Hilcorp exits GOM shelf with $550M sale to EPL
EPL Oil & Gas Inc. (formerly Energy Partners Ltd.) has executed a purchase and sale agreement to acquire certain shallow water Gulf of Mexico (GOM) shelf oil and natural gas interests from Hilcorp Energy GOM Holdings LLC (Hilcorp) for $550 million. EPL has submitted a 10% cash deposit to Hilcorp, who exits the GOM shelf with this sale. The assets are currently producing approximately 10,000 barrels of oil equivalent (boe) per day, about 50% of which are oil. Estimated proved reserves as of the July 1, 2012 economic effective date totaled approximately 36.3 million boe, 54% of which are oil. The central GOM shelf properties include three fields that Hilcorp had acquired from Chevron Corp. in Ship Shoal Block 208, South Pass 78, and South Marsh Island 239. The three fields account for 64% of the current proved reserves, and approximately 82% of the total proved acquisition PV10 value estimated at $626 million using strip prices as of August 31, 2012. The currently estimated asset retirement obligation to be assumed by EPL is expected to total $120 million. The deal will be financed by cash on hand ($60.8 million, as estimated by Stifel Nicolaus), an expansion of its Bank of Montreal borrowing base from $200 million to $450 million, and a $200 million unsecured bridge loan from Bank of Montreal and BMO Capital Markets (which is expected to remain unutilized). EPL plans to hedge 80% of its natural gas and oil production through 2015. The transaction nearly doubles the company's proved reserves to approximately 74 million boe and drives production above 20,000 boe per day, supports EBITDAX generation in 2013 in the range of $450 million to $500 and is accretive to the company's key operational and valuation metrics.
FMC, Cameron, Anadarko named 'most innovative'
Forbes magazine has chosen three Houston companies to its list of the world's 100 most innovative companies. FMC Technologies, Cameron, and Anadarko Petroleum join the list at the No. 13, No. 72, and No. 73 positions, respectively. A San Francisco company, Salesforce.com, scored the No. 1 position on the list, which is in its second year. US-based companies took 42 of the 100 spots on the list. Forbes ranks the list based on the "innovation premium" methodology the authors of "The Innovator's DNA" developed with HOLT, a division of Credit Suisse.
Antonoil, Schlumberger enter China JV
China's Anton Oilfield Services Group has signed a joint venture with US-based global oilfield services company Schlumberger. The move comes roughly two months following Schlumberger's acquisition of a 20.1% stake in the Beijing-based company. The JV, which will provide integrated project management services for the development of China's onshore oil and gas projects, will be incorporated in China with Antonoil and Schlumberger holding stakes of 40% and 60%, respectively. Members of management from both companies will jointly lead the JV.
Summit acquires midstream assets in Piceance, Uinta
Dallas, TX-based Summit Midstream Partners LLC has entered into an agreement with La Grange Acquisition LP, a wholly owned subsidiary of Energy Transfer Partners LP, to acquire ETC Canyon Pipeline LLC for $207 million. Canyon gathers and processes natural gas in the Piceance and Uinta basins in Colorado and Utah. The gas gathering and processing system consists of more than 1,600 miles of pipe, 44,000 horsepower of compression, processing assets with a total capacity of 97 MMcf/d, and two NGL injection stations. Closing is expected to occur in the fourth quarter of 2012.
Graco Oilfield Services acquires F&F Tool assets
Vernal, Utah-based Graco Oilfield Services will acquire the operating assets of F&F Tool Company, a dba of MB Friend Inc. The acquisition expands the company's exposure within the mid-continent division. F&F's management will join Graco and all F&F employees are being extended the invitation to join Graco. Privately-held Graco Oilfield Services, a dba of Graco Fishing & Rental Tools Inc., provides a full range of well services to oil and natural gas companies.
S&P report examines impact of hydraulic fracturing
The use of hydraulic fracturing and horizontal wells over the past few years have dramatically altered the US energy landscape, and many believe the boom is still in its relative infancy, according to a recent report published by Standard & Poor's Ratings Services. "By combining fracing and horizontal drilling, exploration and production companies have greatly increased their access to previously untapped oil and natural gas reserves, which has led to a significant boost in output," said credit analyst Marc Bromberg. "The result of this pairing has been a significant rise in energy production--a trend that we believe will continue to grow." The fracing and horizontal drilling boom in the US has come strong over the past few years and has been a boon in terms of energy production, creating an oversupply of natural gas reserves and reducing the country's reliance on oil imports. However, S&P claims these technologies do pose certain environmental risks. "We believe the energy industry is poised to continue adding drilling capacity over the next six to 12 months, and service companies will likely benefit as rig demand should remain strong in liquids-rich basins," said credit analyst Stephen Scovotti. "However, due to the overcapacity of pressure pumping equipment, oilfield service companies that provide pressure pumping services are likely to see lower pricing for their services." For E&P operators, the horizontal drilling and fracing boom is among several drivers of profitability, and therefore, credit performance. Completion costs for wells have declined recently, but to varying degrees based on region. While the supply and demand picture is different for the gas and oil industries, a decline in completion costs typically bodes well for companies' profitability. "Though still in its early stage, the horizontal drilling and fracing boom is transforming some regional economies," said Scovotti. "On a larger scale, we think these technologies also have the potential to alter the national economy." "We believe the usage of these technologies will continue, particularly in the US, but it will be accompanied by further regulatory oversight regarding environmental and health concerns," said Bromberg. "We also believe horizontal drilling and fracing present an opportunity for growth in certain international locations."
NA to provide 7 bcf/d of global LNG supply by 2020
A new report from Bentek Energy would seem to indicate that natural gas producers in Canada and the US have something to look forward to if they can hold on through the current low-price environment for a few more years. New export projects currently underway and on the drawing board are expected to provide 6.8 billion cubic feet per day of LNG supply to the global market by 2020, according to the report titled, "LNG Exports: The Global Thirst for North American Shale Gas." The report added that even though plans for 19 LNG export terminals in North America could provide more than 24 bcf/day of export capacity, Bentek expects only six of those projects actually to come online by 2020. Bentek noted that regulatory risk in the US, particularly Department of Energy authorization of exports to non-FTA countries, remains the most significant risk to the LNG export forecast.
Northern's borrowing base increase provides capital for Bakken program
A large non-operating participant in the Bakken Shale, Northern Oil and Gas Inc., in response to its mid-year credit facility redetermination, is increasing its borrowing base from $300 million to $350 million to help fund its capex program. The revolving credit facility was also amended to expand the group of lenders by adding The Bank of Nova Scotia and ING Capital. Northern has participated in more than 1,100 Bakken or Three Forks wells since 2007 and controls approximately 180,000 net mineral acres. "The added liquidity provides NOG ample capital to fund its capex program, which takes into account higher than estimated well costs in the Bakken," said Global Hunter Securities in a note to investors October 2. The company currently has drawn down $68 million under its credit facility. At the end of 2Q12, the company had $25 million in cash. Its 2012 drilling capex budget stands at $387 million, with $284 million already being apportioned in the first half of 2012.
Epsilon enters Canadian JV
Epsilon Energy Ltd. has entered into an oil-focused joint venture in Alberta with a private Canadian company. Epsilon will pay $3 million in drill and completion costs in return for a 50% stake in the project. Subsequent costs are expected to be split between Epsilon and its partner in accordance with their participating interests. "A multi-well program will commence later this year. Should the venture prove successful, a quality still being debated concerning the company's other oil-focused ventures in Saskatchewan and the Brown Dense, it would provide attractive diversification for the company's predominant natural gas production stream," said Global Hunter Securities September 17.
Iraq establishes oil and gas free zone at Basra
The director general of the Iraq General Commission of Free Zones, Dr. Sabah Al-Qaisi, said September 13 that the Iraq General Commission, under the auspices of the minister of finance, Dr. Rafi Al-Essawi, has entered into a joint venture agreement with Basra International Oil and Gas Hub Ltd. (BIOGH) for the creation of a specialized oil and gas free zone, at Khor Al-Zubair, Basra. The zone, totaling roughly 118 million square feet, located directly adjacent to Iraq's strategic Oil and Gas Khor Al-Zubair port, will provide a mixed-use site for manufacturing, storage, and servicing of the expanding requirements of Iraq's petroleum sector. The development will provide benefits of a free zone for the oil and gas logistics supply chain and will include permanent residential accommodation and recreation facilities in a secure environment. It will be self-sufficient in terms of power generation, water, telecommunications, and waste management processing. The zone will also provide users with long-term agreements and a fast-track process for regulatory approvals. The Iraq General Commission of Free Zones will carry out administrative functions and together with the appropriate entities, facilitate on-site customs clearance and the provision of work permits. An economic impact study determined that the project will employ approximately 10,000 Iraq Nationals over an initial period of 12 years.
