud Breuillac, Total’s president of exploration and production.
Total’s interest will remain at 33.3% on Blocks EA1, EA2, and EA3 prior to the 15% national company back-in, Total being operator of the Block EA1, which contains the largest part of the reserves. Total keeps the right to preempt any future transactions, in case any party divests part or all of its interest.
Tullow will initiate a new sales process to reduce its 33.33% operated stake in the Lake Albert project which it says has over 1.5 billion bbl of discovered recoverable resources and is expected to produce over 230,000 b/d of oil at peak production.
Exploration & Development Quick Takes
NL seeks nominations for 2020 bid round
Operators interested in exploration and development rights offshore Newfoundland and Labrador have until close of business Nov. 13 to nominate acreage in two areas for inclusion in a call for bids next year. The Canada-Newfoundland and Labrador Offshore Petroleum Board is accepting paper nominations or electronic bids on its web site.
Call for Nominations (Parcels) NL19-CFN01 covers Sector NL04-EN in the Eastern Newfoundland region. Call for Nominations (Parcels) NL19-CFN02 covers the Jeanne d’Arc Region.
The call for bids will close in November 2020. License awards would be made in early 2021.
Eni makes gas-condensate find onshore Niger Delta
Eni SPA, through its affiliate Nigerian Agip Oil Co. (NAOC), made a natural gas and condensate discovery in the deeper sequences of Obiafu and Obrikom fields, in OML61, onshore Niger Delta. The well can deliver more than 100 MMscfd of gas and 3,000 b/d of associated condensates and will be immediately put onstream to increase NAOC’s gas production.
The Obiafu-41 Deep well reached 4,374 m TD. It encountered gas and condensate accumulation within the deltaic sequence of Oligocene age comprising more than 130 m of high-quality, hydrocarbon-bearing sands. The find amounts to about 1 tcf of gas and 60 million bbl of associated condensate in the deep drilled sequences. The discovery has further potential that will be assessed with the next appraisal campaign, Eni said.
The discovery is part of a drilling campaign planned by NAOC JV and aimed at exploring near-field and deep pool opportunities as immediate time to market opportunities.
FAR-Woodside arbitration ruling expected by yearend
The International Chamber of Commerce is expected to make a ruling by yearend in the arbitration between FAR Ltd. and Woodside Petroleum Ltd. over Woodside’s equity in the SNE oil field development project offshore Senegal.
FAR said in its quarterly report that a hearing on preliminary issues took place in Paris on July 8-10 before three arbitrators. Written post-hearing briefs are due from FAR and Woodside by late September. FAR brought the arbitration over the sale by ConocoPhillips of 35% interest in the SNE project in 2016 to Woodside for $350 million. FAR, which was an original member of the SNE consortium, contended that it was denied preemptive rights over the ConocoPhillips stake. Woodside dismissed this claim as having no merit.
SNE is a deepwater oil discovery that has been confirmed with many appraisal wells to the point where development plans are now being considered in detail.
The current shareholding is Cairn Energy with 40%, Woodside 35% and operatorship of the development phase, FAR 15%, and Senegal national company Petrosen 10%.
Drilling & Production Quick Takes
Woodside brings Greater Enfield development on stream
A joint venture of Woodside Petroleum Ltd. and Mitsui E&P Australia Pty. Ltd. reported the start of oil production from its $1.9-billion Greater Enfield development on the North West Shelf off Western Australia.
The project, which was approved in 2016, comprises development of the Laverda Canyon, Norton over Laverda, and Cimatti oil reservoirs via a subsea tieback to the Ngujima-Yin floating production, storage, and offloading vessel, which is moored over nearby Vincent oil field.
The program included a major refit of the FPSO in the Keppel Tuas shipyard in Singapore and the installation of subsea infrastructure involving 12 development wells.
The FPSO returned to Vincent field in early May and production from the field recommenced in early July. Vincent lies 50 km off the Western Australia coastal town of Exmouth.
The start of oil production from Greater Enfield was on schedule and under budget, Woodside said. Production from the reservoirs is expected to be a major contribution to Woodside’s targeted annual production of 100 million boe in 2020.
Woodside is operator of Greater Enfield with 60%. Mitsui has the remaining 40%.
ExxonMobil, Mosaic to explore carbon capturing
ExxonMobil Corp. and Mosaic Materials Inc. have agreed to explore the advancement of technology to remove carbon dioxide from emissions sources.
Mosaic has progressed research on a process that uses porous solids, known as metalorganic frameworks, to separate CO2 from air or flue gas. The agreement enables discussion to evaluate opportunities for industrial uses of the technology at scale.
Mosaic Chief Executive Officer Thomas McDonald said the company’s proprietary technology allows for the separation of CO2 “from nearly any gas mixture using moderate temperature and pressure changes.”
The agreement builds upon ExxonMobil’s carbon capture technology research portfolio.
The company supports Cyclotron Road, a fellowship for entrepreneurial scientists that is managed in partnership between Lawrence Berkeley National Laboratory and Activate, an independent nonprofit.
In May, ExxonMobil entered into an agreement to research and develop advanced lower-emissions technologies with the US Department of Energy’s National Renewable Energy Laboratory and National Energy Technology Laboratory (OGJ Online, May 8, 2019).
With a working interest in one fifth of the world’s total carbon capture capacity, ExxonMobil has been able to capture some 7 million tonnes/year of CO2.
Liza Destiny FPSO arrives offshore Guyana
The Lisa Destiny, Guyana’s first oil production vessel, has arrived at the ExxonMobil Corp.-operated Stabroek block, partner Hess Corp. reported. The floating production, storage, and offloading vessel arrived following a 42-day journey from Singapore (OGJ Online, Jan. 21, 2019).
After clearing customs, hookup and installation of the Liza Destiny FPSO will begin. The Liza Phase 1 development, which involves four subsea drill centers with 17 production wells, is on track for startup by the first quarter of 2020 and will produce up to 120,000 gross b/d of oil. The company and its coventurers have so far discovered estimated recoverable resources of more than 3.2 billion boe on the block.
Esso Exploration & Production Guyana Ltd. is operator and holds 45% interest in the Stabroek block. Hess Guyana Exploration Ltd. holds 30% and CNOOC Petroleum Guyana Ltd. holds 25% interest.
Ohio reports higher 2Q Utica shale oil production
Crude oil production from horizontal wells increased at a higher rate year-to-year during the second quarter than for horizontal wells producing natural gas in the Buckeye State, the Ohio Department of Natural Resources (ODNR) reported on Sept. 3.
Shale oil production climbed 9.54% year-to-year for the 3 months ended June 30 to 5,813,755 bbl from 4,488,104 bbl during 2018’s second quarter, the state agency said. Shale gas production increased 0.81% year-to-year to 614,218,362 Mcf during 2019’s second quarter from 554,306,916 Mcf during the previous year’s comparable period, it indicated.
ODNR said the latest quarterly report listed 2,365 horizontal shale wells, 2,317 of which reported oil and gas production during the quarter. Of the wells reporting oil and gas results, it said that the average amount of oil produced was 2,509 bbl; the average amount of gas produced was 265,092 Mcf; and the average number of days in production during the second quarter was 86.
The agency noted that Ohio law does not require the separate reporting of natural gas liquids or condensate. Oil and gas reporting totals listed on the report include NGLs and condensate, it said.
Husky starts production at Dee Valley thermal project
Husky Energy Inc., Calgary, reported it has started production at its Dee Valley thermal project in Saskatchewan, the second of six 10,000-b/d thermal bitumen projects to be brought on stream during 2018-22.
“Dee Valley is the latest in our deep portfolio of repeatable, small-scale Lloyd developments that provide low-cost, reliable feedstock for our upgrader, asphalt refinery, and US refineries,” said Rob Peabody, Husky chief executive officer.
Peabody added that Husky’s Saskatchewan production is not subject to government-mandated production quotas.
Dee Valley will ramp up through yearend, increasing Husky’s thermal production in Saskatchewan to 90,000 b/d.
Dee Valley follows Husky’s Rush Lake 2 Lloyd thermal project, which began production in October 2018 and achieved its 10,000-b/d design capacity the following month.
Current Rush Lake 2 production is 11,000 b/d, with a steam-oil ratio of 2.1.
Four additional Saskatchewan thermal projects are being advanced through 2022, with a combined design capacity of 40,000 b/d.
- At Spruce Lake Central, drilling has been completed and construction of the central processing facility is progressing, with first production anticipated in second-half 2020.
- At Spruce Lake North, foundation work and module fabrication is under way, with start of production planned by yearend 2020.
- At Spruce Lake East, lease construction is advancing, and start of production is set for yearend 2021.
- At Edam Central, regulatory approval has been received and start of production is expected in 2022.
PROCESSING Quick Takes
Sasol starts up cracker at La. petchem complex
Sasol Ltd. has completed production test runs and achieved beneficial operation of the cracker at its long-planned Lake Charles Chemicals Project (LCCP), an integrated ethane cracker and downstream derivatives complex under construction in Westlake, La., near Lake Charles (OGJ Online, June 7, 2016).
As of Aug. 28, the 1.5 million-tonne/year ethane cracker continues to operate stably at a capacity utilization of about 50%, with the company continuing to focus on improving ethylene quality and advancing ramp-up activities in accordance with the project schedule, Sasol said.
Current output from the cracker is used by some of the complex’s existing downstream units, with the remainder sold to external customers.
Achievement of beneficial operations at the cracker follows first production of ethylene at the LCCP on Aug. 24 that was marginally below polymer-grade specification due to the complex’s acetylene reactor system that—before intervention from the catalyst supplier and technology licensor—did not perform as anticipated, the company said.
While completion of all other downstream derivative units at LCCP has continued to advance, the previously announced commissioning schedule for remaining units has changed (OGJ Online, June 3, 2019).
Currently, Sasol said it expects the timeline for LCCP’s remaining units to achieve beneficial operation to be as follows:
- Low-density polyethylene unit: November.
- Zeigler alcohols unit: January 2020.
- Guerbet alcohols unit: March 2020.
- Ethoxylation unit: January 2020.
While the technical issues and delayed beneficial-operation dates for remaining units has adjusted LCCP earnings for the 2020 financial year to $150-300 million from a previous $300-350 million, overall cost guidance for LCCP remains unchanged at $12.6-12.9 billion, Sasol said.
Formosa Plastics to expand Baton Rouge site
Formosa Plastics Corp. Louisiana, a subsidiary of Formosa Plastics Corp. USA, is investing $332 million to expand its production of polyvinyl chloride (PVC) resin and add production equipment in two other units at the company’s industrial manufacturing site in Baton Rouge, La., on the east bank of the Mississippi River.
The project will include installation of new machinery and equipment for the expansion of the PVC resin production unit, expected to result in a 20% increase in production capacity and sales; installation of new machinery and equipment for a halogenated acid production unit for internal use in the production of vinyl chloride monomer; and installation of utilities equipment needed for operations, the Louisiana Economic Development (LED) said.
Launch of the new operations is scheduled for late 2021 or early 2022, LED said.
The expansion of the existing PVC unit will result in an additional 300 million lb/year of resin production, said Paul Heurtevant, plant manager of Formosa’s Baton Rouge site.
LED estimates the project will create 15 direct jobs and 66 indirect jobs. Formosa also will retain 230 existing jobs.
The expansion project is slated to create 500 construction jobs beginning in early 2020, LED said.
LED said it began discussing potential expansion plans with Formosa in March, and the company considered a Texas location before committing to Louisiana.
To secure the project, LED offered Formosa a competitive incentive package that includes a performance-based grant of up to $500,000. The company also will have access to the Louisiana’s Quality Jobs and Industrial Tax Exemption programs, LED said.
Formosa’s Baton Rouge site currently includes three operating units to produce PVC, a synthetic plastic polymer with a variety of uses in the construction industry, including as insulation on electrical wires, in flooring for buildings needing a sterile environment, and as piping and siding.
South Africa’s Enref refinery due scheduled maintenance
Engen Petroleum Ltd. shut down its 135,000-b/d Enref refinery in Durban, South Africa, for planned maintenance beginning on Sept. 2, the company said.
The scheduled activity forms part of the refinery’s ongoing maintenance program, with 21 days planned for reformer regeneration activities and 63 days for maintenance of the plant’s alkylation unit.
Essential for safe, reliable operation of the refinery, the routine planned maintenance will primarily focus on essential plant maintenance and inspection activities in the alkylation unit as well as reformer catalyst regeneration activities, said Sykry Hassim, the refinery’s general manager.
“To ensure that we complete this planned maintenance outage on time, there will be increased traffic as suppliers and contractors service the refinery. We will, however, do our utmost to keep any disruption to a minimum and have detailed planning schedules to mitigate any potential access and capacity issues,” said Hassim.
Hassim also assured motorists and the company’s commercial customers that the outage will not affect Engen’s ability to service their needs.
“As always, Engen’s valued customers remain our first priority, and they are assured that contingency plans are in place to ensure uninterrupted availability of Engen quality fuels and other primary refined petroleum products,” Hassim said.
TRANSPORTATION Quick Takes
Neb. Supreme Court backs state-approved KXL route
The Nebraska Supreme Court ruled that a route approved by the state’s Public Service Commission for the proposed Keystone XL (KXL) crude oil pipeline across the state is in the public interest. The Aug. 23 decision backing the Mainline Alternative Route, which the PSC approved in a 3-2 vote on Nov. 20, 2017, struck down legal challenges by several of the project’s opponents.
“The Supreme Court decision is another important step as we advance toward building this vital energy infrastructure project,” said Russ Girling, president of Calgary-based TC Energy Corp., the project’s sponsor.
Opponents vowed to continue fighting construction of the proposed 36-in. crude oil pipeline from Hardisty, Alta., to Steele City, Neb.
“The Nebraska legislature and a Democratic President can fix this very bad ruling coming out of the Nebraska Supreme Court,” Bold Nebraska founder and president Jane Kleeb said. “There is nothing American about the KXL pipeline—it is a project with foreign steel and foreign tar sands all headed to the export market.”
An American Petroleum Institute official commended the Nebraska Supreme Court’s decision.
“The Keystone XL Pipeline has gone through 10 years of extensive environmental review under both the Obama and Trump administrations, and will create thousands of high-paying jobs, add millions of dollars to our economy, and help provide reliable and affordable energy to US consumers throughout the country,” API Vice-Pres. of Midstream and Industry Operations Robin Rorick said.
Novatek gets field for ‘next’ LNG project
Arctic LNG 1, a wholly owned subsidiary of Novatek, will pay the Russian government the equivalent of $39 million for geological survey, exploration, and production rights to Soletsko-Khanaveyskoye natural gas and condensate field on the Gydan Peninsula of the Yamal-Nenets Autonomous Region.
Novatek said the area will contribute to the resource base “for the next LNG project similar to Arctic LNG 2, with liquefaction trains to be located at the Utrenniy terminal.”
The new license area, with a 27-year term, borders Novatek’s Trekhbugorniy and Gydanskiy areas.
The Arctic LNG 2 project, under construction on the Gydan Peninsula, is to have three trains with capacities of 6.6 million metric tonnes/year each.
Across the Sea of Ob, Novatek is producing LNG from three of four trains planned in its Yamal LNG project.