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Oil and Gas Energy News Update

Friday, July 29, 2011

Oil & Gas Post - All News Report for Friday, July 29, 2011

Friday, July 29, 2011

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Commodity Corner: Oil Plunges on GDP Report

- Commodity Corner: Oil Plunges on GDP Report

Friday, July 29, 2011
Rigzone Staff
by Matthew V. Veazey

Light sweet crude oil for September delivery lost nearly 2.4 percent Friday after the U.S. Department of Commerce estimated that the real gross domestic product (GDP) grew at an annual rate of only 1.3 percent in the second quarter of this year.

The WTI settled at $95.70 a barrel Friday, down $2.31 from the previous day, after the latest figures from the Commerce Department's Bureau of Economic Analysis (BEA) revealed disappointing real GDP figures for the first half of the year. Real GDP is the monetary value of goods and services produced by labor and property in the United States.

The 1.3 percent figure for the second quarter, an advance estimate, failed to meet private-sector expectations of 1.8 percent, the Commerce Department stated. In addition, the BEA revised its first quarter real GDP figure downward from 1.9 percent to a paltry 0.4 percent.

"Today's first look at GDP in the second quarter confirms what we already knew: The economy isn't growing as fast as it needs to," Commerce Secretary Gary Locke said in a written statement. Locke also implied that the economic situation might improve if Congress and the Administration agree on a plan to increase the national debt by authorizing the federal government to raise its borrowing limit from the current $14.3 trillion. "And every day that we fail to act to lift the debt ceiling and inch closer to default, we threaten our economic progress and job creation," he warned.

Brent futures fell less dramatically Friday, ending the day 0.5 percent lower at $116.74 a barrel after fluctuating from $115.80 to $117.06. The WTI peaked at $97.39 and bottomed out at $94.95.

As of 4 p.m. Central Daylight Time Friday, the center of Tropical Storm Don was approaching the South Texas coast. The storm caused offshore operators to shut in approximately 6.2 percent of current natural gas production in the Gulf of Mexico, according to the Bureau of Ocean Energy Management. However, operators were already sending workers back to offshore installations as early as Friday morning.

Given the minimal impact of the storm offshore, along with an Energy Information Administration report that the country's natural gas inventories grew at a larger-than-expected rate last week, natural gas lost 2.2 percent Friday. The September contract price settled at $4.145 per thousand cubic feet.

Natural gas traded within a range from $4.14 to $4.23.

Gasoline for August delivery settled at $3.11 a gallon, down a penny from Thursday. The intraday range for gasoline spanned from $3.07 to $3.12.

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President Obama Announces 54.5 MPG Fuel Efficiency Standard

- President Obama Announces 54.5 MPG Fuel Efficiency Standard

Jul 29, 2011

President Obama announced an agreement with thirteen major automakers to track the next phase in the Administration's national vehicle program, increasing fuel economy to 54.5 miles per gallon for cars and light-duty trucks by Model Year 2025.

The President was joined by Ford (F), GM (GM), Chrysler, BMW, Honda (HMC), Hyundai, Jaguar/Land Rover, Kia, Mazda, Mitsubishi, Nissan (NSANY), Toyota (TM) and Volvo, which together account for over 90% of all vehicles sold in the United States, as well as the United Auto Workers, and the State of California.

Building on earlier agreements for Model Years 2012-2016 vehicles, which will raise fuel efficiency to 35.5 mpg, the next round of standards will require performance equivalent to 54.5 mpg or 163 grams/ mile of CO2 for cars and light-duty trucks by Model Year 2025.

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Oil Drops Near $96 After Weak US GDP Report

- Oil Drops Near $96 After Weak US GDP Report

Jul 29, 2011

The price of oil dropped $96 a barrel on Friday after the U.S. government said the economy is at an insufficient 1.3% annual rate in the Q2.

The data raised questions about demand for oil over the months. The Commerce Department also revised the January to March figures to display growth in the first six months was the weakest since the recession ended two years ago.

Oil prices have varied over the month, from $94.90 a barrel on July 1 to 98.87 on July 22 before making another fall.

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Penn Virginia to Sell Arkoma Basin Properties

- Penn Virginia to Sell Arkoma Basin Properties

Friday, July 29, 2011
Penn Virginia Corp.

Penn Virginia has entered into a definitive agreement to sell substantially all of its Arkoma Basin properties, together with certain other Mid-Continent properties, to an undisclosed buyer for $30.5 million in cash. This sale is expected to close by the end of August and is subject to customary closing conditions and purchase price adjustments.

The properties being sold include the Hartshorne coalbed methane and Woodford Shale formations, as well as a number of conventional natural gas play types. The properties are currently producing, on a net basis, approximately 7.8 million cubic feet of natural gas equivalent (MMcfe) per day, approximately 97 percent of which is natural gas. As a result of the divestiture, PVA's 2011 production will decrease by an estimated 0.9 billion cubic feet of natural gas equivalent (Bcfe). Estimated proved reserves associated with the divested properties, as determined by PVA's third party engineers at year-end 2010, were 42.5 Bcfe, 78 percent of which were proved developed. PVA intends to use the net proceeds from this sale to fund, in part, its 2011 capital expenditure plan, as well as for general corporate purposes.

RBC Richardson Barr served as PVA's financial advisor in connection with the transaction.

H. Baird Whitehead, President and Chief Executive Officer, stated, "Our strategy to shift the focus of our capital spending to oil and natural gas liquids made our Arkoma and other Mid-Continent assets appropriate divestiture candidates. The increase in liquidity generated by the sale of these properties will give us further flexibility to help fund investment in our liquids-rich plays, such as the Eagle Ford Shale, that generate higher rates of return and also improve our growth and profitability going forward."

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LNG Energy Spotlights Initial Results of Core Analysis, Spudding in Poland

- LNG Energy Spotlights Initial Results of Core Analysis, Spudding in Poland

Friday, July 29, 2011
LNG Energy Ltd.

LNG Energy announced that its third vertical well, the Starogard S-1 well on the Starogard concession in Poland, was spudded on July 16, 2011. LNG has an indirect 20% interest in the well which is currently drilling at a depth of about 1,700 meters and has installed 690 meters of steel casing and cementing it from the bottom to the surface. This depth is below the potential fresh water intervals and was installed to isolate and protect the aquifers. A second string of steel casing will be installed and cemented at an approximate depth of 2,050 meters, prior to drilling ahead to the estimated core point. At the core point, the plan is to core the balance of the well for further analysis of the formations.

LNG has also received an initial portion of the core analysis back from the 3rd party contractors for both the Wytowno S-1 and Lebork S-1 wells, on the adjacent Slawno and Slupsk concessions. The data for the Lebork S-1 well is only from the sidewalls taken in the lower portion of the Ordovician and the Alum shale, as the whole core analysis from above these intervals is not yet completed. The additional core analysis data for the target intervals in the Lebork S-1 well, and the final core analysis reports for both wells are expected to be in by the end of August at which time the log analyses for both wells will be reprocessed with the core data.
  • Porosities:
    • Lebork S-1 well: 47 meter thick Ordovician/Cambrian interval has an average porosity of 4.0% and
    • Wytowno S-1 well: 91 meter thick Lower Silurian target interval has porosity ranges of 1.1% to 4%, averaging 3.0% and the 40 meter thick shallower Lower Silurian interval has a porosity of 5.6%.
  • Gas filled porosity:
    • Lebork S-1 well: gas filled porosity ranges from 0.8% to 3.9%, averaging 1.8% of bulk volume in the Ordovician/Cambrian and
    • Wytowno S-1 well: the Silurian targets range from 0.3% to 1.6%, averaging 1.1% of bulk volume, with one shallower Silurian interval that has a value of 4.3% of bulk volume.
  • Desorption:
    • Lebork S-1 well: average desorption values of 40 Standard Cubic feet of gas per ton of rock, ("SCF/ton") over the Lower Silurian and 268 SCF/ton over the 47 meter Ordovician/Cambrian interval. The Lower Ordovician/Cambrian shale had intervals as high as 451 SCF/ton.
    • Wytowno S-1 well: average desorption values of 124 SCF/ton in the Lower Silurian target interval and 77 SCF/ton in the shallower Lower Silurian interval. For comparative purposes BNK Petroleum Inc.'s Oklahoma Woodford Shale Tishomingo field has average values of 104 SCF/ton.
  • Thermal maturity:
    • Wytowno S-1 well: thermal maturity values were estimated from the reflectance of pyrobitumen and the Thermal Alteration Index (TAI) obtained from Palynological (micro-paleo) analysis of the drill cuttings, which both equate to a Ro of 1.8 in the Lower Silurian.
    • Lebork S-1 well: TAI for the cuttings from the Lower Silurian to Ordovician/Cambrian are also equivalent to a Ro of 1.8, which places the thermal maturity for both wells in the dry gas window.
  • TOC:
    • Wytowno S-1 well: the total organic carbons ("TOCs") are variable across the Lower Silurian target interval, ranging from 0.1 to 1.3 TOC by percent weight. The TOC data from the Lebork S-1 well is not yet available, however both the log calculated values and SEM image analysis values indicate multiple times higher TOCs across the Ordovician/Cambrian shales.

Incorporating the micro-paleo and high-resolution stratigraphic analysis into the geological model indicates that the Wytowno S-1 well was drilled on a localized paleo-topographic high. What was originally interpreted as Ordovician/Cambrian shales are actually Lower Silurian hot shale intervals. The intervals in the Lebork S-1 well have also been revised on the basis of the micro-paleo and high-resolution stratigraphic analysis, resulting in slightly different thicknesses of the various intervals. In addition to the seismic program, a depth to crystalline basement study will be conducted. The study will cover a large portion of northeast Poland, fully encompassing all three concessions. The interpretation of this study will provide better understanding of general basin geometry, identify sub basins and locate significant basement related faulting. The study is slated for completion in September 2011.

Completion activity for the Lebork S-1 and Wytowno S-1 wells are scheduled to begin in the fourth quarter. The possibility of undertaking the completion of the Starogard S-1 well in conjunction with our two other wells is also under review, with well results and equipment availability to determine the timing. Best North American industry practices are being utilized for drilling and testing the wells, including utilizing bladders to hold the fresh water for fracture stimulating the well, the arrival of these are determining the start of the completion activity. The bladders ensure complete isolation from surface soil and water, reduce truck traffic to and from the site and increase safety. The flowback fluids are flowed directly into self-contained steel tanks on location.

Recently approval has been received from the Polish authorities to acquire approximately 407 km of 2D seismic on the concessions. The seismic program will further define basin structure and burial history as well as aid in individual well location selection. The term of the three Saponis concessions were also extended to provide Saponis enough time to acquire the seismic prior to drilling the second well on each concession. It is anticipated that the acquisition of this seismic will commence in the fourth quarter of this year.

"We are very encouraged by the initial results from the sidewall core tests on the Wytowno well," commented Dave Afseth, President and CEO of LNG. "The results of the core analyses as well as the analyses of the sidewall cores will enable us to design and implement an appropriate stimulation to flow test the wells later this year."

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CGGVeritas Sees 16% Increase in YOY Revenue

- CGGVeritas Sees 16% Increase in YOY Revenue

Friday, July 29, 2011

CGGVeritas announced its non-audited second quarter 2011 consolidated results. All comparisons are made on a year-on-year basis unless stated otherwise. All second half 2010 results are reported before restructuring and impairment.
  • Group Revenue was $750MM, up 16% year-on-year and 3% sequentially.
  • Group Operating Income was $16MM:
  • Sercel continued to deliver strong performance with Operating Income at $76MM, a margin of 29%.
  • Services Operating Income was a loss of $29MM mainly related to North American seasonality in Land, operational interruptions and continued overcapacity in the marine market.
  • Multi-client marine and Processing & Imaging contributions were particularly strong.
  • Net Income was negative at $38MM, including one-off $17m refinancing costs.
  • Net Free Cash Flow was negative at $7MM this quarter and positive at $58MM for the first half of the year.
  • Net Debt to Equity ratio was 40%.
  • Debt maturity was extended to 2021 and Term Loan B was fully repaid with the issuance of our $650 million Senior Note.
  • As planned in our Performance Program, following their upgrades, the Oceanic Phoenix and Oceanic Endeavour returned to operations. Our ship management partnership with Eidesvik was established and a support vessel charter agreement with Bourbon was signed. The Commander was decommissioned at the end of May.
  • BroadSeisTM, our advanced marine solution continued to see growing acceptance, and we further developed our newly established commercial joint ventures.
  • Our cost reduction program is progressing well in the context of rising fuel cost and the weakening US dollar.

Backlog as of July 1st sequentially strengthened, up 7% to $1.31 billion.

Post Closing Events

Strategic agreement signed with Spectrum, a Norwegian multi-client company, for the contribution by CGGVeritas of our 2D Multi-client marine library for a consideration in cash and a 25% equity position in Spectrum.

CGGVeritas CEO, Jean-Georges Malcor commented, "During the quarter, Sercel delivered excellent performance and Services, despite the impact of Land seasonality, continued to see the signs of a progressively strengthening second half of the year.

"North American Land activity was seasonally low as we repositioned our crews from Canada and the Arctic to the lower 48 for an expected robust summer campaign. Increasing demand for our marine multi-client data in advance of the announced Gulf of Mexico and Brazil lease sales was confirmed, a promising trend for both future multi-client sales and the progressive balancing of over-capacity in marine.

"Our performance plan is progressing well in a context that remains impacted by rising fuel cost and a weakening US dollar. We continued to manage our balance sheet proactively with the significant extension of debt maturity, and in the first half of the year generated positive net free cash flow.

"Looking forward, we expect Sercel to continue to deliver strong financial performance and, while difficult conditions remain in the marine market, Services should benefit from our performance program and from the increasing demand for multi-client data in the second half of the year and particularly near year-end."

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Dron & Dickson Score Contract Wins in UK North Sea

- Dron & Dickson Score Contract Wins in UK North Sea

Friday, July 29, 2011
Dron & Dickson

Dron & Dickson has secured £55million in UK North Sea contract wins for the first half of 2011.

During the last 6 months the company has landed both new and extended contracts with oil majors such as Nexen Petroleum U.K Ltd, BP, Talisman Energy (UK) Limited and ConocoPhillips.

Work has included the provision of electrical goods to support maintenance of offshore assets and hazardous area inspection services to meet operational requirements in the North Sea.

Dron & Dickson operations director Colin Maver said, "It's been a really fantastic year so far, our most successful yet in terms of activity levels. We have secured a number of significant contract wins and have also seen a marked increase in work load from existing clients.

"We have invested heavily in developing exceptional QHSE standards and a competency-assured workforce. We are also IRATA accredited and I believe that this has contributed significantly to the record levels of business we are winning."

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Nordic American Tankers Expands Fleet by 27%

- Nordic American Tankers Expands Fleet by 27%

Friday, July 29, 2011
Nordic American Tankers Ltd.

Nordic American Tankers announced that Nordic Breeze, the first of the two vessels under construction at Samsung Heavy Industries Co., Ltd., is expected to be delivered to the Company August 23, 2011. This is more than one month earlier than expected.

The second vessel, Nordic Zenith, is expected to be delivered to the Company in the latter part of October 2011 which also is well in advance of the original schedule.

Both vessels are fully financed, and no equity offering is under planning.

Following the delivery of Nordic Breeze and Nordic Zenith, the Company has increased its trading fleet by 27% during 2011, from 15 vessels in 4Q 2010 to 19 vessels in 4Q 2011 -- all suezmax vessels of about 150,000 dwt each -- thereby bolstering the dividend and earnings capacity correspondingly.

As previously advised the market, the dividend and earnings report (including the dividend amount per share) for the second quarter 2011 will be published Monday August 8, 2011 before the opening of the New York Stock Exchange. Dividend will be paid August 31, 2011 to shareholders of record August 19, 2011.

Herbjørn Hansson, the Company's Chairman & CEO, commented, "Going forward, Nordic American is continuously seeking to expand its dividend and earnings capacity through further acquisitions; when the timing is right. Nordic American has ample financial resources and a strong balance sheet. After the delivery of the two Samsung vessels our net debt will still be very small. I am pleased that we will receive the vessels from Samsung earlier than planned, which is a clear advantage."

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Sterling Exploration Director Resigns

- Sterling Exploration Director Resigns

Friday, July 29, 2011
Sterling Energy plc

Sterling announced that Andrew Grosse, Exploration Director, has resigned to pursue other opportunities. The terms of his employment with the Company contain provisions for a 6 month notice period.

The Company will start the process to seek and appoint a successor.

Angus MacAskill, Sterling's Chief Executive said, "On behalf of the Board and Shareholders, I would like to thank Andrew for his contribution during his time with Sterling, particularly during the very challenging operation to drill the Sangaw North well. We wish him well for the future."

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Pemex to Award Its First Incentive Contracts Aug 18

- Pemex to Award Its First Incentive Contracts Aug 18

Friday, July 29, 2011
Dow Jones Newswires
by Laurence Iliff

Mexico's state-owned oil company Petroleos Mexicanos, or Pemex, said Friday it has set Aug. 18 as the date for the final awarding of its first incentive-based contracts allowed under a 2008 energy reform.

Pemex's first tender under the new contract mechanism is for six mature fields in three groupings in its southern region. Pemex said in a presentation on its website that 27 companies have participated in the tender process for the Magallanes, Santuario and Carrizo drilling areas.

Pemex hopes to use the flexible contracts, which pay bonuses for production above a certain level rather than a set per-barrel rate, to draw the best technology to reactivate about 40 mature fields in total. The flexible contracts will later be used to try and draw oil majors to the deep waters of the Gulf of Mexico, where Pemex has no production.

Under Mexican law, Pemex can't engage in shared-risk contracts, which is common in deep-water projects, and can't pay contractors with oil.

Carlos Morales, head of Pemex's exploration and production division, said during a conference call Friday that the re-opening of mature fields with new technology has great potential to compensate for the natural decline at other fields such as the super-giant Cantarell offshore complex.

Cantarell has fallen from a peak of about 2 million barrels a day in 2004 to about 460,000 barrels a day, according to Pemex figures. Morales said Cantarell has stabilized and will have significant production levels for a prolonged period of time.

Overall crude oil production in the second-quarter of this year was 2.558 million barrels a day on average, compared with the 2.578 million barrels a day in second-quarter 2010, Pemex said.

Pemex recorded a net profit in the most recent quarter of $769 million versus a net loss of $1.7 billion in the year-ago period. Total sales rose 25% compared to $33.22 billion, mostly on higher crude-oil prices. Cash flow as measured by earnings before interest, taxes, depreciation and amortization, or Ebitda, rose 31% to $24.1 billion, Pemex said.

Ignacio Quesada, director of corporate finances, said oil prices were affected by worries of availability due to events in the Middle East, among other factors, and that prices remained volatile along with other commodities.

Inline with the oil-price increase, Quesada added, Pemex had to pay higher prices for imported gasoline, which it sells at subsidized rates.

The oil monopoly, which funds about one-third of the federal budget, paid $18.6 billion in taxes and duties in the second-quarter, a 43% rise over the second-quarter of 2010.

Pemex said the economic impact of external and structural effects in the first half of the year included $1.2 billion for subsidies to liquefied petroleum gas sales, $900 million on price losses for gasoline imports, and $4.2 billion in labor obligations.

Copyright (c) 2011 Dow Jones & Company, Inc.

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Rosneft Touts $2.83B in 2Q Earnings

- Rosneft Touts $2.83B in 2Q Earnings

Friday, July 29, 2011

Rosneft has published its consolidated financial results under US GAAP for 2Q and 1H 2011.

In 1H 2011, Rosneft's average crude oil output (including production by subsidiaries and share in production by affiliates) increased by 2.7% year-on-year, to 2,362 th. barrels per day. The increase reflects higher production at Vankor and Verkhnechonsk fields in Eastern Siberia and crude output growth at Sakhalin-1 project. The Company's average daily crude oil production reached 2,368 th. barrels in Q2 2011 and rose to a record of 2,400 th. barrels in July, which was made possible due to on-schedule capacity expansion of oil treatment unit at the Vankor field.

Petroleum product output by Rosneft was 13.4 mln tonnes in 2Q 2011, which is 20% higher year-on-year. The growth reflects acquisition of a 50% stake in Ruhl Oel GmbH, which owns stakes in four German refineries.

In 2Q 2011, Rosneft's revenues grew by more than 1.5 times year-on-year to USD 23.274B. The increase was primarily attributable to higher crude oil prices and growth of production and refinery throughput. In 1H 2011, revenues reached USD 43.397B, which is 44% higher compared with 1H 2010.

Rosneft's EBITDA amounted to USD 5.333B in 2Q 2011, which is an increase of 12% year-on-year. Tax burden rise, particularly due to abolition of a reduced duty for Vankor crude and introduction of increased export duty for naphta, put downward pressure on the figure. The increase was also tempered by real strengthening of the rouble against the USD, and higher transportation and electricity tariffs year-on-year. The above-mentioned negative impact was partially offset by tight cost control. Unit lifting costs increased by 4.4% quarter-on-quarter (to USD 3.1 per barrel) and unit refinery costs rose by 5.7% while real rouble appreciation was 6.2%. In 1H 2011, EBITDA grew by 30% year-on-year, to USD 11.986B.

In 2Q 2011, free cash flow amounted to USD 1.73B, up 8% year-on-year. As a result, in 1H 2011 the Company's free cash flow increased by 66% year-on-year, to USD 4.911B.

Commenting on the results, Rosneft's President Eduard Khudainatov said, "We posted good results for the second quarter, including record operating figures. We closed the deal on acquisition of a stake in German refineries, which resulted in insignificant net debt rise. EBITDA reduction quarter-on-quarter was anticipated following abolition of export duty for Vankor crude. Ongoing performance improvement, investment program implementation and higher shareholder returns are our priorities for the near future."

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American Eagle Energy Charges Ahead

- American Eagle Energy Charges Ahead

Friday, July 29, 2011
American Eagle Energy Inc.

American Eagle Energy provided a general operations update on the Company's projects. The Company's proposed merger with Eternal Energy Corp. continues to progress, subject to the completion of remaining, standard regulatory and administrative processes. American Eagle's individual project updates include:

Hardy Field, Saskatchewan, Canada

The first development well in the field, Hardy S HZ 1A4-16-4B4-9-4-21W2, was drilled and cased in May, 2011. Completion plans included a 29-stage fracture stimulation of the Bakken horizontal well that placed a total of 429,000 pounds of sand and 6,400 barrels of water in the 1370 meter lateral section. The well is currently being evaluated and is projected to be placed on pump in the first week of August. Additional locations are being considered for the 2011 drilling program pending the outcome of the well testing. The existing producing well, Hardy S Re 2D7-9-3D2-16-4-21W2, continues to average approximately 40 BOPD.

Spyglass Project, Divide County, ND

The Spyglass Project is a Bakken and Three Forks play in northern Divide County, North Dakota. The first closing of the sale of half of the respective working interests in the Spyglass Project by American Eagle, and its proposed merger partner Eternal Energy Corp., to a third party occurred on May 26, 2011. The first transaction netted approximately $7.165 million divided equally between American Eagle and Eternal Energy. The previously announced second closing is now scheduled for August 2, 2011, and relates to the potential sale of an undivided 50% interest in approximately 800 additional net acres for roughly $700,000. In addition, the Company will complete the closing on the sale of an undivided 50% interest in 227 net acres for approximately $200,000 from the original closing. The proceeds from both of these subsequent closings will be divided equally between American Eagle and Eternal Energy

American Eagle and Eternal Energy requested regulatory approval for six 1,280-acre spacing units in an area of the Spyglass Project in which they expect to operate. Well permitting for two company-operated horizontal wells in these spacing units has started with the intention of drilling them in late 2011.

Approximately 5,000 acres of additional leasehold has been acquired in the western portion of the Spyglass project through purchase of two land packages and ongoing leasing efforts.

American Eagle and Eternal Energy have participated in drilling of three outside-operated wells in the second quarter of 2011 that are pending completion. One of these wells, fracture stimulated in mid-July, is the second offsetting Three Forks well to yield average flowing rates above 500 BOPD. The other two are expected to be fracture stimulated in August. American Eagle and Eternal Energy have elected to participate in 4 additional wells, with working interests ranging from 4.19% to 7.03%, operated by Crescent Point Energy Corp., SM Energy Company, and Samson Resources Company that are expected to be drilled in the current quarter.

Glacier Project, Glacier & Toole Counties, MT

The American Eagle Glacier Project is located in Montana portion of the Alberta Bakken play. The Company and its two partners control Bakken/Three Forks rights in slightly over 75,000 net acres.

Two vertical evaluation wells were drilled during the second quarter of 2011.

The FX 81-3 well was drilled to evaluate the Banff, Bakken, Three Forks, Nisku and Devonian Formations by deepening an existing well in the Southwest Cut Bank Sand Unit where American Eagle and its partners, FX Energy and Big Sky Operating, own a controlling interest in approximately 10,000 net acres about 6 to 10 miles southeast of multiple vertical and horizontal wells being completed by both Rosetta Resources, Inc and Newfield Exploration Company. The 81-3 well encountered oil shows in the Banff, Bakken and Three Forks and is scheduled to be fracture stimulated in August.

The FX American Eagle Big Sky 14-29 well was drilled in May as the first earning well associated with a large farm-in block east of the Cut Bank well structurally higher on the Kevin Sunburst Dome. A core of the Bakken and Three Forks encountered excellent oil saturation within a thick section including the Middle Bakken and Three Forks. The 14-29 well is scheduled to be fracture stimulated in August.

A third vertical assessment well is currently expected to be drilled in September, 2011 to evaluate the eastern portion of the Company's leasehold. Depending upon the results of the testing of the vertical wells, one or more horizontal wells are projected to be drilled during the fourth quarter of 2011.

Benrude Project, Roosevelt County, MT

The Benrude Project is high-impact Nisku Formation development project in Montana. A contract with Dawson Geophysical was signed for a focused 3-D seismic survey designed to optimize the structural location for the proposed development well. After acquiring and analyzing the seismic data, the new well is currently expected to be drilled in early 2012.

Richard Findley, the Company's Chief Executive Officer stated, "American Eagle has made significant progress on several of our projects despite the operational constraints associated with the exceptionally wet spring and high activity levels in these areas. The drilling of our Hardy and Glacier wells represents major steps forward for both of these projects and the consummation of several acreage acquisitions bodes well for future growth potential of the Company. The non-operated production results in Spyglass provide significant confirmation of the high potential of the Spyglass Project and furthers our efforts to build solid cash-flow and reserves as we move our focus towards company-operated drilling of our higher interest wells"

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Origin Boosts Total 2P Reserves by 13%

- Origin Boosts Total 2P Reserves by 13%

Friday, July 29, 2011
Origin Energy Ltd.

Origin announced record annual production and sales revenues for its Exploration and Production business, released in the company's Production Report for the quarter to June 30, 2011.

This follows the release yesterday of Origin's 2011 Annual Reserves Report, in which the company announced a 13 percent annual increase in total Proved plus Probable (2P) reserves.

Origin Executive Director, Finance and Strategy, Ms. Karen Moses, said, "The Exploration and Production business has delivered record annual production of 135 Petajoules equivalent (PJe), up 30 percent on the prior year. Sales revenues also increased to a record $835 million, an increase of 32 percent on the prior year.

"The strong performance was driven by a 36 percent increase in production from Australia Pacific LNG as gas was supplied into major new contracts, higher production from Origin's increased share of Otway, a full year's contribution from Kupe and higher production from BassGas after an extended shutdown in 2009/2010.

"Notably, the record increases were achieved amid a challenging operating environment with extreme weather conditions impacting a number of our assets.

"Origin also reported a 13 percent annual increase in 2P reserves to 7,041 PJe, driven by increases in our CSG reserves held through Australia Pacific LNG and in the Ironbark area," Ms. Moses said.

During the year, Australia Pacific LNG made significant progress on its CSG to LNG project, culminating with a Final Investment Decision announced on July 28, 2011. The decision initiates development of the first LNG train and infrastructure to support a second train, and is underpinned by a sale and purchase agreement with Sinopec for the supply of 4.3 million tonnes per annum of LNG. Sinopec has also subscribed for a 15% equity interest in Australia Pacific LNG1.

"The Final Investment Decision on the first phase of the Australia Pacific LNG project marks the commencement of one of Australia’s largest LNG export projects," Ms. Moses said.

"Australia Pacific LNG holds Australia's largest 2P CSG reserves, including extensive acreage within the premier production fairways providing high quality gas resources with high deliverability," Ms. Moses said.

Production for the quarter to 30 June 2011 was 37 PJe, or 23 percent, higher than the June Quarter in 2010, with all asset areas either increasing production or maintaining production at comparable levels. Most notably, Otway increased production by 49 percent. Total sales volumes and revenues increased by 8 percent and 11 percent respectively.

Compared with the March Quarter 2011, production was 28 percent higher, as Otway returned to higher production levels and CSG and Cooper Basin production increased after the floods experienced earlier in the year. Sales volumes and revenues were 19 percent and 14 percent higher respectively, reflecting the increased production.

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CGGVeritas Signs Strategic Agreement with Spectrum

- CGGVeritas Signs Strategic Agreement with Spectrum

Friday, July 29, 2011

CGGVeritas has signed a strategic agreement with Spectrum, a Norwegian multi-client company, for the contribution by CGGVeritas of its 2D Multi-client marine library for a consideration in cash and a major equity position in Spectrum.

CGGVeritas has reached a strategic agreement with Spectrum whereby Spectrum will purchase over 500,000 km of CGGVeritas 2D marine Multi-client library, not including select Joint Venture data such as the Kazakhstan library, for a consideration of $40 million to be paid in cash and in shares. With a 25% equity stake in the company, and as part of the agreement CGGVeritas will gain a seat on the Spectrum Board and will provide seismic expertise, technology and services including acquisition, processing and data management to the company.

Jean-Georges Malcor, CEO of CGGVeritas said, "We are very pleased to establish a strategic relationship with Spectrum, who is recognized in the industry for their expertise and commercial development of successful 2D marine libraries. Together, through our combined capabilities we will be able to better meet the 2D marine seismic requirements of our clients."

Closing is expected in mid-September and is subject to all necessary approvals. The two companies will work together to smoothly and effectively address prior CGGVeritas governmental and national agreements and obligations.

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Chevron Beats Estimates For Q2 Earnings

- Chevron Beats Estimates For Q2 Earnings

Jul 29, 2011

Chevron (NYSE:CVX) reported Q2 EPS of $3.85, beating analyst estimates of $3.56 per share. Revenues for the quarter were $71.58 billion, topping analyst estimates with $66.70 billion.

Chairman and CEO John Watson said, "Our second quarter financial performance was very strong. Earnings gains versus last year's quarter were primarily in our oil and gas exploration and production business, resulting from higher crude oil prices on world markets. We continued to advance our major capital projects, resumed important exploration and development drilling activity in the deepwater Gulf of Mexico and acquired new upstream resource opportunities in the second quarter."

Chevron (NYSE:CVX) has a potential upside of 16.9% based on a current price of $105.03 and an average consensus analyst price target of $122.79.

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Nanotechnology Research Contributes to Fracking Proppant Development

- Nanotechnology Research Contributes to Fracking Proppant Development

Friday, July 29, 2011
Rigzone Staff
by Karen Boman

Nanotechnology research efforts at Houston-based Rice University have contributed to the development of a fracking proppant that will optimize production from unconventional oil and gas wells.

Technological advances in hydraulic fracturing have allowed producers to access shale gas. This process requires the use of proppants such as grains of sand, ceramic or other particulates, to prevent the fractures created in hydraulic fracturing from closing when the injection is stopped. However, current proppants used in hydraulic fracturing limit the depths at which wells can drilled, and the chemicals used have raised concerns about their impact on local water supplies and the environment. "Most proppants are either hard and heavy or soft and light," said Dr. Andrew Barron, Welch chair of chemistry and professor of materials science at Rice. "Present technology is defined by the hardness/weight relationship; we need to think outside the norm."

Nanotechnology research at Rice's Richard E. Smalley Institute for Nanoscale Science and Technology contributed to the development of OxBall and OxFrac, which are light, high strength ceramic proppants developed by Oxane Materials Inc., an energy-focused nanoproducts company. OxBall is now being used commercially, while OxFrac is in final scale up development, with sales scheduled to begin this year.

To date, OxBall has been utilized in the drilling of more than eight wells; the results of these wells have been very promising. The first batch of OxBall was manufactured at a 300,000 square foot plant in Van Buren, Arkansas, with an initial production of 20 million lbs/year; this production will be scaled up to 80 million lbs/year. OxBall is being utilized to enhance production flow from the deeper Haynesville and Eagle Ford plays; it is thought that OxFrac will be primarily used on the Barnett shale play.

The company was formed through a nanotechnology venture forum through the Rice Alliance for Technology and Entrepreneurship. The alliance, started in 1999, supports entrepreneurs and early-stage technology ventures in Houston and Texas through education, collaboration and research. The group has assisted in the launch of over 225 technology companies that have raised more than $500 million in funding.

The need to enhance gas production flow will be critical as the decline curve in shale wells is more dramatic than in conventional oil and gas wells, meaning that more shale wells are needed to maintain production from shale gas resources. Stronger proppants are needed to boost production and allow deeper wells to be drilled.

Environmental concerns over hydraulic fracturing, which has led to new legislation in Texas and other states requiring producers to disclose fracturing chemicals, has created the need for ceramic processing of proppants that is more benign.

Barron said the ideal proppant is mono-dispersed, which allows for enhanced flow and packing; light for enhanced transportation; and round-shaped to enhance flow. The material in proppants needs to have strength and depth will allowing proppants to get into the rock.

While fracking sand is cheap, the variance in the shape of the particles can prevent flowback from coming through evenly. Barron used the example of a bucket filled with ping pong balls, since the balls are all the same shape, the water flows evenly. "If the particles are different sizes, as often is the case with fracking sands, the dispersant slows. Developing proppant with particles consistently the same shape allows for better flow."

The application of nanotechnology within the oil and gas industry is part of the institute's mission to solve humanity's most pressing problems through the application of nanotechnology. During 2002 and 2003, Professor Richard E. Smalley developed a list of the Top Ten Problems Facing Humanity over the Next 50 Years. Five of these problems have been identified as Grand Challenges, including energy, water, environment, disease and education. The faculty researchers of the Smalley Institute use a variety of nanotechnology approaches to significantly impact these Grand Challenges.

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BGP Wraps Up Seismic Acquisition for Saudi Aramco

- BGP Wraps Up Seismic Acquisition for Saudi Aramco

Friday, July 29, 2011
BGP Inc.

BGP Crew 8652 announced the successful completion of the S53 3D TZ seismic survey for Saudi Aramco with a total workload of 1876 km2 3D, as well as a remarkable achievement of 3.5 million man-hour without LTI.

The project area, located on the east coast of Saudi Arabia, comprises terrains of desert, Gobi, seasonal lakes, and shallow water, along with infrastructures of industrial facilities, airport, oilfields, wharfs, offshore exploration platforms, plus convoluted subsea pipelines throughout the entire area. The complex surface conditions, coupled with a large number of workers and equipments had presented unparalleled challenge to engender a safe operation while meeting the client expectations.

The S53 project team integrated three different types of energy sources being vibroseis, explosives and air guns, to best accommodate different working terrains, and yet it is able to complete the project in 18 months almost five months ahead of schedule.

Without saying, this extraordinary accomplishment is the synergetic effort from all members of Crew 8652, supported by the unwavering commitment from BGP headquarters.

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Treaty Preps for Belize Drilling Program

- Treaty Preps for Belize Drilling Program

Friday, July 29, 2011
Treaty Energy Corp.

Treaty reported on developments in Belize leading up to the implementation of its initial eight well drilling program.

Andrew V. Reid, Chairman and CEO of Treaty Energy Corporation, stated, "We are pleased to confirm that all things requested of Treaty by both the Belize Ministry of the Environment and Department of Petroleum have now been completed and provided to the proper Belizean agencies. In addition, we are elated that the Director of the Ministry of the Environment has signed off on our environmental checklist, and has confirmed that Treaty may move forward and drill the initial two wells of the eight well drilling program."

Mr. Martin Alegria, Director of the Belize Ministry of the Environment advised Treaty Energy and Princess Petroleum at a recent meeting that they should have the ECP (Environmental Compliance Plan) complete and up to date so that after the first well is drilled (and given that there is a commercial find) the EIA (Environmental Impact Assessment) will take minimal time to be approved so that production may commence.

To accelerate this process the Company has contracted an attorney from BNE to assist in finalizing the surface rental agreement for planned drill sites. Treaty will communicate directly with the land owner to finalize the rental agreement. Furthermore, a local surveyor under contract with Treaty will complete the survey for our initial drill site this week.

Mr. Reid went on to say, "Our stakeholders are reminded that we have established Treaty Belize Energy, Ltd. in May 2011 and located our corporate office in Belize City. In addition, we also equipped a field operations office in Placencia, Stann Creek District, Belize, close to the drilling sites to be developed, which are a three hour drive south of Belize City."

Treaty Energy has had meetings with a number of community leaders in areas where the Company intends to drill and is pleased to report that these community leaders are uplifted and energized with our intent and in particular that Treaty will be providing employment opportunities for numerous local Belizean's.

In conclusion Mr. Reid stated, "Ongoing developments and significant preparation in Belize are proving advantageous to a successful drilling program. Upon arrival of the drilling rig and support equipment by sea on July 27th our Company is moving ahead with an oil program that holds the potential to be a magnificent life changer for all Treaty stakeholders and the people of Belize."

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Analysis: Iraq Faces Challenges in Growing Oil Production

- Analysis: Iraq Faces Challenges in Growing Oil Production

Friday, July 29, 2011
Rigzone Staff
by Karen Boman

Iraq's large oil-production potential could allow it to compete for leadership with Saudi Arabia in the coming decades, but a new energy study by Rice University's Baker Institute for Public Policy finds that in the near term, both Baghdad and Riyadh may have difficulty meeting rising demand for oil.

The study, "Iraqi Oil Potential and Implications for Global Oil Markets and OPEC Politics," argues that ambitious targets set by the government of Iraq may not be reachable in the short-to-intermediate term while international oil companies operating in southern Iraq continue to experience infrastructure development problems.

Iraq has the potential to increase production from 2.5 million b/d in 2010 to over 5 million b/d in the next five to 10 years. The country has expressed the ambition to reach 10 to 12 million b/d of production by 2017, but this lofty target will be difficult, given mounting political, bureaucratic and infrastructure related barriers.

"Political decentralization inside Iraq, social tensions and electricity shortages remain barriers to large-scale repair and construction of infrastructure that is needed before export levels can rise," said author Amy Myers Jaffe, the Wallace S. Wilson Fellow for Energy Studies at the Baker Institute. "Failure to progress quickly on water injection, pipeline, electricity and natural gas facilities will limit the ability of independent oil companies to translate upstream oil-field expansion successes into continued export increases."

The return of international oil companies to Iraq has raised the prospect that Baghdad's oil production will indeed be increasing in the coming years. Iraq is expected to see a 200,000 b/d increase in output in 2011, with output expansions already achieved at the Rumaila, Zubair, West Qurna-1 and Majnoon fields. As of spring 2011, Iraq's southern oil fields were producing a total of 1.986 million b/d and total production was pegged at around 2.7 million b/d. Iraq's June 2011 output was 2.56 million b/d, of which 2.27 million b/d were exported.

However, foreign oil company officials say that, while output gains are easily achievable based on field performance and geology, infrastructure bottlenecks might make future increases harder to accomplish. "The end result may be that ambitious targets set by the government of Iraq may not be reached in the short to intermediate term, delaying the time when OPEC will have to address rising Iraqi output," the study found.

While these operational and logistical factors will play a large role in whether Iraq reaches its energy potential, political factors will be equally important, the study concludes. The resolution or management of several political issues – including ongoing challenges to political stability, difficult power-sharing arrangements at the national level between political parties and growing pressures for provincial empowerment – is essential to the smooth development of Iraq's energy potential.

Iraq's logistical and political challenges come at the same time that the costs for Saudi Arabia to continue to expand and maintain sufficient spare capacity to influence global markets have increased dramatically, according to the study. Saudi Arabia has less spare capacity immediately available now than in the 1980s and 1990s, and it will be quite expensive for Saudi Arabia to bring on additional production capacity.

Saudi Arabia has spent $14 billion since 2005 to increase its oil production since 2005 to grow its oil production capacity from 10 million b/d to 12 million b/d. Future investment in a new tranche of Saudi production capacity is likely to be even more expensive because the kingdom will have to shift to areas that have more complex geology and require greater technological intervention.

But Saudi Arabia is also facing competing priorities with higher spending requirements on social services and defense in light of new regional and internal challenges, which calls into question whether sufficient spending on spare oil production capability will be maintained. King Abdullah ordered sweeping spending increases of $67 million in March 2011 for housing, job creation and the military, on top of a $36 billion hand-out to citizens in February, in an effort to respond to increased instability across the Middle East. "The pressures for higher defense and social spending will make it that much harder for the government to justify a massive campaign to expand its oil sector."

Possible increases in Iraqi oil production will likely be very important to the future stability of the global oil markets, and Iraq’s aspirations to become a major oil exporter create shared interested with the U.S. and other major oil consuming countries. The U.S. and other major powers should meet to discuss way to support Iraq's realization of the potential of its oil and gas deposits.

"As the U.S. government did successfully in the Caspian region and the Japanese government did successfully in Qatar and other LNG [liquefied natural gas] producing nations, the United States, EU, Japan and China should work together to ensure that IOC’s [international operating companies] operating in Iraq and the Iraqi government are able to attain attractive financing and loan packages to underwrite major export infrastructure development projects," the study noted. "Multinational assistance would also be appropriate as a means to support major investments as well as bilateral or trilaterial trade finance and development assistance."

Iraq's ability to reach its energy potential should be of broad regional and international concern. The nation could be poised for a dramatic transformation, one in which it finally escapes the political and technical constraints that have kept it producing less than four percent of the world's oil, despite having the third largest conventional oil reserves in the world.

"Should Iraq meet its ambitions to bring nearly 10 million more barrels of oil on line by 2017, it would constitute the largest ever capacity increase in the history of the oil industry," said Meghan O'Sullivan, the Jeane Kirkpatrick Professor of the Practice of International Affairs at Harvard University's Kennedy School. The health of Iraq's energy sector – currently the source of more than 90 percent of revenues accrued by the state – is a major determinant in setting Iraq's overall trajectory.

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Coastal Makes Oil Find Offshore Thailand

- Coastal Makes Oil Find Offshore Thailand

Friday, July 29, 2011
Coastal Energy Co.

Coastal Energy announced the successful results of the first exploration well drilled at Songkhla H and the results of initial production testing on the Bua Ban North B-06 and B-08 wells.

The Songkhla H-01 well was drilled to a total depth of 9,256 feet TVD and encountered 32 feet of net pay with 20 percent porosity in the Oligocene interval. A drill stem test was performed and the well produced 1,000 bopd with minimal initial pressure drawdown of the reservoir. The crude has an API gravity of 29 degrees. The H-01 well has the potential to produce in excess of 3,000 bopd using an electric submersible pump ("ESP"). The Company has spudded an appraisal well to delineate the reservoir.

The Bua Ban North B-06 and B-08 wells have been completed using ESPs and are producing approximately 2,000 bopd each from the Miocene interval. Flow rates will be restricted to these levels to minimize drawdown on the formation. The crude has API gravity of 29 degrees and is of quality consistent with current production. The Company is currently completing the B-01 well in the Oligocene formation. The B-06 well began producing on July 20th and the B-08 well began producing on July 27th.

Randy Bartley, Chief Executive Officer of Coastal Energy, commented, "We are extremely pleased with the results of both the Songkhla H-01 and the production testing at Bua Ban North B. The Songkhla H-01 well was drilled in the center of the basin where sand risk is the highest. Encountering sand of this quality in the basin center is very encouraging and opens up significant additional exploration potential.

"The initial flow rates from the B-06 and B-08 wells are performing above our expectations. We are proud to announce that we have been able to bring the Bua Ban North B field on production less than three months after the initial discovery well was drilled."

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OMV Spuds Well in Norwegian Sea

- OMV Spuds Well in Norwegian Sea

Friday, July 29, 2011
Valiant Petroleum plc

Valiant announced that drilling has commenced on its first Norwegian exploration well, 6407/5-2S, on PL471 located in the Norwegian Sea. The well is targeting Chamonix, a potentially large Cretaceous stratigraphic prospect, and the secondary Cortina prospect in the Jurassic. The well is being drilled by semi-submersible rig Borgland Dolphin and is anticipated to take around 60 days to complete.

The partners in license PL471 are OMV Norge (50%, operator), Noreco (30%) and Valiant (20%).

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San Leon Secures Rig for Nida Trough Program

- San Leon Secures Rig for Nida Trough Program

Friday, July 29, 2011
San Leon Energy plc

San Leon Energy's Polish subsidiary Vabush Energy Sp. z o. o. (Vabush) has signed with Poszukiwania Nafty i Gazu Jasło Sp. z o. o. (Jasło) to contract a rig for its upcoming two well program in Poland's Nida Trough. Both wells are planned to reach a total depth of 1,000 meters and test multiple targets on trend with the prolific Płowowice and Grobla oil fields. The first well, Chopin-1, is set to spud in early September immediately followed by the Belvedere-1 well. Vabush has secured land access agreements for the first location, Chopin-1, and is finalizing the Belvedere-1 agreements. Both Vabush and Jasło are finalizing the permitting process with plans to start building a location in early August.

Oisin Fanning, Executive Chairman of San Leon, commented, "San Leon is delighted to be on the cusp of a very intensive drilling program in both conventional oil and unconventional gas. The focus of San Leon's high-impact campaign in Poland will see the company drill up to three wells in September alone, weather permitting, and one of which is a shale gas prospect in the Baltic Basin. We look forward to updating the market in due course."

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Jubilant Commences Drilling Campaign in India Kharsang Field

- Jubilant Commences Drilling Campaign in India Kharsang Field

Friday, July 29, 2011
Jubilant Energy N.V.

Jubilant announced the spudding on July 28, 2011 of KPL-A, the first development well of the Phase-III drilling campaign in the Kharsang Field, Arunachal Pradesh, India. The well is located in the northern area of the field and is an infill well targeting the shallow C-50 and D-00 producing Girujan sand layers. The well, which will be deviated by 272 metres towards the northeast, will be drilled to a total depth of around 800 metres TVD, is expected to take three weeks to drill and will cost approximately USD 1.75 million, of which USD 0.44 million will be payable by Jubilant.

The well will test the Upper Girujan C-50 and D-00 sand layers that are currently producing across 10 existing wells ranging from 25 to 140 bopd. The consortium expects to encounter around 35 meters of net reservoir sand.

The well is part of the seven well Phase-III drilling campaign in Kharsang which is planned to be completed by February 2012. On completion of this well, the rig will move to the next development well of the Phase-III drilling campaign.

GeoEnpro Petroleum Ltd., a joint venture of Geopetrol and Jubilant Enpro (a member of the wider Jubilant Bhartia Group), is the operator of Kharsang Field. Jubilant holds a 25% interest in the block through its subsidiary, Jubilant Energy (Kharsang) Pvt Ltd. The other members of the consortium are Oil India Ltd and Geopetrol.

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Subsea 7 Scores Major Contract for Gorgon Proj.

- Subsea 7 Scores Major Contract for Gorgon Proj.

Friday, July 29, 2011
Subsea 7

Subsea 7 has been awarded a contract valued at approximately $440 million from Chevron Australia Pty Ltd for the Chevron-operated Gorgon Project, offshore Western Australia.

The work scope includes installation and tie-in of heavy lift structures in the Gorgon and Jansz Fields, respectively 65km and 130km from Barrow Island, off the north-west coast of Western Australia, in water depths of up to 1,350m. The project scope includes engineering, spools fabrication, transportation, installation and pre-commissioning of the following:
  • 20 subsea structures and foundations, each of up to 1,065 Te;
  • 15 heavy spools, each of up to 190 Te;
  • 48 tie-in spools;
  • 39 electrical and 18 hydraulic flying leads; and
  • 5 infield umbilicals and 2 associated distribution units.

Project management and engineering will commence immediately from Subsea 7's office in Perth, Australia, with offshore operations scheduled to commence in 2013 using Sapura 3000 and other construction vessels from our fleet.

Barry Mahon, Subsea 7's Senior Vice President, Asia Pacific & Middle East, said, "We are delighted to be awarded this pioneering contract, which complements the recent award of the Gorgon Umbilicals Project and provides an excellent opportunity to further build upon our strong local presence, our expertise in engineering, project management and installation and our long standing track record of
delivering significant subsea projects in Australia."

Jean Cahuzac, Subsea 7's Chief Executive Officer, said, "The Gorgon Project represents an important development for the subsea market in Australia and we are delighted to be awarded this prestigious contract by Chevron. This contract builds upon our world class assets and enhanced capabilities to apply advanced solutions to meet the increasingly challenging needs of our clients in their complex
subsea developments, reinforcing our position as a global leader in seabed to surface engineering, construction and services."

The Gorgon Project is one of the world's largest natural gas projects and the largest single-resource project in Australia's history. It is operated by Chevron and is a joint venture of the Australian subsidiaries of Chevron (approximately 47%), ExxonMobil (25%) and Shell (25%), Osaka Gas (1.25%), Tokyo Gas (1%) and Chubu Electric Power (0.417%).

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Chevron Reports $7.7B in 2Q11

- Chevron Reports $7.7B in 2Q11

Friday, July 29, 2011
Chevron Corp.

Chevron reported earnings of $7.7 billion ($3.85 per share - diluted) for the second quarter 2011, compared with $5.4 billion ($2.70 per share - diluted) in the 2010 second quarter.

Sales and other operating revenues in the second quarter 2011 were $67 billion, up from $51 billion in the year-ago period, mainly due to higher prices for crude oil and refined products.

"Our second quarter financial performance was very strong," said Chairman and CEO John Watson. "Earnings gains versus last year's quarter were primarily in our oil and gas exploration and production business, resulting from higher crude oil prices on world markets."

Watson commented, "We continued to advance our major capital projects, resumed important exploration and development drilling activity in the deepwater Gulf of Mexico and acquired new upstream resource opportunities in the second quarter." These achievements include:
  • Kazakhstan/Russia - Marked the start of the construction phase for expansion of the Caspian Pipeline Consortium's pipeline, which carries crude oil from western Kazakhstan to a dedicated terminal on the Black Sea. The design capacity of the pipeline will increase to 1.4 million barrels per day from its current capacity of 730,000 barrels per day. The project is planned to be implemented in three phases, with capacity increasing progressively from 2012 to 2015.
  • Australia - Received recommendation of conditional environmental approval for the Wheatstone liquefied natural gas (LNG) project from Western Australia's Environmental Protection Authority. The company will continue negotiations to finalize the permit conditions as it works toward a final investment decision on the project in the second half of this year.
  • Australia - Signed binding Sales and Purchase Agreements with Tokyo Electric for Wheatstone LNG.
  • Bulgaria -Awarded an exploration permit for a prospective shale gas block of more than 1 million acres in northeastern Bulgaria.
  • United States - Returned to work in the Gulf of Mexico with three rigs active in the deepwater, drilling the Moccasin exploration well, the Buckskin appraisal well and the Tahiti 2 development program. The company is also drilling on the Gulf of Mexico Shelf to test the ultra-deep gas play.
  • United States -Acquired additional acreage in the Marcellus Shale, including from Chief Oil and Gas LLC and Tug Hill, Inc., primarily in Pennsylvania.

"We reached an important milestone in streamlining our downstream asset portfolio with receipt of government approval for the planned sale of our refining and marketing assets in the United Kingdom and Ireland," Watson added. The sale is expected to close in the third quarter. The company also completed the sale of its fuels-marketing and aviation businesses in three Central American countries in the second quarter 2011, as well as other assets in China and North America.

The company purchased $1 billion of its common stock in the second quarter 2011 under its share repurchase program.

Worldwide net oil-equivalent production was 2.69 million barrels per day in the second quarter 2011, down from 2.75 million barrels per day in the 2010 second quarter. Production increases from project ramp-ups in Canada and the United States and new volumes stemming from the acquisition of Atlas Energy, Inc. were more than offset by an approximately 40,000 barrels per day negative effect of higher prices on volumes related to cost-recovery and variable-royalty contract terms, and normal field declines.

U.S. upstream earnings of $1.95 billion in the second quarter 2011 were up $860 million from a year earlier. The benefit of higher crude oil realizations was partly offset by higher operating expenses.

The company's average sales price per barrel of crude oil and natural gas liquids was $104 in the second quarter 2011, compared with $71 a year ago. The average sales price of natural gas was $4.35 per thousand cubic feet, up from $4.01 in last year's second quarter.

Net oil-equivalent production of 694,000 barrels per day in the second quarter 2011 was down 2 percent, or 14,000 barrels per day, from a year earlier. The decrease in production was associated with normal field declines and maintenance-related downtime. Partially offsetting this decrease was production from the acquisition of Atlas Energy, Inc. and increases at Perdido in the Gulf of Mexico.The net liquids component of oil-equivalent production decreased 2 percent in the 2011 second quarter to 478,000 barrels per day, while net natural gas production declined 1 percent to 1.30 billion cubic feet per day.

International upstream earnings of $4.92 billion increased $1.47 billion from the second quarter 2010. Higher realizations for crude oil increased earnings between quarters. This benefit was partly offset by higher operating expenses, including fuel, and increased exploration expense. Tax charges were also higher between periods. Foreign currency effects increased earnings by $26 million in the 2011 second quarter, compared with an increase of $107 million a year earlier.

The average sales price for crude oil and natural gas liquids in the 2011 second quarter was $107 per barrel, compared with $71 a year earlier. The average price of natural gas was $5.49 per thousand cubic feet, up from $4.40 in last year's second quarter.

Net oil-equivalent production of 2.00 million barrels per day in the second quarter 2011 was down 38,000 barrels per day from a year ago. Production increases from project ramp-ups in Canada and Brazil were more than offset by an approximately 40,000 barrels per day negative effect of higher prices on volumes related to cost-recovery and variable-royalty contractual terms, and normal field declines. The net liquids component of oil-equivalent production decreased 2 percent to 1.39 million barrels per day, while net natural gas production declined 1 percent to 3.67 billion cubic feet per day.

Capital and exploratory expenditures in the first six months of 2011 were $13.4 billion, compared with $9.4 billion in the corresponding 2010 period. This represents 52 percent of the company's planned annual capital and exploratory expenditures announced in December 2010. The amounts included $584 million in 2011 and $609 million in 2010 for the company's share of expenditures by affiliates, which did not require cash outlays by the company. Expenditures for upstream represented 91 percent of the companywide total in 2011. These amounts exclude the acquisition of Atlas Energy, Inc., which was accounted for as a business combination.

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Tropical Storm Don to Make Landfall Late Friday

- Tropical Storm Don to Make Landfall Late Friday

Friday, July 29, 2011
Rigzone Staff

Tropical Storm Don, the fourth tropical storm in the Atlantic this season, is expected to make landfall late Friday or early Saturday, according to the National Hurricane Center.

At 0900 GMT, the storm was located 290 miles southeast of Corpus Christi, Texas, headed west-northwest near 14 mph. Maximum sustained winds were near 50 mph.

According to the Bureau of Ocean Energy Management (BOEMRE), approximately 6.8 percent of the current GOM oil production has been shut-in and 2.8 percent of the natural gas production.

According to BP, it is starting to send workers back to its oil and gas platforms in the GOM. There is no production impact at Mad Dog and Holstein as both facilities have been completing scheduled maintenance.

Along with majors Shell, Apache, Chevron, BP and BHP, Enbridge has also evacuated personnel from its West Cameron 509 platform.

Northern Natural Gas will shut-in production from its Matagorda Offshore Pipleline System in GOM.

Refineries such as Valero's 115,000-barrel-a-day-plant, ConocoPhillips' 247,000-barrel-a-day Sweeny refinery, Citgo's 165,000-barrel-a-day facility and Flint Hills Resources 300,000-barrel-a-day-plant are located in the storm's path, near Corpus Christi.

Tropical Storm Don isn't expected to become a hurricane.

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