Houston American Energy Updates Test Results from La. Well

Houston American Energy Corp. announced Friday that Pennington Oil & Gas, LLC, the operator of the Crown Paper #1 well in the Profit Island Field in East Baton Rouge Parish, Louisiana, has successfully carried out a recompletion of the Crown Paper #1 well. Houston American holds a 5.675 percent royalty interest in the well, which interest will be reduced to a 2.838 percent royalty interest after Houston American's receipt of royalties totaling approximately $225,000. Houston American also holds working interests and royalty interest in adjacent acreage to the Profit Island Field.

The Crown Paper #1 well came back on production following the recompletion April 25 and is currently producing in excess of 300 barrels of condensate and 900 mcf of gas per day.

John Terwilliger, Chief Executive Officer of Houston American Energy, stated, "While it is early in its production life for this new interval, I am very pleased with the initial production from the well. As a royalty owner, Houston American is not privy to all of the data on the well and can't speak as to the future cash flows that may be realized from the well. Nonetheless, I view the successful recompletion in the Tuscaloosa Sand as favorable to our Profit Island and North Profit Island Prospects. Houston American will continue to evaluate this area as well as pursue other domestic opportunities."

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Cobalt Reports Drill Stem Test Results for Well Offshore Angola

Cobalt International Energy, Inc. announced that its drill stem test of the lowest interval drilled in the Cameia #2 well in Block 21, offshore Angola, did not produce measurable hydrocarbons. The Cameia #2 drill stem test did however confirm the existence of a lower interval potentially capable of high flow rates across the basin. This interval had not previously been penetrated or tested in the Kwanza Basin.

The Cameia #2 well did confirm the presence of the same high quality hydrocarbon bearing mound reservoir that was penetrated by the original Cameia #1 discovery well.

"While I am disappointed this deep interval did not flow oil to the surface, I am encouraged by this interval's potential for significant flow rates across the basin. This information is important as we continue the evaluation of the Kwanza Basin Pre-salt's upside potential," noted James W. Farnsworth, Cobalt's chief exploration officer. "In addition, as we previously announced, Cameia #2 confirmed the extension of the same exceptional mound reservoir as seen in Cameia #1."

The results of this drill stem test have no bearing on the commerciality of the Cameia Mound Development Project and Cobalt is continuing to work with the Concessionaire to move this project to sanction.

The Diamond Offshore Ocean Confidence (UDW semisub) is now in the process of temporarily abandoning the Cameia #2 well. The wellbore will be used as part of the Cameia Mound Development Project, which is expected to be sanctioned in early 2014. Following this operation the Ocean Confidence will move to and commence drilling the Mavinga #1 Pre-salt exploratory well located adjacent to and north of the Cameia discovery.

Cobalt anticipates that the Pre-salt Lontra #1 exploratory well in Angola Block 20 will spud as planned in the second quarter of 2013. Lontra #1 will be drilled with the Petroserv SSV Catarina (UDW semisub), which is currently in Angola undergoing final acceptance testing.

In addition, the Ocean Rig Olympia (UDW drillship) has spud the Diaman #1 well, located on the Diaba block, offshore Gabon. Diaman #1, which is operated by Total Gabon, will be the first deepwater Pre-salt well drilled in Gabon.

Finally, drilling operations continue in the deepwater Gulf of Mexico on the Ardennes Prospect, located in the prolific Inboard Lower Tertiary play. Cobalt plans to spud three additional wells during 2013 in the West African Pre-salt and the Gulf of Mexico Inboard Lower Tertiary trends.

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Cobalt Reports Drill Stem Test Results for Well Offshore Angola

Cobalt International Energy, Inc. announced that its drill stem test of the lowest interval drilled in the Cameia #2 well in Block 21, offshore Angola, did not produce measurable hydrocarbons. The Cameia #2 drill stem test did however confirm the existence of a lower interval potentially capable of high flow rates across the basin. This interval had not previously been penetrated or tested in the Kwanza Basin.

The Cameia #2 well did confirm the presence of the same high quality hydrocarbon bearing mound reservoir that was penetrated by the original Cameia #1 discovery well.

"While I am disappointed this deep interval did not flow oil to the surface, I am encouraged by this interval's potential for significant flow rates across the basin. This information is important as we continue the evaluation of the Kwanza Basin Pre-salt's upside potential," noted James W. Farnsworth, Cobalt's chief exploration officer. "In addition, as we previously announced, Cameia #2 confirmed the extension of the same exceptional mound reservoir as seen in Cameia #1."

The results of this drill stem test have no bearing on the commerciality of the Cameia Mound Development Project and Cobalt is continuing to work with the Concessionaire to move this project to sanction.

The Diamond Offshore Ocean Confidence (UDW semisub) is now in the process of temporarily abandoning the Cameia #2 well. The wellbore will be used as part of the Cameia Mound Development Project, which is expected to be sanctioned in early 2014. Following this operation the Ocean Confidence will move to and commence drilling the Mavinga #1 Pre-salt exploratory well located adjacent to and north of the Cameia discovery.

Cobalt anticipates that the Pre-salt Lontra #1 exploratory well in Angola Block 20 will spud as planned in the second quarter of 2013. Lontra #1 will be drilled with the Petroserv SSV Catarina (UDW semisub), which is currently in Angola undergoing final acceptance testing.

In addition, the Ocean Rig Olympia (UDW drillship) has spud the Diaman #1 well, located on the Diaba block, offshore Gabon. Diaman #1, which is operated by Total Gabon, will be the first deepwater Pre-salt well drilled in Gabon.

Finally, drilling operations continue in the deepwater Gulf of Mexico on the Ardennes Prospect, located in the prolific Inboard Lower Tertiary play. Cobalt plans to spud three additional wells during 2013 in the West African Pre-salt and the Gulf of Mexico Inboard Lower Tertiary trends.

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Petroamerica Updates Testing Results from Colombia Well

Petroamerica Oil Corp. presented preliminary drilling results for its Las Maracas-8 well on the Los Ocarros Block, and provide the results of selective testing for the La Casona-1 well on the El Eden Block, Colombia.

The Las Maracas-8 well was targeting the northern extension of the Las Maracas field and reached its total depth in a record drilling time of 10 days. A petrophysical evaluation of wireline logs from the well indicates more than 56 feet (true vertical depth (TVD)) of net pay, comprising 34 feet (TVD) in the Mirador Formation and 22 feet (TVD) in the middle Gacheta reservoir. The well is currently being cased, and it is expected that the well will be completed as a Mirador producer initially. Following completion, the rig is expected to drill Las Maracas-9 that will target the Gacheta and Une reservoirs.

The Las Maracas Field is currently producing between 8,000 to 9,000 barrels of oil per day (bopd) in total and the permanent production facility is still on schedule for completion by the end of May 2013.

The Company also carried out an extensive testing program of the Une and Gacheta reservoirs in its La Casona-1 well using a workover rig.

The Une Formation in La Casona-1 flow tested at an average rate of 1,700 bopd and 6 million cubic feed per day (MMcf/d) of gas over a 56-hour period. The well produced under natural flow conditions and the quality of the crude oil produced was 35 degree API. The measured watercut at the end of the test was 1 percent.

A number of basal Gacheta sands, not previously described in net pay numbers that were announced in the November 13, 2012 press release, were also tested and produced 105 bopd of light 24 degree API oil and 0.5 MMcf/d of gas. The watercut at the end of the test was 2 percent. A middle Gacheta sand was also tested separately yielding no flow to surface. It is speculated that this last test was dry due to either formation damage, or the well required more clean-up time to flow naturally.

The Mirador Formation, which had good oil shows and potential hydrocarbon pay from logs, could not be tested in this well due to a poor cement bond. It is expected that the Mirador, Gacheta and Une reservoirs will be further evaluated with a follow-up well, La Casona-2, to be drilled later this year.

The operator of the block is currently procuring production facilities that include natural gas compression equipment and plans to use the produced gas as a power source at the Las Maracas and Kona production facilities. Production from the La Casona discovery is expected to commence sometime during the third quarter of 2013.

Petroamerica holds a 50 percent participating interest in the Los Ocarros Block where the Las Maracas field is situated, and a 40 percent participating interest in the El Eden Block, 15 percent of which is still pending approval by the Colombian National Hydrocarbon Agency (ANH), where the La Casona discovery is located.

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Musings: The Gulf of Mexico Is Back Based On Lease Sale Results

Two weeks ago the Department of the Interior reported the results of the Central Gulf of Mexico lease sale 227, which, based on the total amount of money oil and gas companies bid, suggested the industry is bullish on prospects in this region. As usual, the media focused on the total dollar figures and the bidding intensity among companies over a few tracts, but it may have missed some of the underlying trends that are shifting and will shape the Gulf's future.

The media focused on the total dollar figures and the bidding intensity among companies over a few tracts

Some 52 oil and gas companies submitted 407 bids on 320 tracts offered by the government. BP plc did not submit a bid, although they were told by the Interior Department that they could. BP is currently prohibited from securing government contracts due to the settlement terms of the Macondo oil spill. The Interior Department told BP they could submit a bid and after a review would be informed whether they were able to be awarded the tract. We assume BP declined to invest the time and effort in what was likely to be nothing more than an exercise. What we don't know is whether BP bid as a partner with others, although their legal status could impact the award status. The 320 tracts bid on represented only 4.5% of all the tracts offered, which was the smallest percentage since 2001, as shown in Exhibit 6 on the next page.

The 320 tracts bid on represented only 4.5% of all the tracts offered, which was the smallest percentage since 2001

When the results of the sale are examined from the perspective of the total number of tracts bid on, the post-2000 period has generally demonstrated a downward trend, although there have been some very successful lease sales such as in 2007 and 2008. Those years appear to have been an aberration from the general trend of bidding in a mature oil and gas province. The high sale results were consistent with the speculative fever that gripped the U.S. and global economy immediately prior to the 2008 financial crisis.

BOEM altered some of the terms of the lease bids from prior sales

Federal officials, such as Interior Secretary Ken Salazar and Bureau of Ocean Energy Management (BOEM) Director Tommy Beaudreau, cheered the results of the sale, and pointed out that comparisons of this Central Gulf of Mexico sale to the prior one in 2012 should be made with caution since the prior sale reflected pent-up industry demand due to the absence of a sale in 2011 following the Macondo oil spill. Additionally, BOEM altered some of the terms of the lease bids from prior sales. Deepwater acreage minimum bids were boosted to $100 per acre compared to prior sale amounts of only $37.50 an acre. The minimum bid hike came following extensive analysis by BOEM showing that deepwater leases with high bids of less than $100 per acre experienced virtually no exploration and development. The deepwater tracts leased in this sale also carried escalating rental rates and tiered durational terms with relatively short base periods followed by additional time under the same lease if the operator drills a well during the initial period. This is the federal government's attempt to make sure that acreage leased offshore is drilled rather than becomes a Congressional talking point whenever gasoline prices soar about how many idle offshore leases the oil industry holds.

Extensive analysis conducted in the mid-1980s showed that between 1974 and 1984, the industry always acquired lease acreage that was never drilled

While we have not seen the BOEM analysis, we would be cautious about interpreting the data. Since the federal government shifted its offshore leasing program to area-wide lease sales in 1983, oil and gas companies have often purchased acreage with minimum bids as they attempt to lock up sufficient acreage spreads to cover geological/exploration theories they planned to test. Extensive analysis conducted in the mid-1980s showed that between 1974 and 1984, the industry always acquired lease acreage that was never drilled. That analysis shocked many in the industry who had always assumed that, prior to the introduction of area-wide leasing, all the acreage ever leased offshore was drilled. The practice of not drilling all leased tracts mushroomed once the industry was freed from the "nomination process for identifying acreage to be leased" in order to test unconventional geologic theories. If the theory proved wrong with a test well, then multiple tracts were often condemned and never drilled. We tend to believe that the shift to area-wide leasing in the Gulf and away from the acreage nomination system previously in effect contributed to the successful development of sub-salt plays, Lower Tertiary plays and the entire deepwater phenomenon.

We attribute this consistency to the exploration philosophy of the modern oil and gas industry that companies are in the business of replacing and growing their reserves and production and they must continue to reinvest in the business every year if they expect to remain in business long-term

A measure we follow when attempting to assess the success of a Gulf of Mexico lease sale is the ratio of bids made to tracts bid on. We have examined this ratio going back to the very first Central Gulf sale but more importantly since area-wide lease sales began in 1983. Exhibit 8 shows the tracts bid on, the number of bids made and the ratio of those figures for each Central Gulf sale since 1983. The sale results should be read from right to left, but what they show is how relatively consistent the ratio has been over this 30-year period. With commodity prices rising and falling and the fortunes of the industry ebbing and flowing, one might have expected greater variability in the bids-to-tracts trend. We attribute this consistency to the exploration philosophy of the modern oil and gas industry that companies are in the business of replacing and growing their reserves and production and they must continue to reinvest in the business every year if they expect to remain in business long-term. This investment trend goes counter to the "speculator" view of oil company managements. Under that theory, oilmen would not be bidding during periods when oil prices were high and rising but would only bid when commodity prices were low. Yes, high oil prices, which provide incremental cash flows for the companies, are often the justification for accumulating greater exploration acreage inventory than when industry times are lean. But the stability of the bids-to-tracts ratio suggests greater, and more consistent, financial discipline than the speculator thesis.

The shallow Gulf of Mexico segment may be on the cusp of a revival after having been ‘left for dead’ by the emergence of the shale revolution onshore

The most notable figures to come from the lease sale results were the number of bids in deep and shallow water depths. According to data from BOEM, there were 131 bids for tracts located in water depths of 1,600 meters of water depth or greater but 85 bids for tracts in less than 200 meters of water depth. Those figures suggest to us that the shallow Gulf of Mexico segment may be on the cusp of a revival after having been 'left for dead' by the emergence of the shale revolution onshore. If accurate, it means better times for many of the more traditional domestic suppliers of offshore oilfield services. It has been the absence of activity in shallow water that has retarded the Gulf of Mexico recovery, but that may be about to change.

G. Allen Brooks works as the Managing Director at PPHB LP. Reprinted with permission of PPHB.

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Encana Posts Smaller 4Q Loss; Results Beat Views

Encana Corp., which has been grappling with a slump in natural-gas prices, posted a fourth-quarter loss that was much smaller than its year-earlier loss and better than analyst expectations.

The Calgary, Alberta-based natural-gas focused company said it lost $80 million in its latest quarter, compared with a loss of $476 million a year earlier.

Operating earnings, which exclude amounts related to hedging and impairments, improved to $296 million, or 40 cents a share, from $232 million, or 31 cents, a year earlier.

The Thomson Reuters mean estimate was for a profit of 33 cents a share.

Cash flow dipped 18% to $809 million, or $1.10 a share.

Natural gas production averaged 2.95 billion cubic feet a day, down 15% from a year earlier, while liquids production jumped 51% to 36,200 barrels a day.

Encana said it's budgeting about 80% of its 2013 operating budget to light oil and liquids-rich natural gas plays.

Capital spending for 2013 is projected at $3.0 billion to $3.2 billion and cash flow at $2.3 billion to $2.5 billion. It's targeting net divestitures in the range $500 million to $1.0 billion.

Encana said it expects oil and natural gas liquids production this year to be between 50,000 and 60,000 barrels a day, with annual natural gas production around 2.8 billion to 3.0 billion cubic feet a day.

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

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Connecticut shooting results in locked school doors in Colorado

Font ResizeEducationBy Karen Augé
The Denver Postdenverpost.comPosted: 12/17/2012 07:20:39 PM MSTDecember 18, 2012 2:21 AM GMTUpdated: 12/17/2012 07:20:40 PM MST

 As uneasy parents across the nation sent their children back to class Monday, thousands of them in Colorado did so with schools' attempts at reassurance tucked away in their inboxes.

"In light of the tragedy in Connecticut, we will begin keeping our front doors locked . . ." began an email to parents at one Douglas County school.

"PSD is committed to ensuring that all students continue to remain safe in our schools," Poudre School District Superintendent Nancy Wright wrote to parents in her district.

Counselors, class discussions and locked doors were deployed with seemingly equal intensity after the massacre of 20 children and six adults at a Connecticut school once again reminded educators of the need to walk a fine line between keeping schools safe and turning them into armed camps.

A first order of business at many schools was not just the physical safety but the emotional health of kids who may or may not have heard accounts of the bloodbath over the weekend.

Stefan McVoy, school director at Denver School of Science and Technology's Stapleton campus, told parents that students were informed at their regular Monday morning meeting that if they need to talk, someone will be there.

"We recognize that students will process this information in different ways - for some, it will seem like a world away; but for others, it may be difficult to sit in a classroom," McVoy wrote to parents.

"Rest assured, our intent is not to dwell on the issue, but to simply acknowledge that there are caring adults who can help . . ." he wrote.

At the same time, McVoy reminded parents that they need to show identification when they visit the school, "even though we are likely to recognize many of you."

In Jefferson County, where they know as well as anyone how quickly a typical school day can unfold into a national nightmare, security is always a priority, said spokeswoman Lynn Setzer.

That's not to say the district that is home to Columbine High School is complacent.

"I'm sure no school district would say they have everything 100 percent right; you're always thinking about and looking at your practices and you want to be open to looking for improvements to what you have in place," she said.

On the Western slope, Mesa County schools has five full-time resource officers from local law enforcement agencies. Monday, they added more, with police driving around neighborhoods near schools.

"We wanted to put students', staff and parents' minds at ease," said Tim Leon, district director of safety, security and transportation.

In Douglas County, Superintendent Liz Fagen said that when news broke about the shooting in Connecticut, county and law enforcement officials immediately began re-arranging their calendars to set up a meeting Monday morning.

By Monday afternoon, the district had released a plan of action, some ideas being implemented immediately, others to be added over time.

Among them: Creating a marshal program similar to that used by the Transportation Security Administration. Only instead of trying to blend in with airline passengers, these plain-clothes officers would be in schools.

"You never know if there's one a plane when you're flying," Fagen said. "It would be the same with the schools; there wouldn't be a marked car in the parking lot where someone could go, 'Oh, Bill is here today, I'd better go to another school.'"

Douglas County schools offer free wi-fi to law enforcement officials. The school district wants to take that a step further: officers in the field who need to write reports are asked to do so from schools, just to get them on school grounds. To sweeten the deal, any law enforcement official can get a free lunch at any Douglas County school.

Even with lots of ideas, Fagen realizes no system is perfect.

"The law enforcement officials were very clear that we can be creative and innovative but they can't guarantee that nothing will ever happen," she said.

"But these ideas, taking this multi-layered approach, will really move the odds more in our favor."

Staff writer Anthony Cotton contributed to this report.

Karen Augé: 303-954-1733, kauge

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