Rosneft Expects 2013 Output to Increase by 1%-2%

MOSCOW - OAO Rosneft expects to increase its output by between 1% and 2% in 2013 mainly due to production growth at its giant Vankor field in Siberia, the company said Friday as it reported its 2102 full year earnings.

In a conference call Dmitry Avdeev, the vice president for finance and economics, said he expects crude oil production from Vankor to reach between 430,000 barrels and 440,000 barrels per day, although he neither confirmed nor denied that oil production at the company's other main fields could decline.

Vankor was the main contributor to Rosneft's oil output growth of 2.5% to 2,43 million barrels a day in 2012 amid declining output at the company's other main fields.

Higher output and higher oil prices led to a 13% rise in revenue for the year to 3.08 trillion rubles ($102 billion) and a 7.2% rise in net profit to RUB342 billion.

However, the profit figure fell well below market expectations. "Reasons for such results are not exactly clear. There is an item called 'other expenditures' which unfortunately the company does not disclose," said Alexander Kornilov, an analyst with Alfa Bank, who called the results "disappointing".

The market is also worried by a sharp drop in free cash flow, which dropped to RUB45 billion for the full year from RUB99 billion a year before, partly due to increased investment and lower income from operations. Shares in the company closed down 2.1% RUB261.5 in Moscow, underperforming the wider index which was flat on the day.

Rosneft is buying competitor TNK-BP from BP PLC and its partners in a deal worth $50 billion that will create the world's largest traded oil producer. BP will increase its stake in Rosneft to 19.8% as part of the deal.

Mr. Avdeev said antitrust bodies in Russia and Ukraine have already approved the deal, and that the purchase, which is fully funded, is going ahead as planned.

To finance the purchase of the stake from BP, Rosneft has agreed to borrow $16.7 billion from international banks, the company said in its earnings report.

Mr. Avdeev added that the oil giant may also place a Eurobond later this year, as last year's debut issue showed "a very strong demand". He added that the company would hit the international bond market after considering the attraction of this instrument compared to domestic bonds, direct loans, or contracts with trading companies.

The company's net debt stood at RUB581 billion at the end of the fourth quarter compared to RUB542 billion at the end of the previous quarter, as Rosneft is yet to draw the agreed loans.

However, the acquisition of TNK-BP dented Rosneft's Earnings before interest, taxation, depreciation and amortization, or Ebitda, due to an increase in spending on audit and consulting services.

The company's Ebitda margin, the measure used to judge a company's profitability, dropped to 19.8% in 2012 from 24.4% in the previous year.

Mr. Avdeev said the company is aiming at paying dividend at 25% of its full-year profit, as announced before.

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

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TAG Oil, Apache Conclude Farmout Agreement for NZ Permits

TAG Oil Ltd. announced that the Company's 100-percent owned New Zealand subsidiaries have concluded an agreement with Apache New Zealand Corporation LDC, which results in an early termination of the Farmout Agreement dated Sept. 1, 2011. This agreement relates to exploration in Petroleum Exploration Permits 38348, 38349 and 50940 located in the East Coast Basin of New Zealand.

Main Highlights of the Agreement:

Apache has paid TAG Oil a lump sum payment to satisfy its obligations related to funding Phase 1 operations under the Farmout Agreement.TAG Oil will retain all assets developed under the Agreement, including all seismic and technical work completed by the Joint Venture.TAG retains its 100% interest in the subject East Coast Basin permits, including the Waitangi Hill shallow oil discovery.

TAG Oil CEO Garth Johnson commented, "Although we are disappointed that Apache's shift in corporate strategy resulted in a refocusing of their international holdings, we do understand that tough decisions sometimes need to be made. TAG remains highly enthusiastic about the future of these prospects: All the work completed to date as a result of our JV Phase 1 activities strengthens our beliefs in the potential of TAG Oil's East Coast Basin holdings. We're also pleased to have full control back over the project with funding in place."

TAG intends to utilize the lump sum payment received by Apache to fund the drilling of up to four East Coast Basin wells as planned in the Apache-agreed Phase 1 work program. These wells will test several high-impact play objectives including the Waipawa and Whangai source rocks that have independently been confirmed to be generating 50 degree API oil. Additionally, these naturally fractured, high-quality source rocks are believed to be widespread across TAG's acreage. Independent assessments have concluded that there are approximately 14 billion barrels of undiscovered original oil in place potential, within less than a fifth of TAG's total land holdings on the East Coast.

Drilling of the first East Coast wells is expected to commence in late March/ April 2013, subject to receipt of the necessary consents from regional government. TAG will utilize conventional vertical drilling techniques similar to those used by TAG Oil over many years in its successful Taranaki Basin operations.

Mr. Johnson concluded: "It was a pleasure to have had the opportunity to work closely with Apache. Our work together provided important geotechnical and operational related work, which has confirmed our belief in the major potential of this project, and advanced it to drill-ready status. Furthermore, TAG's cash flow and assets have grown dramatically since we first signed the agreement with Apache. So the Company can now fund further drilling operations and exploration activities from a place of strength and greater flexibility."

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Canary Soars to Shale Stardom

There seems to be a common theme with companies servicing the oil and gas industry – growth and job recruitment. How can an institution grow as a top-notch company while recruiting for the best in the industry?

Canary, LLC, formerly Frontier Energy Group, seems to be leading by example and appears to be on the fast-track to stardom by expanding its domestic presence with its latest acquisition, Canary Wellhead. This eighth acquisition in four years elevates the company to a national level – one that takes its roots beyond Bakken and into all major shale oil plays.

"It's been a lot of hard work," said Dan Eberhart, CEO of the company, reflecting on his success in a Rigzone exclusive interview. "We have built a phenomenal team that has helped us with our growth, specifically at integrating companies."

"I'm confident that the gains made over the last year are setting us up for an even better playing field – specifically the exposure we now have to the Utica and Mississippi Lime," he added. "We want to be a part of that and we will be focusing on that for the next five years."

Prior to becoming Canary, LLC, Frontier Energy Group experienced rapid growth in a short amount of time. The oilfield services company acquired Canary Wellhead Equipment Services, Inc. (2013); Spicer Wireline Inc. (2012); Luft Machine & Supply Co. (2011); Hanson Hot Oil (2010); Western Wellhead Grand Junction (2010); Cable, Incorporated (2010); Kodiak Stack Testing Company (2009); and Frontier Wellhead & Supply Co. (2009).

This latest acquisition allows for the company to expand the company's footprint and service offerings in the oilfield drilling and production services.

"With all of the M&A [merger and acquisitions], the medium-size companies are gone," said Eberhart. "There are no independent, medium-size companies left. We really want to emerge and fill that role and I feel that this latest multi-million dollar agreement will allow us to do just that."

This acquirement brings together two long-standing companies with more than 50 years of experience and advances Canary into the largest independent wellhead service provider in the United States with combined revenue of up to $100 million. With more than 26 locations across the United States and around 300 employees, the company is now servicing customers in every major shale oil and gas region, including North Dakota's Bakken, Colorado's Niobrara, Oklahoma's Woodford and Ohio's Utica.

"We are a relatively fun company to watch," stated Jacob Eberhart, the company's communications and marketing manager. "We are a growing group and we are aggressive. We have done an excellent job of integrating quickly. Where other companies have struggled with that in the past, we have a team that focuses specifically on integration while the rest of the team focuses on what's presently on hand."

The company is set to expand its distribution business in Oklahoma City by building a centralized center in 2013. Canary is looking to expand its growth by 15 percent throughout the year and is looking to hire laborers, engineers and a sales team in Oklahoma City. Canary will also come south and open a Houston executive sales center that will serve the greater Houston area.

"It will be a migration of growth and we expect to have these two areas completed within this year," said Mark Tassin, sr. vice president of operations. "We incorporate, we merge and we grow."

But such rapid growth brings challenges. Job recruitment and job retention appear to be two categories in which Canary is looking to overcome by culling through available candidates to find who best fits the overall picture of the company.

"North Dakota, the Bakken area, has been a tough recruiting area due to the high cost of living and weather issues," said Tassin. "We are recruiting out of the northern states to find individuals that are used to that type of environment, but what we have noticed is that a lot of these people do not have much industry experience. We will invest in our employees that are interested in a long-term commitment. Our basic recruiting process is we will work with you, get you started, get you trained, and pay accordingly."

"We are basically looking for someone that wants to make a career out of it and that will help our company grow," he added.
"Canary really prefers when our employees can recommend someone," added Jacob. "We know that we can count on what our own people say and recommend."

Canary is now the number one inventory company in North Dakota, which is also the number one oil producing state. In November 2012, North Dakota reached its highest output, yet. With more than 4,910 wells online, the state produced 20,072,728 barrels of oil.

"The Bakken is really our core competency and has been our focus until recently. We always have what the customer wants – that is how we grew in that area," said Tassin. "We are always forecasting, looking at markets, looking at our customers and forecasting with them. We stay one step ahead in order to meet our customer needs."

"We are not finished – we have only started," he stated.

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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Rodriguez Well Makes 'Significant' Gas Condensate Discovery

Faroe Petroleum and the Norwegian Petroleum Directorate reported Thursday that it a significant gas condensate discovery has been confirmed at the secondary target of the Rodriguez exploration well in the Norwegian Sea. Faroe reported that the operator's preliminary volumetric estimates of the size of the discovery are between 19 and 126 million barrels of recoverable oil equivalent.

The 6407/1-6S exploration well, which is on the PL475 license operated by Wintershall Norge, was drilled around 2.5 miles northeast of the Tyrihans field and about five miles southeast of the 6406/3-8 oil/gas discovery, the NPD said.

Faroe said that the 6407/1-6S well is the first exploration well to be drilled on the Rodriguez license and that further appraisal will be required to establish the lateral extent and size of the discovery.

"We are very pleased to announce this gas condensate discovery on the secondary target of this Norwegian Sea exploration well. This significant discovery gives the partnership a good indication of further upside potential on the rest of the licence block with at least two further matured and partially de-risked prospects and we look forward to its further appraisal," Faroe Petroleum Chief Executive Graham Stewart commented in a company statement.

"We have an active 2013 exploration drilling programme which includes several high impact exploration wells including Darwin (Barents Sea), Novus (Norwegian Sea) and two Butch wells (Norwegian North Sea)."

The well was drilled by the Transocean Arctic (mid-water semisub) rig, which the NPD said will now proceed to production license 418 in the northern part of the North Sea to drill appraisal well 35/9-8.

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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U.S. Crude Futures Fall From Four-Month Highs

U.S. crude-oil futures pulled back from a four-month high Thursday as oil traders' recent optimism about economic growth faded ahead of Friday's monthly jobs data.

The number of U.S. workers filing for unemployment benefits jumped last week to a higher-than-expected 368,000, the Labor Department reported Thursday, which has prompted some worries about the more closely watched January U.S. employment report.

With such qualms, many cashed in on bets of higher prices, traders said. U.S. crude futures had risen 14% over the last seven weeks.

"The energy and equities [markets] are pricing in a pretty good number tomorrow, so oil may sell off on it. If we get a bad number, it could sell off even more," said Rich Ilczyszyn, a broker and trader at iiTrader in Chicago. "I think there's going to be a correction."

Light, sweet crude for March delivery settled 45 cents, or 0.5%, lower, at $97.49 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded 61 cents higher, at $115.51 a barrel.

Gasoline prices also slumped Thursday, ending a 10-session rally as traders took profits before the expiration of the February contract.

Seasonal refinery maintenance has tightened supply and driven gasoline prices up sharply in the past two weeks, with gasoline futures settling at an all-time high for January of $3.0315 a gallon Wednesday. But investors stepped back from bullish bets, concerned that prices rallied too high, too quickly.

"We were due for a pullback in gasoline," said Jim Ritterbusch of Ritterbusch & Associates. "We had a huge price spike, and now we're seeing a little correction."

Front-month February reformulated gasoline blendstock, or RBOB, settled 1.29 cents lower at $3.0258 a gallon. February heating oil settled 1.25 cents higher at $3.1298 a gallon.

The February fuel-product futures expired at settlement Thursday.

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

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BP Names New Safety, Operational Risk EVP

BP announced Tuesday it has named Bob Fryar as executive vice-president for Safety and Operational Risk (S&OR), reporting directly to Bob Dudley, group chief executive.

Fryar, who is currently executive vice president for production in BP’s upstream business will take up his new position from Feb. 15.

The appointment follows the decision of Mark Bly, who has headed BP’s safety functions since March 2008, to retire from BP in the summer.

"Mark has played a key role in advancing BP’s safety agenda, ensuring that we are heading towards industry-leading safety performance and processes, and helping to drive safe, reliable and compliant operations across BP’s operating businesses.

"I thank him wholeheartedly for his tremendous efforts,” said Dudley. “And Bob Fryar’s deep technical expertise, profound knowledge of our operations and commitment to our values will serve him well in his new role on my executive team."

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Two Nominees, Two Opportunities for Growth

This opinion piece presents the opinions of the author.
It does not necessarily reflect the views of Rigzone.

In the coming months, President Obama will have to make two huge decisions about the future of American energy policy: whether to permit the Keystone XL pipeline and whether to allow Shell to move forward with its Arctic offshore drilling program. Coincidentally, both decisions may be influenced by the President's new appointments at the State Department and the Interior Department.

With Nebraska Governor Heineman's approval this week of the new route through Nebraska, the stage is set to bring more than 4 years of wrangling, delay, and political posturing on the Keystone XL pipeline to a close. Once the State Department conducts an environmental review that is already underway, there will be nothing preventing President Obama from making a final decision on the project - finally.

The President's decision to reject Keystone XL's application for a permit last January, despite the fact that the Department of State has affirmed that Keystone XL would be the safest pipeline ever constructed, was a political move meant to allay environmentalists until after the election. After suffering significant blowback from labor groups and the majority of Americans who support the project, the President enthusiastically supported construction of the southern leg of the pipeline and invited TransCanada to reapply for the permit that they need to cross the border from Alberta into Montana.

The delays and route changes that TransCanada has been forced to endure have added more than a billion dollars to the cost of the project, suspended tens of thousands of high paying jobs, delayed relief at the pump for millions of American drivers and prevented the project from pumping more than $20 billion into the U.S. economy.

As the State Department makes its final Environmental Impact Statement and National Interest Determination, supporters of the pipeline should make clear to both the White House and to the President's nominee for Secretary of State, Massachusetts Senator John Kerry, the importance of the project to the U.S. economy. Members of the Senate should ensure that Mr. Kerry pledges not to inject politics into the Department's review of the project in his confirmation hearings.

At the other end of the country, another energy company is wading through arbitrary delays and red tape in its efforts to develop resources off the Alaskan coast. In 2005 and 2008, the federal government sold Shell leases in the Beaufort and Chukchi Seas with a good faith agreement that the company would be able to explore the leases for oil and natural gas. In 2007, a federal court prevented Shell from drilling wells in the area due to a lawsuit by environmental groups. It happened again in 2009 and 2011 when baseless lawsuits aimed at the federal approvals process stopped the project from moving forward. Despite years of insisting that Alaskan offshore energy is part of the President's "all of the above" energy strategy, Secretary Salazar and the Department of the Interior has failed to permit the project in a timely manner.

Now, Mr. Salazar is departing Washington for the family ranch in Colorado, leaving the future prospects of the Alaska project in limbo. President Obama and his new nominee for Secretary of the Interior must understand the consequences of imposing further delays on the Alaskan offshore project. Beyond simply setting a standard of bad business on the part of the federal government, delay by the Interior Department would also jeopardize efforts by other energy companies invested in the region and would diminish the United States' ability to lead in Arctic energy development.

The potential energy and economic benefits of the Keystone XL project and Shell's Arctic development are staggeringly large. The pipeline project would create 20,000 jobs and pour $20 billion into the U.S. economy. Offshore Alaskan energy development will create more than 54,000 jobs annually for 50 years and generate $300 billion in revenue for the U.S. Treasury. We cannot afford further delay.

President Obama and Sen. Kerry should move quickly to give final approval to the Keystone XL pipeline. Meanwhile, Congress should ensure that his nominee to lead the Interior Department understands the importance and benefits of energy development off Alaskan shores. It would be a boon for the U.S. economy, and the U.S. energy consumer.

Michael Whatley is the executive vice president of Consumer Energy Alliance in Washington D.C.

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