BP: Commercial Flow Rates at Itaipu-1, Offshore Brazil

LONDON - BP PLC Monday said it has completed a flow test at its Itaipu-1A well offshore Brazil, one of the world's most promising oil and gas frontiers, that indicates commercially viable flow rates from the pre-salt reservoir.

BP said the test achieved flow rates of up to 5,600 barrels of oil a day for 32 hours from the well, which is located in the deep-water sector of the Campos Basin, 125 kilometers offshore Brazil.

"This is a good result for the Itaipu project, indicating that commercially viable flow rates can be achieved from this pre-salt carbonate reservoir," said BP vice president for exploration Brazil Neil Piggott.

Geologists believe the oil and gas exploration areas off Brazil's northeastern coast may hold similar reserves to those found in west Africa. Bountiful hydrocarbon discoveries in the last decade have led to a near 70% rise in the South American country's proven oil and gas reserves. Much of that success has been achieved by tapping reservoirs contained beneath an ultra-deep layer of salt that lies thousands of meters below the seabed.

The Itaipu-1A pre-salt well was drilled in 2009 by Devon. BP purchased Devon's interests in Brazil in 2011.

The Itaipu-2 appraisal well was drilled in 2011. A second appraisal well location, Itaipu-3, has been agreed with the Brazilian National Petroleum Agency, and will be the next operation at the Itaipu field later this year.

BP is the operator of the block with 40% equity. Anadarko Petroleum Corp. (APC) holds a 33.3% stake in the block and Maersk Energia Ltda. has a 26.7% share.

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

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PetroNeft All Smiles over Arbuzovskoye Production Rates

PetroNeft Resources plc, owner and operator of Licences 61 and 67, Tomsk Oblast, Russian Federation, provided the following update on its operations at Licence 61.

Highlights:

Arbuzovskoye well 105 successfully completed Initial oil flow rate of 160 barrels of oil per day (bopd), with no water productionSuccessful workover restores production at Arbuzovskoye well 102 to 380 bopdRecent pressure testing of two Arbuzovskoye wells shows normal pressure declineArbuzovskoye water source well completed, planned pressure maintenance to commence shortlyTiming and location of future Arbuzovskoye wells to be determined by response to pressure maintenance programTotal production increased to 2,800 bopd

Arbuzovskoye well 105, the sixth well in the current program, has been successfully tested at an initial rate of 160 bopd with no visible water cut.

Further to last month's update, pressure testing of two wells at Arbuzovskoye was carried out which indicated that reservoir pressures are in line with expectations based on volumes produced to date. This confirmed that the rapid decline in production experienced in the Arbuzovskoye 102 well in January and February was due to a near-wellbore problem resulting from likely migration of fine grained materials that had plugged the perforations and was not due to problems with reservoir pressure. As a result an underbalanced re-perforation of the Arbuzovskoye 102 well was performed, which successfully removed the flow restrictions in the well and restored production to 380 bopd.

Following the success of this remediation procedure, other Arbuzovskoye wells are currently being examined with a view to re-perforating additional wells in the near term.

A water source well has now been drilled to supply injection water for the planned pressure maintenance program at Arbuzovskoye. Locations and timing of further production wells will be selected based on the response to the pressure maintenance program. The objective is to optimize recovery from the field and allow the pressure maintenance system time to get established. It is likely that at least three additional wells will ultimately be drilled from Arbuzovskoye Pad 1 to fully exploit the area.

Arbuzovskoye contains 2P reserves in excess of 13 million barrels of oil according to independent reserve auditors Ryder Scott and is the Company's second field being developed.

Total oil production, comprising both the Lineynoye and Arbuzovskoye oil fields has increased up to 2,800 bopd after successful completion of 105 well and re-perforation of 102 wells at Arbuzovskoye.

Dennis Francis, chief executive officer of PetroNeft Resources plc, commented:

"Development work at Arbuzovskoye has been positive this past month. Not only has the pressure testing of two wells confirmed normal pressure decline for the field in line with production, but the workover of well 102 was successful. We will now implement the planned pressure maintenance program on the field which will slow production decline and improve recoveries. A similar program was implemented at Lineynoye field where we had positive results."

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PetroNeft All Smiles over Arbuzovskoye Production Rates

PetroNeft Resources plc, owner and operator of Licences 61 and 67, Tomsk Oblast, Russian Federation, provided the following update on its operations at Licence 61.

Highlights:

Arbuzovskoye well 105 successfully completed Initial oil flow rate of 160 barrels of oil per day (bopd), with no water productionSuccessful workover restores production at Arbuzovskoye well 102 to 380 bopdRecent pressure testing of two Arbuzovskoye wells shows normal pressure declineArbuzovskoye water source well completed, planned pressure maintenance to commence shortlyTiming and location of future Arbuzovskoye wells to be determined by response to pressure maintenance programTotal production increased to 2,800 bopd

Arbuzovskoye well 105, the sixth well in the current program, has been successfully tested at an initial rate of 160 bopd with no visible water cut.

Further to last month's update, pressure testing of two wells at Arbuzovskoye was carried out which indicated that reservoir pressures are in line with expectations based on volumes produced to date. This confirmed that the rapid decline in production experienced in the Arbuzovskoye 102 well in January and February was due to a near-wellbore problem resulting from likely migration of fine grained materials that had plugged the perforations and was not due to problems with reservoir pressure. As a result an underbalanced re-perforation of the Arbuzovskoye 102 well was performed, which successfully removed the flow restrictions in the well and restored production to 380 bopd.

Following the success of this remediation procedure, other Arbuzovskoye wells are currently being examined with a view to re-perforating additional wells in the near term.

A water source well has now been drilled to supply injection water for the planned pressure maintenance program at Arbuzovskoye. Locations and timing of further production wells will be selected based on the response to the pressure maintenance program. The objective is to optimize recovery from the field and allow the pressure maintenance system time to get established. It is likely that at least three additional wells will ultimately be drilled from Arbuzovskoye Pad 1 to fully exploit the area.

Arbuzovskoye contains 2P reserves in excess of 13 million barrels of oil according to independent reserve auditors Ryder Scott and is the Company's second field being developed.

Total oil production, comprising both the Lineynoye and Arbuzovskoye oil fields has increased up to 2,800 bopd after successful completion of 105 well and re-perforation of 102 wells at Arbuzovskoye.

Dennis Francis, chief executive officer of PetroNeft Resources plc, commented:

"Development work at Arbuzovskoye has been positive this past month. Not only has the pressure testing of two wells confirmed normal pressure decline for the field in line with production, but the workover of well 102 was successful. We will now implement the planned pressure maintenance program on the field which will slow production decline and improve recoveries. A similar program was implemented at Lineynoye field where we had positive results."

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Diamond Offshore 4Q Net Falls 17% Amid Lower Day Rates

Diamond Offshore Drilling Inc.'s fourth-quarter earnings fell 17% as lower day rates dampened improved utilization of ultradeep-water and midwater floaters.

Results topped consensus estimates and the contract driller's board once again declared a special cash dividend of 75 cents a share. The board also reiterated its policy of considering the payment of special cash dividends on a quarterly basis.

Diamond Offshore, which is majority owned by Loews Corp. (L), had seen declining revenue over the past year as the offshore-drilling sector struggles with a recovery from 2010's Deepwater Horizon rig explosion in the Gulf of Mexico. U.S. authorities in February 2011 resumed the approval of deep-water drilling programs, which now face heightened scrutiny.

Diamond Offshore reported a profit of $155.7 million, or $1.12 a share, down from $188.5 million, or $1.36 a share, a year earlier. Revenue climbed 0.3% to $750.5 million.

Analysts polled by Thomson Reuters had most recently forecast earnings of $1.10 a share on revenue of $740 million.

Operating margin shrank to 26% from 29.2%.

Day rates for ultradeep-water floaters fell 2.2%, while utilization increased to 89% from 70% a year earlier.

For deep-water floaters, day rates dropped 12% while utilization fell to 85% from 97%.

Meanwhile, midwater floaters saw a 1.1% decline in day rates, with utilization improving to 70% from 60%.

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

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