Wednesday, March 13, 2013

Rosneft Approves $14.2B Deal to Buy TNK-BP

Rosneft Approves $14.2B Deal to Buy TNK-BP

Russia's Rosneft announced Wednesday that its board of directors has approved a $14.2 billion financing deal to pay for the acquisition of 50 percent of TNK-BP.

The firm said its board met Monday to make the decision to execute the financing from a group of international banks in order to purchase shares owned by the Alfa-Access-Renova (AAR) consortium.

The meeting also saw the directors agree to expand its cooperation with ExxonMobil and to remove Gani Galiyev from its management board, while appointing two new members: Vice President Yuri Kalinin and acting VP Andrey Votinov. 

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W&T Offshore to Boost 2013 Onshore, Offshore Production

W&T Offshore, Inc. announced production guidance for the first quarter of 2013 in a range of 4.3 million barrels of oil equivalent (MMboe) to 4.8 MMboe and for the full year of 2013 in a range of 17.0 MMboe to 18.7 MMboe.

W&T Offshore began 2013 with a high level of activity that was heavily weighted toward exploration projects and currently have four rigs working in the Gulf of Mexico. W&T Offshore believes its offshore exploration program offers solid opportunities for organic reserve and production growth, as well as building on recent successes.

At its highly successful Mahogany field, the fifth well in the multi-well drilling program, the Ship Shoal ("SS") 349 A-9 development well was brought on production in mid-January at an initial rate of approximately 2,700 barrels of oil equivalent per day (boepd) from the P-sand, which has traditionally been the field's principal productive reservoir. The A-9 well exceeded pre-drill expectations in the main target. Additionally, it discovered another upside reservoir which was also completed and will be retained as a future zone change, increasing total proved reserves for the field. Current average daily gross production from the Mahogany field is approximately 9,150 barrels of oil equivalent (approximately 75% crude oil) which is up from about 1,300 boepd gross in late 2011, an increase of approximately 700% over the last 15 months.

On January 15, 2013, W&T Offshore spud the SS 349 A-14 well, the sixth well in the multi-well drilling program at its Mahogany field, which is an exploration well designed to test the T-sand, a deep play located beneath the main reservoir. If successful, it will expand its proved reserves and possibly create additional development opportunities in the field. The A-14 well also holds proved reserves in the P-sand level, serving as a robust back-up to the exploratory T-sand test. Following the SS 349 A-14 well, W&T Offshore plans to drill the SS 349 A-15 well which is planned to target multiple stacked amplitudes in the sub-salt section. The A-15 also has additional field expansion potential in the P-sand and if successful will further expand the P-sand reservoir limits. W&T Offshore continues to have excellent drilling results to date in this high impact oil field and in the reserve and production expansion potential this field has for the Company.

In addition, W&T Offshore is currently drilling two exploration wells in the Main Pass ("MP") Area. One is located at the MP 108 field, being the MP 108 B-1 well targeting the Tex W-6 sand. W&T Offshore plans to drill another well, the MP 108 B-2 well, immediately following operations on the MP 108 B-1 well. The company recently drilled the MP 159 #1 well to TD but have deemed the well non-commercial. The well is currently being plugged.

W&T Offshore anticipates drilling at least one additional deepwater exploration well in 2013, and will provide the details for that well in the future. W&T Offshore expects to have additional capital expenditures in 2013 on the Mississippi Canyon ("MC") 698 "Big Bend" deepwater discovery that reached total depth in late 2012, once it is sanctioned. Additionally, the company is currently evaluating the 65 deepwater leasehold blocks it acquired in the Newfield property acquisition in the fourth quarter of last year. As a result of the high level of interest in those undeveloped leases, W&T Offshore is currently working on several joint venture arrangements.

The company's development activity in the Gulf of Mexico includes the MC 243 "Matterhorn" A-2 ST well which is currently drilling in the deepwater and expected to add approximately 1,000 boepd production of initial rate.W&T Offshore expects to follow this well with the planned MC 243 A-5 well, a water injection well that will be used for pressure maintenance in the field. The A-5 well is expected to increase the ultimate recovery of the eastern sector of the field, add reserves and assuming success, would lead to additional secondary reserves expansion in other areas of the field.

Other development wells on the 2013 schedule include the High Island 21 A-1 well targeting the LH-20 sand which will twin the previously producing High Island 21 A-3 well. W&T Offshore also expects to finish the tie-back and hook up of the West Cameron 73, a 2012 shelf discovery well with first production expected in the third quarter of 2013.

Onshore, as a result of the company's success with both the Wolfcamp horizontal drilling program and the 40-acre infill spacing, W&T Offshore added value to its Yellow Rose project in the Permian Basin (Martin, Dawson, Gaines and Andrews counties). The 2013 budget provides for the drilling of seven horizontal and 20 vertical wells and it currently has two rigs running in the field.

During the fourth quarter of 2012, the company completed 18 new wells at the Yellow Rose project, bringing the total completed wells for 2012 to 64 wells. During 2012, W&T focused on three specific areas to add value to the Yellow Rose Wolfberry development, which were: (1) enhanced 80 acre vertical development drilling program, (2) down-spaced pilot program to 40 acre spacing vertical development, and (3) exploring the horizontal development potential in the Wolfcamp. Tactically, W&T Offshore focused on field optimization, as well as on continuous and aggressive stimulation development and deployment in the company's vertical and horizontal campaigns. Current production rate for the Yellow Rose project is approximately 5,150 boepd gross which is 100% above field production rates a year ago. This production performance improvement is driven by several factors including attractive vertical well completion performance, continued improvements in the field uptime and effectiveness, attractive results from the 40-acre infill program and, most recently, encouraging results from the new Wolfcamp horizontal wells.

The more recent vertical wells have seen improved initial production rates with the latest wells averaging approximately 67 boepd (average 30 day production rate) as it continues to refine its fracture stimulation program, with vertical well costs averaging approximately $ 2.3 million. Prior to year end 2012, the company carried no "proved" reserves associated with down-spaced 40 acre locations. A portion of its 2012 drilling capital was aimed at infill drilling specific pilot areas to 40 acre vertical well spacing and the company had good success with the down-spacing program, observing positive incremental production and incremental reserves in its 40 acre pilot areas. At year end, W&T Offshore began booking a portion of its 40 acre infill locations into "proved" and expect that trend to continue into 2013, 2014 and beyond. Should it be able to fully develop its acreage on 40 acre locations, the company would possess a total of 200 to 300 40-acre locations across the Yellow Rose project.

Complementing its vertical development, during 2012 W&T Offshore drilled and brought on line two new horizontal Wolfcamp wells, with one well achieving an initial production ("IP") rate of 485 boepd and another well achieving 346 boepd. W&T's longest Wolfcamp horizontal has been a 7,482' lateral with a 23 stage frac treatment. The most recent horizontal well, currently on flowback, has just been stimulated with a 28 stage frac treatment. W&T Offshore is pleased with its initial horizontal well results and the leading completion practices in this emerging play. As a result of the successful horizontal exploration tests of the Wolfcamp formation, W&T Offshore has budgeted to drill and complete seven horizontal Wolfcamp wells for 2013. These wells are designed to have an average lateral length of 5,400 feet completed with between 20 and 22 hydraulic fracturing stages at a total well cost of approximately $ 6.0 million to $7.0 million, depending on the length of the lateral. Based on the early evaluation of the program, W&T Offshore expects IP rates of 350 to 400 boepd and estimated ultimate recoveries ("EUR") of 300 to 450 MMboe, also depending on the length of the lateral. Assuming continued success with this program, W&T Offshore anticipates expanding its horizontal operations in the Wolfcamp formation and potentially testing additional horizontal levels (benches) in other formations on its acreage position. Ultimately, W&T Offshore may consider further vertical well down spacing to 20-acre spacing or even less, adding even greater development potential for its acreage position.

In Terry County, West Texas, the horizontal drilling program is progressing with two wells fracture stimulated and on flowback. To date, the company does not have enough information on the flowbacks to determine its future development plans. W&T Offshore anticipates having more information within the next few months.

In East Texas at the Star Prospect, W&T Offshore completed drilling and fracture stimulation of the third and fourth wells of its initial delineation program. Both of those wells are now on flowback, and the company should be able to determine its future plans on this project in the near term.

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North America Oil, Gas Resources Main Focus of 2012 M&A Activity

North America Oil, Gas Resources Main Focus of 2012 M&A Activity

Upstream oil and gas assets remained the focus of merger and acquisition (M&A) activity in 2012, with the total value of energy deals done last year rising to $321.5 billion from $300.6 billion in 2011, according to Deloitte's year-end 2012 report on M&A activity in the oil and gas sector.

Rosneft's $61.6 billion acquisition of BP-TNK drove buyers' focus on upstream assets, but excluding this deal, North American unconventional and deepwater oil and gas plays remained the focus of M&A activity in 2012. A few major transactions near the end of 2012 bumped total M&A deal value higher, but the number of overall deals completed declined from 698 to 576 in most segments except downstream.

National oil companies and other larger international buyers remained active in North America and other markets as they continue to expand their resource base, said John England, leader of Deloitte's U.S. Oil & Gas and vice chairman of Deloitte LLP, in the report. These companies found the North American market attractive in 2012 due to:

North America's political stability and mature investment environmentInvestment opportunities in well-known North American resource plays with predictive resultsAccess to technology and workforce expertise which has driven the exploration and production boom in unconventional and deepwater resources in North AmericaPotential continued growth that could to an export market for North American resources

Global upstream oil and gas activity grew 50 percent to $253.4 billion last year, compared with $167.9 billion in 2011, while the number of deals grew 11 percent from 518 to 461. The hunt by international companies for North and South American properties should continue as countries such as China and India address their growing energy demands and diversify their portfolios. Large integrated companies should also be active buyers as they look to the market for new properties to offset production declines that have been prevalent among the majority of supermajors.

While M&A activity in the upstream sector remained brisk last year, the oilfield services sector was quiet, partly due to the steadily declining U.S. rig count during 2012. M&A transactions totaled $17.9 billion, a 54 percent decline from 2011, and the number of deals also declined from 97 in 2011 to 57 in 2012.

Softening demand in the second half of the year also put pressure on margins and on public company stock prices, making companies less capable or interested in doing transactions. The shift by producers from dry gas to liquids also forced oilfield companies to relocate resources and services, creating inefficiencies and overcapacity in some areas and a struggle to reposition resources and labor to emerging liquids areas.

However, "2013 may be a year when M&A activity rebounds in the onshore oilfield services sector, as sellers become more realistic about pricing and consolidation," England commented.

Midstream M&A also slowed from the rapid 2011 pace, but activity remained at historically high levels, and continued to focus on transactions that will facilitate serving of the North American shale plays. Midstream M&A total value reached $35.6 billion in 2012, down from $84.5 billion in 2011.

"Growth in the midstream pipeline and processing infrastructure has not kept pace with growth in the unconventional resource plays, providing many opportunities for capital investment that we expect to lead to more midstream deal activity in 2013," England noted, adding that Deloitte believes that some bigger players could enter the market, some consolidation to take place, or a combination of both, if the midstream segment is going to continue supporting shale and tight oil activity in the United States.

Downstream M&A activity held steady, with the value of deals rising to $14.6 billion for 2012 from $11 billion in 2011. The downstream sector has been through a major reshuffling in the past two years, with the spinoff of downstream businesses of two large integrated oil companies and two significant refinery dispositions by BP. Independent companies now mainly dominate North America's refining industry after once being controlled by large integrated firms.

"U.S. refiners in general have seen their underlying business fundamentals greatly improve over the last two years, as a result of fundamental prospects and valuations being highly dependent upon geographic location and access to cheap crude and pipeline capacity," England noted.

Crude oil prices, which have settled into a stable range, set the stage for greater confidence around upstream oil investments. U.S. natural gas prices, which have traded at historic lows thanks to the U.S. shale gas exploration boom which has significantly increased supply, are not expected to rebound significantly in 2013, but deal activity may grow in the exploration and production and service areas.

"At some point the valuations in the natural gas area become so attractive that buyers with a long-term strategy could make a good deal of money," said Roger Ihne, principal with Deloitte Consulting LLP, in the report.

Thanks to technological advancements in drilling and production, the number of completions in North American fields has risen, and Deloitte expects to see improvements not only in cost effectiveness but in safety as well.

However, industry executives and other deal market participants should keep an eye on regulatory direction in the upcoming second term of the Obama administration, England noted. The oil and gas industry has been targeted by some groups in Washington looking for sources of new tax revenues, and whether they achieve the desired results could affect activity in the coming year.

"As the U.S. oil and gas industry and its activities become larger and more publicly visible across the multiple shale and tight oil basins, it is incumbent upon companies to be particularly diligent in following the evolving regulations and be sensitive to environmental concerns as these new plays are developed," England commented.

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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Total to Spend 80% of $28B Budget on Upstream in 2013

Total reported Wednesday that it will spend more than 80 percent of its organic investment budget for 2013 of $28 billion on its upstream activities.

The French major said it expected to achieve production growth targets of 3 percent per year, on average, through to 2015 and that it would potentially achieve 3 million barrels of oil equivalent per day (boepd) by 2017. In 2012, the company produced an average of 2.3 million boepd compared with 2.35 million boepd in 2011.

Total said its production growth should be fueled by 2012 start ups as well as anticipated 2013 start ups, including Anguille in Gabon, Angola LNG, Kashagan in Kazakhstan and the extension of OML 58 in Nigeria.

Meanwhile, the firm said that it is continuing to work in cooperation with the UK authorities towards "a safe and progressive" restart of the Elgin-Franklin field during the first quarter of 2013. Total confirmed that it suffered a three percent decline in its total production due to the Elgin gas leak incident in the North Sea as well as flooding affecting its Nigeria operations.

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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Oil Majors Back Scottish Corrosion Prevention Firm

Scottish oil and gas technology firm LUX Assure announced Wednesday that it has received an investment of approximately $5.2 million from a number of sources, including oil majors ConocoPhillips and Statoil.

The firm, which specializes in corrosion management, will use the funds to transform itself from a technology development business to a service provider for the oil and gas sector.

LUX Assure Chairman Laurence Ormerod said in a company statement:

"This major investment will allow LUX to capitalize on the excellent chemical monitoring products developed by the company. Our CoMic and OMMICA products have been very well received by the industry so this seems to be an appropriate time to dedicate the company to growing sales, both within the UK and overseas. We are delighted to have ConocoPhillips and Statoil as new shareholders."

As well as receiving investment from ConocoPhillips and Statoil Technology Invest, Archangel Informal Investment and the Scottish Investment Bank (a division of Scottish Enterprise) also took part in the funding round, LUX Assure said.

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Iraq Postpones Budget on Account of Kurdistan Dispute

The Iraqi parliament has postponed a vote on the country's 2013 budget, running at $117.5 billion, as lawmakers differ on whether Baghdad should allocate money for companies working in the country's Kurdistan region in the north, lawmakers said Tuesday.

The Kurds have suspended crude oil exports via the Baghdad-controlled export pipeline since December last year, protesting delays in payment to producing companies in the region. Even in November, the Kurds didn't reach the level of 250,000 barrels a day in exports as agreed upon with Baghdad.

"There is no agreement and the vote on the budget has been postponed to an indefinite time," Mahmoud Othman, a leading parliamentarian from the Kurdistan alliance in the federal parliament, told Dow Jones Newswires. The main reason is that the budget hasn't allocated enough money for paying companies exploring for oil and gas in Kurdistan, Mr. Othman added.

The Kurds want the budget to include some 4.2 trillion Iraqi dinars ($3.5 billion) as payments due to oil companies working in the Kurdish region. The Kurds said that this amount would cover retroactive payments from 2010 up to 2013.

Meanwhile the Iraqi Prime Minister Nouri al-Maliki's bloc in the parliament, the State of the Law, is arguing that the Kurds should first pay for the 250,000 barrels a day they have failed to export from November up to now, said Ibrahim al-Mutlaq, a member of the parliament's finance committee.

The central government in Baghdad has made one payment to companies, but Iraqi officials said last year that they wouldn't pay oil firms a second portion because the Kurdistan Regional Government has failed to reach agreed production under an agreement reached in September.

The KRG further annoyed Baghdad when it started unilateral exports of more than 15,000 barrels a day of oil and condensate via trucks to Turkey at the beggining of January and pledged to increase them gradually. The Kurds also plan to set up their own export pipeline away from the Baghdad-controlled one.

Baghdad paid some IQD650 billion last year to companies but decided to suspend payment of another portion of IQD350 billion because the Kurds suspended exports.

Mr. Othman also said there is disagreement over what percentage of the budget should be allocated to Kurdistan spending. Over the last few years, the national budget has allocated some 17% of spending to Kurdistan assuming that the population in the region makes up some 17% of Iraq's total population.

"Many lawmakers argue that some 17% of budget to Kurdistan is too much and should be made less," Mr. Othman said, adding that the Kurds would accept a fresh population census to determine the percentage but not now as it would delay the budget further.

The KRG and Baghdad are locked on dispute over who should control oil in the Kurdistan region. Baghdad considers scores of oil deals signed with companies such as Exxon Mobil Corp., Total SA, Gazprom Neft, DNO International ASA and Genel Energy PLC as null and void because they haven't been approved by the central government, while the Kurds argue that they are legal according to the new constitution.

Also there is disagreement over the defense ministry budget, said Mr. al-Mutlaq, a member of the Al-Iraqiya bloc led by former prime minister Ayad Allawi, an opponent of Mr. Maliki.

"The Al-Iraqiya bloc has also asked to deduct some IQD2 trillion from the defense ministry budget and transfer it to families who were affected by recent floods along the river Tigris," Mr. Ibrahim said. "We think that the defense budget is too much," he added.

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

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BP Names Final Victim of In Amenas Attack

BP confirmed in London Tuesday the identity of the fourth of its employees who were killed in the terrorist attack on the In Amenas gas plant in southeastern Algeria in mid-January.

Stephen Green, who was from Fleet, England, was an HSSE specialist, who had more than 23 years of experience working on major international projects.

The announcement means that BP has now confirmed the identities of all four of its employees who were unaccounted for after the attack. Sebastian John, Carlos Estrada and Gordon Rowan were also among the 40 people at In Amenas who were killed.

"These men were murdered while carrying out their jobs on a normal working day. It was a calculated and evil act," BP Group Chief Executive Bob Dudley said in a company statement.

"As BP mourns the loss of our colleagues, our thoughts are also with the families and friends of all of those who lost their lives in this terrible incident."

At the end of January Statoil, BP's partner in the In Amenas joint venture, confirmed that the last of its missing employees – Victor Sneberg – had been found dead. Statoil lost five of its staff in the attack.

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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Oil Majors Back Scottish Corrosion Prevention Firm

Scottish oil and gas technology firm LUX Assure announced Wednesday that it has received an investment of approximately $5.2 million from a number of sources, including oil majors ConocoPhillips and Statoil.

The firm, which specializes in corrosion management, will use the funds to transform itself from a technology development business to a service provider for the oil and gas sector.

LUX Assure Chairman Laurence Ormerod said in a company statement:

"This major investment will allow LUX to capitalize on the excellent chemical monitoring products developed by the company. Our CoMic and OMMICA products have been very well received by the industry so this seems to be an appropriate time to dedicate the company to growing sales, both within the UK and overseas. We are delighted to have ConocoPhillips and Statoil as new shareholders."

As well as receiving investment from ConocoPhillips and Statoil Technology Invest, Archangel Informal Investment and the Scottish Investment Bank (a division of Scottish Enterprise) also took part in the funding round, LUX Assure said.

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Ecuador's Petroamazonas to Operate With $3.58B Budget

QUITO, Ecuador - Ecuador's state-run oil company, Petroamazonas, will operate with a $3.58 billion budget this year, the company said Wednesday.

Of that amount, about 60% will be used for investment projects for exploration and the production of crude oil and natural gas. The remaining amount will be allocated for operating costs and debt payments, among other things.

As part of its growth strategy, Petroamazonas plans to carry out five pilot projects of oil-enhanced recovery, aiming to increase reserves and production.

Petroamazonas, which in January merged with state-run Petroecuador, operates 14 oil blocks, including the Amistad gas field. Petroecuador, meanwhile, controls sales, refining and transportation activities.

Petroamazonas produces about 313,000 barrels of crude oil a day, about 62% of the Ecuador's oil output.

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

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JKX Oil & Gas Raises Funds

Eastern Europe-focused JKX Oil & Gas announced Wednesday that it has arranged to raise $40 million through a placing of convertible bonds with institutional investors.

Already this month, JKX has made a series of announcements regarding the progress of its operations in Ukraine.

On Monday this week, JKX said the remaining reserves for its Elizavetovskoye field near Poltava, Ukraine, had been revised upwards to 22 billion cubic feet of gas.

On Tuesday, the company confirmed that it was on track to achieve its second-quarter fracture stimulation project on a horizontal section of its R-103 well in the Rudenkovskoye deep tight-gas field in Ukraine.

JKX also announced in a separate statement Wednesday that the equipment it requires to upgrade its LPG plant at the Novo-Nikolaevskoye Complex in Ukraine has been shipped from a construction yard in Alberta, Canada. The new equipment, which is expected to be commissioned in May 2013, will enable the recovery propane and deliver an overall 15-percent increase in LPG production, said the company.

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.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

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BP Names Final Victim of In Amenas Attack

BP confirmed in London Tuesday the identity of the fourth of its employees who were killed in the terrorist attack on the In Amenas gas plant in southeastern Algeria in mid-January.

Stephen Green, who was from Fleet, England, was an HSSE specialist, who had more than 23 years of experience working on major international projects.

The announcement means that BP has now confirmed the identities of all four of its employees who were unaccounted for after the attack. Sebastian John, Carlos Estrada and Gordon Rowan were also among the 40 people at In Amenas who were killed.

"These men were murdered while carrying out their jobs on a normal working day. It was a calculated and evil act," BP Group Chief Executive Bob Dudley said in a company statement.

"As BP mourns the loss of our colleagues, our thoughts are also with the families and friends of all of those who lost their lives in this terrible incident."

At the end of January Statoil, BP's partner in the In Amenas joint venture, confirmed that the last of its missing employees – Victor Sneberg – had been found dead. Statoil lost five of its staff in the attack.

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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