Subsea 7 Says Tendering Levels Remain Strong

International oilfield services firm Subsea 7 said Thursday that levels of tendering remain strong across its markets and that it remains positive about medium and long-term market prospects.

Reporting its fourth quarter results for 2012, Subsea 7 said that despite the strong tender levels delays in project awards and supply chain bottlenecks will temper the firm's rate of progress in 2013. However, it expects both revenue and profit at the EBITDA level to show some progress during the year.

For 2012 Subsea 7 reported a 15-percent increase in its revenue to $6.3 billion, compared with 2011. Adjusted EBITDA for the year came in 13.6-percent greater at $1.1 billion. For 4Q 2012, the firm reported 13.7-percent increase in revenue to $1.6 billion, with EBITDA improving to $270 million (4Q 2011: $227 million).

Subsea 7 warned that its West Africa business will see a period of lower offshore activity in 2013 as operations on SURF (subsea umbilicals, risers and flowlines) contracts awarded in the second half of 2012 and early 2013 are projected to start in 2014.

However, Subsea 7 said that it sees increased tendering in the Gulf of Mexico and strong tendering in both the North Sea and the Norwegian Sea. The firm added that in Brazul demand from Petrobras for flexible pipelay vessels remains strong, while it also recently won its first contract in Mexico – which will require the deployment of its Seven Borealis vessel.

Subsea 7 CEO Jean Cahuzac commented in a statement:

"2012 was another year of significant achievement for Subsea 7. We have delivered strong financial results in line with our expectations. We have built a record backlog, exited non-core businesses and successfully completed the integration process following the Combination in January 2011. Our fleet enhancement program is also on track with the start-up of Seven Borealis in Angola, the ongoing construction of Seven Waves, and the recent order of a new-build diving support vessel for the North Sea.

"Tendering activity increased through the year, in particular in the North Sea, Africa and Brazil, reflecting our clients' ambitious investment plans. We remained disciplined in our bidding approach with a focus on project risk management and profitability, and I am pleased with the quality of our new awards and current level of order in-take."

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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Subsea 7 Says Tendering Levels Remain Strong

International oilfield services firm Subsea 7 said Thursday that levels of tendering remain strong across its markets and that it remains positive about medium and long-term market prospects.

Reporting its fourth quarter results for 2012, Subsea 7 said that despite the strong tender levels delays in project awards and supply chain bottlenecks will temper the firm's rate of progress in 2013. However, it expects both revenue and profit at the EBITDA level to show some progress during the year.

For 2012 Subsea 7 reported a 15-percent increase in its revenue to $6.3 billion, compared with 2011. Adjusted EBITDA for the year came in 13.6-percent greater at $1.1 billion. For 4Q 2012, the firm reported 13.7-percent increase in revenue to $1.6 billion, with EBITDA improving to $270 million (4Q 2011: $227 million).

Subsea 7 warned that its West Africa business will see a period of lower offshore activity in 2013 as operations on SURF (subsea umbilicals, risers and flowlines) contracts awarded in the second half of 2012 and early 2013 are projected to start in 2014.

However, Subsea 7 said that it sees increased tendering in the Gulf of Mexico and strong tendering in both the North Sea and the Norwegian Sea. The firm added that in Brazul demand from Petrobras for flexible pipelay vessels remains strong, while it also recently won its first contract in Mexico – which will require the deployment of its Seven Borealis vessel.

Subsea 7 CEO Jean Cahuzac commented in a statement:

"2012 was another year of significant achievement for Subsea 7. We have delivered strong financial results in line with our expectations. We have built a record backlog, exited non-core businesses and successfully completed the integration process following the Combination in January 2011. Our fleet enhancement program is also on track with the start-up of Seven Borealis in Angola, the ongoing construction of Seven Waves, and the recent order of a new-build diving support vessel for the North Sea.

"Tendering activity increased through the year, in particular in the North Sea, Africa and Brazil, reflecting our clients' ambitious investment plans. We remained disciplined in our bidding approach with a focus on project risk management and profitability, and I am pleased with the quality of our new awards and current level of order in-take."

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.

View the original article here

Subsea 7 Says Tendering Levels Remain Strong

International oilfield services firm Subsea 7 said Thursday that levels of tendering remain strong across its markets and that it remains positive about medium and long-term market prospects.

Reporting its fourth quarter results for 2012, Subsea 7 said that despite the strong tender levels delays in project awards and supply chain bottlenecks will temper the firm's rate of progress in 2013. However, it expects both revenue and profit at the EBITDA level to show some progress during the year.

For 2012 Subsea 7 reported a 15-percent increase in its revenue to $6.3 billion, compared with 2011. Adjusted EBITDA for the year came in 13.6-percent greater at $1.1 billion. For 4Q 2012, the firm reported 13.7-percent increase in revenue to $1.6 billion, with EBITDA improving to $270 million (4Q 2011: $227 million).

Subsea 7 warned that its West Africa business will see a period of lower offshore activity in 2013 as operations on SURF (subsea umbilicals, risers and flowlines) contracts awarded in the second half of 2012 and early 2013 are projected to start in 2014.

However, Subsea 7 said that it sees increased tendering in the Gulf of Mexico and strong tendering in both the North Sea and the Norwegian Sea. The firm added that in Brazul demand from Petrobras for flexible pipelay vessels remains strong, while it also recently won its first contract in Mexico – which will require the deployment of its Seven Borealis vessel.

Subsea 7 CEO Jean Cahuzac commented in a statement:

"2012 was another year of significant achievement for Subsea 7. We have delivered strong financial results in line with our expectations. We have built a record backlog, exited non-core businesses and successfully completed the integration process following the Combination in January 2011. Our fleet enhancement program is also on track with the start-up of Seven Borealis in Angola, the ongoing construction of Seven Waves, and the recent order of a new-build diving support vessel for the North Sea.

"Tendering activity increased through the year, in particular in the North Sea, Africa and Brazil, reflecting our clients' ambitious investment plans. We remained disciplined in our bidding approach with a focus on project risk management and profitability, and I am pleased with the quality of our new awards and current level of order in-take."

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.

View the original article here

Barnett Shale to Remain Major Contributor to US Gas Production

The Barnett shale play will continue to be a major contributor to U.S. natural gas production through 2030, despite a slow decline in production through 2030 and beyond, according to a new study from the University of Texas at Austin's Bureau of Economic Geology (BEG).

The study, which brought together the related research in engineering, geoscience and economics, examined on a well-by-well basis production data from over 16,000 individual wells in the Barnett play through mid-2011. The study results indicate significant recoverable resources remain in the Barnett play, with total recovery at greater than three times cumulative production to date.

The study's base case forecasts the Barnett, at a base price of $4 per thousand cubic feet of gas, will produce approximately 44 trillion cubic feet (Tcf) of gas through 2050 based on already drilled wells and well that will be drilled through 2030. In the base case, production will plateau from a current high of 2 Tcf per year and slowly decline to about 900 billion cubic feet per year by 2030.

The BEG team's calculations show 86 Tcf of technically recoverable free gas in 8,000 square miles that the play covers, of which 12 Tcf has been produced and 7 Tcf is proven. Of the 67 Tcf remaining, 45 Tcf is in drilled blocks and 22 Tcf is in undrilled acreage.

The 45 Tcf of technically recoverable free gas in 4,172 square miles of drilled areas exceeds the U.S. Energy Information Administration's July 2011 estimates of 23.81 Tcf for the 4,000 miles of active area. The 67 Tcf of remaining technically recoverable reserves across the full Barnett play also exceeds EIA's full estimate for the Barnett of 43.37 Tcf, which covered 6,500 square miles. It also exceeds the U.S. Geological Survey's 2003 assessment of 26 Tcf, which covered 5,000 square miles of the Barnett.

Other assessments of the Barnett have relied on aggregate views of average production, offering a "top down" view of production, said Scott Tinker, director of the BEG and co-principal investigator for the study, in a statement. Instead, the BEG study takes a "bottoms up" approach, starting with the production history of every well and then determining what areas remain to be drilled, which the study authors say creates a more accurate and comprehensive view of the basin.

The BEG team enhanced the view by identifying and assessing the potential in 10 production quality tiers and then using those tiers to more accurately forecast future production. The economic feasibility of production varies tremendously across the basin depending upon production quality tier.

The study's model centers around a base case of $4-gas, but it also allows for variations in price, volume drained by each well, economic limit of a well, advances in technology, gas plant processing incentives and many other factors to determine how much gas operators will be able to extract economically. This forecast falls in between some of the more optimistic and pessimistic predictions of production from the Barnett, the study authors noted.

While the BEG model shows the correlation between price and production, it suggests that price sensitivity is not overly dramatic, at least in the early phase of a formation's development.

"This is because there are still many locations to drill in the better rock, which is cost effective even at lower prices," Tinker commented.

While this drilling won't last forever, there are still a few more years of development remaining in the better rock quality areas.

The study was funded by the Alfred P. Sloan Foundation, a non-profit grant-making institution, and conducted a by team of 12 researchers from the University of Texas as well as Rice University. BEG will complete similar studies of the Marcellus, Haynesville and Fayetteville plays by year-end.

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.

View the original article here

Barnett Shale to Remain Major Contributor to US Gas Production

The Barnett shale play will continue to be a major contributor to U.S. natural gas production through 2030, despite a slow decline in production through 2030 and beyond, according to a new study from the University of Texas at Austin's Bureau of Economic Geology (BEG).

The study, which brought together the related research in engineering, geoscience and economics, examined on a well-by-well basis production data from over 16,000 individual wells in the Barnett play through mid-2011. The study results indicate significant recoverable resources remain in the Barnett play, with total recovery at greater than three times cumulative production to date.

The study's base case forecasts the Barnett, at a base price of $4 per thousand cubic feet of gas, will produce approximately 44 trillion cubic feet (Tcf) of gas through 2050 based on already drilled wells and well that will be drilled through 2030. In the base case, production will plateau from a current high of 2 Tcf per year and slowly decline to about 900 billion cubic feet per year by 2030.

The BEG team's calculations show 86 Tcf of technically recoverable free gas in 8,000 square miles that the play covers, of which 12 Tcf has been produced and 7 Tcf is proven. Of the 67 Tcf remaining, 45 Tcf is in drilled blocks and 22 Tcf is in undrilled acreage.

The 45 Tcf of technically recoverable free gas in 4,172 square miles of drilled areas exceeds the U.S. Energy Information Administration's July 2011 estimates of 23.81 Tcf for the 4,000 miles of active area. The 67 Tcf of remaining technically recoverable reserves across the full Barnett play also exceeds EIA's full estimate for the Barnett of 43.37 Tcf, which covered 6,500 square miles. It also exceeds the U.S. Geological Survey's 2003 assessment of 26 Tcf, which covered 5,000 square miles of the Barnett.

Other assessments of the Barnett have relied on aggregate views of average production, offering a "top down" view of production, said Scott Tinker, director of the BEG and co-principal investigator for the study, in a statement. Instead, the BEG study takes a "bottoms up" approach, starting with the production history of every well and then determining what areas remain to be drilled, which the study authors say creates a more accurate and comprehensive view of the basin.

The BEG team enhanced the view by identifying and assessing the potential in 10 production quality tiers and then using those tiers to more accurately forecast future production. The economic feasibility of production varies tremendously across the basin depending upon production quality tier.

The study's model centers around a base case of $4-gas, but it also allows for variations in price, volume drained by each well, economic limit of a well, advances in technology, gas plant processing incentives and many other factors to determine how much gas operators will be able to extract economically. This forecast falls in between some of the more optimistic and pessimistic predictions of production from the Barnett, the study authors noted.

While the BEG model shows the correlation between price and production, it suggests that price sensitivity is not overly dramatic, at least in the early phase of a formation's development.

"This is because there are still many locations to drill in the better rock, which is cost effective even at lower prices," Tinker commented.

While this drilling won't last forever, there are still a few more years of development remaining in the better rock quality areas.

The study was funded by the Alfred P. Sloan Foundation, a non-profit grant-making institution, and conducted a by team of 12 researchers from the University of Texas as well as Rice University. BEG will complete similar studies of the Marcellus, Haynesville and Fayetteville plays by year-end.

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.

View the original article here

U.S. Must Remain Active to Ensure Middle East Energy Supplies

The United States must continue its activist role, diplomatically and potentially militarily, in the Middle East, to ensure a free flow of oil and natural gas from the region, former U.S. Ambassador to Iraq James Jeffrey said Sunday on Platts Energy Week, an all-energy news and talk show program.

"The region keeps erupting into one kind or another of violence or instability," Jeffrey said on the program. "So we have to be present."

Currently a visiting fellow at the Washington Institute for Near East Policy, Jeffrey was U.S. ambassador to Iraq from 2010 until June 2012 and was U.S. ambassador to Turkey for two years before that.

Jeffrey acknowledged that the current U.S. presence in the Middle East is "adequate."

"We have a strong presence in the Gulf," Jeffrey said. "We have good relations with most of the countries in the region. But even with the pivot to Asia, this is something we have to be very careful about," he said, referring to the Obama administration's 2012 East Asia strategy.

"Oil is fungible," Jeffrey said. "There is one international oil market. Prices go up because of shortages in one area, they are going to go up in every other area, even in the United States, even if we import from safer areas or produce it ourselves.

"Even more importantly, at the very core of America's security relationship since World War II has been guaranteeing supplies of oil and gas to our friends and allies. Even if we are independent in energy, most of our friends in East Asia and certainly in Europe, and elsewhere in the world are not. If we want a stable world, if we want a world that isn't overrun by terrorists and enemies for freedom, we need to be present and we need in ensure that this gas and oil keeps flowing."

Discussing Iraq, Jeffrey said while that country has boosted its crude production to 3.4 million barrels per day (b/d) in December and is on target for 3.7 million b/d this year, earlier stated Iraqis hopes for reaching about 12 million b/d production over the next 20 years are not realistic.

"In fact, the Iraqis themselves are now negotiating to ratchet that down to the 8-9 million b/d, which would be right behind Saudi Arabia, still the second-most important oil exporter in the world," he said.

"The problem," Jeffrey said, "is that Iraq itself is not completely stable and it is anchored between two greatly unstable countries: Syria, which is under total civil war at this point, and Iran, which is under international sanctions and facing possible military action of the nuclear question. And Iraq itself has problems between the Kurds in the north and the central government. Oil companies from all over the world are flocking into northern Iraq because there are extraordinary reserves of oil and gas up there."

Chevron last week signed its third oil deal with the Iraqi Kurdish Regional Government, while ExxonMobil, Total, Gazprom Neft and other international oil companies have reached similar agreements. Iraq's central government considers all of them illegal.

"The U.S. has been very active trying to work out arrangements where everybody cooperates and oil and eventually gas from the north is exported in cooperation with Baghdad," Jeffrey said. "The latest deal has fallen through. People are back arguing and more needs to be done to ensure that a solution satisfactory to everybody can be achieved. Because this involves military as well as energy politics."

But despite much public rhetoric by both the central government and the Kurds, the two sides have cooperated on the shipment of oil when it benefits them, Jeffery said.

"Everybody is playing a veiled as well as open game here. I can’t give specific advice," he said. "This is a sensitive issue. A great deal is at stake, not only in energy, but in the political stability of Iraq, where we lost so many people, and therefore, I know the U.S. government is very energetically engaged in trying to find a solution. "

An advisor on Iran at State Department and White House during George W. Bush Administration, Jeffrey was adamant that U.S. and European Union sanctions over its nuclear program have been "extremely effective" against Iran.

"They've cut Iran's exports by more than 50%," he said. "But because oil markets are extremely flexible, including Iraq with its surge in exports, we've been able to balance that out globally and thus the sanctions have been able to tighten the screws on Iran without impacting world energy markets.

"Iran will be under much more pressure to go to the table, but this requires several things," Jeffrey said. "First of all, an offer that they would find acceptable in terms of ending their enrichment to at least 20%. Secondly, they would have to be persuaded that if they do not go down this route, military action will follow, and they may not be persuaded of that yet."

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U.S. Will Remain Largest Source of New Oil Growth in 2013

Topping the list of the big oil and gas stories in 2012 was the dramatic surge in U.S. oil production. In 2013, the U.S. will remain the largest source of new oil growth worldwide aided by the shale boom, but surpassing Saudi Arabia as the globe’s top oil producer by 2020 will be a challenge.

The big turnaround of U.S. oil production brought by new light tight oil developments was fully recognized in 2012, putting to rest the long-held notion that domestic oil production was in terminal decline. The rise in domestic oil output and the expectation that U.S. oil development will continue to grow amid high oil prices prompted some market observers to predict the U.S. could become the world’s largest oil producer, upstaging Saudi Arabia, by 2020.

But while U.S. oil output growth is expected to continue to be strong, it’s going to be hard to rival Saudi Arabia. U.S. oil production comes at an extremely high cost. Some anticipated increases in domestic oil production may not materialize if crude prices decline below $80 a barrel.

"Whether the U.S. will become the world’s top producer is not the most important thing to focus on," said Marcela Donadio, Americas Oil and Gas Leader for the global Ernst & Young organization. "What matters is the dramatic reversal of the U.S. energy fortunes and the need for the U.S. to take significant steps to ensure oil supply growth continues. Coherent energy policy, access to resources, improved infrastructure and economic stability are all key to future success."

Oil

In 2013, the global oil supply-demand balance is expected to remain uneasy amid geopolitical tensions and economic uncertainty. Oil markets could face an ugly Arab winter given the unstable political environments in Syria, Egypt and Libya. Meanwhile, Iraqi production continues to grow, currently topping 3 million barrels of oil a day, taking the No. 2 spot among OPEC producers from Iran. The Iraqi increases put significant pressure on OPEC members to cut back their production in order to make room for Iraq’s new output.

The long overdue, super-giant Kashagan project offshore Kazakhstan is expected to start production by mid-year and contribute to the rising global oil supplies from non-OPEC sources.

In the U.S., despite a substantial build-out of the oil transportation infrastructure this year, bottlenecks in the Midwest are expected to continue the pressure on US and Canadian oil prices.

Gas

Last year, U.S. natural gas prices averaged below $3/MMBtu for the first time since the late 1990s amid a glut of production, leaving many if not most natural gas producers in a bind. Small gas producers are expected to continue struggling this year with questions remaining about their ability to survive. Low natural gas prices, however, will continue driving a renaissance in the U.S. petrochemical and manufacturing sectors as they lower feedstock costs. U.S. natural gas exports will remain a controversial issue this year as supporters and adversaries escalate political tensions around how much exports could impact domestic natural gas prices.

Downstream

Profit margins for the U.S. refining business were up across the board in 2012, with Midwest refineries having another stellar year thanks to access to cheaper WTI and Canadian crudes. While expected to diminish somewhat, the structural imbalances in the U.S. Midcontinent are expected to continue this year, prolonging the advantage of regional refiners that have access to cheaper oil supplies.

Globally, refiners had a good year in 2012, but their performance was nowhere near the profitability seen in the U.S. Going forward, the consensus view is that the economics for refiners outside the U.S. will remain challenging as more refining capacity comes online and plants continue to process relatively more expensive crudes.

Oilfield services

Last year was not a bad year for oilfield services companies as rig counts held up and global upstream spending cautiously increased. The U.S. rig count was slightly off as gas-directed drilling slowed and was not fully offset by new oil- and liquids-directed drilling. Oilfield service cost pressures slowed somewhat due to efficiency gains, while labor pressures rose. Offshore, there still are a large number of new-builds coming into the market, that are expected to keep a lid on day rates, utilization and profit margins.

Transactions

Annual transaction activity in terms of total reported deal value was up 20 percent in 2012 compared with a year earlier, topping $400 billion, the highest ever reported value. However, activity in terms of deal volume or the number of deals was down slightly for the year. A full $60 billion of the total transaction value involved Russia’s oil giant Rosneft, which struck deals with AAR and BP for the TNK-BP joint venture. Asian outbound oil and gas acquisitions had another strong year in 2012, and the acquisition pace looks to continue in 2013.

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