SandRidge Approves TPG-Axon Board Candidates

SandRidge Energy Inc. – which has faced criticism over its financial decisions and calls for CEO Tom Ward to resign and the board to be replaced – has approved the direct candidates proposed by investment firm TPG-Axon, the company reported Tuesday in a U.S. Securities and Exchange Commission filing.

The decision was made in response to Delaware Chancery Court Judge Leo E. Strine Jr.'s ruling that SandRidge's board of directors had violated its fiduciary duty to shareholders by refusing to approve TPG-Axon's slate of director nominees, and barred SandRidge from soliciting consent revocations until TPG-Axon's director nominees were approved.

"This is just the latest in a pattern of this board of putting their own interests ahead of the shareholders – this board simply has no shame," TGP-Axon Founder Dinakar Singh commented in a statement. "This is the second time during out solicitation that this Board has chosen to waste the Company's resources in a useless court battle in a desperate attempt to entrench themselves."

In early February, SandRidge's board decided it would hold off on approving TPG-Axon's director candidates, saying it believed that any change of control event under the Indentures, or legal document issued to lenders describing key terms of a bond offering, during current market conditions was not likely to have material consequences for SandRidge and its stockholders.

When SandRidge's board of directors initially reviewed the potential consequences of TPG-Axon's proposals to replace SandRidge's board of directors, certain potentially significant consequences were identified that could occur under SandRidge's indentures governing its senior notes, the company said in the filing. The company's board found that a change of control would require SandRidge to offer to repurchase its outstanding senior notes under the Indentures, in the absence of advance approval by the incumbent directors of the director candidates proposed by TPG-Axon group.

"The Board continues to oppose the election of the director candidates proposed by TPG-Axon group, believes their election is not in the best interest of the company's stockholders, and recommends that stockholders support the company's existing experienced board of directors," SandRidge said in the filing.

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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Subsea 7 Scoops Up Petrobras Work Offshore Brazil

Subsea 7 S.A. announced the award of three contracts with a combined value in excess of $300 million from Petrobras.

The scope of work comprises the installation of flexible lines by the Seven Seas, under two lump sum contracts and one day rate contract.

The lump sum contracts encompass the installation of two export flexible Lazy Wave Risers at the Sapinhoa and Lula NE fields in the Santos Pre-Salt Basin in water depths of approximately 6,890 feet (2,100 meters). The day-rate contract encompasses the project management, engineering and installation of Petrobras - supplied flowlines and umbilicals. Operations will commence in 2013.

"We’re proud to be selected by Petrobras to perform these important projects, using our in-depth experience of operating in ultra-deep water. We look forward to supporting Petrobras in future developments," Subsea 7 Senior Vice President for Brazil Victor Bomfim said.

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Norway May Adjust Planning Guidelines for Oil, Gas Projects

OSLO - Norway will review some oil and gas projects and may change its planning guidelines, the government said Wednesday, after the operator and owner of the unsafe Yme platform agreed to scrap it before it had produced a drop of oil.

The Norwegian Ministry of Petroleum and Energy will ask the country's Petroleum Directorate "to review some bigger development projects that recently have or should have entered production," said ministry state secretary Per Rune Henriksen.

The owner of the Yme platform in the North Sea, Dutch oil service company SBM Offshore NV, said Tuesday it would pay operator Talisman Energy Inc. $470 million to remove Yme, located in the southeastern part of the North Sea. The platform was evacuated last summer when cracks were discovered in its structure. This is the first time in Norway a platform is to be scrapped without producing oil.

The dismantling of Yme platform is an untypical case, but it raises critical issues over the safety and planning of oil and gas projects, and also has serious cost implications for the government. Other recent oil and gas projects in Norway have also been hit by delays, cost overruns and quality concerns.

In total, the 24 ongoing oil and gas developments off Norway are estimated to overrun their initial budgets by 49 billion Norwegian kroner ($8.6 billion), according to the 2013 government budget. The lion's share of the overruns are at the Skarv, Valhall and Yme projects, it said.

The government's revised project cost of the BP PLC-operated Valhall field is now NOK46.7 billion, up 85.7% from BP's initial estimate from 2007. And the Yme project cost was estimated at NOK14.1 billion, up 188.4% from the initial estimate, the government said.

In Norway, oil companies can deduct 78% of their investments from their tax base, which means that the government can incur huge losses in the form of lost tax revenue due to overruns. The government said that in the case of the Yme project taxes would be handled by the appropriate authorities, without giving any figures.

"This is a project that up until now has only had losers. The economic losses have been huge for all the involved parties," said Mr. Henriksen.

The Norwegian government said it may change the planning of oil and gas projects to reduce the risk of repeating past mistakes, but didn't specify what changes it was considering. Such a review would also reduce tax revenue losses.

Based on the directorate's review, the ministry "will consider whether adjustments should be made, for instance in the guidelines for plans for development and operation," said Mr. Henriksen.

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Oil Industry Boosts Efforts to Coax More from Shale

The oil industry is increasing spending on research that it hopes will make it cheaper and easier to coax more crude and natural gas from shale formations and deep-sea oil fields, extending and accelerating the U.S. energy boom.

The largest oil-field-service firms--Schlumberger Ltd., Halliburton Co. and Baker Hughes Inc.--raised their research and development budgets by 24% from 2010 to a combined $2.1 billion in 2012. In recent years, these companies, which provide a range of services for energy exploration, have become the primary R&D engines of the oil industry, surpassing spending by oil-and-gas companies such as Chevron Corp. and Royal Dutch Shell PLC.

The hunt for new sources of fossil fuels has led energy companies into deeper offshore regions and into dense shale formations, both of which are expensive to develop.

Much of the oil-field companies' research is focused on understanding shale rocks better and developing improved tools to get more oil and gas from these formations. A decade after large-scale exploitation of shales began, the industry is drilling thousands of wells every year in Pennsylvania, Texas, Louisiana, Ohio, Oklahoma and North Dakota, and is testing other shale rocks in California and Mississippi.

Right now, even with horizontal drilling and hydraulic fracturing, new shale wells tap only a small percentage of the oil and gas trapped in small pores in the rock, leaving more than 75% behind.

"From 2004 to 2012, the development of shales was basically, hit it with a big sledgehammer and see what comes out," says Richard Spears, vice president of Spears & Associates, a Tulsa, Okla., firm that tracks oil-field spending. "Now the question is who can do it the best and optimize the process. Shales aren't tube socks, a one-size-fits-all thing," he said, pointing to using fracking techniques of differing scale and intensity in different shale formations.

Drilling improvements could mean that the North American energy boom, which has seen natural-gas production rise by 19% and oil by 37% over the past five years, could get a new boost from better tools.

"We are in the dawn of this new age, so now the whole industry is starting to look at this resource and figure out ways to get as much of the oil and gas out as it can from these locations," says Dan Hill, chairman of the Texas A&M University petroleum-engineering department.

He said that small improvements in hydraulic-fracturing techniques, in which pressurized water, sand and chemicals crack open rocks far below the Earth's surface, could result in significant profits for the oil-field companies and additional energy for global markets. One new technique involves changing the order in which segments of each well are fracked, with an eye toward impacting the surrounding rock in a way that improves yields. Another is changing chemical mixtures to better suit the shale being drilled.

Oil-field-service companies are also researching techniques to improve deep-water exploration and production. Schlumberger, which has been developing new oil-field technology since 1927, recently introduced what it said was one of the largest engineering projects in the company's history. Called IsoMetrix, it is a new tool for using seismic waves to accurately spot oil reservoirs in deep water.

Halliburton spokeswoman Beverly Stafford said the company is focused on helping oil companies get improved access "to new hydrocarbon discoveries and to maximize the value of their existing assets." The company is working on shales and deep-water exploration, along with improving energy recovery from mature oil and gas fields that have been producing fuel for years.

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Crude-Oil Futures Settle Down at $92.52/Barrel

Attempts to push a rally in U.S. crude-oil futures prices into a fifth day faltered Wednesday under the weight of rising inventories and worries over weak demand.

Data that showed U.S. crude oil supply relative to refiner demand climbed to a 21-year high followed a warning by the International Energy Agency, the West's oil-policy watchdog, that the market is facing weaker oil-demand growth and higher supplies.

"The subdued growth rate of oil demand now looks increasingly entrenched in the face of high oil prices and weak economic growth," the IEA said in its monthly global outlook.

That outlook followed a Tuesday report from the U.S. Energy Information Administration which sees only modest growth in oil-demand growth in the world's biggest oil consumer this year after 2012 consumption hit a 16-year low.

EIA's latest weekly oil-inventory data show U.S. refiners trimmed crude-oil processing rates to a two-year low of less than 14 million barrels a day last week, amid maintenance work and operating snags at some facilities. At that same time, rising domestic output and imports lifted stocks by 2.6 million barrels last week, slightly ahead of expectations.

The combination of lower demand and higher supply means current inventories now are sufficient to cover 27.4 days of refiner needs, the highest level since 1992, and compared with the five-year average of less than 24 days of cover.

The data snuffed out an early attempt to push a four-day, 2.3% rally in prices higher for a fifth day.

"The move to push crude up to $93.50 lost momentum," said Gene McGillian, broker and analyst at Tradition Energy. "The fundamentals aren't really particularly strong" enough to justify prices at those levels which were last hit in late February, he said.

Light, sweet crude oil for April delivery on the New York Mercantile Exchange settled 2 cents lower, at $92.52 a barrel, after trading in a range of $93.40 to $91.91 a barrel.

April ICE North Sea Brent crude settled $1.13 lower, at $108.52 a barrel, the lowest price since Dec. 17, 2012.

Traders said Brent came under pressure as the EIA data showed oil inventories at Cushing, Okla. fell by 1.5 million barrels last week, the biggest decline since May 2011. Analysts said the large drop at Cushing suggests that Gulf Coast refiners appear to be moving more crude oil out of the terminal hub that is the delivery point for the Nymex contract, most likely by rail, as pipeline outlets are constrained.

Crude exiting Cushing for the Gulf Coast refinery hub would increase competition with imports priced in relation to Brent, the international benchmark, and would put pressure on Brent prices, traders said. Supplies of North Sea crudes have been rising after operational snags were resolved in recent weeks and the IEA said a pipeline agreement between Sudan and South Sudan means more crude could be flowing from that area, increasing supplies by 200,000 barrels a day by year's end.

Despite a fall of nearly 3.6 million barrels in gasoline stockpiles last week, prices of reformulated gasoline blendstock futures were weaker for a third day. Analysts said the decline in inventories likely reflected movement of fuel during the transition from winter-grade to summer-grade fuel that are typical at this time year, rather than signalling stronger demand. The EIA said in its Short-Term Energy Outlook on Tuesday it sees gasoline stunted at a 2012 level over the next two years, as improvements in fuel-mileage standards cut consumption.

April-delivery reformulated gasoline futures were 0.79 cents lower, at $3.1423 a gallon. The contract fell 1.9% in the past three sessions.

April heating oil was 2.42 cents lower, at $2.9242 a gallon, and lost 1.9% over the past four sessions.

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

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Keppel's $1.2B Contract with Ukraine's Naftogaz Cancelled

Singapore-based Keppel FELS Ltd.'s previously announced $1.2 billion-contract to build two semisubmersibles for Ukrainian state energy firm Naftogaz has been terminated due to certain conditions within contract's timeline not being met.

Keppel, a subsidiary of Keppel Offshore & Marine, announced in December of last year that it would construct two rigs for Naftogaz based on Keppel's proprietary DSS 38D design, which is customized for the harsh weather conditions of the Black Sea.

"Keppel will continue to seek opportunities where we can support Naftogaz in their E&P activities," said Keppel FELS in a statement.

Keppel and Naftogaz did not immediately respond to Rigzone's request for comments.

In September of last year, Naftogaz announced an open contest for the construction of two semisubs, and invited four Ukrainian and 11 international companies to bid on the project. Five additional international companies also expressed interest in bidding on the project, Naftogaz said in a statement last year.

Besides Keppel FELS, Rigas Kugu Buvetava of Latvia, Belize-based Magic Worldwide LTD, and Aida Holding Ltd. of Belize submitted tenders, Naftogaz reported in a Dec. 3 statement.

Geological studies have identified the Pallas area, located in water depths of 1,476 feet to 2,788 feet (450 meters to 850 meters), as a primary target for development with semisubmersibles, Naftogaz said in a statement.

The Pallas area is estimated to hold non-associated gas reserves of approximately 4.2 trillion cubic feet (120 billion cubic meters (Bcm)), liquefied gas reserves of 303.7 Tcf (8.6 Bcm) and oil and gas condensate of 70 million tons. Ukraine's portion of these reserves is 3 Tcf (86 Bcm), 289.5 (8.2 Bcm) and 45 million tons respectively.

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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Japan to 'Help' With Russian LNG Projects

TOKYO - Liquefied natural gas was on the agenda when the energy ministers of Russia and Japan met on Tuesday, a senior official at Japan's Ministry of Economy, Trade and Industry said.

Japan can help with LNG projects at Vladivostok and Yamal, Russia's Alexander Novak said without elaborating according to METI's Oil and Natural Gas Director Ryo Minami who was present.

Competitive pricing will raise interest from Japanese buyers, Japan's Economy, Trade and Industry Minister Toshimitsu Motegi said according to Mr. Minami. LNG demand in Japan is increasing after the country shifted away from nuclear power.

Russia is looking to sell to new markets because prices in Europe are relatively low. Two Russian companies in February announced plans to export LNG to Asia.

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

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Aker Wins Contract for Schiehallion Redevelopment

Norwegian oilfield services firm Aker Solutions reported Wednesday that it has secured an approximately $105 million contract with BP to help redevelop one of the UK's largest oilfields.

Aker said its Aberdeen, Scotland operation will manufacture and supply all subsea controls equipment for the Quad 204 project. This is the redevelopment of the Schiehallion and Loyal fields, which are located approximately 100 miles west of the Shetland Islands.

The Schiehallion and Loyal fields are estimated to contain a further 450 million barrels of recoverable oil and the total redevelopment is budgeted to cost some $4.5 billion. Due to the water depth in the area, Schiehallion is entirely reliant on subsea production technology and oil from the field is collected on a floating production, storage and offloading vessel (FPSO).

Alan Brunnen, the head of Aker's subsea business, commented in a statement:

"West of Shetland is an exciting area for oil and gas and we are delighted to continue our successful relationship with BP by playing such a significant role in the continuing development of this project."

The scope of Aker's work includes subsea controls equipment for subsea trees, manifolds and subsea safety isolation valves, as well as controls distribution assemblies. The work will be managed, designed and built by Aker’s subsea controls center of excellence in Aberdeen, with the first deliveries made in the first half of 2014.

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Keppel's $1.2B Contract with Ukraine's Naftogaz Cancelled

Singapore-based Keppel FELS Ltd.'s previously announced $1.2 billion-contract to build two semisubmersibles for Ukrainian state energy firm Naftogaz has been terminated due to certain conditions within contract's timeline not being met.

Keppel, a subsidiary of Keppel Offshore & Marine, announced in December of last year that it would construct two rigs for Naftogaz based on Keppel's proprietary DSS 38D design, which is customized for the harsh weather conditions of the Black Sea.

"Keppel will continue to seek opportunities where we can support Naftogaz in their E&P activities," said Keppel FELS in a statement.

Keppel and Naftogaz did not immediately respond to Rigzone's request for comments.

In September of last year, Naftogaz announced an open contest for the construction of two semisubs, and invited four Ukrainian and 11 international companies to bid on the project. Five additional international companies also expressed interest in bidding on the project, Naftogaz said in a statement last year.

Besides Keppel FELS, Rigas Kugu Buvetava of Latvia, Belize-based Magic Worldwide LTD, and Aida Holding Ltd. of Belize submitted tenders, Naftogaz reported in a Dec. 3 statement.

Geological studies have identified the Pallas area, located in water depths of 1,476 feet to 2,788 feet (450 meters to 850 meters), as a primary target for development with semisubmersibles, Naftogaz said in a statement.

The Pallas area is estimated to hold non-associated gas reserves of approximately 4.2 trillion cubic feet (120 billion cubic meters (Bcm)), liquefied gas reserves of 303.7 Tcf (8.6 Bcm) and oil and gas condensate of 70 million tons. Ukraine's portion of these reserves is 3 Tcf (86 Bcm), 289.5 (8.2 Bcm) and 45 million tons respectively.

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