Thursday, July 18, 2013

Rialto Energy, Vantage Drilling Agree to $12.4M Settlement

Rialto Energy Ltd. and Vantage Drilling Company have settled an agreement regarding payment terms in regards to the early termination of the rig contract regarding Vantage's Sapphire Driller (375' ILC) jackup.

Rialto has agreed to pay Vantage an amount equivalent to 75 days of the operating rate, about $12.38 million. The original contract had specified a rate of $17.33 million for 105 days.

The company had contracted the rig until December 2013 to explore Block CI-202.

In April 2013, Rialto and Vitol E&P entered into a contract to jointly develop Rialto's interests in Cote d'Ivoire and Ghana. Vitol acquired, subject to regulatory and joint venture partner approval, a 20 percent stake in Rialto Energy (Ghana) Limited in exchange for funds to cover Rialto's $7.7 million obligation to drill the high-impact Starfish-1 exploration well in the Accra Block, Ghana – which is due to spud in June 2013.

Additionally, Vitol will acquire 65 percent of the shares in Rialto Energy (Cote d'Ivoire) Limited in exchange for providing $50 million of capital to be invested in a to-be-agreed Block CI-202 work program. The deal also called for the release of the Sapphire drilling rig, according to an April 23 press release.

"Whilst we are disappointed to have had to make the difficult decision to terminate the rig contract, it was made to ensure that Rialto and Vitol had sufficient time to finalize matters around our recently announced deal and to work together on a robust technical program in Block CI-202," Rialto's Managing Director Rob Shepherd said in a press release. "We are continuing to work with Vitol on finalizing the transaction and are doing everything possible to bring this to a swift conclusion."

With more than 10 years of journalism experience, Robin Dupre specializes in the offshore sector of the oil and gas industry. Email Robin at rdupre@rigzone.com.

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EMAS AMC Awarded Smorbukk South Contract by Statoil

Subsea services firm EMAS AMC reported Thursday that it has been awarded a $75-million contract from Statoil for its Smørbukk South extension project in the Norwegian Sea.

The contract will see EMAS AMC supply subsea engineering, procurement and offshore construction services to the project. This will include the installation of flexible flowlines, tie-in spools, manifolds and umbilicals, as well as associated abandonment and removal activities. The extension will be developed with a new subsea template connected to existing infrastructure in the area.

Offshore activities will start in the second quarter of 2014, with the project being expected to last through 2015.

EMAS Managing Director Lionel Lee commented in a statement:

"We have been investing heavily in building up our global engineering expertise as well as technologically advanced and game-changing assets. This has borne fruit and I am extremely pleased with this latest win by EMAS AMC. It demonstrates an ever growing confidence in our project execution capabilities and validates EMAS."

Discovered in 1985, the Smørbukk South Extension holds estimated recoverable reserves of 16.5 million barrels of oil equivalent. 

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Contango, Crimson Exploration Pen Merger Agreement

Contango Oil & Gas Company and Crimson Exploration Inc. jointly announced Wednesday that they have signed a merger agreement for an all-stock transaction pursuant to which Crimson would become a wholly owned subsidiary of Contango. Upon consummation of the merger, each share of Crimson stock will be converted into 0.08288 shares of Contango stock resulting in Crimson stockholders owning 20.3 percent of the post-merger Contango.

Following the merger, the combined company will be a premier Houston-based independent oil and gas company with a balanced offshore Gulf of Mexico (GOM) and onshore Texas production profile and a deep inventory of high-impact GOM prospects complemented by Crimson's onshore oil and natural gas liquids-focused, lower-risk unconventional resource positions in several prolific plays. Pro forma for the merger, Contango's net daily production for the quarter ending March 31, 2013 would be approximately 101 Mmcfe (31 percent oil and natural gas liquids) and the proforma combined company's total proved reserves are estimated to be approximately 312 Bcfe (31 percent oil and natural gas liquids), based on SEC pricing at March 31, 2013. Pro forma PV-10 of the estimated proved reserves of the combined company would be approximately $932.5 million. The enhanced size and scale of the combined company and its conservatively capitalized balance sheet will position it to implement an accelerated oil and natural gas liquids-focused drilling program. This transaction is expected to be immediately accretive to cash flow per share for Contango.

Joseph Romano, President, Chief Executive Officer and Chairman of Contango said, "We are excited about the complementary nature of this combination and the numerous benefits make it a win-win for the stockholders of each company. We also are very pleased to welcome Allan Keel and his Crimson team to Contango. We all see a great opportunity to accelerate and optimize the development of Crimson's significant resource potential in parallel with continuing Contango's GOM exploration focus. Contango will look to optimize capital allocation across the combined portfolio and we currently expect to continue to drill two to four exploration prospects per year in the GOM while operating two to four onshore rigs focused on unconventional resource development. This transaction is consistent with Contango's strategy of increasing stockholder value through the drill-bit and it helps us achieve a number of our long-term strategic objectives."

Allan D. Keel, Crimson's president and chief executive officer said, "We look forward to joining Contango and assuming responsibility for a portfolio of top tier offshore assets and combine them with Crimson's extensive inventory of onshore opportunities. The combination with Contango provides substantial offshore cash flow generation that can be used to accelerate our drilling program in our oil and natural gas liquids-rich acreage targeting the Woodbine, Buda, Eagle Ford, James Lime and Liberty County prospects. This accelerated development should result in meaningful reserve, production and cash flow growth for the combined company. Furthermore, the merger will allow Crimson to de-lever our balance sheet and increase our trading float. We believe this merger is a great combination of two complimentary companies and a great opportunity to unlock value more quickly for Crimson's stockholders."

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Rigzone Ranks the Top 10 Oil & Gas Cities in the World

Rigzone Ranks the Top 10 Oil & Gas Cities in the World

For years, the petroleum industry has created significant job opportunities and economic benefits through energy hubs around the world. Innovations in technology and old-fashioned determination have allowed vast supplies of oil and gas to be brought to market from key cities in nearly every country. The running list of active and pending projects, along with the amount of planned global investment, speaks volumes about the career options on the horizon for our industry.

For those with the right education and training, the opportunities for international mobility are unrivaled. In fact, many oil and gas companies are offering educational programs that encourage key job functions to train in different parts of the world over time. So the question doesn’t have to be: where in the world do I want to live and work? It can now be: how many countries will I get to see during the course of my career?

While Houston has long dominated the list of key oil and gas cities, there are many amazing locations that have emerged as important centers for exploration, production, transportation, technology developments and refining. Today, a wide array of cities with close ties to the petroleum industry circle the globe.

Given the large group of Rigzone users and our focus on careers, we asked our readers to tell us which oil and gas cities represent the most important, promising opportunities for the industry and the employees that drive it. Nearly 8,000 people weighed in. In the pages that follow, see just how far a career in oil and gas can take you.


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New System Offers Holistic Approach to Frack Water Treatment

 New System Offers Holistic Approach to Frack Water Treatment

A wastewater treatment process long utilized in the food industry now is available to treat flowback and produced water from hydraulic fracturing.

Established in 2002, Alpharetta, Georgia-based Ecologix Environmental Systems has provided wastewater treatment services to companies such as Tyson, Kellogg's and Toyota as well as mining and metal plating industries.

The company has reached agreements to ship its wastewater treatment management system to oil and gas customers in Canada and Texas. These units are the third generation of systems geared towards the oil and gas industry – the company previously had sent protoypes into the field in Oklahoma and Texas' Permian basin to learn the lessons of what and what not to do. These lessons include everything from how to maximize unit performance, improve manufacturing and make the units more user-friendly in terms of maintenance and ground operations.

The company also sold a prototype unit to Halliburton Co. that reduced the turbidity level from 530 nephelometric turbidity unit (NTU) to just 3 NTU, a 176 fold improvement in water clarity.

When Ecologix CEO Eli Gruber looked at the oil and gas industry, he saw nothing had been done to address wastewater treatment in a way that made sense to him. Various companies had rushed in with black box ideas, but Gruber still saw a need for a water solution to correct the whole spectrum of contaminants.

"Other companies who rushed in do one thing well, but they ignore five other things," Gruber told Rigzone in a recent interview. "We attempt to take care of every step along the way to  both clean and disinfected the water."

Ecologix Environmental Systems
Ecologix Environmental Systems' flagship ITS-900 units for frac water recycling. Each system can process up to 31,000 barrels per day of flowback or produced water.

Ecologix's Integrated Treatment System (ITS) for hydraulic fracturing water treatment allows water to be treated near the well pad, allowing the storage and transportation costs of produced and flowback water to be eliminated.  The ITS also eliminates the need for fresh water withdrawal, shortens hauling distances and reduces truck traffic and creates reusable water from waste, eliminating need for water disposal.

The platform uses a basic wastewater treatment process, Dissolved Air Floatation (DAF), which uses targeted chemicals to precipitate oils and solids out of suspension and a physical mechanism to remove these solids from the water.  In the DAF process, millions of tiny air bubbles force total dissolved solids and fats oil and grease to flow to the surface, where they can be skimmed away. Through this process, over 99 percent of the sludge can be removed.

The ITS-900 consists of three main units:

to control chemical dosingto mix the chemicals into the waterto perform the physical separation of solids

The ITS process is flexible, and can be adapted to meet the specific needs of the formation and driller preferences.

The ITS platform is available in two sizes: one that can process 900 gallons per minute, or 31,000 barrels per day, and a fourth generation ITS that can process 500 gallons per minute, or 17,000 barrels per day. The fourth generation ITS has a lower processing rate, but it has a smaller footprint that combines equipment from two trailers into one. The company will limit production of the units to the smaller unit, noting that customers can always choose to utilize two ITS-500 units, if the volume of water justifies it, Gruber noted.

"However, the 17,000 barrels per day unit seems to be within the industry's sweet spot for most fracking operations," Gruber noted.

Ecologix Environmental Systems
EcoLogix's Integrated Treatment System offers a holistic approach to wastewater treatment for the oil and gas industry.

The oil and gas industry's increased use of hydraulic fracturing to explore for and produce unconventional oil and gas has made the treatment of produced and flowback water a top concern for the oil and gas industry, environmentalists and the government. 

Between one and five million gallons of water are used in the hydraulic fracturing of one well. The high volume of water used in this process has raised concerns about water resources used in agriculture or drinking water being diverted towards hydraulic fracturing instead, particularly in areas that have or are experiencing drought conditions. The impact on drinking water supplies due in part to the disposal of flowback and produced water, which could contain organic chemicals, metals, salts and naturally occurring radionuclides, is another issue.

To deal with wastewater, oil and gas operators have either injected wastewater into disposal wells or hauled water away by truck. However, some studies have indicated that injecting hydraulic fracturing wastewater injection into disposal wells can trigger earthquakes. A recent study tied a series of earthquakes in central Oklahoma to the injection of wastewater deep underground. Additionally, high salt levels in water can reduce the number and types of organisms found at a site, impacting the entire ecosystem, according to a recent study Australian and European researchers. 

The heavy traffic of trucks hauling wastewater and other materials related to shale exploration and production has resulted in wear and tear on roads around the country. Almost 1,200 loaded trucks are needed to bring one gas well into production, over 350 are required each year for maintaining a gas well, and nearly 1,000 are needed every five years to refracture a well, according to the March 2013 Eagle Ford Shale Task Report. In many places, the existing roads are not equipped to handle the weight and volume of this traffic.

Gruber sees his company's technology as a way to keep both environmentalists and the oil and gas industry happy.

"What appears to be clean may not be clean," Gruber commented, noting that the oil and gas industry's previous attempts to clean water fell short.

By using a short-cut approach, only 20 percent of suspended solids are removed from water, and without a chemical solution, only larger suspended solids will be removed, leaving small suspended particles behind. These smaller  suspended solids, called colloidal, have very large surface area that add friction to the gelling agents and friction reducers, negatively affecting the viscosity of the fluid from carrying the  proppant sand further distances in the water and keep the hydraulic fractures open, impacting the efficacy of a frack job.

Arguments have been made by some in the oil and gas industry that salt must be completely removed from the water to make it suitable for reuse in hydraulic fracturing, Gruber stated that this is simply not the case.

Gruber cited a recent study conducted by Halliburton and XTO Energy and that the level of salt in water does not impact the quality of a hydraulic fracturing job as long as the total suspended solids have been removed. This finding means that oil and gas companies do not have to remove water from aquifers, meaning this water can be saved for agriculture or other purposes.

In the study, Halliburton and XTO found that produced water with total dissolved solids levels as higher 285,000 milligrams per liter, or 28.5 percent salinity, was shown to generate proper cross-linked rheology for hydraulic fracturing in line with wells that were fracturing with just 20,000 particles per million, or 2 percent salinity.

The study results, which were published by the Society of Petroleum Engineers earlier this year, came from a test of seven wells in New Mexico's Delaware Basin. In the field study, a mixture of common drilling chemicals, such as Cacrboxymethyl Hydroxypropyl Guar Gum, a zirconium-based cross linker, sodium chlorite breakers and non-emulsified surfactants were blended with 100 percent treated produced water to generate a frac fluid that performed as well as that expected from a fluid based on fresh water.  

"The study shows that brine water possesses all the characteristics required for effective fracking: easy preparation, rapid hydration, low fluid loss, good proppant transport capacity, low pipe friction, and effective recovery from the reservoir," said Gruber in a recent white paper in regards to the Halliburton-XTO study. "Unlike fresh water, salt water does not restrict oil flow because of an osmotic imbalance that results in clay swelling."

That study also indicated that by using produced water for hydraulic fracturing can help reduce approximately 1,400 truckloads from the roads, and all but eliminate the use of disposal wells. The study delivered $70,000 to $100,000 cost savings per well.

"Removing the suspended solids is the key," Gruber commented. "If you take shortcuts, you compromise the quality of the hydraulic fracturing job."

For this reason, 100 percent brine water can be used for hydraulic fracturing, so long as the suspended solids are removed completely.

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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Venezuela Oil Minister: Contracts Could Be Canceled if Output Demands Not M

CARACAS--Venezuela's government could revoke contracts of 10 small partner companies in the nationalized oil industry if they fail to meet the state's demands to increase production, Oil Minister Rafael Ramirez told reporters Friday.

The government, which has laid out ambitious plans to raise production capacity over the next several years, wrote to all of its partners in November 2010 calling on them to boost output.

"At this moment we have identified 10 companies with problems, four of which are very critical," Mr. Ramirez said. "I'm going to make the call again. If they don't complete the plans then I will have to go to the National Assembly and say that these companies are not fulfilling what they promised," he said, warning that those not meeting their targets could have their contracts canceled.

The minister declined to name the companies but said that "they are very small" and include some that produce no more than 30 barrels a day.

"Time is up. I hope that the companies come and talk to us," Mr. Ramirez said.

He added that large partners like U.S. oil major Chevron Corp. (CVX) and China National Petroleum Corp. (CNPC.YY) have already responded to the government's demands and now he is waiting for the smaller companies to follow suit.

Under late President Hugo Chavez, who died in March, Venezuela's government revised contract terms with its oil partners to give the state a larger claim on oil projects. Some companies like ConocoPhillips (COP) and Exxon Mobil Corp. (XOM) rejected the new terms and are now seeking billions in compensation from Venezuela through international arbitration courts.

Copyright (c) 2013 Dow Jones & Company, Inc.

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Aquaterra MD Appointed to New Oil, Gas Body

Offshore oilfield services firm Aquaterra Energy announced Thursday that its managing director, Patrick Phelan, has been appointed as a member of the new Oil and Gas Industry Council.

The council has been established to represent the views of producers, operators and supply chain firms in a partnership between the industry and the UK government. Phelan has already been involved as a consultant concerning the development of the government's strategy for the UK oil and gas sector, which was launched on March 28.

Commenting on his role as a member of the new body, Phelan said in a statement:

"There are some 400,000 people employed through the oil and gas industry in the UK and it is vital for the economy and energy security that the industry continues to thrive.   
"Aquaterra Energy is engaged in providing specialist engineering solutions for offshore drilling needs and our products and services are in demand all over the world.  So, the promotion of engineering as a career choice and the caliber of training young people receive through our high-class universities is of particular importance to businesses like ours." 

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Nexen: Production Ramping Up On Buzzard Oil Field

LONDON--The operator of the U.K.'s Buzzard oil field said Friday that production from the field resumed during the last 24 hours and would be ramping up within the next two days.

Nexen Inc., a unit of China's CNOOC Ltd.(CEO), wouldn't comment on when Buzzard would reach full capacity. Production was impacted Monday after a steam release triggered an alarm.

A London-based trader said the outage had caused the front-month price of Brent to steepen relative to later months.

Nexen is the second largest oil producer in the U.K. North Sea, according to the company's website. In 2012, Buzzard generated 160,000 barrels a day of oil equivalent.

Copyright (c) 2013 Dow Jones & Company, Inc.

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Sirius Secures Off-Take Deal with Glencore

Sirius Petroleum reported Friday that it has secured up to $65 million in funds for the development of near-term production assets located offshore Nigeria.

Sirius said it had made an 'exclusivity off-take agreement' with Glencore Energy UK that includes provision for a pre-financing facility of up to $65 million that will see Sirius deliver up to 60,000 barrels of crude oil per day to Glencore while Glencore has exclusivity to market this oil on behalf of Sirius for a period of three years.

Sirius said that it intends to focus its initial drilling activities on the re-entry of the Ororo-1 well, located in the Ororo field, which sits in shallow water of between 23 and 27 feet offshore Nigeria. Sirius owns 40 percent of the field.

The field was discovered in 1986 when Chevron drilled the Ororo-1 well, which tested at approximately 2,895 barrels per day of light crude oil (43-degree API).

Toby Hayward, a non-executive director at Sirius, commented in a statement:

"Our partnership with a major multinational oil trading company is transformational for Sirius, and Glencore's invaluable expertise marks a fundamental step in our strategy to put our initial assets into production and to build a portfolio of highly valuable oil assets."

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CEONA Welcomes New VP

CEONA is growing its executive team with the appointment of Mark Preece, who will join the company in the capacity of executive vice president commercial and business development. Preece will begin work with the offshore construction, engineering and project management specialist in June 2013.

Preece has extensive senior management, commercial, operations and business development experience gained both in the UK and international Oil & Gas and Offshore Renewable energy markets.

Before joining CEONA, Preece was CEO at the tier two subsea start-up company Reef Subsea, SVP Business Development & Marketing at Acergy, Managing Director with Bibby Line Ltd, and earlier was with Technip SA, Coflexip Stena and Stena Offshore where he was Managing Director Canada & Caspian, and Senior Vice President UK and International Business Development.

In his earlier career he was a ship's master, a marine superintendent and a project manager. Preece is a master mariner with an MBA from Henley Management College.

"Mark will bring a wealth of experience to Ceona, and we are confident he will contribute to further strengthening our position in the market," commented CEONA CEO Steve Preston.

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BP Confirms Mexican Lawsuit over Deepwater Horizon

Deepwater Horizon Gulf of Mexico Oil Spill

BP Confirms Mexican Lawsuit over Deepwater Horizon

BP confirmed Wednesday that it is being sued by the Mexican government in relation to the Deepwater Horizon disaster. The firm's first quarter results Tuesday revealed that, since March 6, it is among a number of companies named as defendants in more than 2,200 additional civil lawsuits related to the incident.

Plaintiffs include a "foreign government", which press reports speculated was Mexico. In a phone call with Rigzone Tuesday, a BP press officer confirmed that the foreign government is indeed Mexico, which had said back in 2010 that it would look at some sort of action against the company in relation to the Deepwater Horizon spill.

BP is currently evaluating the lawsuits, of which it said the vast majority consist of claims under the US Oil Pollution Act 1990 (OPA 90). BP said it believes that claimants in these new lawsuits may have sought to file them in advance of the third anniversary of the incident on April 20 2013 in order to avoid time bar challenges under OPA 90's three-year statute of limitations.

Meanwhile, BP reported late Tuesday that it has reached agreement with Federal and Natural Resources Damages trustees on two additional proposed early restoration projects in Louisiana that are expected to cost approximately $340 million.

The projects are part of a commitment from BP to provide up to $1 billion in early restoration funding to speed up recovery of natural resources that were damaged as a result of the Deepwater Horizon incident.

"We are extremely pleased to have reached agreement with the trustees on the new projects, which will provide significant long-term benefits to the environment and the people of Louisiana," said Laura Folse, BP's executive vice president for Response and Environmental Restoration.

"With the help of the extensive cleanup efforts, early restoration projects, and natural recovery processes, the Gulf is returning to its baseline condition, which is the condition it would be in if the accident had not occurred."

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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