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Oil and Gas Energy News Update

Thursday, March 31, 2011

BP Spill Study Says BOP Needs Further Work

BP Spill Study Says BOP Needs Further Work

Thursday, March 31, 2011
Parks Paton Hoepfl & Brown
by  G. Allen Brooks

Last week, the results were released from the forensic study of the blowout preventer (BOP) used on BP Ltd.’s (BP-NYSE) Macondo well in the Gulf of Mexico that blew out last year causing an explosion, fire and eventual sinking of the Deepwater Horizon semi-submersible drilling rig and this nation’s greatest offshore environmental accident.

Den Norske Veritas (DNV), the Norwegian engineering and risk-management firm hired by the U.S. Department of the Interior to assess the BOP and determine its role in last year’s Deepwater Horizon disaster, after examining and testing the unit recovered from the ocean floor, prepared a 200-page report with a 351-page appendix.

The inspectors’ conclusion was that the shear ram valves in the BOP were unable to fully sever the drillpipe as the unit is designed to do because the pipe inside buckled from the well’s initial blow-out and was out of alignment that prevented complete closure.

DNV found that the shear rams had closed to within 1.4 inches.  This gap, albeit small, provided sufficient room for an estimated 4.9 million barrels of oil to escape.

While the report details the failure, the conclusions confirm the early belief of many drilling engineers consulted about the disaster.

The inability of the shear rams to cut the pipe because of it being off center highlight potential problems for companies drilling over-pressured wells.

The buckling of the pipe was due to the high pressure fluids roaring up the drilling pipe and annulus lifting the pipe until it hit an obstacle.  At that point, the momentum of the pipe and pressures and heat of the flows resulted in its bending.

Exhibit 10.  Why BP’s Macondo Well Spilled Oil
Why BP’s Macondo Well Spilled Oil
Source:  The Wall Street Journal

The report quickly generated further criticism of the offshore oil and gas industry and its safety procedures in drilling deepwater wells that tend to exhibit high formation pressures.

All facets of the oil and oilfield service industry involved in drilling these wells is working on ways to improve the performance of the drilling and safety equipment, especially the BOP.

There still remain unanswered questions about what actually caused the well to blow out and there will be more information and hypotheses presented down the road, but the DNV report was the last major report on the equipment involved in the accident.

The belief of most observers is that the Deepwater Horizon disaster was the result of a confluence of questionable decisions and actions by all parties involved that resulted in the creation of an unbalanced pressure differential between the downhole formation and the equipment designed to hold back that pressure.

Criticism of the DNV report came immediately from political opponents of offshore drilling including Rep. Edward Markey (D., Mass.) who said, “This report calls into question whether oil-industry claims about the effectiveness of blowout preventers are just a bunch of hot air.”  The man responsible for overseeing U.S. offshore drilling rules until he retired in 2009, Elmer Danenberger III, was quoted by The Wall Street Journal as saying, “They have to rethink the whole design,” meaning the BOP.

The DNV report concluded that the BOP failure was due to a design flaw and not the operation, abuse or maintenance of the BOP by the companies involved in drilling the Macondo well.

The BOP in question was manufactured by Cameron International (CAM-NYSE), the leading provider to the drilling industry of such units for over 90 years.  The BOP has been the industry’s last and best defense against well pressures, which often came as a result of encountering pockets of higher-pressured natural gas at shallower depths while drilling a well.  In fact, the BOP that became the signature product for Cameron was developed in response to several high-pressure well workover accidents in 1922.

The co-founder and majority owner of then Cameron Iron Works, James Abercrombie, was also a successful contract driller with a history of putting out well fires and blow-outs, long before Red Adair made the occupation of fire-fighting glamorous.

In late 1921, Mr. Abercrombie secured a contract to work over a troublesome well in the Hull field in Liberty County, northeast of Houston.  This was a field with many small pockets of high pressured gas.  In the course of working over wells in this field, Mr. Abercrombie’s company had lost its newest and best rig and had encountered three blowouts.

While each of the blowouts resulted in lost equipment, fortunately no one was hurt.

The episode, however, focused Mr. Abercrombie on ways to design equipment that could be used to prevent wells from blowing out.

Originally, he had used an elementary blowout preventer called a “boll weevil.”  It was essentially a piece of heavy-gauge pipe surrounded by a thick lead casing.  There was stopcock on top of the arrangement.  If it was suspected that a well might blowout, the unit was slipped over the well’s casing and the stopcock closed.  The unit proved impractical as a well containment device but mainly it was used to try to give the drilling workers time to get away from the rig before the well blew.

There was another preventer on the market designed to improve on the “boll weevil” and Mr. Abercrombie purchased one of them to use on his next well workover in the Hull field.  Unfortunately it, too, failed to prevent another blowout.  Mr. Abercrombie came up with the idea of a ram-type preventer with the faces of the rams closing in on the drillpipe in order to close off the pressure in the well.  With a sketch of the concept, Mr. Abercrombie went to his co-founder and partner, Henry Cameron, the next morning and sketched out his concept in the sawdust and dirt of the machine shop’s floor.  With a casting produced by Howard Hughes’ nearby shop, Mr. Cameron machined the design.

A patent application was filed on April 14, 1922, but patent number 1,569,247 was not issued until January 12, 1926.

As the unit was tested it was discovered that it leaked when pressure increased.  Mr. Cameron designed a fix whereby the increasing pressure would force open a notch in the corner of the ram face and force it to close tighter.  Patent number 1,498,610 was issued as a modification to the original BOP design but before the original patent was even granted.

By adding steel and cast iron parts to the BOP and being able to guarantee the unit would work to shut off 2,000 pounds of flowing pressure, the orders started coming in, not only from domestic companies in Texas, Louisiana and California, but also for use in foreign locations such as Mexico and Venezuela.  The Cameron Iron Works company was on its way to a glorious history that continues today.  [Much of this history about Cameron comes from the book, Mr. Jim, by Patrick J. Nicholson.]

We have high confidence that the engineers in the drilling business will figure out how to improve the performance and safety of the drilling process, just as they have for the past 150+ years.  Well control episodes have occurred throughout the history of the petroleum industry.  The Deepwater Horizon was the latest and most devastating, both due to the loss of 11 lives and the environmental damage to the Gulf of Mexico from the oil spill.

The evidence from the investigations of the disaster continues to show the Macondo well blowout was an accident.  All aspects of our daily lives, including the energy, involve risks.  We need to better understand the risks and their potential ramifications.  Importantly, we need to keep a perspective on risk and our risk tolerance.  We don’t stop driving after a car accident.  We don’t stop flying after a plane accident.  We shouldn’t stop drilling after a drilling accident.

Buccaneer to Meet AIDEA for Rig Usage Offshore Alaska

Buccaneer to Meet AIDEA for Rig Usage Offshore Alaska

Thursday, March 31, 2011
Buccaneer Energy Ltd.
Buccaneer advised that the board of the Alaskan Industrial Development and Export Authority (AIDEA) is due to meet on April 1, 2011 to consider and vote on the investment by AIDEA of up to US $30.0 million to acquire a jackup rig for use in the Cook Inlet and other Alaskan waters.

AIDEA's involvement will be as a joint owner in the jackup rig to be acquired. Therefore the proposed investment by AIDEA does not involve the issuance of any securities by the Company.

Extensive due diligence has been undertaken by AIDEA management and a Joint Ownership Agreement (JOA) between the Company's subsidiary Kenai Offshore Ventures, LLC and AIDEA has been negotiated. The JOA contains Conditions Precedent that must be finalized before draw down of the AIDEA investment. The Company is confident that these Condition Precedents can be met in a timely manner.

AIDEA's management have made a recommendation to the board of AIDEA that it views participation on the terms and conditions contained in the JOA is in the best interests of AIDEA and recommends approval of the resolution to proceed.

If the resolution to proceed is approved by the AIDEA board it is anticipated that the JOA will be executed in the week commencing April 4, 2011. Further details will be released at that time.

Lexaria: 4 Wells Producing at Belmont Lake Field

Lexaria: 4 Wells Producing at Belmont Lake Field

Thursday, March 31, 2011
Lexaria Corp.
Lexaria announced that for the first time, there are now up to four producing oil wells at the Belmont Lake oil field, and a salt-water disposal well that is connected and operational. The necessary work was completed despite challenging field conditions prior to the seasonal rise in Mississippi River water levels. Some residual infrastructure work will be completed during the next dry season.

The Belmont Lake oil field has now produced over 100,000 barrels of oil.

Lexaria has drilled both oil and gas wells in the region since 2005, concentrating on shallow geologic horizons that are less expensive to exploit than deeper targets. There are a number of geologic target zones from the shallowest all the way to the Tuscaloosa Marine Shale. A 1996 Louisiana State University study estimates that 7 Billion recoverable barrels of oil may exist in this oil shale that in some regions is 400-800 feet thick.

Lexaria holds an option to drill up to 38 exploration wells on roughly 130,000 acres of land in the region, in which it holds a 60% interest. Shallow fields are of primary interest to the Company, in part, because of the history of this region. Some of the shallow oil fields in the area produced by others include:
  • 593,000 barrels produced at Ashwood Field
  • 730,000 barrels produced at Stamps Field
  • 55,000,000 barrels produced at Little Creek Field
  • 1,412,000 barrels produced at Freedom field
Lexaria currently holds a 40% gross working interest in the PP-F12-4 and PP-F12-5 directional wells, and a 32% interest in the PP-F12 and PP-F12-3 wells. It holds a minimum 32% interest with the potential for higher interests, in any additional development wells to be drilled at Belmont Lake.

Honda Motor, Mazda Will Resume Limited Production At Japanese Factories In April

Honda Motor, Mazda Will Resume Limited Production At Japanese Factories In April

Honda (NYSE:HMC) and Mazda said they will resume limited production at several Japanese factories in April, but full production will depend on the availability of parts, which is another sign that the Japanese auto industry is starting to come back from the March 11 earthquake and tsunami.

Industry analysts say it could take until summer before factories are back at full output.

Japan is the second-largest supplier of cars in the world, and is also a major parts producer. The impact of the earthquake is already causing production cuts in other countries, including the U.S. Few plants were seriously damaged in Japan but water and electricity supplies have been hampered.

Commodities Report: Gold Hits Record High; Crude Tops $106 a Barrel

Commodities Report: Gold Hits Record High; Crude Tops $106 a Barrel

Commodities rallied to finish higher Thursday as both crude oil and gold futures surged as the first quarter came to a close.

Light, sweet crude oil for April delivery finished up 2.4% to $106.72 a barrel. In other energy futures, heating oil was up 1.7% to $3.09 a gallon while natural gas was up 0.99% to $4.39 per million British thermal units.

Meanwhile, gold futures ended at a record high helped in part by a weaker dollar.

Gold for June delivery finished up $15 to $1,439.90 an ounce. In other metal futures, silver was up 0.78% to $37.80 a troy ounce while copper traded up 0.82% to $4.30.

The U.S. dollar index (DXY) is down 0.36% to $75.84.

Robbins & Myers Reports Q3 Results

Robbins & Myers Reports Q3 Results

Robbins & Myers Inc (NYSE:RBN) reported Q2 EPS today of $0.62 excluding one time charges related to its acquisition of T-3 Energy Services, beating the consensus estimate for $0.48 per share. Consolidated revenue was up 65% year-over-year to $215 million, beating the consensus estimate for $199 million. Excluding revenue from T-3 Energy, sales were up 38% from the year ago period.

"We are rapidly integrating T-3 into our Fluid Management Group and have secured most of the expected $9 million of annualized synergies," said Peter C. Wallace, President and CEO. "Other potential benefits from the acquisition have surfaced, such as new sales opportunities with key account relationships, opportunities to leverage regional strengths and capabilities, and savings through low-cost sourcing. All of this is occurring against a backdrop of strong order levels at T-3, which continues to benefit from increased North American oil & gas maintenance and repair activity as well as higher spending related to shale projects. Our legacy energy business is also benefitting from high levels of customer demand, tempered somewhat by capacity constraints for one product line, for which we expect additional capacity to begin coming on line at the end of the third quarter."

Gas Driller Citations to Be Reviewed

Gas Driller Citations to Be Reviewed

Thursday, March 31, 2011
Knight Ridder/Tribune Business News
by  Timothy Puko, The Pittsburgh Tribune-Review

Every Marcellus shale drilling citation will need a review from the new Department of Environmental Protection chief before final approval, said an agency spokeswoman.

All violation notices for gas drillers and the enforcement actions the agency plans must be e-mailed to Acting Secretary Michael Krancer, spokeswoman Katherine Gresh said. The department's six regions each enforce rules differently, and Krancer is trying to improve consistency across the state, she said, noting the policy may be temporary.

But putting a political appointee in a position to micromanage regulatory enforcement could lead to unfair interference on behalf of campaign donors, said Myron Arnowitt, state director for Gov. Tom Corbett received $835,000 in campaign contributions from gas companies, according to, a website run by Common Cause Pennsylvania and Conservation Voters of Pennsylvania.

"Krancer has talked a lot about being scientifically-based, factually-based and implementing the law," Arnowitt said. "It's not clear how what he's doing does any of that."

Corbett has promised he will give no special consideration to the industry because of the donations he has received.

The DEP has spent much of the past three years playing catch-up with the gas drilling industry, going on a hiring spree to ensure it had enough employees to match the plethoraof permit requests statewide. There were 1,200 violations last year, and adding another layer of bureaucracy to enforcement raises more questions about how quickly the agency can stop lawbreakers, Arnowitt said.

Gresh said the effort won't be time consuming, but she didn't know how much time it might add to Krancer's day or how many more documents he might need to review. Ultimately, it will make the agency more efficient by ensuring new staffers received proper training and are enforcing regulations consistently, she said.

"We have communications like that around the department all the time. This is one aimed at achieving a goal that is very important to Secretary Krancer," Gresh said. "We'll take whatever time is necessary to ensure the consistency to improve efficiency, protect the environment, and, you know, which will benefit all Pennsylvania."

Samson O&G Closes Asset Sale, Sets Frac Date for Earl Well

Samson O&G Closes Asset Sale, Sets Frac Date for Earl Well

Thursday, March 31, 2011
Samson O&G Ltd.

Samson O&G has closed its previously announced sale of gas assets in the Jonah and Lookout Wash Fields in Green River Basin, Wyoming for $6.3 million to a group of private buyers, with an effective date of January 1, 2011. Samson's cash balance following this transaction stands at US $73.3 million.

Samson has also been advised that a frac date has been set for the Earl #1-13H well and it is expected that frac operations will commence Monday April 4th. Earl #1-13H was previously drilled to a measured total depth of 17,342 feet, and a 5,700 foot liner set in the horizontal section. This horizontal section will be fracced with 20 stages and the treatment is expected to place 2.3 million pounds of proppant. This operation will take approximately five days.

Devon Chairman Sees Plenty of Barnett Drilling

Devon Chairman Sees Plenty of Barnett Drilling

Thursday, March 31, 2011
Fort Worth Star-Telegram, Texas
Devon Energy, the largest producer in North Texas' Barnett Shale, has lots of drilling ahead of it in the big natural gas play, Executive Chairman Larry Nichols told the Star-Telegram in a telephone interview.

"We have at least 7,500 undrilled locations," said Nichols, who last year gave up his CEO title after 30 years in the job. Devon plans to keep about a dozen drilling rigs busy in the Barnett this year and will drill perhaps 325 wells, he said.

The Oklahoma City-based company has an office in downtown Fort Worth and 550 employees involved in Barnett Shale operations.

Devon's net Barnett production peaked at the equivalent of 1.2 billion cubic feet of natural gas per day in the fourth quarter last year. As a result of weak gas prices and limited demand, the company will probably maintain production at about that level this year, but it has the capability to increase output to at least 1.5 billion cubic feet Nichols said.

While current natural gas prices of slightly more than $4 per million British thermal units are not sufficiently high for sustaining production levels for "dry gas," it can be sufficient for "wet gas" production, which includes natural gas liquids that generate additional revenue, Nichols said. Devon's Barnett production is a mix of dry and wet gas, he said.

A geologist and lawyer by training, Nichols said he expects continued technological advances in drilling and completion of wells that will result in greater recovery of oil and natural gas.

As an example, he cited major technological advances in horizontal drilling and hydraulic fracturing that -- along with higher oil prices -- have revived activity in West Texas' heavily drilled Permian Basin.

Devon currently has 17 drilling rigs running in the Permian, where the company has about one million acres under lease, Nichols said.

He said he's "very excited" about the company's new 50-story corporate headquarters under construction in Oklahoma City. It will allow the company to consolidate its approximately 1,700 workers in Oklahoma City into a single building. They presently are scattered among five buildings, he said.

All the Devon employees are expected to be in the new building by the end of 2012. 

Exxonmobil to Start Exploration Offshore Vietnam Next Month

Exxonmobil to Start Exploration Offshore Vietnam Next Month

Thursday, March 31, 2011
Asia Pulse Pte. Ltd.

ExxoMobil will start its first exploratory drilling off the central coast of Vietnam late next month.

The decision was agreed upon at a city on March 29 between leaders of the People's Committee of Da Nang City and representatives from ExxonMobil Exploration and Production Vietnam Ltd.

The drilling will be conducted at block 119 on the continental shell offshore Quang Ngai Province and Da Nang City. Phung Tan Viet, Vice chairman of the Da Nang People's Committee, asked the company to strictly guarantee technical requirements to avoid environmental pollution. The two sides also discussed plans to ensure safety during oil-rigs construction.

Viet also ordered the city's Department of Agriculture and Rural Development to inform fishermen not to use the exploration area during the 40 days of drilling.

According to reports from state-owned Vietnam Oil and Gas Group PetroVietnam, Vietnam's crude oil reserve in 2010 was estimated at 4.4 billion barrels. The crude oil and gas exploration output in 2010 reached 15.1 million metric tonnes and 9.4 billion metric tonnes, respectively.

UK Oil Producers to Lobby Osborne Over North Sea Tax Hike

UK Oil Producers to Lobby Osborne Over North Sea Tax Hike

Thursday, March 31, 2011
Dow Jones Newswires

PetroChina Drills China's 1st HZ Shale Gas Well

PetroChina Drills China's 1st HZ Shale Gas Well

Thursday, March 31, 2011
Dow Jones Newswires

Reef Reaches TD at Ausable Well

Reef Reaches TD at Ausable Well

Thursday, March 31, 2011
Reef Resources Ltd.

Reef Resources reported that drilling of its Ausable # 5 well reached total depth of 615 meters on March 29. A total of 4 cores were taken over a depth of 32 meters with overall good recoveries. Oil staining was observed on the core sample which is currently being analyzed with results to be released in the near future. Data from the core samples will provide information on cap rock integrity and will be utilized, in addition to existing 3D seismic data, to pinpoint further drilling targets for future horizontal wells in the Ausable pinnacle reef.

The Ausable # 5 wellbore is being logged to identify the intersected hydrocarbon zones in the Ausable reef at this location. Results will be analyzed and released as soon as it is available.

The Ausable reef is currently on production and is generating revenue from the initial Enhanced Oil Recovery Natural Gas Recycling program which commenced in 4th quarter 2010.

Executive Director of Solo, Neil Ritson commented, "The presence of oil on the cores is considerable encouragement that we will be able to commercially produce this well while we awaiting the further planned development of the EOR scheme by Reef later this year."

BP Extends Aker's Maintenance, Modification Contract

BP Extends Aker's Maintenance, Modification Contract

Thursday, March 31, 2011
Aker Solutions
BP has decided to extend the maintenance and modification contract with Aker Solutions, exercising a one year option in the existing
agreement for the Ula, Valhall, Hod and Tambar fields. Work under the new option will last until April 2012. The contract value is estimated to be NOK 2-300 MNOK.

The original maintenance and modification contract was signed in 2005.

"We are very pleased that BP again demonstrates their trust in Aker Solutions. We look forward to continue our long term cooperation with BP," said executive vice president for Maintenance, Modifications and Operations in Aker Solutions, Tore Sjursen.

Scope of work under the contract includes engineering, procurement, fabrication, installation and maintenance support services and currently employs approximately 280 people in Stavanger, 50 in Egersund and 1000 in offshore rotation. The contract also includes hook-up and completion of the new PH platform at Valhall and tie-in of Oselvar to the Ula field.

Contract parties are Aker Solutions subsidiary Aker Offshore Partner AS and BP Norway AS.

Shell to Start Drilling at Iraq Majnoon Oil Field in July

Shell to Start Drilling at Iraq Majnoon Oil Field in July

Thursday, March 31, 2011
by  Hassan Hafidh

Shell along with its partners, Malaysia's Petronas and the Iraqi state Missan Oil Co., will start drilling the first new well in the super-giant Majnoon oil field in July, a company executive said Thursday.

"Shell is targeting July 2011 to spud the first well," Ole Myklestad, managing director of Shell in Iraq told reporters in Basra.

Between 15 and 20 wells will be drilled in Majnoon oil field in southern Iraq and some 27 others will be refurbished to bring output to 175,000 barrels a day by the end of next year from the current 60,000 barrels a day, Myklestad said. The new wells and the refurbish work is part of an early production plan.

The well drilling is part of a contract Shell and its partners signed with U.S. service giant Halliburton and the state-run Iraqi Drilling Co. last year.

The executive also said that Shell has opened a new office in Basra to manage its projects in Iraq. The office is to make sure that "we have the human resources and all the supports required by an international company in Basra."

Myklestad said that there are some 300 Iraqis working on the Majnoon project and they are from the state-run South Oil Co. Some 50 Shell expatriate personnel are also working on the project, he said.

Shell and Petronas won the right to develop Majnoon oil field, located in Basra governorate in southern Iraq, at an auction held in Baghdad December 2009. Shells owns 45% of the venture and Petronas 30%, with Iraq's Missan Oil Co. the remaining 25%.

Shell also will start constructing a 75 kilometer pipeline to connect Majnoon with the crude oil depots in Faw, as a stop before shipping the crude into vessels in the Gulf. Myklestad said that Shell and its partner would provide the finance for building the pipeline.

The Anglo-Dutch giant is also planning to commence a seismic survey but after clearing mines left from the 1980-88 Iraq-Iran war.

"We want to get results of a seismic survey in the next two years," he said.

Pacific Rubiales Acquires Maurel & Prom Stake in Colombia

Pacific Rubiales Acquires Maurel & Prom Stake in Colombia

Thursday, March 31, 2011
Pacific Rubiales Energy Corp.

Pacific Rubiales announced the acquisition of 50% of the interests held by Maurel et Prom in the Sabanero, Muisca, SSJN-9, CPO-17 and COR- 15 blocks, which are all located on-shore in Colombia.

Mr. Ronald Pantin, Chief Executive Officer of the Company, commented, "We are very pleased to join forces with Maurel et Prom. This acquisition adds significant resources and exploratory potential to our already robust resource base. Moreover, this acquisition fits synergistically with our other assets located in the same basins, paving the way to significant efficiencies in production and transport. With this acquisition we continue raising the bar as the premier explorer and operator in Colombia."
Upon completion of the transaction, Pacific Rubiales will partner with Maurel et Prom in respect of the following interests:
  • 100% participation in the Sabanero Block ("E&P Contract No. 17 of 2007 Sabanero") located in the central region of Colombia in the Department of Meta.
  • 100% participation in the Muisca Block ("E&P Contract No. 20 of 2008 Muisca") located in the central region of Colombia in the Departments of Boyacá and Cundinamarca.
  • 50% participation in the SSJN-9 Block ("E&P Contract No. 47 of 2008 SSJN- 9") located in the northern region of Colombia in the Departments of Bolivar, Cesar and Magdalena. The remaining 50% interest is currently held by HOCOL.
  • 50% participation in CPO-17 Block ("E&P Contract No. 40 of 2008 Llanos Orientales - Area Occidental CPO-17") located in the central region of Colombia in the Department of Meta. The remaining 50% interest is currently held by HOCOL.
  • 100% participation in the COR-15 Block ("Special Technical Evaluation Agreement Type 3 Contract") located in the central region of Colombia in the Department of Boyacá.
This agreement is subject to legal and regulatory approvals of the ANH and certain contractual approvals with the partners in Colombia.
The general terms of the agreement with Maurel et Prom are as follows:
  • Pacific Rubiales will pay to Maurel et Prom cash consideration to a maximum of US $66 million as a reimbursement for past exploration costs in the blocks, as at March 31, 2011.
  • Pacific Rubiales will assume a full carried obligation on the exploration and delineation activities in the Sabanero Block with a reimbursement out of the free cash flow. The Company will also secure the financing required by Maurel et Prom to execute its portion of the development activities in such block.
  • Reimbursement will also be made by means of free cash flow derived from future hydrocarbon production. Pacific Rubiales offers to assume a full carried obligation of up to US $120 million in three years for exploration activities in the SSJN-9, CPO-17 and Muisca Blocks. This obligation will be subject to revisions pending the activity results and negotiations with the other applicable partners.
  • Pacific Rubiales will assume a full carry obligation on exploration activities for Block COR-15, with reimbursement by means of free cash flow derived from future hydrocarbon production. The Company will also secure the financing required by Maurel et Prom to execute its portion of the development activities in such block. Reimbursement will also be made by means of free cash flow derived from future hydrocarbon production.

BHP Billiton Hands Reins to FOGL Offshore Falklands

BHP Billiton Hands Reins to FOGL Offshore Falklands

Thursday, March 31, 2011
Falkland O&G Ltd.
by  SubseaIQ

FOG announced further progress on its rig contract negotiations and certain changes to its license arrangements.

Changes to license arrangements

On March 30, 2011 FOGL signed a binding Heads of Agreement with its joint venture partner, BHP Billiton, that provides for the exit of BHP Billiton from the Northern license area once certain conditions have been satisfied, including approval of the Falkland Islands Government to both the assignment of BHP Billiton's 51% interest and transfer of operatorship to FOGL.

In relation to this withdrawal BHP Billiton will contribute towards the costs of drilling the Loligo well, by placing funds in an escrow account. The funds are to be drawn by FOGL against the costs of drilling the Loligo well. In the event that the Loligo well encounters hydrocarbons, BHP Billiton will have the option to back in to the Loligo development area only, for a maximum 40% non-operating interest in the discovery, in return for making a cash contribution to FOGL's future exploration and appraisal costs. Such a reassignment of interests will also be subject to approval by the Falkland Islands Government.

The settlement with BHP Billiton will, together with other funds available to FOGL, provide FOGL with total cash resources of US $110 million. These cash resources will be sufficient to fund the Loligo well, other exploration expenditures and allow the Company to fulfill the Phase 1 work commitment of the Northern license area.


Further to its announcement on March 15, the company is close to finalizing a rig contract for its deep water exploration program.

FOGL is also considering additional drilling options. The site survey program is progressing well, with surveys already completed on three locations. FOGL is considering the most appropriate means of financing and advancing these options and is in discussion with several parties that are interested in farming in to its licenses.

Tim Bushell, Chief Executive of FOGL, said, "We are pleased to have made good progress in our rig contract negotiations and to have reached an amicable agreement with our joint venture partner that gives FOGL control over its deepwater exploration program, commencing with the drilling of the Loligo prospect."

Chariot O&G In Talks to Farm-Out Blocks Offshore Namibia

Chariot O&G In Talks to Farm-Out Blocks Offshore Namibia

Thursday, March 31, 2011
Chariot O&G Ltd.

Chariot O&G provided an update on the farm-out process and progress with regard to drilling plans and further exploration work achieved across its license acreage offshore Namibia.

Chariot has been very encouraged with the offers that have been received to date and reported that it is at the advanced negotiation stage on several blocks in the farm-out process. Discussions continue and the Company looks forward to updating the market with further information shortly.

Chariot remains committed to drilling its first well in 4Q 2011 and is pleased to report that a contract has been signed with Senergy (GB) Ltd to provide drilling and support services for its planned wells on the Tapir North (Northern License) and Nimrod (Southern License) prospects. Chariot management and a team from Senergy recently visited Namibia as part of this process, meeting with government officials and local contractors. As previously stated, Chariot is planning to drill one well in 4Q 2011 with a second in 1Q 2012.

Chariot also reports that additional attribute analysis and mapping work has continued on the 3D seismic acquired in the Southern blocks. As a result it expects to release a further resource update following the completion of this work in the early part of the second quarter.

Paul Welch, CEO of Chariot commented, "Our farm-out efforts continue to be our main focus of activity and these discussions are progressing very well. Concurrent to these negotiations, we are very pleased with our developments in regard to moving our drilling efforts forward. This year is going to be one of significant progress for the Company and I look forward to providing updates in due course."

TGS Commences Reprocessing Program Offshore Indonesia

TGS Commences Reprocessing Program Offshore Indonesia

Thursday, March 31, 2011
TGS-NOPEC Geophysical Co. ASA
TGS has commenced an extensive multi-phase reprocessing program of 2D seismic data located in the Makassar Strait, Indonesia. The first phase consists of 2,700 km of seismic data in the Northern Mahakam Delta.

The original and reprocessed data support the exploration potential of the deepwater area of the Mahakam Delta. Interpretation of the seismic data since 2001 has demonstrated potential hydrocarbon prospectivity in the basin, resulting in the award of exploration acreage and the drilling of several exploration wells. Partial relinquishment of the exploration blocks have also recently created opportunities for new exploration in the area.

The data will be reprocessed with customized techniques to enhance imaging of the main structures and reservoir targets in the basin. The reprocessed data is intended to enhance definition of Direct Hydrocarbon Indicators (DHIs) and Amplitude Versus Offset (AVO) anomalies associated with turbidite reservoirs seen on the original 2D seismic data.

Data from this initial phase of reprocessing will be available for clients in 3Q 2011. This project is supported by industry funding.

Aztec Encounters Formations at Tx. Well

Aztec Encounters Formations at Tx. Well

Thursday, March 31, 2011
Aztec O&G Inc.
Aztec announced the Welder A-37 was drilled to a total depth of 6,208 feet and encountered multiple formations.

"Utilizing sidewall cores to further evaluate the well's electric log, there appear to be four to five zones of commercial interest in the probable to possible categories," stated Waylan Johnson, President of Aztec Oil & Gas, Inc. Furthermore, he stated, "The A-37 is our second successful well in the area, and we are working on several more ideas in San Patricio County. This county is typical of the type of area in Texas where we are afforded the opportunity to find sizeable reserves shallower than 6,500 feet."

Several Texas Independent Producers have joined Aztec as Partners in the San Patricio County area drilling as Aztec continues its dedication to drilling low-risk, shallow oil wells in Texas.

KCA Deutag Finishes Refinancing Process

KCA Deutag Finishes Refinancing Process

Thursday, March 31, 2011

KCA Deutag announced the completion of a refinancing process. The successful conclusion of this process has resulted in a transaction that strengthens the capital structure of the Company and ensures the long term financial stability of the business.

KCA Deutag will benefit from a strong institutional shareholder base led by existing shareholder Pamplona Capital Management together with funds and accounts managed by GoldenTree Asset Management, EIG Global Energy Partners, and BlackRock Financial Management. Pamplona is the largest shareholder and will have a majority on the new board. The shareholders have equitized mezzanine debt and injected $550 million of new equity into KCA Deutag's holding company Turbo Alpha, of which $300 million will be used to pay down senior debt and $250 million to further develop the business.

Simultaneously, KCA Deutag also confirms that non-executive chairman, Tim Summers, has stepped down following successful conclusion of the restructuring and has been replaced by Alex Knaster from Pamplona Capital. Non-executive directors Chris Hughes and Bob Ellis, appointed at the commencement of the refinancing also step down.

John Halsted of Pamplona commented, "We would like to thank Tim Summers, Chris Hughes and Bob Ellis for their leadership and guidance in steering the Company through a prolonged and intensive refinancing period. The Company has emerged with a significantly strengthened balance sheet, growth capital in the business and an experienced and knowledgeable shareholder base, committed to assisting the Company grow and capitalise on the many opportunities in its core international markets. As shareholders we are very excited about the prospects of the Company in a strongly improving market sector."

Despite the tough economic and trading condition, 2010 was a year in which KCA Deutag delivered robust financial, operational and HSE performance. Compared to our international and US peer group, KCA Deutag mitigated the effects of economic and industry factors better than most, emerging from 2010 with:
  • An improved contract backlog. In our platform drilling division almost every contract was extended by negotiation or competitive tender, securing a revenue backlog of more than $1.5 billion, with the major highlight being the award by AIOC in Azerbaijan of a six-rig, five-year plus options contract.
  • Continued high utilization in our international land fleet with strategic awards in both northern and southern Iraq and increased activity in Algeria and Nigeria.
  • Maintained and extended contracts for all three owned jack-ups.
  • Major contract extensions and awards in our engineering division RDS, relating to the UK, Azerbaijan, Newfoundland, Australia and Brazil.
  • Significant success in KCA Deutag sister Company Bentec, the specialist rig and drilling equipment manufacturer, with the successful introduction of it's top drive and six rigs currently under construction.
  • Best ever company-wide HSE performance.
  • Continuous improvement in our operating efficiency and equipment uptime.
Holger Temmen, CEO of KCA Deutag, commented, "We are pleased to have completed the refinancing of the Company and to have emerged with a strengthened balance sheet and debt position. Throughout this period, KCA Deutag's operational and financial performance remained very robust. This performance has been recognized in the many contract extensions and awards given by our clients and our shareholders and lenders also demonstrated their faith in our business plan by approving the build of five new land rigs during 2010 for key growth markets in Europe, Russia and MENA.

"KCA Deutag's strategic presence in the major international markets has allowed us to outperform the majority of our drilling peer group, especially those exposed to the US domestic market. The opportunities developing in markets such as Russia, Iraq, Algeria and the emerging unconventional oil and gas plays in Europe leave me very optimistic about our medium term growth prospects.

"I would like to thank all staff in KCA Deutag, our clients and suppliers for their patience and understanding as we have progressed through the refinancing process. I am delighted that we can now completely focus on delivering the business plan and continuing to meet and exceed our clients' expectations for safe, effective and trouble- free operations."

Petrofac Lands Contract for Shell's Majnoon Field

Petrofac Lands Contract for Shell's Majnoon Field

Thursday, March 31, 2011
Petrofac Ltd.
Petrofac has been awarded a contract, in excess of US $240 million by Shell Iraq Petroleum Development B.V. for developments in the Majnoon Field, Southern Iraq.

Under the competitively tendered contract, Petrofac is providing engineering, procurement, fabrication and construction management services for the development of a new early production system comprising two trains each with capacity for 50,000 barrels of oil per day, along with upgrading of existing brownfield facilities. Work on the project began in mid-2010 and is expected to complete during the fourth quarter of 2012.

Ayman Asfari, Petrofac group chief executive, said, "Majnoon is one of Iraq's largest developments and we are delighted to be working with Shell to assist them with unlocking the field's potential. Iraq's geographic location, adjacent to many of our existing areas of operation, made it a natural market for the group as we continue to broaden our geographic footprint."

Subramanian Sarma, managing director, Petrofac Engineering & Construction added, "Prior to beginning work with Shell in Iraq last year, we had spent many months preparing in order to achieve a sufficient level of readiness across several aspects of our business operations. All of our activities are underpinned by our strong commitment to safety, quality and integrity and alongside Shell and the local community, we are working to deliver this project to the standards our customers and stakeholders expect from us."

Subsea 7 Secures E.ON Contract for Huntington Development

Subsea 7 Secures E.ON Contract for Huntington Development

Thursday, March 31, 2011
Subsea 7 Inc.
Subsea 7 announced the award of an engineering and installation contract by E.ON Ruhrgas UK E&P for the Huntington Development in the North Sea.

The Subsea 7 workscope comprises the installation of 12km of the 8-inch Gas Export pipeline, installation of infield flexible flowlines, main static umbilical and associated risers as well as installation of subsea structures followed by tie-ins, pre-commissioning and system testing. Engineering work has commenced in the Aberdeen office with installation using several of Subsea 7's fleet occurring through to 2012.

Steph McNeill, Subsea 7's Vice President – UK stated, "I'm delighted that E.ON Ruhrgas UK E&P has chosen Subsea 7 to work on its prestigious Huntington development. We have safely and successfully delivered numerous North Sea projects whilst maximizing efficiencies through security of supply and early engagement in the planning and design process. We look forward to similar success with the Huntington Development over the coming year."
The Huntington Development is located 140 nautical miles North East of Aberdeen in Block 22/14 in the Central North Sea with water depths of 90m. E.ON Ruhrgas UK E&P is the operator and has a 25 % interest.

Statoil Allows Extra Time for Tenderers to Mature

Statoil Allows Extra Time for Tenderers to Mature

Thursday, March 31, 2011
Statoil has decided to allow more time for the tenderers to mature their respective category B rig concepts, which includes an extended front end engineering and design (FEED) phase. The planned award date is set for the fourth quarter of 2011.

Statoil has had an ongoing tender process for the new category B rig type – a semi-submersible designed and equipped for subsea well intervention. The rig will be a highly anticipated contribution to the rig fleet on the Norwegian continental shelf (NCS).
"The decision to allow more time to mature category B is motivated by input from the bidders. We see that an integration of additional services, combined with more time for an in-depth FEED phase, can improve the robustness of the concept," said Statoil's chief procurement officer, Jon Arnt Jacobsen.

"In reality, this is to be regarded as an extension of the bidding process where we according to plan will be able to award the final contract within 2011. Expected delivery from the yard should take place in 2014," Jacobsen added.

The design of the category B service unit is based on the bidders own FEEDs. The rig is designed for year-round well intervention operations for Statoil, providing a full range of heavy well intervention and light drilling techniques – including through-tubing rotary drilling (TTRD), wireline, coil tubing, high pressure pumping and cementing. Statoil is asking for a minimum of one rig of this type for work on the NCS.

"Traditional drilling rigs are not efficient enough for well intervention purposes, so Statoil has developed a new rig type for well intervention in collaboration with industry partners. This rig type will close the gap between light intervention vessels and conventional drilling units. The category B rig with its integrated service lines is expected to reduce well intervention operations costs by up to 40%," Jacobsen said.

The key to maintaining the current production level on the NCS through 2020 is increased recovery from existing fields and fast and effective development of new fields. It is becoming more important to increase drilling activity in mature fields to attain the full potential of the NCS.

"Improved subsea well intervention methods are making vital contributions to increased recovery. Increased recovery is one of the most important contributions to keep up current production level at the Norwegian continental shelf," says Knut Gjertsen, responsible for Operations North field development.

Strike Preps for Testing at Sadie Well

Strike Preps for Testing at Sadie Well

Thursday, March 31, 2011
Strike Energy Ltd.

Strike advised that production casing has been set in preparation for testing at the Sadie-1 well at the onshore Homeplace prospect in the Gulf Coast, Texas, USA.

Gas shows encountered while drilling and subsequent wireline logging indicate potential gas pay intervals in the main Wilcox Formation objective.

The current plan is to test the well direct to sales. Options to tie into nearby pipelines are currently being investigated. It is anticipated that pipeline installation and scheduling of fraccing equipment will enable testing to commence in two to three months.

The Homeplace prospect in the Wilcox Formation, in which Strike holds a 40% working interest, has a prospective gas resource of 15-20 billion cubic feet (Bcf). The prospect has the potential to more than double the Company’s growing gas and condensate reserves.