Tuesday, February 12, 2013

Aker Wins Dagny/Sleipner Tie-In Contract

Aker Solutions reported Wednesday that it has been awarded a $117 million contract by Statoil to carry out modification work on the Sleipner A offshore platform in the Norwegian sector of the North Sea. The contract will see Aker carry out engineering, procurement, construction, installation and commissioning (EPCIC) work to tie in gas production from the Dagny platform.

Engineering work for the project will be carried out from Aker Solutions' offices in Stavanger, Bergen and Mumbai and will also engage prefabrication resources at its yard in Egersund, the firm said.

"We are very proud to be selected by Statoil for another tie-in project. Modification work is part of our core business and it is important for us to stay competitive and be awarded key projects such as this," Tore Sjursen, Aker's head of maintenance, modifications and operations, said in a company statement.

The Sleipner area is the second largest gas producer in the North Sea, after the Troll field. The Dagny field is located approximately 20 miles northwest of Sleipner East. Dagny was discovered in 1974.

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Statoil Hostage Victims' Bodies Being Flown Home

The caskets of four Statoil employees, who were killed in the recent In Amenas hostage crisis in southeastern Algeria, are being flown home Wednesday, the company announced.

Statoil confirmed Saturday that the four employees – Tore Bech, Hans M. Bjone, Thomas Snekkevik and Alf Vik – were all dead as a result of the crisis, which came to an end when Algerian forces launched an operation against the Islamist hostage takers a week earlier.

Statoil CEO Helge Lund, along with Executive Vice President Lars Christian Bacher and Senior Vice President Anders Hatteland, will be in attendance with the families of the victims to receive the caskets in a private and closed reception, the firm said.

Statoil added that its country manager for Algeria, Victor Sneberg, is still missing.

On Tuesday, BP finally confirmed the identities of three of its employees who were killed as a result of the In Amenas hostage crisis. They were: Sebastian John from Nottingham, England, a member of the firm's graduate development program; Carlos Estrada, a Colombian who was living in London and had worked for BP since 1995; and Gordon Rowan from Oregon, U.S.

A former engineer, Jon is an award-winning editor who has covered the technology, engineering and energy sectors since the mid-1990s. Email Jon at jmainwaring@rigzone.com.

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ConocoPhillips 4Q Profit Down 58% as Commodity Prices Fall

ConocoPhillips 4Q Profit Down 58% as Commodity Prices Fall

ConocoPhillips' fourth-quarter earnings fell 58% as commodity prices fell and as the exploration and production company was hurt by lower average realized prices for oil and natural gas.

"We achieved our production targets, continued to successfully execute our growth projects and drilling programs, and announced significant progress on our asset disposition program," said Chairman and Chief Executive Ryan Lance. "Our quarterly production from continuing operations is growing and we delivered strong organic reserve replacement."

Conoco is in the midst of a three-year plan aimed at improving its balance sheet and focusing on more-profitable, unconventional fields in North Dakota, Texas and other plays throughout North America. The company spun off its refining, pipeline and chemicals business as Phillips 66 (PSX) during May.

Including its recent deal to sell some properties in Montana and North Dakota to Denbury Resources Inc. for $1.05 billion, Conoco had announced total asset sales of about $12 billion since the beginning of 2012, far exceeding the company's stated goal of $8 billion to $10 billion in asset sales by the end of 2013.

ConocoPhillips reported a profit of $1.43 billion, or $1.16 a share, down from $3.39 billion, or $2.56 a share, a year earlier. Excluding disposition-related impairments, discontinued operations and other items, adjusted earnings fell to $1.43 a share from $1.55 a share. The company said adjusted earnings fell primarily due to lower commodity prices.

The latest period included a loss of 32 cents a share from discontinued operations, while the year-ago period included income of $1.61 from discontinued operations. Conoco also noted that its recent agreements to dispose of interests in the Kashagan Field and the Algeria and Nigeria business units, which have been reported as discontinued operations, hurt adjusted earnings by two cents a share in the latest period.

Sales and other operating revenues slipped 2.4% to $15.57 billion. Analysts polled by Thomson Reuters most recently projected earnings of $1.42 on revenue of $13.31 billion.

Production from continuing operations edged up 1.8% to 1.566 million barrels of oil equivalent a day. The company said the increase was primarily due to new production from major projects and drilling programs, as well as higher production in Libya and China. Average realized prices for crude oil fell 2.7% and for natural gas slipped 1.5%.

Earlier on Wednesday, Phillips 66 reported that fourth-quarter earnings fell 65% amid a $564 million investment write-down and weaker revenue, masking the benefits of stronger refining and chemical margins.

Copyright (c) 2012 Dow Jones & Company, Inc.

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Chesapeake Asset Sales Likely to Accelerate with McClendon Departure

Chesapeake Energy's asset sale pace will likely accelerate beyond $17 billion to $19 billion in assets for 2012/2013 in light of co-founder and CEO Aubrey McClendon's departure in April, as the company's board will likely favor pulling the present value of Chesapeake's massive 15.1 million undeveloped acreage forward, according to a Jan. 30 research note from GHS Research.

The pending departure of McClendon over "philosophical differences" took GHS analysts by surprise. In a meeting with McClendon in last year's fourth quarter, GHS analysts said they came away thinking that these philosophies were more in line than worlds apart.

"In fact we were told that everything positive that could come from tighter corporate discipline at Chesapeake would in fact emerge," according to a Jan. 30 GHS research note.

Analysts were also told that the board was on the right track in terms of setting management's 2013 bonus criteria in which return on capital, efficiency gains, and hitting budgets would be the favored incentives versus prior year targets that centered almost entirely on growth.

Chesapeake Chairman Archie Dunham told company employees in an email that Chesapeake is not for sale. GHS does see value for a major who might want to make a play on Chesapeake, which has massive undeveloped acreage positions in plays such as the Utica, Marcellus, Eagle Ford, Mississippian and Power River/DJ Basin.

However, Chesapeake's intimidating capital structure, which includes seven joint ventures, $12.6 billion in long-term debt, $3 billion in preferred equity, and $2.4 billion non-controlling interests, present complications.

"We think that a major with lower cost of capital versus Chesapeake can quickly get to a starting point of $30/share of value fairly easy," GHS noted.

To meet future funding gaps, Chesapeake needs to sell a large, desirable position of undeveloped acreage in order to right-size its balance sheet, as selling production by itself is not accretive to multiples, and the loss of cash flow generation offsets an improved balance sheet, according to a Jan. 30 research note from TPH Energy Research.

"Given the current strategy, the Marcellus is the only gassy asset that fits the bill," said TPH analysts, who believe Chesapeake's Marcellus asset could fetch $8 billion, or $6.4 billion after tax.

Even after selling its single most valuable asset, it's not enough to repair the long-term leverage trajectory without making other adjustments to future plans, such as scaling back leasing and spending less on ancillary investments.

A sale of Marcellus assets would reduce 2013 cash flow by $550 to $600 million, according to TPH estimates, while reducing aggregate production by 22 percent. The cost structure of the company also would change slightly with gas differentials worsening by 10 percent to 15 percent, given transportation commitments on other assets.

All else equal and assuming no incrementally announced asset sales, TPH anticipates the company will reaccumulate $9 billion in new debt by year-end 2015 which again puts the balance sheet in an undesirable position. Chesapeake would have to further reduce drilling activity in the Mississippi Lime and the Cleveland-Tonkawa, and reduce capital expenditures by $500 million to $1 billion per year, and leasing by $300 million per year.

"Only then would Chesapeake's outspend be in-line with cash flow growth by 2015," TPH noted.

Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.

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AWE Sees Revenue Increase, HSE Measurement Improves

AWE posted Wednesday a rise in revenue and production volume, and an improvement in its health and safety (HSE) measurement for the quarter ended Dec. 31, 2012.

In its quarterly report, AWE noted that sales revenue for the three months to Dec. 31, 2012, was at $80.6 million, up 13 percent from the previous quarter. The company produced 1.3 million barrels of oil in the same period, up 33 percent from three months ago.

AWE attributed the rise in production mostly to the resumption of output from the BassGas project and a ramp up in drilling activity at the Sugarloaf asset. The BassGas project – located offshore southeast Australia – was shut-in for ten months last year for platform upgrading works. AWE was able to restart production at the BassGas project in mid-October last year. For its onshore Texas-based Sugarloaf project, AWE saw increased oil and gas production through an additional 12 wells which were brought online last year. At present, the Sugarloaf project houses 63 producing wells.

AWE also saw improvements on the HSE front. The company posted zero Lost Time Injuries (LTI) for the quarter ended Dec. 31, 2012.

"Given the nature of our industry, it is important that we remain committed to our goal of zero harm and strive to ensure that our employees are award of safety at all times," AWE's Managing Director Bruce Clement said in a statement.

During the financial year 2011/12 ended June 30, the company recorded six LTIs across its operations. AWE acknowledged that the outcome was unacceptable.

AWE stated in its 2012 report that its key HSE objectives for 2012/13 include: recruiting a corporate HSE manager, developing an integrated HSE management system, implementing a recognition program for business units delivering the best safety performance and establishing systems for sharing best practices.

AWE is maintaining its target of zero LTIs for the financial year 2012/13.

Quintella has reported on the upstream and downstream oil and petrochemicals markets from 2004. Email Quintella at quintella.koh@rigzone.com.

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CNPC: China 2013 Oil Demand Expected to Rise 4.8%

China's oil demand in 2013 is expected to rise to 514 million metric tonnes, up 4.8 percent, a research institute affiliated with China National Petroleum Corp., the country's biggest energy producer, said Wednesday.

In an annual report, the CNPC Research Institute of Economics & Technology said oil demand is expected to "bounce back slightly" in line with a nationwide "economic rebound" this year.

China's economy slowed in the first three quarters of 2012 before recovering in the fourth quarter.

The CNPC affiliate didn't say how it calculated domestic oil demand or whether it included crude oil or refined oil products in the calculation.

Net imports of crude are expected to rise 7.3 percent to 289 million tonnes, or 5.8 million barrels a day, in 2013, it said. Dependence on foreign crude is expected to rise to 58 percent, it added.

Dependence on foreign crude was 57 percent in 2012, customs data showed.

The country's demand for refined oil products will rise 5.8 percent to 293 million tonnes, growing at a slightly faster rate than in 2012, CNPC said.

Output of oil products will rise 6.2 percent to 299 million tonnes.

China's apparent consumption of natural gas will rise 11.9 percent to 165 billion cubic meters, CNPC said, but didn't say how it calculated it.

Natural gas will account for 5.8 percent of the country's total energy mix in 2013, it added.

Natural gas imports will rise 23.8 percent to 53 billion cubic meters, mostly due to a rise in supplies from Myanmar.

Liquefied natural gas imports will rise 14.6 percent to 16.5 million tons, while natural gas imported via pipeline will reach 30 billion cubic meters, up 31.6 percent.

The combined domestic production of natural gas and coal-bed methane gas will reach 115 billion cubic meters in 2013, up 6.8 percent.

CNPC also said China's crude-oil refining capacity will grow 6.9 percent to 614 million tons in 2013. The country will process 489 million tons of crude in 2013, up 5.4 percent.

Copyright (c) 2012 Dow Jones & Company, Inc.

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Clough Aquires Leading Commissioning Contractor

Engineering and project services company Clough disclosed Thursday that it has acquired e2o, a leading provider of specialized commissioning, completions and hazardous area inspection services to the energy and resources sectors.

Clough will acquire e2o for approximately $15 million with $9 million in cash being paid on completion of the deal and an additional $5 million in cash and shares being paid over a three-year period, subject to meeting certain performance criteria.

The acquisition is expected to be Earnings Per Share (EPS) accretive in the first full year of ownership. For the financial year 2014, e2o should deliver in excess of $5 million EBIT from forecast revenue of approximately $42 million.

e2o is well positioned in the LNG sector, and is currently working on commissioning scopes for major LNG projects, including Chevron's Wheatstone LNG, Origin's Australia Pacific LNG, and Santos' Gladstone LNG projects. e2o will continue to operate under its existing strong management team and brand to provide an integrated and independent commissioning service to clients. This will increase Clough's project service capabilities and enhance the company's range of services to operators in the energy and resources industry.

The Australian commissioning market has an excellent outlook with significant growth predicted in this sector in the next four years, as major LNG projects move from construction to operations.

Clough CEO and Managing Director Kevin Gallagher said: "The acquisition of e2o aligns with our growth strategy, supporting our plan to strengthen expertise in our commissioning and asset support business and to become the pre-eminent commissioning contractor in Australia.

"e2o is one of Australia’s leading commissioning contractors that has achieved and continues to achieve rapid growth. The company provides access to a database of more than 2,000 highly qualified personnel, providing the ability to quickly mobilize professional teams to suit project requirements.

"Through our acquisition of e2o Clough aims to provide clients with a seamless transition from construction to operations resulting in a flawless start-up of facilities and increased productivity."

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Origin Energy Sees Decline in Production, Sales Revenue

Origin Energy released its quarterly production report for its exploration and production business, reporting production of 29 petajoules equivalent (PJe) and sales revenues of $207 million (AUD 200 million).

When compared to the previous quarter, production was 13 percent lower, while sales revenues saw a decline of 11 percent.

Origin said that the drop in production is due to scheduled maintenance shutdowns at the Otway and Kupe gas plants for 23 days and 25 days respectively, partly offset by the return of production at the BassGas project. The company's lower production volume directly impacted its revenue for the quarter.

Origin noted that significant progress continues on the Australia Pacific LNG (APLNG) project, and at the end of the reporting period, the upstream component of the project was 29 percent complete and the downstream component was 31 percent complete. Origin added that it was not required to make any cash contributions in the December quarter as a result of Sinopec's cash injection and the first draw down from APLNG's $8.5 billion project finance facility.

Origin also revealed that the APLNG project ran into recent operational hiccups following tropical cyclone Oswald in late January.

"Flooding and rainfall impacted construction activities due to access restrictions and wet conditions. Drilling was halted for approximately three days due to access constraints, while site activities on Curtis Island were restricted for seven days," Origin said in a statement.

Quintella has reported on the upstream and downstream oil and petrochemicals markets from 2004. Email Quintella at quintella.koh@rigzone.com.

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Shell Continues with Drive to Grow Upstream

Shell Continues with Drive to Grow Upstream

Royal Dutch Shell reported Thursday that it is to continue with its strategic drive to grow its upstream businesses, with ongoing "selective" investment in its downstream activities.

Shell said it has around 30 new projects under construction, which it believes will unlock some seven billion barrels of resources. After ending 2012 with production averaging 3.4 million barrels of oil equivalent per day, Shell believes it is set to achieve around four million boepd in 2017/2018.

"With the first year of our 2012-2015 growth targets completed, Shell is on track for plans we set out in early 2012, despite headwinds last year," Shell CEO Peter Voser commented in a statement.

"Shell is competitive and innovative. We are delivering a strategy that others can't easily repeat, with unique skills in technology and integration and a worldwide set of opportunities for new investment."

For 2013, Shell expects to make an net capital investment of $33 billion. $12 billion of this will go into what it calls its upstream and downstream "engines" – the mature, cash-generative businesses in Shell. Some $18 billion will be directed at "growth priorities": integrated gas, deepwater and resource plays. Another $4 billion will be invested in 2013 in "future opportunities" such as Nigeria onshore, Kazakhstan, Iraq, the Arctic and heavy oil.

In a separate statement, the company reported that it had suffered a fall in its profit (on a 'current cost of supplies' basis) of six percent in 2012 to $27 billion.

A former engineer, Jon is an award-winning editor who has covered the technology, engineering and energy sectors since the mid-1990s. Email Jon at jmainwaring@rigzone.com.

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Contact Exploration Announces Participation in New Acreage and Well

Contact Exploration said Wednesday that it will be participating in a new non-operated Montney well, immediately adjacent to its existing 25 percent working interest Kakwa acreage. The operator advises that drilling of this well is expected to start in mid-February. Contact is to pay 23.75 percent of the costs of drilling and casing this well to earn an average 23.75 percent working interest in the Montney Formation in 2.25 gross sections of lands contiguous to Contact's existing Kakwa acreage position, subject to a 5 percent non-convertible gross overriding royalty on the production from the well. Once earned, Contact will hold 27 gross (12.75 net) sections of Montney acreage at Kakwa.

The first Contact-operated horizontal Montney well has been on production since Dec.1, 2012. Various capacity bottlenecks associated with downstream processing restricted December 2012 production from this well. Upon introducing additional condensate handling equipment at the well site on Jan. 4, 2013, Contact has maintained stable gross production averaging 3.8 million cubic feet per day (mmcfd) and 575 barrels per day (bbld) well head condensate. Contact has a 37.5 percent working interest in the 13-17 well, before payout. 

Contact's second operated Montney well has been successfully tied into downstream processing facilities. In January 2013, the 14-30 well was flowed for only a brief period, due to the third party gas plant not having capacity for the extremely high levels of free flowing condensate from the well.

Contact's third operated Montney well is being drilled from the same surface location as the 14-30 well, with drilling scheduled to be finished in mid-February 2013, and completion operations anticipated to be finished by mid-March 2013. Once completion operations on the 3-19 well are finished, Contact will equip the 14-30 and 3-19 wells in a similar fashion to the 13-17 well, such that condensate can be separated at location, allowing for flow of natural gas from these wells to the third party facility and for condensate to be trucked directly to the sales point. Contact has a 25 percent interest in both the 14-30 and 3-19 Wells. 

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