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Oil and Gas Energy News Update

Tuesday, April 26, 2011

Commodity Corner: Oil Edges Downward

Tuesday, April 26, 2011
Rigzone Staff
by Matthew V. Veazey

June crude oil fell slightly Tuesday as investors anticipated the outcome of the Federal Open Market Committee (FOMC) meeting, which concludes Wednesday.

Oil lost seven cents to end the day at $112.21 a barrel as the FOMC began its regular two-day meeting to decide on the Federal Reserve's monetary policy. Fed Chairman Ben Bernanke is expected to provide clues about any changes to existing policy Wednesday. The Fed's latest policy course has been to keep interest rates very low in an attempt to stimulate the economy. The policy has had the effect of weakening the U.S. dollar, which in turn has been bullish for oil.

Crude oil peaked at $112.64 and bottomed out at $111.12 Tuesday.

Gasoline for May delivery gained four cents Tuesday after a late-Monday power outage resulted in the temporary shut down of three Texas City, Texas, refineries. The BP, Valero, and Marathon refineries together can process 796,000 barrels of oil per day.

Gasoline futures settled at $3.36 a barrel Tuesday. U.S. gasoline inventories have trended downward over the past two months, prompting investors to pay particularly close attention to the Gulf Coast outages.

May gasoline traded within a range from $3.30 to $3.37 Tuesday.

Front-month natural gas ultimately remained flat at $4.39 per thousand cubic feet Tuesday after fluctuating from $4.34 to $4.41.

Musings: Natural Gas Is So 2010; Now It's All About Liquids-rich Shale

Tuesday, April 26, 2011
Parks Paton Hoepfl & Brown
by G. Allen Brooks

Last week the Baker Hughes U.S. active drilling rig count hit 1,800, up 1.6% from the prior week and up 21.5% over the past year. These were notable achievements. The increases reflect the exploration and development fever that is gripping oil and gas companies. This should be good news for the country's oilfield service industry, but maybe even better news for consumers as the increased drilling should lead to higher oil and gas production, and maybe lower fuel prices. More production means the nation's economy need not import as much oil and gas from abroad, which could have a significant impact on our balance of trade and payments, and the value of the dollar.

The most notable bit of data about last week's rig count was that for the first time in nearly 16 years, the oil and gas industry is employing more rigs targeting crude oil prospects (913 rigs) than drilling for natural gas wells (878 rigs). Analysts and investors, keen to see higher natural gas prices, have seized on this switch in drilling focus as a signal that future gas production will soon stop climbing. Assuming that the nation's natural gas consumption continues to rise, the drilling switch portends a shrinking of the oversupply of natural gas. That should mean higher natural gas prices – the only question is when.

Those E&P companies that are leading the charge into the gas shale plays around the country will be happy to see higher natural gas prices. They continue to claim that they can be profitable drilling these gas shale plays at natural gas prices in the $4.00 to $5.00 per thousand cubic feet (Mcf) of gas. Their financial results suggest something different. They still proclaim the success of the gas shale revolution, a movement that is beginning to spread globally.

Slightly over two weeks ago, the Energy Information Administration (EIA) released an analysis of gas shale resources around the world. It was clear from the report that the EIA believes the domestic gas shale revolution will be embraced globally. The EIA report estimates that 32 countries with known gas shale resources have added 5,760 trillion cubic feet (Tcf) of technically recoverable natural gas to the world's resources. With the addition of the U.S. gas shale resources, the global total would swell to 6,622Tcf. For comparison purposes, the world's proven natural gas reserves as of January 1, 2010, were 6,609Tcf. The world's total technically recoverable gas resources were 16,000Tcf as of the beginning of 2010, so with the new gas shale resources added in, the world now has over 22,000Tcf of gas resources.

The 32 countries with gas shale resources span the world and are likely to become energy-headline locations before long. Most people are familiar with the gas shale drilling underway in Poland and China, but those are only two of the 32 countries that span the globe. China leads the world with an estimated 1,275Tcf of gas shale resources. In Europe, Poland is in first place with an estimated 1,867Tcf of potential reserves, followed closely by France with 180Tcf. Interestingly, France has announced it is considering banning the drilling of gas shale wells until a study of possible water pollution problems associated with hydraulic fracturing are investigated and proven false. Equally surprisingly is that Norway has nearly half the gas shale resources of Poland and France.

Exhibit 1.  Gas Shales Located Around The World
Gas Shales Located Around The World
Source:  EIA

In South America, Argentina is highly prospective with nearly 90% of the total gas shale resources estimated to be in the United States. Brazil has about a third of the resources of Argentina with most of the potential resources located in the area close to some of the key manufacturing sites in the country. Surprisingly, Mexico has a huge potential with almost 80% of the estimated United States gas shale resources.

In Africa, the greatest potential source of natural gas from shales lies in South Africa, which has an estimated 485Tcf of resources. Libya, the site of the current civil war involving the country's crude oil reserves and production, has an estimated 290Tcf of gas shale resources. Algeria follows with nearly 80% of Libya's estimate.

While the world has lots of gas shale resource potential, it is in North America, and primarily the United States, where the gas shale revolution is in high gear producing substantial volumes of new gas production. According to the EIA, 2010's 4.87Tcf of gas shale production represents about 23% of total U.S. output, but it is projected to account for 45% of the nation's gas supply by 2035. The huge potential of gas shales in this country was first highlighted by the 2009 report of the Potential Gas Committee (PGC) at the Colorado School of Mines. In that report, the PGC estimated that there was about 616Tcf of gas shale resource, or about a third of the country's total resource potential.

Recently, Ken Medlock, a professor at Rice University, delivered a presentation about the gas shale industry at the American Association of Petroleum Geologists (AAPG) annual meeting. In his presentation he listed a timeline of potential gas shale resource estimates beginning with the 2003 National Petroleum Council estimate of 38Tcf. Two years later the estimate was raised to 140 Tcf and then in 2008 Navigant, a consulting company, estimated there was 520Tcf of potential reserves. The next year came the PGC estimate of 616Tcf and last year, consultant ARI estimated gas shale resources of more than 1,000Tcf. Mr. Medlock said there is a Department of Energy study underway with a May release date that will contain an estimate greater than ARI's estimate, likely putting it close to China's estimated 1,275Tcf of potential reserves.

All this potential gas has led politicians, investment professionals and E&P company executives to announce that the United States has in excess of 100 years of natural gas supply. In his presentation at the AARP, Art Berman showed that by reading the PGC report it becomes clear that gas shale reserves will likely only supply about 20 years of demand at the current 23Tcf of annual consumption.

Mr. Berman's pricking of the gas shale 100-year supply bubble should be having a greater impact, but instead the air is barely slipping out of the balloon. In fact, President Barack Obama has endorsed the huge potential gas supply mantra. In a recent presentation about the nation's energy situation, President Obama said, "We have a lot of natural gas here in this county." In doing so, however, he touched on the key issue now swirling around the gas shale revolution, which is the use of hydraulic fracturing to release the trapped gas from the formation President Obama's observation was, "The problem is…extracting it [shale gas] from the ground. The technologies aren't as developed as we'd like and so there are some concerns that it might create pollution in our groundwater, for

Exhibit 2.  Gas Shale Reserves Less Than 100 Years
Gas Shale Reserves Less Than 100 Years
Source:  Art Berman

Hertz Reports Solid Q1 Results, Loss Narrows To $0.03, Revs Up 7.2% YoY

Hertz Reports Solid Q1 Results, Loss Narrows To $0.03, Revs Up 7.2% YoY

Apr 26, 2011

Hertz Global Holdings (NYSE:HTZ) reported a Q1 EPS loss of $0.03, beating the consensus estimate for a $0.05 per share loss. Revenue for the quarter was up 7.2% year-over-year to $1.78 billion, just above the consensus estimate for $1.77 billion.

Mark P. Frissora, the Company's Chairman and Chief Executive Officer, said, "We continued to make significant operational progress and balance sheet improvements in the first quarter of 2011. U.S. car rental delivered record first quarter adjusted pre-tax income results despite unusually severe winter weather in January and February, and Europe car rental performed well again despite an unsettled economic environment. Both businesses achieved their highest customer service ratings since we began measuring in 2007."

The company sees 2011 EPS of $0.85 to $0.90, above the consensus estimate for $0.83 per share, and 2011 revenues of $8.10 to $8.20 billion, vs. the consensus estimate for $8.13 billion.

FMC Technologies Reports $1.1B for 1Q Revenue

Tuesday, April 26, 2011
FMC Technologies Inc.

FMC Technologies reported first quarter 2011 revenue of $1.1 billion and diluted earnings per share from continuing operations of $0.35. The diluted earnings per share included a tax benefit of $0.03 per diluted share.

Total inbound orders of $1.4 billion were up 11 percent from the first quarter of 2010 and included $940 million in subsea systems orders. Backlog for the Company reached $4.6 billion including subsea systems backlog of $3.9 billion. Subsea systems recorded its fifth consecutive quarterly backlog increase.

"The outlook for the subsea market in general, and our subsea business in particular, is strong," said John Gremp, President and Chief Executive Officer. "We are also encouraged by the continued strength of the North American land activity and its impact on our fluid control and surface wellhead businesses. We are reiterating our estimate for 2011 diluted split-adjusted earnings per share of $1.60 to $1.70."

Review of Operations – First Quarter 2011 

Energy Production Systems

Energy Production Systems' first quarter revenue was $856.4 million, including subsea systems revenue of $683 million. Surface wellhead revenue was up 5 percent from the first quarter of 2010 with stronger North American activity partially offset by weakness in some of our international markets.

Energy Production Systems' operating profit of $82.2 million decreased 48 percent from the prior-year quarter, due to expected lower margins in subsea systems combined with increased costs in surface wellhead.

Energy Production Systems' inbound orders for the first quarter were $1.1 billion, including subsea systems orders of $940 million. Backlog for Energy Production Systems was $4.2 billion, including $3.9 billion in subsea systems at the end of the first quarter.

Energy Processing Systems

Energy Processing Systems' first quarter revenue of $226.1 million was 35 percent higher than the prior-year quarter. The increase came mainly from fluid control, with record revenue in the quarter.

Energy Processing Systems had record operating profit of $43.7 million in the first quarter, up 86 percent from the prior-year quarter. The increase was driven by higher volume in fluid control resulting from strong North American pressure pumping activity.

Energy Processing Systems' inbound orders were a record $267.1 million in the first quarter led by strong orders in fluid control. Backlog for the segment finished the quarter at $342.1 million.

Corporate Items

Corporate expense in the first quarter was $8.4 million, a decrease of $0.6 million from the prior-year quarter. Other expense, net, was $8.2 million, a decrease of $12.6 million from the prior-year quarter.

The Company ended the quarter with net debt of $45.2 million. Net interest expense was $1.5 million in the quarter.

Depreciation and amortization for the first quarter was $25.4 million, down $3.2 million from the prior-year quarter. Capital expenditures for the first quarter totaled $41.0 million.

The Company's effective tax rate was 20.9 percent for the first quarter and included a $7.3 million credit for a foreign tax holiday.

RWE Dea Scoops Up Block Offshore Trinidad and Tobago

Tuesday, April 26, 2011

As a result of the 2010 shallow water bid round in Trinidad and Tobago, RWE Dea has been awarded one of the country’s offshore blocks. The respective Production Sharing Contract has now been signed with the Government of Trinidad and Tobago in Port of Spain. For RWE Dea, this marks the entry into the country with its established natural gas infrastructure in a prolific oil and gas prone region.

The NCMA2 block is situated approximately 50 kilometers off the northern coast of Trinidad. The block covers 1,019 km² and is located in water depths of 100 to 200 meters. It is on trend with the Hibiscus and Chaconia gas fields. Operational work is planned to commence in July with the acquisition of a 3D seismic survey covering the whole concession. RWE Dea's share in block NCMA2 is 24% with Niko Resources as operator holding 56% and the state company Petrotrin the remaining 20%.

"We are delighted to have been awarded our first block in Trinidad and Tobago," said Thomas Rappuhn, Chief Executive Officer of RWE Dea AG. "The signed PSC strengthens our strategic position and secures further highly prospective exploration acreage for the company." In its annual press conference in early April, the RWE Dea had already announced to increase its annual gas and oil production to 70 million barrel of oil equivalent by 2016. "To allow us to sustain the anticipated higher production volumes of the coming years for the long term, and to increase them, we step into new areas like Trinidad and Tobago and will expand our country portfolio even further," Rappuhn continued. RWE Dea is today active in 14 countries through licenses and branch offices. The company holds stakes in more than 170 licenses and is the operator in more than 40% of them.

The engagement in Trindad and Tobago also ties in with RWE's gas strategy to strengthen the group’s business in one of the most important LNG supply countries along the Atlantic margin.

Credo Charges Ahead with 'Aggressive Drilling Program'

Tuesday, April 26, 2011
Credo Petroleum Corp.

Credo updated its drilling activities.

Marlis E. Smith, Jr., President and Chief Executive Officer, stated, "Credo is continuing to execute the most aggressive drilling program in the Company's history which is projected to drill 57 wells in fiscal year 2011, a 67% increase compared to last year. In addition, the average working interest retained by Credo is 47% in 2011, up 52% over last year. This report includes initial results from our new oil drilling play in southwest Nebraska where well tests and drilling data indicate that we have hit the first three out of four wells. We also continue to be excited about our Bakken, Kansas and Texas Panhandle drilling programs. We expect these diversified, Mid-Continent oil drilling plays to add substantial production and reserves during 2011."


Credo has established its first oil production in the State of Nebraska with the successful re-entry of an abandoned well in the southwestern portion of the state. For proprietary business reasons, the name and location of the well is being withheld at this time. The well tested at an initial rate of approximately 50 barrels of oil per day. Oil is being produced from a previously bypassed Lansing Kansas City interval at 4,000'. The Company believes there is potential to conduct offset drilling to the new discovery. Credo owns a 70% working interest and is the operator.

Also in southwestern Nebraska, Credo has set production casing and commenced completion operations on a second re-entry well which the Company also believes contains bypassed Lansing Kansas City production and reserves. Credo owns a 70% working interest and is the operator.

The Company has drilled and set pipe on another well which electric logs and drilling data indicate is productive. Completion operations will begin shortly. Credo owns a 70% working interest and is the operator.

A third re-entry well is currently drilling. Results from the new wells will be released in the near future.

Credo has assembled approximately 40,000 net acres in Nebraska, and is continuing an aggressive shallow oil prospect generation program to extend the Company's Kansas exploration success into Nebraska on the Central Kansas Uplift. Prospects are generated utilizing a combination of detailed subsurface geology with advanced 3-D seismic technology to identify highly economic shallow oil targets.


The Company has recently added five new horizontal Bakken wells to its growing list of Bakken producers on the Fort Berthold Reservation, bringing the total to eight wells. While Credo's working interests in the new wells are small, ranging from 1% to 3%, its share of initial production from the four wells is about 140 BOEPD (barrels of oil equivalent per day). Three of the five wells have been completed and had excellent initial production rates of over 1,500 BOEPD. The fourth new producer, the Enerplus Ethan Hall, reported an initial production rate of 3,732 BOEPD. This marks the highest initial rate of any Credo Bakken well drilled to date and ranks among the highest rates among all Bakken wells. In addition to the four new producers, one new well is in its final stages of completion for production.

Credo's 2011 North Dakota Bakken drilling schedule includes six wells where its interest will range from 12% to 20%. These wells will be drilled in the same area as the Company's small working interest Bakken producers and are expected to achieve similar results. They will be operated by large independents and a major oil company.

"Initial production rates and long term well performance continue to improve on the Reservation," Smith said. "As drilling and production have ramped up on the Reservation, it has become one of the 'hot spots' for Bakken horizontal drilling."


Next month Credo will commence drilling its third horizontal Tonkawa well in Lipscomb County, Texas. The 7,500-foot vertical depth James Lee 74-2H is projected to have a 4,400 foot horizontal lateral. Credo owns a 35% working interest. The new well will be drilled on the 320 acre spacing unit adjacent to the Bussard Cameron 74-1H. The Bussard Cameron is still cleaning up as frac fluid recovery continues. The well exhibited good quality sand and very encouraging shows, and its oil cut continues to increase. Credo owns a 32% working interest in the well.

Credo's first horizontal Tonkawa well, the Bill 141H, located approximately one mile from the Bussard-Cameron, was drilled last year and is currently producing approximately 200 BOE per day. Credo owns a 22% working interest in the well.

The Company owns an average 33% interest in about 3,000 gross acres in Lipscomb and Hemphill Counties, Texas. In addition to its two new horizontal wells, the Company operates 12 vertical wells producing from various formations at depths of 7,000 to 11,500 feet. The Company believes that its Texas Panhandle acreage also has excellent Cleveland horizontal potential.


Marlis E. Smith, Jr., Chief Executive Officer stated, "We are off to a good start in Nebraska with three indicated producers out of four wells drilled. I am confident that the excellent results we have achieved in Kansas can be extended to the adjoining, oil-bearing formations in Nebraska. Also, our large working interests (50% and greater) will be quite impactful to Credo in this excellent oil price environment.

"I am also pleased with our progress in the Texas Panhandle and North Dakota Bakken horizontal oil drilling plays. Credo is beginning to build critical mass with the drilling of our third horizontal Tonkawa well in the Texas Panhandle, along with our upcoming, larger-interest North Dakota Bakken wells. These projects will have a major positive influence on 2011 production and reserves."

GE Concludes Acquisition of John Wood Group's Well Support Division

Tuesday, April 26, 2011

GE has completed the strategic acquisition of John Wood Group PLC's Well Support Division, expanding GE Oil & Gas' extensive drilling and surface manufacturing and services portfolio.

The John Wood Group PLC Well Support division, which has over 3,800 employees globally and operates approximately 20 manufacturing and multiple sales and service centers worldwide, is comprised of three business platforms – ESP (electric submersible pumps), Pressure Control (surface wellheads and trees) and Logging Services - which, combined, recorded 2010 revenues of $947 million.

The $2.8 billion transaction enables GE to capitalize on the fast-growing demand for enhanced oil recovery from mature oil fields using downhole pump 'artificial lift' in brownfield developments; as well as, expanding GE's high-technology product and service offering in unconventional oil and gas production, with significant applications for shale gas production.

Claudi Santiago, President and CEO, GE Oil & Gas said, "Given the reliability and quality of its technology and the expertise of its employees, the Well Support division is an excellent addition to GE Oil & Gas, strengthening our engineering capabilities and our extensive suite of advanced capital drilling and production solutions. Combined with our integrated portfolio, global supply-chain and footprint, the Well Support division adds further value for our customers and enhances GE's position in rapid growth oil and gas industry segments and regions."

Jim Renfroe, the CEO of Wood Group PLC's Well Support Division, said, "We are delighted to become part of the GE Oil & Gas family. The transaction positions GE Oil & Gas firmly to lead a new chapter in oil and gas unconventional production, expanding our combined customer base and providing significant new channels for advanced high-tech equipment and services around the world."

Helix 1Q Earnings Increase on Oil Prices

Tuesday, April 26, 2011
Helix Energy Solutions Group Inc.

Helix reported net income of $25.9 million, or $0.24 per diluted share, for the first quarter of 2011 compared with a net loss of $17.9 million, or $(0.17) per diluted share, for the same period in 2010, and a net loss of $49.8 million, or $(0.48) per diluted share, in the fourth quarter of 2010.

Owen Kratz, President and Chief Executive Officer of Helix, stated, "While weakness in the subsea construction market in the Gulf of Mexico remains a challenge for our Contracting Services business, increased oil production combined with higher oil prices resulted in increased earnings and cash flow for Helix. Consistent with our higher earnings and cash flow, our liquidity position increased to $837 million at March 31, 2011 from $787 million at December 31, 2010. Separately, efforts to make our containment system, the Helix Fast Response System, available to producers in the Gulf of Mexico have begun to pay off in the permitting process. Six deepwater drilling permits referencing our containment system have been approved since late February, and we are optimistic that permitting activity will continue to increase. Consistent with improving activity levels for our Contracting Services business as well as the higher commodity price environment, we are upgrading our earnings outlook for 2011."

First quarter 2010 results included the following items:
  • A $17.5 million ($11.5 million after-tax) settlement of litigation related to a terminated 2007 international construction contract.
  • A net reduction of $5.2 million ($3.2 million after-tax) in the carrying values of certain oil and gas properties due primarily to the deterioration of field economics resulting from a significant decrease in natural gas prices.

The net impact of these items in the first quarter of 2010, after income taxes, was $(0.14) per diluted share.

Fourth quarter 2010 results included the following items:
  • Non-cash impairment charge of $16.7 million to write-off the carrying value of goodwill and a $7.1 million deferred tax asset valuation allowance attributable to our Southeast Asia well operations subsidiary (total of $23.9 million after-tax).
  • Impairment charges totaling $9.2 million primarily associated with a reduction in carrying values of certain oil and gas properties and $6.4 million related to expiring offshore leases ($10.2 million after-tax).
  • Loss associated with the Lufeng project offshore China of $21.4 million ($22.4 million after-tax) related to weather, downhole and mechanical issues.

The net impact of these items in the fourth quarter of 2010, after income taxes, was $(0.54) per diluted share.

Contracting Services
  • Subsea Construction and Robotics revenues decreased in the first quarter of 2011 compared to the fourth quarter of 2010 attributable to a weak subsea construction market in the Gulf of Mexico. Overall, our utilization rate for our owned and chartered construction vessels decreased to 44% in the first quarter of 2011 from 84% in the fourth quarter of 2010. Further, global Robotics utilization declined to 49% in the first quarter of 2011 from 60% in the fourth quarter of 2010.
  • Well Operations revenues decreased in the first quarter of 2011 compared to the fourth quarter of 2010 due primarily to lower overall utilization (77% compared to 90%). The Seawell incurred 17 days of repair and maintenance downtime and the Well Enhancer incurred 40 days of maintenance downtime during the first quarter of 2011.
  • Gross profit margins for our Contracting Services business were 8% in the first quarter of 2011 compared to 1% in the fourth quarter of 2010. Gross profit margins in the first quarter of 2011 were negatively impacted by low utilization in Subsea Construction and Robotics. Gross profit margins in the fourth quarter of 2010 were negatively impacted by the loss on the Lufeng project offshore China.

Production Facilities
  • The HP I produced the Phoenix field throughout the first quarter of 2011.

Oil and Gas
  • Oil and Gas revenues increased in the first quarter of 2011 compared to the fourth quarter of 2010 due primarily to increased oil production and higher oil prices. Production in the first quarter of 2011 totaled 14.4 Bcfe compared to 13.7 Bcfe in the fourth quarter of 2010.
  • The average price realized for oil, including the effects of settled oil hedge contracts, totaled $90.49 per barrel in the first quarter of 2011 compared to $80.11 per barrel in the fourth quarter of 2010. For natural gas, including the effect of settled gas hedge contracts, we realized $5.77 per thousand cubic feet of gas (Mcf) in the first quarter of 2011 compared to $6.11 per Mcf in the fourth quarter of 2010.
  • Our April 2011 oil and gas production rate has averaged approximately 140 million cubic feet of natural gas equivalent per day (MMcfe/d) through April 22, 2011, compared to an average of 160 MMcfe/d in the first quarter of 2011 and an average of 149 MMcfe/d in the fourth quarter of 2010.
  • We currently have oil and gas hedge contracts in place totaling 19.9 Bcfe (2.1 million barrels of oil and 7.4 Bcf of gas) for the remainder of 2011 (April through December) and 7.6 Bcfe (0.6 million barrels of oil and 4.0 Bcf of gas) in 2012.

Other Expenses
  • Selling, general and administrative expenses were 8.6% of revenue in the first quarter of 2011, 9.9% in the fourth quarter of 2010 and 11.4% in the first quarter of 2010 (excluding the $17.5 million pre-tax charge related to a payment to settle litigation related to a terminated 2007 international construction contract).
  • Net interest expense and other increased to $22.3 million in the first quarter of 2011 compared with $21.5 million in the fourth quarter of 2010. Net interest expense increased to $24.2 million in the first quarter of 2011 compared with $23.7 million in the fourth quarter of 2010, primarily reflecting lower interest income on our invested cash due to lower interest rates.

Financial Condition and Liquidity
  • Consolidated net debt at March 31, 2011 decreased to $916 million from $967 million at December 31, 2010. At March 31, 2011, we had no outstanding borrowings under our revolver. Our total liquidity at March 31, 2011 was approximately $837 million, consisting of cash on hand of $441 million and revolver availability of $396 million. Net debt to book capitalization as of March 31, 2011 was 41%. (Net debt to book capitalization is a non-GAAP measure. See reconciliation attached hereto.)
  • As of March 31, 2011, we were in compliance with all covenants and restrictions under our various loan agreements.
  • We incurred capital expenditures (including capitalized interest) totaling $44 million in the first quarter of 2011, compared to $33 million in the fourth quarter of 2010 and $75 million in the first quarter of 2010.

Atwood Awarded Contract Extension for Vicksburg

Tuesday, April 26, 2011
Atwood Oceanics Inc.

Atwood announced that one of its subsidiaries has been awarded a six-month contract extension with a six-month option, both priced at the current dayrate of $90,000, with an affiliate of Nucoastal (Thailand) Limited for the company's jackup Vicksburg. The option must be exercised by August 31, 2011. With the extension, the Vicksburg's firm commitment extends through December 31, 2011.

Rockhopper Secures Additional Slot on Semisub

Tuesday, April 26, 2011
Rockhopper Exploration plc

Rockhopper has entered into a further assignment agreement to secure an additional well slot on the Ocean Guardian mid-water semisub. The rig has been working for a consortium of operators led by AGR offshore the Falkland Islands since February 2010.

The company will now be able to use the Ocean Guardian for four well slots in succession. Rockhopper's plans for the remainder of 2011 call for the size of the Sea Lion discovery to be determined and additional exploration wells to be drilled.

Europa O&G Director to Resign

Tuesday, April 26, 2011
Europa O&G Holdings plc

Europa O&G announced that after 16 years with the Company, Paul Barrett has signaled his intention to resign as Managing Director of Europa in order to pursue other interests. Paul intends to remain with the Company during his 12 month notice period in order to effect an orderly handover.

Paul will continue to oversee the planned exploration, appraisal and development work program on the Company's assets in the UK, Romania and France as discussed in the Company's interim results statement announced on April 20.

Bill Adamson, Chairman said "Paul is a co-founder of Europa and has been instrumental in developing the Group and its assets to the current position. I'm grateful to him for his early notification, enabling the Company to carry out sensible succession planning. A search for a Chief Executive Officer will commence immediately and the Board looks forward to moving the Company to the next stage in its development as a maturing pan-European E&P business."

Blackford Dolphin Picks Up Additional Brazilian Work

Tuesday, April 26, 2011
Fred. Olsen Energy ASA

Dolphin Drilling, a subsidiary of Fred. Olsen Energy, has entered into a Letter of Intent for the provision of the semi-submersible Blackford Dolphin for the drilling of one well offshore Brazil. Commencement is scheduled late in the fourth quarter 2011, with an estimated duration of total 135 days of which some 118 days will be in continuation of the existing Reliance contract. Total contract value is approximately USD 47 million. The contract remains subject to final contract agreement, partner and management approval which are anticipated to be closed within end May.

Prosafe Snags Bareboat Contract in Mexico

Prosafe Snags Bareboat Contract in Mexico

Tuesday, April 26, 2011
Prosafe SE

Prosafe has been awarded a Letter of Intent by Interpetroleum Services Limited ("charterer") for a bareboat contract for the Safe Bristolia, and contract extensions for the Jasminia and Safe Hibernia. The three rigs are going to be used at Pemex' Cantarell field in Mexico.

The Safe Bristolia bareboat contract commences mid-May 2011 and ends around end-March 2013. Mobilization and demobilization costs to and from the North Sea are for charterer's account. The total value is about USD 45.3 million.

The Jasminia bareboat contract is extended by 572 days, through to end-December 2012. The value of the extension is about USD 25.7 million. The extension of the Safe Hibernia bareboat contract is 219 days, through to mid-December 2011, and has a value of about USD 11.6 million.

Odfjell Drilling Cements Deal for Drillship Deepsea Metro I

Odfjell Drilling Cements Deal for Drillship Deepsea Metro I

Tuesday, April 26, 2011
Odfjell Drilling AS

Odfjell Drilling has on behalf of Deep Sea Metro secured a contract with the BG Group for its first drillship; the Deepsea Metro I.

The contract with BG Group has a firm duration of 365 days with 3x6 months options and a contract value of approximately 175 million USD including mobilization and net taxes, excluding options.

CEO of Odfjell Drilling Mr. Simen Lieungh said, "We are delighted that Deepsea Metro I has been chosen by the BG Group for this drilling campaign in Tanzania. We believe that the award of the contract to Deepsea Metro I by BG Group is a validation of Odfjell Drilling’s proven deepwater capabilities and ability to take a new build from yard straight into operations."

On behalf of Deepsea Metro Ltd, Odfjell Drilling will be manager and operate Deepsea Metro I.

Deepsea Metro I is scheduled for delivery from Hyundai Heavy Industries (HHI) early June 2011. The first well is assigned to Woodside Energy for one well in South Korea prior to start of operations in Tanzania.

Deepsea Metro I is the first of two ultra deepwater drillships. Deepsea Metro II will be delivered from HHI in November 2011.

Gas Jobs Await Trained Work Force

Gas Jobs Await Trained Work Force

Tuesday, April 26, 2011
Knight Ridder/Tribune Business News
by Laura Legere, The Times-Tribune, Scranton, Pa.

The list of want ads is long.

Project engineer, gas marketing administrator, landman, heavy equipment operator, compressor technician, business development director, regulatory clerk, petrophysicist.

In late March, the member companies of the Marcellus Shale Coalition advertised hundreds of open positions they want to fill in Pennsylvania or just over the border in New York. Three years into the gas-drilling boom, the job listings testify to the continued need for workers with a variety of skills to propel the growing industry.

Researchers with the Marcellus Shale Education and Training Center estimate shale drilling will require between 3,700 and 15,000 direct jobs in central and northern Pennsylvania by 2013 and an additional 8,100 to 13,500 direct jobs in southwestern Pennsylvania by 2014.

About 75 percent of the jobs will be blue-collar work, said the study's author, James Ladlee, director of Penn State Cooperative Extension in Clinton County. A significant amount, 20 percent, of the jobs can be characterized as general office work -- everything from information technology to receptionists.

"People think about the workers on the drilling rig and they think those are the only jobs out there," he said. "There are a whole bunch of people that are backing them up in a variety of ways to make sure that they are able to do their jobs out in the field."

The Education and Training Center, based at Pennsylvania College of Technology in Williamsport, has continued to adapt to the industry's work force needs, but the basic framework for many of the skills necessary for industry jobs are already available in general skills courses at most technical schools.

For example, many of the skills learned in a diesel mechanics course will apply to the diesel compressors used to push gas from wells into pipelines, Mr. Ladlee said.

Some higher-paying jobs will require more education. Engineers, a real need for the industry, will need four or more years of college education to acquire the necessary skills.

Larry Milliken, director of energy programs at Lackawanna College, said a certified pipeline welder can make more than $100,000 anywhere in the country because they are in such high demand.

"You can't get that skill in a year, but you can develop that skill in four years," he said. "And most of that is paid, on-the-job training after you get a two-year technical degree."

Prospective employees will need to accept a demanding schedule if they want to work in the gas industry, Mr. Milliken said. It is a hard truth he reiterates to the 50 students in the college's natural-gas technology program.

"A lot of people want to work an eight-hour day, go home, not work holidays or weekends and never be interrupted on their personal schedule. That's not the oil and gas business," he said.

"It's a 24-hours-a-day business. It is demanding. You've got to be available when the job calls."

Valero Energy Reports Mixed Q1, EPS Misses By $0.12, Revs Up 42% YoY

Valero Energy Reports Mixed Q1, EPS Misses By $0.12, Revs Up 42% YoY

Apr 26, 2011

Valero Energy (NYSE:VLO) reported Q1 EPS of $0.18, missing the consensus estimate for $0.30 per share. Revenues for the quarter were up 42% year-over-year to $26.31 billion, beating the consensus estimate for $22.29 billion.

"Clearly, the first quarter was a much better start to the year than last year," said Valero Chairman and CEO Bill Klesse. "Our refining system experienced strong margins and turned in solid results despite a heavy maintenance schedule and associated restart delays. We also announced the acquisition of Chevron's Pembroke refinery, marketing, and logistics assets in the United Kingdom and Ireland. These attractively priced assets will improve the competitiveness of our asset portfolio and should be immediately accretive to earnings upon closing in the third quarter."

Experts Explore Possibilities of Drilling in NW Ohio Again

Tuesday, April 26, 2011
The Blade, Toledo, Ohio
by Tom Henry

Today's high gas prices have rekindled thoughts of extracting tons of oil left underneath northwest Ohio in the 1930s when the nation's drilling frenzy moved southwest to Texas and Oklahoma.

But for now, that's just wishful thinking.

Experts believe it remains impractical to extract that local crude, even with gas prices approaching $4 a gallon and news commentators abuzz with last week's speculation that $6.50-a-gallon prices could be on the horizon. Economist Richard Hastings of Global Hunter Securities in Charlotte got TV anchormen and Internet bloggers busy when he told CNBC the latter easily could happen if demand stays strong, the value of the dollar continues to drop, turmoil in the Middle East continues, and production is interrupted by hurricanes or other major storms.

Yet even industry stalwarts, such as Tom Stewart, executive vice president of the Ohio Oil & Gas Association, see little hope in an eventual revival of northwest Ohio's dormant oil wells.

"Yes, there's probably a lot of oil left. But there's no energy to move it through the rock now," he said.

But Larry Wickstrom, chief of the Ohio Department of Natural Resources' geology division, hasn't ruled it out. He said advantages of modern horizontal drilling techniques, as opposed to traditional vertical drilling, offer some hope.

"I think we'll see some activity back up there again if the prices stay like this," Mr. Wickstrom said.

The last attempt to extract northwest Ohio oil on a commercial scale ended in failure in the fall of 1995, a little more than a year after it began.

Meridian Oil, a subsidiary of the former Burlington Resources of Houston, made its case for a controversial permit to inject water into the bedrock of its 620-acre drilling site in Allen County's Perry Township, near Lima, on June 10, 1994. The water helped push oil deposits upward. That technique is controversial because of the inherent risk of having introduced water contaminate groundwater after making contact with oil.

The natural resources department's mineral-resource management chief issued a permit in July, 1994, a month after the hearing. The operation drilled to 1,300 feet below the surface, according to the department. Meridian ceased the drilling in August, 1995.

Jonathan Airey, a lawyer in the Columbus-based Vorys, Sater, Seymour, and Pease LLP law firm which represented Meridian, said the technique worked fine, but the 22 wells at the test site didn't produce enough to justify the company's $5 million commitment to the pilot program.

"It was a legal and regulatory success, but production was not as great as they had anticipated," Mr. Airey said. "They simply didn't have enough oil to make it worthwhile."

The chosen well was supposed to be representative of what Meridian could expect if it went ahead with large operations, he said.

"They picked the one they thought was representative [of the region] from test drilling," Mr. Airey said. "It moved fluid. But it ended up not being economical."

That attempt was the first time since 1956 that anyone had tried to extract large quantities of oil from northwest Ohio. Meridian at the time was the nation's largest independent oil and gas producer.

Between the regulatory hurdles and the difficulty in extracting oil, Mr. Airey said he is "skeptical" anyone will try again. "You need a high-enough upside to make it worth the risk," he said. "I'm skeptical anyone would find that [area] attractive."

Most of northwest Ohio's oil is in a geological area known as the Lima-Indiana Field, characterized by Trenton limestone. It forms a broad, 185-mile arc across Lucas, Wood, Hancock, Allen, and Van Wert counties in Ohio, and extends into northeastern Indiana. The first major field discovered in North America, it runs from almost Toledo to Indianapolis.

Few people today may realize Ohio was America's leading oil-producing state from 1895 to 1903.

John D. Rockefeller, the wealthiest man in the world in 1895, got his start in the Cleveland area with Standard Oil Co. in 1870. Ohio moved past its neighbor Pennsylvania, where Col. Edwin L. Drake drilled the world's first commercially successful oil well, at Titusville, on Aug. 27, 1859.

"We really were the Saudi Arabia of the world at one point," Mr. Wickstrom said. "In the 1890s, we were producing more oil than any place in the world."

It wasn't just oil that has caused boom times in northwest Ohio, either -- to some degree, so did the discovery of all of the natural gas that accompanied it.

Findlay especially was rich in both oil and natural gas reserves. Marathon Oil got its start in Findlay. And natural gas was so plentiful, it was flared off in downtown street lamps and torches at one time, as illustrated in an 1885 photo published by Harper's Weekly magazine.

The abundance of oil and natural gas helped Findlay grow from 5,553 people in 1880 to 25,000 in 1990.

Many people thought at the time there was an inexhaustible supply of natural gas; Findlay even allowed unrestricted use of that which came from one of its largest wells.

A lot of it was just lost or flared off as if it were a nuisance by-product of oil. People didn't know the value of natural gas, Mr. Stewart said.

According to historical archives, about 1.5 billion cubic feet of natural gas were wasted from Findlay's Karg well alone.

A New York engineer once reported that Findlay had, through torches and other devices, used enough natural gas in a day to serve New York City for a year.

"It was really just an appalling waste of natural resources," Mr. Wickstrom agreed.

But natural gas ultimately played a key role in the industrialization of Toledo, wooing Edward Drummond Libbey from Massachusetts.

The Libbey company's now-famous glass legacy here began when he signed a contract on Feb. 6, 1888, to move his New England Glass Works from Boston to Toledo to take advantage of cheap natural gas he needed to fuel his glass furnaces.

Mr. Libbey was drawn to Toledo by its vast supplies of natural gas, sand, soda ash, and labor.

His plant northeast of downtown opened on Aug. 17, 1888, after more than 50 train carloads of equipment and workers were delivered from the East Coast to Toledo. They were greeted with a parade. He and a superintendent Mr. Libbey later hired for his factory, a mechanical genius by the name of Michael J. Owens, gave Toledo its nickname of "The Glass City."

But many questions existed about natural gas back then.

David Ross Locke, who was The Blade's editor from 1865 until his death in 1888, first campaigned for a municipally owned natural gas plant in Toledo, then reversed himself after coming to the conclusion the project would not be worth its enormous cost in the long run. The fear was that the region's natural gas supplies would be exhausted before the city got its money out of the plant.

Mr. Locke stated in an editorial back then that "perhaps the hardest fight The Blade ever undertook was that in opposition to the natural gas project."

Northwest Ohio's oil boom is generally seen as a 50-year phenomenon, from the 1880s to the 1930s.

Another famous Toledoan, former Mayor Samuel M. "Golden Rule" Jones benefitted from it.

Mr. Jones, a millionaire businessman whom some experts have ranked as one of the greatest mayors in U.S. history, owned Acme Sucker Rod Co., which produced devices for extracting crude oil from the ground.

A onetime Republican who fell out of favor with the GOP, Mr. Jones became Toledo's 28th mayor in 1897 and was re-elected three times as an Independent. He died in office in 1904, the city's first mayor to do so.

Known for his populism, municipal reforms, and fairness, he was credited with having a major role in the creation of the national Independent political movement.

Mr. Jones won praise for shortening the work week, hosting employee picnics, and for changing the way Americans looked at labor in Toledo. He got his nickname from his belief that workers should be treated the way their bosses would want to be treated. He was one of the first to offer revenue-sharing, health insurance, and subsidized hot meals for his employees, all radical ideas at the time.

A pair of catastrophic events changed Mr. Jones' life.

His 2-year-old daughter, Eva Belle, died in 1881. Four years later, he lost his beloved first wife, Alma.

Mr. Jones emerged from a year-long funk by moving to newly opened oil fields near Lima, Ohio, with his two sons in 1886. There, Mr. Jones drilled the state's first large well and helped found the Ohio Oil Co., which later was bought by Mr. Rockefeller's Standard Oil Co.

In 1894, he secured a patent for an iron pumping rod, known as a sucker rod, for deep-well drilling.

Mr. Jones opened a plant in East Toledo and later moved it to Segur Avenue near Field Avenue.

The Lima-Indiana Field in northwest Ohio was the nation's most active in the 1890s, with production peaking in 1896, when it produced more than 23 million barrels of oil.

Tiny Cygnet in Wood County was a booming oil town with 13 saloons and so many workers that hotel owners rented "hot beds" -- beds used for no more than 12 hours at a time, rotated between workers on day and night shifts.

Historians have noted a high rate of illegitimate births in the Cygnet area during that era. Some women sought refuge in the Findlay Home for Friendless Women and Children, the forerunner to Blanchard Valley Hospital in Findlay.

In all, the Lima-Indiana Field produced more than 380 million barrels of oil while in commercial-scale operation from the 1880s to 1930s, when 76,000 wells drilled, according to the natural resources department. It's not known how much oil remains. Over the last 20 years, state officials have estimated from several million to 4.5 billion barrels exist beneath northwest Ohio.

The Lima-Indiana Field was abandoned as oil began to be harder to extract, prices dropped, and the vast oil fields of Texas and Oklahoma were discovered.

Oil can be hard to extract because it is trapped between rocks. With rare exception, it does not -- as many people believe -- pool up and form underground lakes.

That's an important point, Mr. Stewart said, because extracting oil is not as simple as plunging pipes downward and having them act as straws.

"Oil is between the porous spaces of rock," he said. "It's not like you're drilling into a huge pool or cavern of oil."

Mr. Stewart said oil needs underground pressure, known as "energy drive," to push it upward.

Northwest Ohio lost most of its underground pressure during its 1880s-to-1930s oil boom because too many wells were drilled. And, being a fledgling industry, rudimentary drilling techniques were used. Drilling produced gushers, now seen as a highly inefficient way of extracting oil. If done today, pressure would be moderated and controlled to extract as much oil as possible, Mr. Stewart said.

"They wasted a large amount of the energy drive. Even though they got a lot of oil out, they could have gotten a lot more if they understood modern drilling techniques, which they obviously did not," Mr. Stewart said. "They were just trying to get that oil out of there as fast as they could."

Water was used to push out oil in Meridian's 1995 effort because there wasn't enough pressure left beneath the ground to push oil upward.

The cost and logistics of repressurizing the region with underground gas would be prohibitive, Mr. Stewart said.

Mr. Wickstrom said northwest Ohio still may have a chance at a comeback, though, if the natural geology of the Lima-Indiana Field is in separate compartments.

It's unclear now if it is, he said.

But if there are compartments within the field where underground pressure has not been exhausted, a portion of what's left may someday be extracted, Mr. Wickstrom said.

"With the prices what they are and technology being available, I think we'll start seeing that being proposed at some point," he said. "There's a possibility we could find some virgin compartments that wouldn't need to be repressurized."

Northwest Ohio's drilling legacy isn't the only one in this part of the country that's steeped in some folklore.

On Jan. 7, 1957, the famed Albion-Scipio range in southern Michigan -- one of the Wolverine state's most productive oil fields -- was discovered after a fortune teller had a vision of oil on a Hillsdale County farm called "Rattlesnake Gulch" that was owned by a friend of hers.

Zulah "Ma" Larkin, a Coldwater, Mich., spiritualist, told her friend Rattlesnake Gulch owner Ferne Bradford she would get oil on her property at precisely 4 p.m. on the birthday of someone known to Ms. Bradford. She even showed Ms. Bradford the exact spot on her land where the good fortune would come.

A local driller named Clifford Perry was enlisted to help. He had drilled 31 dry holes in the area. He didn't expect to find any oil on Ms. Bradford's farm, but drilled after Ms. Bradford had sold shares in the project. On the birthday of Mr. Perry's son -- at 4 p.m. -- oil squirted out of a well on Ms. Bradford's property called Houseknecht No. 1. For a while, that well produced 100,000 barrels a day, more than any other in Michigan.

BP Liquidates Well in Caspian Sea

BP Liquidates Well in Caspian Sea

Tuesday, April 26, 2011
Knight Ridder/Tribune Business News
by E.Ismayilov, Trend News Agency, Baku, Azerbaijan

BP is the technical operator for development of the gas condensate field Shah Deniz in Azerbaijan's sector of the Caspian Sea. It will drill a new well SDX-07 for more advanced drilling in the field, a source in the oil and gas market said.

BP previously began drilling the SDX-07 well, but operations were suspended due to problems of lifting the casing pipe. The pipe was to be lowered to a depth of 1,100 meters, but could only descend to a depth of 900 meters.

"The well will be eliminated," a source said. "The drilling rig will be moved to another location to drill a new well."

The source did not mention a set date of liquidating the old well and its replacement with the new one.

He said that drilling is conducted from the Istiglal rig.

Drilling of the new well is planned to be completed by late 2011.

Two offshore platforms will be installed and 30 underwater wells will be drilled to extract additional 16 billion cubic meters of gas per year within the Shah Deniz -2 project. Peak production is forecast at over 8.6-9 billion cubic meters. Gas production may be brought up to 25 billion cubic meters per year under the second stage of development.

The field's reserves are estimated at 1.2 trillion cubic meters during the first stage. The contract to develop Shah Deniz was signed June 4, 1996. Participants are BP (operator) -- 25.5 percent, Statoil Hydro -- 25.5 percent, NICO -- 10 percent, Total -- 10 percent, LukAgip -- 10 percent, TPAO -- 9 percent, and SOCAR -- 10 percent.

Concerns about jobs and inflation eased in April

Concerns about jobs and inflation eased in April

Apr 26, 2011

The Associated Press is reporting that a monthly survey by The Conference Board says concerns about jobs and inflation eased in April. According to the report, the Consumer Confidence index rose to 65.4 from a revised 63.8 in March. Economists expected a smaller rise to 64.8. This comes after an unexpected drop in March stemming from worries about rising gas prices and other household items. The index is still far from the reading of 90 that indicates a healthy economy. The AP says it hasn't approached that level since the recession began in December 2007.

Breitling Wraps Up Ops at Ok. Well

Breitling Wraps Up Ops at Ok. Well

Tuesday, April 26, 2011
Breitling O&G Corp.

Breitling O&G announced that the Breitling-Yardeka #1, the first well in its new Arkoma Basin gas field in McIntosh County, Oklahoma, is being completed as a possible natural gas producer after reaching a total vertical depth of 3,500 feet.

From log analysis, the well encountered several potentially productive zones over a gross interval in the Jefferson Sand from 3380 feet to 3390 feet; the Upper Gilcrease Sand from 2246 feet to 2378 feet; the Lower Gilcrease Sand from 2868 feet to 2870 feet; and the Cromwell Sand from 3227 feet to 3236 feet. Testing and completion plans were finalized April 21 and a completion rig and crew moved into location April 25. Natural gas pipeline tie-in is slated for the week of May 16.

Chris Faulkner, CEO of Breitling Oil and Gas, said, "We are excited about developing this shallow gas field." Faulkner added, "We have good serendipity even though we are only drilling to 3500 feet."

Breitling ran a density-neutron log, microlog and an induction log and decided to run pipe based in analysis by Breitling's engineers and geologists. Joe Simo, Chief Geologist for Breitling Oil and Gas, said, "We had good gas shows on the way down and from the logs we have some good-looking formations in this well and hopefully throughout the field."

US Airways Group Posts Better Than Expected Q1 Results

US Airways Group Posts Better Than Expected Q1 Results

Apr 26, 2011

US Airways Group (NYSE:LCC) reported a Q1 loss of $0.68 per share, better than the expected loss of $0.72 per share. Revenue for the quarter was up 11.7% year-over-year to $2.96 billion, edging the consensus estimate for $2.94 billion.

US Airways Group, Inc. Chairman and CEO Doug Parker stated, "Our first quarter results were clearly impacted by the extremely high price of oil, but our team did an exceptional job of managing to largely offset that impact. Demand for our product was strong and unit revenues increased more than eight percent. We also continued to keep our non-fuel expenses in check as evidenced by a year-over-year decline in our mainline non-fuel unit costs."

Statoil: Production Start Delayed at Njord Platform

Statoil: Production Start Delayed at Njord Platform

Tuesday, April 26, 2011
by SubseaIQ

Production on the Njord platform was shut down on April 24 as a result of operational problems with gaskets in a gas export compressor. Later the same day, during work to resume production, a gas leak was discovered in one of the risers.

All production on Njord was immediately shut down and will remain shut down until the cause of the leak has been determined.

Production at the Njord field has been shut down since April 1 as a safety measure, while inspection of risers is carried out after earlier discoveries of internal damage to a particular type of flexible pipe.

The first instances of damage were discovered during a planned inspection last autumn, and an inspection program was initiated which is now being carried out. Riser inspection is also being carried out at the Visund field.

Risers are the pipes that convey oil and gas from the seabed to the installation, and consist of several layers of plastic and steel. Production at Njord and Visund is planned to be phased in again in due course as inspection of the risers confirms that they are in order, or after they have been repaired or replaced.

The Njord field resumed partial production on April 16, but was shut down again on April 24 when manual measurements during a work operation revealed a gas leak from one of the risers after an automatic shutdown. The well was contained when the leak occurred.

The riser in which the leak was discovered was quickly depressurised, and production and the other risers were shut down in a controlled manner.

The Norwegian Petroleum Safety Authority (PSA) has been informed of the incident.

Shutdown delays production from the field. The total field production for Njord is around 70,000 barrels of oil equivalents (oe).

Risers on all installations are subject to constant monitoring and routine inspections in accordance with applicable inspection programs.

Delta Reports Better Than Expected Q1, Loses $0.38 Per Share

Delta Reports Better Than Expected Q1, Loses $0.38 Per Share

Apr 26, 2011

Delta Air Lines (NYSE:DAL) reported a Q1 loss of $0.38, a narrower loss than the $0.50 per share consensus estimate. Revenue was up 13% year-over-year to $7.7 billion, beating the consensus estimate for $7.6 billion.

Richard Anderson, Delta's chief executive officer said, "Fuel is the biggest challenge facing this industry and Delta is actively reducing capacity, implementing fare actions, hedging our fuel needs and attacking our cost structure in order to offset fuel's impact on our earnings. These actions would not be possible without the dedication and determination of Delta people worldwide, who are working every day to build the best airline in the world for our shareholders, our employees and our customers."

Lockheed Martin Reports Solid Q1 Results, Raises 2011 EPS Guidance

Lockheed Martin Reports Solid Q1 Results, Raises 2011 EPS Guidance

Apr 26, 2011

Lockheed Martin Corp (NYSE:LMT) reported Q1 EPS of $1.55, beating the consensus estimate for $1.51 per share. Revenues for the quarter increased 2.9% year-over-year to $10.63 billion, just above the consensus estimate for $10.58 billion.

Bob Stevens, Chairman and CEO commented: "We had a solid operating and financial start to 2011. We focused on executing on our programs while continuing to find affordable solutions, because we and our customers need to make every dollar count. In this new reality shaped by an increasingly complex global security environment and an uncertain economy, we remain committed to providing value to our customers while achieving strong financial results for our shareholders."

The company raised its 2011 EPS expectation to $7.25 - $6.95, from $6.70 - $7.00 previously, with the consensus estimate currently at $6.98 per share.

LNG Energy IDs Gas Shows at 2nd Polish Well

LNG Energy IDs Gas Shows at 2nd Polish Well

Tuesday, April 26, 2011
LNG Energy Ltd.

LNG Energy announced that the Lebork S-1 well, on the Slupsk concession in Poland, has been successfully drilled, cased and cemented to its total depth of 3,590 meters. During drilling, numerous gas shows were recorded over 285 meters of the Lower Silurian, Ordovician and Cambrian shales. The gas shows consisted of mainly methane gas. The strongest gas shows were in the Cambrian shale, although gas shows may have been suppressed in the other shallower intervals due to the full diameter coring operations.

The well was originally drilled to 3,517 meters and had 223 meters of full diameter core recovered. At that time a comprehensive suite of openhole logs were run by Schlumberger. Upon evaluation of the logs, the well was deepened to a final depth of 3,590 meters, whereupon a 2nd suite of logs were run over the additional interval drilled; including the recovery of 113 sidewall cores. The full diameter core and sidewall cores were taken for specialized gas shale core analysis that will fully evaluate the physical parameters of the rock and will be used to calibrate the openhole logs. These analysis will provide, among other data, information on porosity, permeability, total organic carbon, rock eval pyrolysis, thermal maturity, gas composition, micropaleontology, and critical mechanical properties for completion stimulation design.

The two primary shale target intervals were thicker in the Lebork S-1 well than in the previously drilled Wytowno S-1 well. The Ordovician shale interval in the Lebork S-1 well is approximately 91 meters thick, which is slightly thicker than the 83 meters found in the Wytowno S-1 well. The Cambrian shale also thickened to 15 meters from the 9 meters found in the Wytowno S-1 well. This provides further support for the hypothesis of an increasing thickness trend that may continue into deeper portions of the basin.

The comprehensive core analysis is expected to be completed by the third quarter. The analysis of the sidewall cores from the Wytowno S-1 well are also still pending. The suite of Schlumberger openhole logs that were run in the Lebork S-1 well will be recalibrated, using the core data, to more precisely calculate the potential pay sections. The log suite in the Lebork S-1 well currently calculates the highest gas and best properties in the Cambrian shale interval followed by the overlying Ordovician shale interval. The uncalibrated log suites of both wells currently indicate higher gas calculations in the Ordovician interval in the Lebork S-1 well than in the Wytowno #1 well, but this may change after core analysis and the logs are recalibrated. During the third quarter it is anticipated that the completion will be designed and the first intervals in each well will be fracture stimulated.

The cost of the well at rig release, with casing in the ground and including the additional deepening, side wall cores and second set of logs is approximately US $5.6 million. The current estimated cost of the Lebork S-1 well, before completion, but including all future core analysis work, is US $6.5 million. Despite these added costs and due to increased efficiencies, the drilling costs are expected to be only US $0.1 million above the original drilling budget. The rig will stay on location until the end of May at which time it will begin mobilizing to the Starogard concession to begin drilling operations in mid June. The Starogard concession's wellbore will be the 5th successive gas shale well drilled by the same drilling equipment contractor and crew. LNG Energy anticipates further drilling optimization and efficiencies that will be observed in both lower costs and days on location.

American Standard Extends Presence in Bakken/Three Forks

American Standard Extends Presence in Bakken/Three Forks

Tuesday, April 26, 2011
American Standard Energy Corp.

American Standard has entered into a definitive agreement to acquire an additional 11,775 net leasehold acres in the Bakken/Three Forks. The acquired leasehold acreage is located within seven (7) counties widely considered to be the 'fairway' for the Bakken and Three Forks formations; and particularly increases ASEN's holdings in Mountrail, Stark and Williams Counties. This portfolio of leases includes a large number of working interest positions in the 5-15% range, multiple 20% working interests and two at 100%.

Scott Feldhacker, CEO of American Standard Energy Corp. commented, "This is another major acquisition for our company that increases our Bakken/Three Forks holdings to over 31,000 acres and further advances our strategic profile in the region. This major addition to our lease portfolio increases our current revenue and reserve outlooks and also has potential to increase our well count and production rates for 2012. As a result of this acquisition, ASEN will have six controlling interest positions in the Bakken/Three Forks formations available for development or exchange.

This acquisition works to establish a heightened awareness of ASEN as an effective consolidator of lease acreage around, under and within the development path of key operators such as Brigham, Continental, EOG, Whiting and Petro-Hunt; and further qualifies ASEN as a preferred partner for these quality operators."

Chesapeake Begins Tender Offer to Buy Bronco Drilling

Chesapeake Begins Tender Offer to Buy Bronco Drilling

Tuesday, April 26, 2011
Chesapeake Energy Corp.

Chesapeake announced that it, through a new wholly owned subsidiary, Nomac Acquisition, Inc., is commencing a cash tender offer to purchase all outstanding shares of common stock of Bronco Drilling. On April 15, 2011, the companies previously announced a definitive agreement whereby Chesapeake would acquire Bronco in a cash tender offer and subsequent merger for approximately $315 million, including debt, net working capital and outstanding warrants.

Upon the successful closing of the tender offer, Bronco stockholders will receive $11.00 in cash for each share of Bronco common stock tendered in the offer, without interest and less any required withholding taxes. If more than 50 percent of the shares of Bronco common stock on a fully diluted basis (but less than all of the outstanding shares of Bronco common stock) are tendered, and all other closing conditions are satisfied, any remaining shares not tendered will be converted into the right to receive the same consideration in cash in connection with a merger of Nomac Acquisition into Bronco. Following the transaction, Bronco will be an indirect wholly owned subsidiary of Chesapeake.

Today Chesapeake will file with the Securities and Exchange Commission (SEC) a tender offer statement on Schedule TO that provides the terms of the tender offer, and Bronco will file a solicitation/recommendation statement on Schedule 14D-9 that includes the recommendation of Bronco's board of directors that Bronco stockholders accept the tender offer and tender their shares in the offer. As previously disclosed, the board of directors of each of Bronco and Chesapeake has unanimously approved the transaction.

The tender offer will expire at Midnight, New York City time, on May 23, 2011 unless extended in accordance with the merger agreement and the applicable rules and regulations of the SEC. The closing of the tender offer is conditioned upon the valid tender of a majority of the outstanding shares of Bronco common stock on a fully diluted basis. As previously disclosed, stockholders holding shares representing approximately 32% of Bronco’s outstanding common stock have agreed, among other things, to tender all of their shares in the tender offer. In addition, Bronco’s directors and executive officers, who beneficially own in the aggregate approximately 1.7% of the outstanding shares of Bronco common stock (excluding unvested restricted shares), have indicated that they intend to tender their shares in the tender offer.

The closing of the transaction is conditioned upon expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and other customary closing conditions.

Fred. Olsen Lines Up Semisub for Offshore Brazil Drilling

Tuesday, April 26, 2011
Fred. Olsen Energy ASA

Dolphin Drilling, a subsidiary of Fred. Olsen Energy, has entered into a Letter of Intent for the provision of the semi-submersible Blackford Dolphin for the drilling of one well offshore Brazil. Commencement is scheduled late in the fourth quarter 2011, with an estimated duration of total 135 days of which some 118 days will be in continuation of the existing Reliance contract. Total contract value is approximately USD 47 million. The contract remains subject to final contract agreement, partner and management approval which are anticipated to be closed within end May.

Ithaca Inks Earn-In Agreement on Hurricane Discovery

Tuesday, April 26, 2011
Ithaca Energy Inc.

Ithaca has signed an Earn In agreement with Challenger Minerals (North Sea) Limited ("CMI") on the Hurricane discovery ("Hurricane") in Block 29/10b, within the Ithaca operated Greater Stella Development Area.

Hurricane was discovered in 1995 by well 29/10-4Z which tested the western lobe of a mapped structure and encountered light oil (41 degrees API) in a 62 foot section of reservoir sands; no drill stem test was undertaken at that time. The Hurricane appraisal well is being designed to confirm hydrocarbons in the eastern lobe of the structure characterized by high porosity (up to 30%) channelized Paleocene Rogaland sandstones. On successful appraisal of Hurricane by the initial well, the intention is to drill a sidetrack 'keeper' well up structure in anticipation of future development and tie back to the Stella hub.

Under the terms of the Earn In agreement, CMI is committed to pay a share of costs of the initial well in Block 29/10b. In consideration for this commitment CMI is provided with an option, exercisable no later than 90 days following abandonment or suspension of the initial appraisal and any sidetrack well, to take an interest in Block 29/10b. Under the Earn In arrangements, CMI will pay 40% of gross Hurricane initial appraisal well costs in exchange for a 31% equity interest in Block 29/10b, thereby carrying a part of Ithaca's share of all costs of drilling an initial appraisal well. In addition, upon successful appraisal, CMI will pay 40% of gross costs of a drill stem well test of any sidetrack. All additional costs, including those for planned sidetrack drilling, shall be apportioned such that CMI shall pay its 31% pro rata share.

The transaction is subject to agreeing 'turnkey' terms with Applied Drilling Technology International ("ADTI") (a subsidiary of Transocean Inc.) for the provision of a suitable drilling unit and well management services. Upon agreement of 'turnkey' terms and provision of a suitable rig, Ithaca anticipates that the appraisal well will be commenced in Q4 2011.

Ithaca currently holds 100% equity interest in the Hurricane discovery and Block 29/10b.

China Short Lists 6 Firms for First Shale Gas Auction

China Short Lists 6 Firms for First Shale Gas Auction

Tuesday, April 26, 2011
Dow Jones Newswires
by Jing Yang

China has short listed six domestic firms to participate in the nation's first shale gas auction, which has been postponed to May, an official with the Ministry of Land and Resources said Tuesday.

Shale gas, which recent technologies have started liberating from relatively impermeable rock, could help China to slow its growing reliance on imported energy. Chinese companies have been gaining know-how in the shale gas drilling from pioneering U.S. partners. The auction marks a move to exploit on a large scale the clean-burning fuel, of which it has identified massive reserves.

The six firms--PetroChina, China Petroleum & Chemical, Cnooc, Shaanxi Yanchang Petroleum Group, China United Coal Bed Methane and Henan Provincial Coal Seam Gas Development and Utilization--will bid for eight shale gas blocks, the official said.

The ministry will likely hold at least one more auction later this year, which could allow more companies, such as Sinochem Group and China Zhenhua Oil Co., to participate. As these two companies don't yet have domestic mining licenses, they can't bid in the current tender, he said.

Technical advances allowing the development of shale gas have transformed the U.S. energy sector in recent years, prompting a wave of merger-and-acquisition activity and sharply reducing reliance on gas imports.

Earlier this year, Cnooc Ltd. bought into several shale oil and gas leases in the U.S. owned by Chesapeake for $570 million in cash, following a similar deal in October.

A recent report from the U.S. Energy Information Administration showed that China holds 1,275 trillion cubic feet of technically recoverable shale gas reserves, the largest in the world.

The nation has invited U.S. and European companies into its tightly controlled onshore gas acreage in order to gain technical know-how. The firms that win blocks in the upcoming auction will also be allowed to work with foreign companies.

PetroChina completed the drilling of China's first horizontal shale gas well last month in Sichuan province. Horizontal shale gas wells are more productive and have proven to be more commercially viable compared with vertical wells.

Production of unconventional gas, such as coal bed methane and shale gas, is expected to reach 20 billion cubic meters annually by 2020, while output of conventional natural gas will rise to 200 billion cubic meters a year, the Research Institute of Economics and Technology of China National Petroleum Corp. forecast in an annual report earlier this year.

Max Petroleum, Saipem Enter Kazakh Drilling Contract

Tuesday, April 26, 2011
Max Petroleum plc

Max Petroleum has entered into a contract with Saipem, a subsidiary of Eni, S.p.A., for a National 1625 DE onshore drilling rig for its deep, pre-salt exploration program. The contract secures the use of the 3,000 hp rig to drill a minimum of two deep wells in the Company's Blocks A&E license area.

The Company plans to commence drilling the NUR-1 well on the Emba B prospect in Block E during August 2011, targeting unrisked mean resource potential of 467 million barrels of oil equivalent ("mmboe") distributed over a probable range (P90 to P10) of 170 million to 817 million mmboe with a 29% geological chance of success.

W&T Offshore to Add Acreage in West Tx. Permian Basin

W&T Offshore to Add Acreage in West Tx. Permian Basin

Tuesday, April 26, 2011
W&T Offshore Inc.

W&T Offshore has entered into a purchase and sale agreement with private sellers to acquire approximately 21,900 gross leasehold acres (21,500 net acres) in the West Texas Permian Basin for a purchase price of $366 million, subject to adjustments and an effective date of January 1, 2011. The reserves are over 91% oil and natural gas liquids. At January 1, 2011, estimates of proved reserves to be acquired are approximately 27 million barrel equivalents (164 Bcfe); and, estimates of proved and probable reserves to be acquired are approximately 53 million barrel equivalents (318 Bcfe) (both using a 6 to 1 Mcf to barrel equivalency). The current wells produce around 2,800 barrel equivalents per day. Since the effective date of the proposed acquisition, production has increased from about 1,900 barrel equivalents. The sellers have three active rigs drilling in the field and ongoing completions are being made on the new wells. We expect to keep at least three rigs working in the field throughout the remainder of 2011. Accordingly, we would expect daily production to increase.

There is significant upside potential in the acquisition with hundreds of proved undeveloped and probable well locations. Capital expenditures associated with planned development activities for these properties for the rest of 2011 are currently estimated at $35 to $40 million. The closing, which is subject to customary closing conditions and normal closing price adjustments, including effective date adjustments, is anticipated in the second quarter and will be funded from cash on hand and borrowings under our revolving bank credit facility.

Tracy W. Krohn, Chairman and Chief Executive Officer, commented, "The acquisition of the Permian Basin oil properties will allow us to continue with our goals of a steadier growth pattern coupled with good cash flow and positive full cycle economics. We believe that there are many more attractive acquisition opportunities for us both onshore and offshore."