Tuesday, June 25, 2013

Oilfield Service Providers Unlikely to See Expected US Rebound in 1Q

Oilfield Service Providers Unlikely to See Expected US Rebound in 1Q

Oilfield services providers, which helped unleash America's new oil and gas bounty, struggled to grow U.S. profits through last year as low natural gas prices curtailed drilling. Now, it looks like a widely expected rebound in the first quarter of 2013 is not happening.

Oilfield service giants Schlumberger Ltd., Baker Hughes Inc. and Halliburton Co. provide the specialized technology needed to coax oil and gas out of shale--including the key process of drilling horizontal wells deep underground. But that activity saw a relatively unprofitable end to 2012, as the exploration and production firms these companies work for work for pulled back sharply in order to stay within budget.

Executives had said the number of rigs working would likely be lower in 2013 than in 2012 overall, but they expected the first quarter to be better than the fourth quarter of 2012. Citing feedback from customers, Schlumberger Chief Executive Paal Kibsgaard said in an earnings call in January that the number of rigs drilling for oil and natural gas in North America would bounce back by 100 to 150 rigs during the quarter after a sharp decline in the fourth quarter. Halliburton Chief Executive Dave Lesar also said the North American rig count would "continue to grow from current levels," as oil companies started the year afresh with new capital budgets.

But that hasn't happened. The U.S. land rig count fell about 3% in the first quarter of 2013 from the fourth quarter of 2012, and was 13% lower than in the previous year. Mr. Kibsgaard said at a conference last month that activity has been weaker than expected in North America and profit margins will therefore suffer.

The continued weakness in North America operations will be more evident once earnings figures for the first quarter start coming out this week. Schlumberger and Baker Hughes report on Friday. Halliburton, the second-largest oilfield services company after Schlumberger, posts earnings next week. Analysts polled by Thomson Reuters expect Schlumberger to post earnings of 99 cents a share, up 1% from last year. Halliburton earnings are estimated at 57 cents per share, down 36%, and Baker Hughes earnings are forecast at 62 cents per share, down 28%.

Credit Suisse analyst Jim Wicklund said expectations of a rig count rebound were misguided--unpredictable and unfavorable weather means the first quarter is normally a slow time of year with exploration and production companies in no hurry to blow through their budgets, he said.

"I can tell you I have a date with Miss America tonight, and if you believed it and are terribly disappointed, shame on you," he said, adding that predictions that more than 100 rigs would get back to work in the first quarter should have been equally eyebrow-raising.

To be sure, oilfield companies are still making a lot of money. Analysts say red-hot activity in offshore and international markets should give large, diversified companies such as Schlumberger and Halliburton a boost to offset their U.S. drilling woes.

And rig counts don't tell the whole story--even though drilling of new wells is down, work done to get a well ready for production has increased as operators restart projects that were put on hold as budgets tightened at the end of the year. Though the market for services like pressure pumping remains crowded, Raymond James analyst Marshall Adkins said companies that do completion work and not just drilling are in a better position.

Nevertheless, North America accounts for more than half the revenue collected by Halliburton and Baker Hughes, and about a third of Schlumberger's, and the expected weakness has led some analysts to lower their forecasts for service company earnings.

Argus Research analyst Phil Weiss recommends Schlumberger as a stock to buy, but trimmed his estimate of the company's earnings in 2013 by 10 cents per share to $4.70, to reflect slower-than-expected activity and lower margins. Mr. Weiss also lowered his 2013 estimate for Halliburton's annual earnings from $3.20 per share to $3.05. ISI Group analyst Jud Bailey also trimmed his earnings estimates by 5 to 9 cents per share for each of the four large cap services companies.

How quickly North American drilling will recover is the big question mark going forward. Simmons analyst Bill Herbert wrote in a research note that "at this juncture, in our view, it's better to assume slower versus faster," with exploration and production companies proceeding very cautiously before making any moves. A recent pullback that sent U.S. oil prices below the $90 per barrel mark could also have some impact on oilfield services producers' bottom lines, and their outlook.

Mr. Herbert added that oil companies are likely to be restrained on upcoming earnings conference calls, and reluctant to commit to increasing capital spending.

"If oil prices were to weaken further and stay weak for more than a period of weeks, that's going to grow to be quite concerning," he said.

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Shale Boom Could Happen in Russia, China but Not Europe

Shale Boom Could Happen in Russia, China but Not Europe

LAUSANNE, Switzerland - Russia and China will lead the way in the production of resources from shale after the U.S., according to executives, but Europe will likely lag behind.

Torbjorn Tornqvist, chief executive of trading house Gunvor, said Wednesday it was clear that shale production on a scale similar to that in the U.S. is possible in several of the world's biggest current energy producers and consumers -- but that Europe is unlikely to be transformed by it.

Surging production of oil and gas from unconventional sources has seen the U.S. outstrip predictions to become one of the world's most energy-secure regions.

"Is it possible to adapt that elsewhere? And the answer is yes, but not everywhere," Mr. Tornqvist said. "I think in Russia, you will see the first major change. You have the political climate there to drive through large-scale shale operations both in gas and oil."

He also said that China, Australia and South America were promising as a shale-exploiting countries.

Mr. Tornqvist sounded a much less positive note for Europe, which has so far been divided on its approach to the relatively new technology of hydraulic fracturing, the method of extracting shale resources known as fracking. France has voiced strong opposition to the idea, while the U.K. government has insisted that shale gas production "will happen."

Mr. Tornqvist said: "Europe? You all know the problems there: political problems, no-one really wants to see rigs on the landscape -- and problems and fears about groundwater and so forth will prevent Europe from exploiting its resources, which aren't that big anyway," Mr. Tornqvist said.

The Gunvor CEO was addressing the Financial Times Global Commodities Summit in Lausanne, Switzerland.

Bob H. Takai, general manager in energy for Sumitomo Corp., speaking in a panel discussion that followed Tornqvist's talk, said that China could rival Russia as the biggest shale producer.

"As far as the reserve is concerned I think China has got the largest potential reserves of shale oil and shale gas, even bigger than the U.S.," Mr. Takai said. He added that before those reserves could be accessed China would struggle with problems ranging from infrastructure to the availability of water.

The discussion led Tornqvist to reiterate: "It will take a long time. And if I was to put the first nation to do that in the scale, I would guess today Russia.

"Because they, through their political system, they have decided to do it," he said. "They have the infrastructure, they have the tradition of drilling gas, it isn't so densely populated, they have the water, they have the ingredients.

"And they're already doing it," he said. "I know from my talks with Gazprom … they have advanced plans to get into shale gas and shale oil."

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Gran Tierra Touts Record Production in Colombia

Gran Tierra Energy Inc., a company focused on oil exploration and production in South America, Wednesday provided updates for its production and exploration drilling in Colombia, Peru and Brazil.

"Gran Tierra Energy is pleased to start the year with record levels of production as we continue to successfully mitigate transportation disruptions in Colombia," commented Dana Coffield, president and Chief Executive Officer of Gran Tierra Energy. "Operationally, we believe the northern boundary of the Moqueta field has now been successfully delineated with the Moqueta-9 appraisal well. The balance of this year will focus on increasing water injection for pressure support and increasing production capacity from the field.  Once permits are in place, we can then direct our attention to appraising the eastern flank of the Moqueta structure, which remains undrilled. In Peru, the evaluation of our Bretaña Norte oil discovery continues, with initial testing of our well extension expected in the coming month, preliminary field development planning initiated, and long term testing expected to begin within a year. Our exploration program in the onshore Recôncavo Basin in Brazil, testing a new play with horizontal drilling and multi-stage fracture stimulation, is ongoing with results expected mid-year," concluded Coffield.

Average daily consolidated light and medium crude oil and natural gas production net after royalty (NAR) before inventory adjustments for the three months ended March 31, increased 21 percent to approximately 21,860 barrels of oil equivalent per day (boepd) NAR compared with 18,148 boepd NAR for the corresponding period in 2012. Approximately 97 percent was oil and natural gas liquids. First quarter production reflects increased production in all countries in which we are producing with the largest contribution to the increase from the Costayaco, Moqueta, and Surubi oil discoveries. This increase was partially offset by approximately 44 days of oil delivery restrictions due to disruptions in the Ecopetrol-operated Trans-Andean oil pipeline (the "OTA pipeline") in Colombia . Gran Tierra Energy continued production while the OTA pipeline was down, selling oil through an alternative pipeline and trucking and storing excess oil.

Average daily Colombian production of light and medium crude oil and natural gas for the three months ended March 31, 2013 increased 18 percent to approximately 17,850 boepd NAR before inventory adjustments, compared with 15,163 boepd NAR before inventory adjustments for the comparable period in 2012. The production is primarily from the Costayaco and Moqueta fields in the Chaza Block in which Gran Tierra Energy has a 100 percent working interest.

Additionally, preliminary indications show approximately 139,800 barrels NAR net liquidation of inventory during the quarter.  Inventory volumes will be finalized near the end of April 2013 and, as such, this figure is subject to change.

In Colombia, the Moqueta-9D appraisal well was spud on Jan. 20 to test the northwest extent of the Moqueta field. It discovered hydrocarbons in a different fault block, separate from the main Moqueta oil accumulation. The T-Sandstone tested gas and the combined Caballos and U-Sandstone formations tested oil and water. Further isolation testing on the Caballos and U-Sandstone formations will be conducted to define their hydrocarbon potential. These results, integrated with seismic and other wells drilled to date, indicate the well has defined the northern margin of the main Moqueta oil accumulation. The down-dip extent of the oil column to the west, south and east, and the lateral extent of the structure to the east, have not yet been defined by drilling, with this additional resource potential to be defined with our ongoing drilling campaign.

The Moqueta-10 well has begun drilling. This well will be used as a water injection well to assist with pressure support in the Moqueta field to support production growth from existing and future planned production wells. This well is being drilled to the far western flank of the field, and may provide additional information on the down-dip extent of the oil column in the primary reservoirs in the main block, which has not yet been determined. This well will be followed by Moqueta-11, which is planned to be a production well.

Gran Tierra Energy has initiated drilling of the horizontal side-track extension of the Bretaña Norte 95-2-1XD oil discovery well. Casing has been set at the top of the Vivian reservoir, where very high quality sands with very good oil shows were encountered, and the drilling of a 500 meter horizontal leg has been initiated. Upon completion, a short test will be conducted. Plans are ongoing to initiate long-term testing from this horizontal well, with production to be initiated within a year. In addition, a Preliminary Front End Engineering Design has been initiated for the Bretaña Norte field development to support reserves booking, with results expected before year-end.

Gran Tierra Energy's horizontal multi-stage fracture stimulation exploration drilling program in the Recôncavo Basin onshore Brazil is ongoing, with results of the program expected mid-year.

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Shell Studying Oil, Gas Areas Up for Bids in Brazil Auctions

RIO DE JANEIRO - Anglo-Dutch oil major Royal Dutch Shell is interested in Brazil's upcoming oil and natural gas concession auctions but has not yet decided whether to participate, Chief Executive Peter Voser said Thursday.

"Shell will study the bid areas and make a technical evaluation before deciding how to participate" in the auctions, Mr. Voser told reporters. The first of three auctions scheduled for this year will be held May 14-15, the first such bid round since 2008.

"Our assumption is that Brazil has significant resources being developed and to be developed," Mr. Voser said, noting that Latin America's largest country will play an important role in the global oil and natural gas map in the future.

In addition to the concession auction, Mr. Voser said that Shell was evaluating assets state-run energy giant Petroleo Brasileiro, or Petrobras, has put up for sale in Brazil and the Gulf of Mexico. Petrobras plans to sell $9.9 billion in assets to fund its $237 billion investment plan through 2017.

"We have a very successful partnership with Petrobras and are interested in further collaboration," Mr. Voser said.

Shell is also carefully watching developments in Venezuela, where the company has a small operation in the Lake Maracaibo region, Mr. Voser said. Venezuela has suffered with political unrest following President Hugo Chavez's death and last weekend's election of his handpicked successor, Nicolas Maduro.

"We take a long-term view on investments in Venezuela," Mr. Voser said, adding that Shell was on the lookout for growth opportunities in the country that is home to the world's largest crude-oil reserves.

Elsewhere, Mr. Voser said, the shale gas revolution in the U.S. could fundamentally change industry in the world's largest economy. "Cheap natural gas feedstock could drive a reindustrialization in the U.S.," Mr. Voser said, bringing previously outsourced manufacturing heavy industry and petrochemicals output back to the U.S.

Shell also expects the U.S. to approve exports of between 50 million and 60 million tons of liquefied natural gas derived from shale gas, Mr. Voser said.

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Opening: Derrickman

Posted on Tuesday, October 11th, 2011 at 6:18 pm

Responsible for working board during tripping operations; mixes chemicals and oversees pit and mud pump operations. Must be able to perform all duties needed to rig-up, drill, rig-down and maintain rotary equipment.


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Rosetta Resources Raises 2013 Capital Expenditure Guidance

Rosetta Resources Inc. raised its 2013 capital guidance to $840 million to $900 million, from $640 million to $700 million.

The 2013 capital program is based on a five to six-rig program in South Texas and a Delaware Basin program with three rigs increasing to six rigs during the year.

Rosetta said about $600 million will be spent for development activities primarily located in the liquids-rich window of the Eagle Ford shale in South Texas, including about $55 million allocated to facilities projects. About $175 million will be allocated to operated and non-operated development activity in the oil-rich Delaware Basin, including about $7 million for facilities projects.

Last month Rosetta agreed to buy all of Comstock Resources Inc.'s oil and gas properties in the Reeves and Gaines counties of West Texas for $768 million, giving Rosetta exposure to the Permian Basin and a complement to its Eagle Ford properties.

On Monday, the company noted the guidance range now includes about $25 million of capitalized interest related to the pending acquisition. The remainder of the capital plan includes allocations for new ventures activity and other corporate capital.

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Uganda Reaches Deal With Oil Companies Over Refinery

KAMPALA, Uganda - The Ugandan government has reached an agreement with oil companies operating in its oil-rich Lake Albertine rift basin over the construction of a 30,000 barrels-a-day refinery, ending a nearly two-year deadlock that has largely been blamed for delaying the development of the country's oil fields, the Ugandan presidency said over the weekend.

The refinery agreement brings the two parties closer to a final deal on the basin-wide oil development plan, where companies are expected to invest more than $12 billion to develop the country's nascent oil sector.

A presidential spokeswoman said in a statement the refinery agreement was reached following a meeting on Saturday between President Yoweri Museveni and representatives of companies operating in the country--U.K.-based Tullow Oil PLC, France's Total SA and China's CNOOC Ltd. "The parties agreed to start with the refinery size of 30,000 barrels per day" the spokeswoman said, adding that Mr. Museveni noted that oil production in the country was long overdue because a lot of time has been wasted in negotiations and formulation of oil production documents. "We have wasted too much time. We are now with the issue of oil for seven years. We need to make our final decisions," Mr. Museveni was quoted as saying.

With an estimated 3.5 billion barrels of untapped oil, Uganda is expected to join Nigeria, Angola and Sudan among sub-Saharan Africa's major crude producers. But the government had withheld consent for the development of the fields since last year, due to a spat with oil companies over development plans, chief among them the size of the refinery. While the companies have been pushing for a pipeline to export crude on the open market, government has been insisting on the construction of a large refinery, with the capacity to refine as much as 180,000 barrels-a-day of crude into fuel products, initially for domestic consumption and then for regional export.

Last week, Mr. Museveni said that the two sides were close to agreeing an oil and gas extraction plan that is "optimal" for both government and oil companies. Following the meeting with oil companies, government also agreed to the construction of an export pipeline, the presidency said. In February, Total said that its project in Uganda would stall, unless government approved the construction of a pipeline. Negotiations over the final development plans for the oil basin are continuing and the two sides expect a final deal in the next few weeks, according to government officials. There was no immediate reaction from company officials.

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Drilling Commences at Magnum Hunter's First Utica Well

Magnum Hunter Resources Corporation announced the commencement of drilling its first Utica Shale well on the Farley Pad (4 Well Pad) located in northern Washington County, Ohio along the Noble County, Ohio border. Triad Hunter, LLC, a wholly-owned subsidiary of the Company, is operating the well and owns 100 percent working interest in this drilling unit. The development plan is to first drill a vertical pilot hole for extensive logging and core analysis, and then to plug back and drill a 6,000+ foot lateral in the Point Pleasant portion of the Utica Shale. The well will then be fracture stimulated and tested this summer.

Triad Hunter has mineral rights on approximately 88,000 gross acres (79,000 net acres) of Utica potential in Ohio and West Virginia, with a significant portion of this mineral acreage held by existing production. Based on offset well results and industry analysis, we believe approximately one-half of our existing acreage position is located in the wet gas window of this emerging play.

Gary C. Evans, Chairman of the Board and Chief Executive Officer of Magnum Hunter Resources, commented, "While this new well currently drilling represents our first horizontal Utica Shale test in Ohio, we have three other horizontal wells already drilled in the Marcellus formation located nearby in Monroe County, two of which are waiting on fracture stimulation and new pipeline installation by our midstream affiliate, Eureka Hunter. Having the opportunity of possessing two significant production horizons at one location is unique in this region. The down hole log interpretations of these two new wells which indicate a very high liquids content is most encouraging. We believe our activities in Southeastern Ohio will have significant economic impact on our Company in the ensuing months. We continue to assemble mineral acreage in the region to increase our inventory and foothold position."

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Matra Appoints New Chairman

Russia-focused junior Matra Petroleum announced Friday that it has appointed Bill Guest as its new non-executive chairman.

Matra said that Guest has more than 37 years of experience in the upstream oil and gas industry, having trained as a geologist and petroleum engineer. He has been a non-executive director of Matra since 2010 and also sits on the boards of Sacoil Holdings and British European Energy.

Matra Chief Executive Maxim Barskiy commented in a statement:

"We are fortunate to be able to call upon the experience of Bill Guest as chairman of Matra. As a non-executive director of the company his knowledge and understanding is held in the highest regard. His leadership will be invaluable as we continue to work diligently to execute the company's stated strategy."

Matra's previous chairman, Sire Michael Jenkins, died at the start of April.

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