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Oil and Gas Energy News Update

Monday, June 20, 2011

Oil & Gas Post - All News Report for Monday, June 20, 2011

Monday, June 20, 2011

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Commodity Corner: Oil Settles Higher on Greek Bailout Hopes

- Commodity Corner: Oil Settles Higher on Greek Bailout Hopes

Monday, June 20, 2011
Rigzone Staff
by Matthew V. Veazey

Crude oil for July delivery gained 25 cents Monday to settle at $93.26 a barrel.

Monday's increase reflected investors' optimism that the Greek government will be able to broker a debt restructuring deal with the European Union (EU) and the International Monetary Fund (IMF). Eurozone finance ministers met through the weekend to develop a bailout deal to prevent Greece from defaulting on its public debt.

In order to qualify for a loan from the EU and IMF, the Greek government needs to adopt austerity measures. An austerity plan proposed by the ruling Socialist government includes tax hikes, spending cuts, and privatizations. The proposal has generated considerable discontent among the Greek populace.

Crude oil peaked at $93.49 and bottomed out at $91.14 Monday.

Summer officially begins Tuesday in the Northern Hemisphere, but the Upper Midwest and Northeast regions of the U.S. have been experiencing a dearth of scorching temperatures lately. Thanks to these mild conditions and expectations of more of the same, cooling demand has not been higher than normal. July natural gas lost a penny to end the day at $4.32 per thousand cubic feet.

Natural gas traded within a range from $4.28 to $4.38 Monday.

The front-month price for a gallon of gasoline fell four cents to settle at $2.91 Monday. July gasoline fluctuated from $2.90 to $2.95.

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BP, Weatherford In Settlement on Deepwater Horizon

- BP, Weatherford In Settlement on Deepwater Horizon

Monday, June 20, 2011
Dow Jones Newswires
by Drew FitzGerald

BP on Monday reached a settlement with Weatherford's U.S. subsidiary that indemnifies the oil-services company from future Deepwater Horizon-related disaster claims.

Under the deal, Weatherford agreed to pay BP $75 million to spend on its Gulf Coast recovery fund. The entire cost of the settlement is being funded by insurance policies Weatherford had in place when the disaster happened.

The deal ties up another end in a web of litigation for companies that worked on the drilling rig, which exploded last year and caused one of the largest oil spills in U.S. history. Weatherford provided BP with products and services for the Macondo oil well, along with rig-owner Transocean and contractor Halliburton.

Under the latest agreement, BP indemnified Weatherford from all current and future environmental, pollution, personal, business, property and economic loss claims arising from the accident.

Separately, Transocean said Friday that insurers of its sunken rig have asked a federal judge to decide if BP and other owners of the doomed Macondo well are entitled to any coverage for the accident.

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

The Gulf of Mexico Oil Spill
Latest Deepwater Horizon Headlines

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Rosneft Sell-off Could Be Brought Forward to 2012 - Report

- Rosneft Sell-off Could Be Brought Forward to 2012 - Report

Monday, June 20, 2011
Dow Jones Newswires
by London Bureau

Russia wants to hasten its planned privatization of state-owned oil giant Rosneft in the wake of the collapsed share swap deal with U.K. supermajor BP, the Guardian reports Monday, citing an interview with one of President Dmitry Medvedev's key economic advisers.

"We want Rosneft to be a normal commercial company," said Arkady Dvorkovich, according to the paper. "The original government proposals were to start [the share sale] in 2013 but maybe now will be brought forward to 2012," Dvorkovich said.

The Russian government was planning to sell more than 85% of its stake in the company in 2013 if BP had gone ahead as planned. Now ministers are looking at bringing this process forward a year, the newspaper reports, adding that state control in the firm could fall below 50%.

The government would be happy if BP bought shares in Rosneft, according to the Guardian.

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

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Enhanced Oil Updates Operations

- Enhanced Oil Updates Operations

Monday, June 20, 2011
Enhanced Oil Resources Inc.

Enhanced Oil provided the following update regarding the Company's activity for the first six months of 2011.

The Company had previously announced, on January 19, 2011, that its principal focus for 2011 is the accelerated development of the Company's oil reserves at the Milnesand, Chaveroo and Crossroads oil fields. Specifically, during 2011 the Company intends to focus on:
  • Commencing the Milnesand oil field 20-acre infill drilling program in New Mexico.
  • Continuing a long-term program of well reactivations and workovers at both Milnesand and Chaveroo oil fields.
  • Continuing to exploit behind pipe zones in existing wells in Crossroads oil field.
  • Completion of pipeline right of way for the Company's proposed 41 mile pipeline from Kinder Morgan CO2 Company LP's Cortez Pipeline to the Company's Milnesand and Chaveroo oil fields.
  • Preparation for the potential delivery of CO2 to Milnesand oil field.
  • Continued evaluation of a helium project in our St Johns field.
  • Continued evaluation of a geothermal project in our St Johns field.
  • Market and industry exposure of Enhanced Oil Resources.

Oil Field Operations

During the first six months of 2011, we have been engaged in a very active fieldwork program in New Mexico, addressing some production decreases in our Crossroads field and addressing non-compliant wells in the Chaveroo and Milnesand fields. We have been restricted by state and federal regulators from certain reactivations and operating activities which would have benefited our current cash flows, pending reductions of non-complaint wells which formerly have been allowed to exist for decades. During this period, crude oil production has averaged approximately 408 barrels of oil per day (bopd) over the first five months of 2011. At Crossroads, May production averaged approximately 287 bopd, a loss of approximately 105 bopd since December, 2010. These reductions are principally related to an erratic production pattern and scaling problems with the # 307 Devonian well and gas/oil production difficulties with the # 101 Morrow well. We have attempted two reactivations in the Crossroads field that, to date, have not yet proved successful. We are continuing to give our attention to this field which has been enormously successful over the last two years.

Since the start of the year the Company has utilized three well service rigs operating almost continuously in our oilfields to reactivate, convert or abandon non-producing wells and to date we have completed operations on 48 wells. At Chaveroo, the Company has reactivated seven wells and realized production increases from 29 bopd at the start of the year to approximately 70 bopd during May of this year. In May, the Milnesand Plan of Development (POD) for 2011 was finally approved by the Bureau of Land Management (BLM) after three submissions over a nine month period, thus allowing the re-entry of 10 wells since the approval of the POD. We have concentrated our remedial work programs to forestall increases in the number of non-compliant wells and have identified a list of non-core well bores to begin turn-key abandonment operations in July. The plugging program of 13 wells (all considered non-essential to our plans) is expected to commence as the service contractors become available and will begin to significantly reduce the number of non-compliant wells. Once this operation has been completed and paperwork filed we believe we can then begin our drilling program in the Milnesand field. Engineering design for the infill lateral wells from existing wellbores at Milnesand has been completed and we are currently soliciting vendors to commence this program as soon as approvals are received and services can be provided. At Crossroads, we will continue the process of reworking several existing wells to increase production from the Devonian and other reservoirs in an attempt to bring production back towards previous levels.

St. Johns Development

The Company is expected to sign a drilling agreement shortly for the remaining two wells required for drilling under the St. Johns unit agreement obligations. We hope to initiate that drilling program towards the end of the third quarter of this year. Both wells will be targeting the high Helium area of the field within the Amos Wash interval. We will provide further details once a drilling contract has been executed.

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EOG Resources Contracts Seafox Rig for East Irish Sea Work

- EOG Resources Contracts Seafox Rig for East Irish Sea Work

Monday, June 20, 2011
Seafox Contractors B.V.

EOG Resources United Kingdom Limited, a subsidiary of EOG Resources, Inc., has signed a contract with Seafox Contractors for the use of accommodation and multi-support jackup Seafox 1 at the Conwy field in the East Irish Sea.

Seafox Contractors will provide EOG with one of her jackups to assist with piling works and the hook-up and commissioning of an offshore structure at the Conwy field. Besides the installation works, Seafox 1 will be re-positioned to the Douglas platform to perform accommodation and crane services.

"We are very pleased to work on EOG's first oil project in the East Irish Sea and we are confident to deliver a successful project to EOG Resources," said Keesjan Cordia, Managing Director of Seafox Contractors BV.

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Little Lizard Could Cause Big Disruptions for Texas Drillers

- Little Lizard Could Cause Big Disruptions for Texas Drillers

Monday, June 20, 2011
Fort Worth Star-Telegram, Texas
by Anna M. Tinsley

Deep in the West Texas sand dunes is something that some say could threaten the state's oil and gas production: A tiny lizard.

But it's not just any lizard: It's a dunes sagebrush lizard, also known as the sand dune lizard.

This little brown reptile is a concern for state officials, who hope that federal officials don't designate it an endangered species. That, they say, could disrupt oil and gas exploration in the heart of Texas' oil country, leading to higher gas prices and shrinking dollars for schools.

"It's reptile dysfunction," said Texas Land Commissioner Jerry Patterson, who oversees the permanent school and university funds, which get money from royalties and leases on some of the potentially affected land. "It has the potential to bring oil exploration and production to a halt."

The U.S. Fish and Wildlife Service, which has had the issue before it for about a decade, is considering protections because oil and gas exploration and ranching are shrinking the lizard's habitat. A decision could come by year's end.

The lizard

The blunt-nosed lizard at the heart of the issue has bright yellow eyes but is barely as long as a person's hand. The lizard is important prey for a number of other species, including some birds and mammals.

It can be found in the West Texas counties of Andrews, Crane, Gaines, Ward and Winkler -- part of the Permian Basin, known to petroleum officials as the most "prolific oil-producing region in onshore America" -- as well as in southeast New Mexico.

There it lives, in the shade of shinnery oak trees, which look like bushes and are found mainly in the sand dunes. The lizard lives only in dunes that have medium-size sand grains.

Environmentalists say the spiny lizard is in danger of extinction because its habitat has been disturbed or removed by oil and gas development. Shinnery oaks, for instance, have been destroyed by drillers, who clear space and move equipment. They have also been killed by ranchers, who say the plant can be poisonous to cattle.

The lizard has been a candidate for endangered status since 2001, when the Center for Biological Diversity asked the federal government to list it. But this proposal was moved forward at least in part because of a federal lawsuit by the environmental advocacy group WildEarth Guardians.

"I think the current federal proposal is based on a number of years of examining the status of the lizard," said Ken Kramer, director of the Lone Star Chapter of the Sierra Club. "It's not a last-minute sort of proposal."

State opposition

Patterson, who has compared the sand dune lizard to Godzilla for its ability to potentially freeze gas and oil work, said this fight is about more than just a reptile.

It's about what he said is a new strategy to gain endangered status for many animals and essentially block industries from doing their work.

"You overwhelm Fish and Wildlife with requests ... and rather than do science on several hundred species, they just settle the lawsuit," he said.Patterson, who has held a sand dune lizard and said it actually is "a cute little bugger," is calling on federal officials to reject the proposed designation.

"The science is not complete, it's out of date, and there's no decent information that has been sufficient to warrant the designation," he said. "If the designation comes, and it isn't based on sound science, we will file a lawsuit."

Texas Agriculture Commissioner Todd Staples, University of Texas System officials and Texas Association of Business President Bill Hammond also oppose the designation.

UT System officials manage more than 2.1 million acres for the benefit of the system, including acreage that could be a habitat for the lizard. They sent a letter to federal officials saying that listing the lizard as endangered is "at best premature" because that decision would be based on "faulty science, inadequate data and seriously erroneous assumptions."

Patterson said that a herpetologist from Texas A&M University has been hired and that studies of the lizard have been commissioned.

The Texas Endangered Species Task Force, primarily made up of property and business owners who could be affected, is developing conservation plans, said R.J. DeSilva, a spokesman for the Texas comptroller's office.

"The goal is to have a plan by November," he said. "There's a need to balance the development of the industry, and economic development in the industry, and take actions to mitigate and preserve the habitat."

Political move?

This year, the Obama administration said a decade's worth of petitions to add wildlife to the endangered species act would be addressed over the next six years.

About 1,400 plant and animal species are designated endangered. Officials work to protect their habitats and review what can be done. Several Texas Republicans in Congress, including Reps. Michael Conaway of Midland, Randy Neugebauer of Lubbock and Francisco Canseco of San Antonio, have asked colleagues to keep the lizard from being designated as endangered. Sen. John Cornyn filed an amendment to prevent federal officials from offering protections to the lizard.

"If the Obama administration has its way, this scaly political pawn will land on the Endangered Species List, without sufficient supporting research to back up the move, and effectively bring new and existing oil and gas production in parts of Texas and New Mexico to a screeching halt," he said in a statement.

Federal officials say they used the best science available and are working with companies to minimize problems or interruptions. Some petroleum companies have signed on to voluntary conservation agreements, agreeing to pay for habitat restoration and use techniques to lessen the impact on the lizards.

Kramer, of the Sierra Club, said he believes that state and industry officials are exaggerating the crisis.

"Practically every time there is a proposal, we get these people saying ... 'The sky is falling. This is going to be the end of civilization as we know it,'" Kramer said. "There is almost always an overreaction based upon their lack of understanding in which the species can be protected."

Copyright (c) 2011, Fort Worth Star-Telegram, Texas

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JEDI to Snaps Up Eagle Ford Assets

- JEDI to Snaps Up Eagle Ford Assets

Monday, June 20, 2011
JGC Corp.

JGC Energy Development ("JEDI"), a wholly-owned subsidiary of JGC, signed a purchase and sales agreement on June 14th to acquire 10% ownership of the Eagle Ford Shale oil window assets, located in south Texas, from TriTech I, LLC ("TriTech"). JEDI is headquartered in Houston, Texas.

The ownership of the assets is scheduled to be transferred from TriTech to JEDI by the end of July, on completion of due diligence. Chesapeake, operator and 50% owner of the assets, is a leading company in the exploitation of unconventional resources, and has established a predominant position in various unconventional plays such as Eagle Ford Shale, Anadarko Basin, Permian Basin, Niobrara Shale and Utica Shale.

With the advancement of development technologies, United States production of shale gas has been skyrocketing, and shale oil is also being produced and developed in full swing in the Bakken Shale region extending from the northern United States up into Canada. Eagle Ford has also been yielding shale oil, and many oil companies have been ramping up the development of the region. The area acquired by JGC consists of approximately 63,000 acres (approximately 253 square kilometers), on which Chesapeake holds 50% and other American oil company holds 40%, while the 10% formerly held by TriTech will be transferred to JGC.

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Another Boom?

- Another Boom?

Monday, June 20, 2011
Knight Ridder/Tribune Business News
by Chuck Slothower, The Daily Times, Farmington, N.M.

Since the San Juan Basin first boomed after World War II, natural gas has formed the backbone of the local energy industry.

Reliable natural gas production brought jobs, pumped tax revenues into government coffers and, in many ways, built Farmington. Oil production, meanwhile, was at best an afterthought.

That may be about to change. New technology, coupled with high oil prices, is spurring renewed interest in oil buried deep within San Juan Basin shales.

"We've always known that there's hydrocarbons in the shales. We haven't been able to get it out in economic quantities," said Steve Dunn, drilling and production manager at Merrion Oil & Gas in Farmington. "That's changing."

Though it's far from certain, oil and gas industry insiders say there's also a realistic possibility that San Juan County could be on the verge of an oil boom.

Several major producers are exploring the potential for drilling San Juan Basin oil, industry officials said. Companies recently have approached local independent oil and gas firms to discuss buying rights in the Mancos Shale, the oil-rich geologic layer of the basin.

"We're on the cusp of a lot of interest," Dunn said.

One major North American company in discussions with Merrion Oil & Gas flew geologists to Farmington to evaluate the basin, said Dunn, who declined to identify the company, citing ongoing discussions.

The geologists estimated the Mancos Shale holds 59 billion barrels of oil, of which perhaps

3 billion is recoverable -- 10 times more than the basin has produced in the past 90 years.

"That would make this a big, big prize, and that's why these companies are coming in," Dunn said. "If they see success, there will be a boom overnight, assuming the price of oil holds."

Elliott Riggs, a Farmington-based independent petroleum geologist, has studied the San Juan Basin for more than 50 years. He sees potential for significant oil production in the Mancos Shale.

"It's real," he said. "Every 10 years, something happens here unanticipated and unexpected in the basin that changes the economics of the basin. The last big change was coal-bed methane 10 or 15 years ago. I predict the Mancos will be the next big change."

Forbidden shale

The Mancos Shale stretches across the San Juan Basin from Durango, Colo., at its northern extreme nearly to Gallup southward, and from Shiprock to the Chromo, Colo., area.

At 3,600 square miles, the basin is the largest natural gas-producing region in the Rockies.

Natural gas dominates the basin to the north, while oil is thought to be more prevalent in the south. Oil and gas officials say the Mancos Shale is geologically similar to the Niobrara Shale in Northeast Colorado, where production has boomed.

San Juan Basin oil is difficult to drill. The shale is a tight and nonporous layer of rock, and only in recent years have drillers perfected two techniques that could set the oil free: horizontal drilling through thousands of feet of rock, and multiple-stage hydraulic fracturing that can shatter shale rock, allowing oil to flow.

The techniques were pioneered in the Barnett Shale near Fort Worth, Texas, where they revolutionized oil and gas production.

The process is expensive and raises numerous environmental concerns. But drillers say it's the only way to bring oil to the surface in significant quantities.

Black Hills Exploration and Production, a Denver-based firm, is among the first companies to pursue Mancos Shale oil. The company in April drilled a test well for Mancos Shale oil. Results are expected by the end of the year.

"It's our first horizontal well drilled in the Mancos Shale in the San Juan Basin," said Amy Estes, a Black Hills spokeswoman. "Certainly, depending on when the results come in, we may develop further."

ConocoPhillips, which has major operations in the San Juan Basin, also is taking a look.

"We are aware of the potential in the Mancos, and we're in an early evaluation stage," said Jim Lowry, a Houston-based ConocoPhillips spokesman. "But right now we don't have any Mancos development under way."

Likewise, BP said it is evaluating the shale play.

"BP has acreage in a number of shale basins in the U.S., including access to acres in the Mancos play," spokesman Daren Beaudo said. "At this time we are evaluating the potential opportunity there but are not able to speculate further about its potential or our plans going forward."

Sources caution it's not clear that large-scale oil production can be done profitably in the San Juan Basin.

"The jury is still out," said John Byrom, president and CEO of DJ Simmons Inc. in Farmington. "It's a legitimate possibility. The rocks have the potential."

Tucker Bayless of Bayless Drilling Co. said he has heard rumblings about Mancos Shale oil. But, he said, "I also hear it's just as likely to be gas as oil."

Companies look for land

Out-of-state companies looking at drilling for San Juan Basin oil face a major challenge: The land is taken.

For decades as natural gas production surged in the San Juan Basin, companies snapped up leases on nearly every conceivable productive corner of land.

"There is no open acreage here in the San Juan Basin," Riggs said. "In the producing area, you probably couldn't find 40 acres that isn't leased."

That leaves the out-of-state companies interested in the Mancos Shale seeking to make deals with small, local firms such as Merrion Oil & Gas on the assumption that international firms such as ConocoPhillips and BP won't deal away their rights.

Merrion is listening.

"It's too expensive for us to experiment with," Dunn said. "It takes somebody with size to come in and do the science part."

Companies are working to cobble together significant acreage to undertake the work, industry officials said.

Oil prices are driving interest in San Juan Basin oil. While natural gas prices have stagnated, oil remains highly valuable, trading for $93 per barrel on the New York Mercantile Exchange on Friday.

Natural gas, meanwhile, has been trading for less than $5 per million British thermal units, far below levels seen a few years ago. Natural gas production in Northwest New Mexico has declined steadily since 2006.

Oil drilling has helped compensate. Production has increased for three consecutive years, according to state Oil Conservation Division data.

In the San Juan Basin and across the nation, oil and gas firms are retooling their operations to focus on oil.

High oil prices may make expensive operations worth undertaking for large firms. Drilling for oil in the Mancos Shale would require a huge investment, making it necessary for a large firm to take the first plunge into the shale.

"It's a big deal to do one of these wells, and a lot of capital up front," said John Thompson, president of the Independent Petroleum Association of New Mexico. "Somebody's got to go first."

A boom town again?

If drillers find significant oil in the Mancos Shale, it could transform Farmington once again into a boom town.

Communities across the nation from Utah to New York have seen dramatic transformations when shale plays exploded, marked by a rush of jobs coupled with growing environmental concerns.

The Bakken Shale in North Dakota and Montana has been one of the busiest drilling areas in recent years. It boomed after an accidental discovery.

"The Bakken, nobody knew about it until one guy had to drill horizontally under a lake," Thompson said.

An economic boost would be welcome in San Juan County. The steep decline in natural gas production, coupled with low prices, has been felt in a widespread economic slowdown marked by lost jobs, slow retail sales and closed businesses. The county's unemployment rate surged past 9 percent in 2010 before declining to 7.2 percent in April.

While sales tax data suggest retail sales are improving, the recovery is expected to be a slow one. The Mancos Shale may be Farmington's best shot at a dramatic recovery.

"I hope it works," Byrom said. "It would provide a lot more economic development here when our activity is on the decline. If it is successful, it could reverse all that."

Copyright (c) 2011, The Daily Times, Farmington, N.M.

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Rep. Gardner Bill to Help Oil Cos Drill Off The Coast of Alaska Slate

- Rep. Gardner Bill to Help Oil Cos Drill Off The Coast of Alaska Slate

Monday, June 20, 2011
Greely Tribune, Colorado
by Nate A. Miller, Greeley Tribune, Colo.

U.S. Rep. Cory Gardner is the driving force behind legislation slated for a vote in the House this week that would make it easier for oil companies to drill off the coast of Alaska.

"Energy security and job creation is very important to me," the Republican said. "This bill accomplishes both goals."

The bill, H.R. 2021, would streamline the process for air permits on deep-water drilling operations off the coast of the U.S., with the exception of the Gulf of Mexico, which is controlled by the Department of the Interior. It also would require the Environmental Protection Agency to make a ruling on permit requests within six months.

Fort Collins resident Gary Wockner, who is the Colorado program director of Clean Water Action, said the bill is misguided.

"This bill will increase polluters' profits at the expense of public health and the environment," he said.

While it may seem strange for a Colorado congressman to take up the cause of offshore oil drilling in Alaska, Gardner, who serves on the House Energy and Commerce Committee, said it's a good fit.

"We need an all-of-the-above energy policy in this country that lessens our dependence on Middle Eastern oil," he said. "Whether it's natural gas produced in Weld County or oil produced in our deep-water reserves. We need to be doing everything we can to help reduce the price of gasoline and to help ween ourselves off of Middle East oil."

Gardner said permits to drill off the coast of Alaska have become stuck between the EPA and the Environmental Appeals Board, which the EPA created to address administrative appeals involving the major environmental statutes the EPA administers.

"Congress said these permits had to be approved or denied within a limited time frame. The EPA created a bureaucracy without Congress that has delayed some of these permits by as much as six years," he said. "It's the EPA end-run around Congress that's hurting our energy independence."

Gardner's legislation would remove the duplication created by the EPA and appeals board permitting process.

In testimony last month before the subcommittee on Energy and Power of the House Committee on Energy and Commerce, EPA assistant administrator for air and radiation Regina McCarthy said the appeals board ensures all parties are heard and often actually makes the process more efficient.

"Rather than adding a step, the board usually serves as a cheaper, faster, more expert substitute for judicial review," she said. She used the example of a group of subsistence fisherman concerned that an EPA permit didn't address their concerns about air pollution. "They would not be required to hire a lawyer; they could attend oral arguments via video conference; and they would know that their concerns were being heard by experts."

She also said offshore drilling operations can have very real impact on air quality, and it's important to ensure effective, efficient oversight of the operations.

Gardner said the permitting process gives ample time for public comment without the added bureaucracy of the appeals board. He said the permits can be held up even when there aren't health concerns. He gave the example of a Royal Dutch Shell permit for Alaska drilling which he said the EPA held up for six years, even though EPA head Lisa P. Jackson said health concerns weren't an issue.

Gardner estimates the measure, if it becomes law, would create 50,000 jobs across the country -- including some in Colorado -- and help ease the pressure at the pump for drivers by allowing more than 1 million barrels of oil a day to be pumped from Alaska.

Wockner said Gardner should focus on energy solutions Colorado has to offer.

"Rep. Gardner should be worrying about clean energy jobs in northern Colorado, not polluters' profits in Alaska," he said.

Copyright (c) 2011, Greeley Tribune, Colo.

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Leading Marcellus Geologist Advocates Forced Pooling of Gas

- Leading Marcellus Geologist Advocates Forced Pooling of Gas

Monday, June 20, 2011
The Patriot-News, Harrisburg, Pa.
by Donald Gilliland

Opponents of forced pooling -- and that would include Gov. Tom Corbett -- should watch the movie "There Will Be Blood," according to the state's leading Marcellus Shale geologist.

Terry Engelder explained that the concept -- whereby drillers are allowed to remove natural gas from beneath properties of owners who refuse to lease their mineral rights -- originated with Upton Sinclair's expose of the oil industry, "Oil!", which forms the basis of the 2007 Academy Award-winning film.

Speaking to the governor's Marcellus Shale Advisory Commission on Friday, Engelder acknowledged up front that the concept bumps squarely up against traditional property rights.

But the benefits, he said, have been determined time and again to outweigh the risk of infringing on those rights.

Pooling is a common feature in the laws of nearly all the oil and gas states, including Pennsylvania.

Yes, Pennsylvania has a forced pooling statute -- 50 years old -- which makes it illegal to waste gas, said Engelder. But the law only applies to gas below the Onondaga Limestone. The Marcellus -- and most of the other gas-rich shale formations in the state -- are all above it.

At the moment, Engelder said, the state has the worst of all worlds.

While drillers cannot lay pipe under a property that has not leased its mineral rights, they can drill immediately adjacent to it and legally fracture the shale under that property and drain gas from it -- without compensating the owner.

That's the rule of capture.

What's more, hold-out owners can prevent drilling into areas where gas has been leased, thereby denying those lease holders the royalties that could be generated from their property.

Engelder showed an example from Lycoming County where he estimated 5 billion cubic feet of gas and $20 million in revenue had been stranded by one hold-out landowner.

"This is not what the oil and gas conservation law of 1961 intended as an outcome," he said.

Engelder said pooling "maximizes the economic benefit, minimizes wasteful stranded gas, minimizes the environmental footprint and provides just and fair compensation" to all.

Lt. Gov. Jim Cawley did not comment, but he did announce that the Commission members have submitted more than 200 policy recommendations, which are now being reviewed by the working groups in preparation for the Commission's final report to the governor next month.

Copyright (c) 2011, The Patriot-News, Harrisburg, Pa.

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Nostra Terra Enters Agreement for Verde Stake

- Nostra Terra Enters Agreement for Verde Stake

Monday, June 20, 2011
Nostra Terra O&G Co. plc

Nostra Terra has entered into an agreement with Plainsmen Partners LLC ("Plainsmen Partners") to acquire a 16.25% working interest in the Verde prospect, located in south-eastern Colorado.

The leases cover approximately 636 net acres in which an initial test well will be drilled into the Mississippian formation to a projected total depth of 5300 feet. The total estimated cost of the well is US$ 1,131,691, of which Nostra Terra's estimated portion is US $183,900. The net revenue interest of Nostra Terra's 16.25% working interest is 13.41%. Drilling of the well is expected to begin during 3Q, 2011.

Highlights of the Verde Field Development project include:
  • Shallow oil, with the potential of associated natural gas;
  • Regional structural mapping suggests subsurface closure;
  • Confirmation of subsurface high-structural block by 3D Seismic;
  • Multi-pay potential of Marmaton, Morrow/Keyes & Mississippian reservoirs;
  • Analogous to geological settings of several substantial oilfields.

3D seismic has been shot and interpreted that supports the subsurface mapping of a structural high being 25 to 50-feet up dip to historical production from the Lower Morrow Keyes. Should the drilling of the initial test well on the Verde prospect prove successful, two to three further development wells (PUDs) could be drilled, in which Nostra Terra also has the right to participate.

Lower Morrow/Keyes target

The Lower Morrow/Keyes Sand has produced, to date, from 4 wells down dip within the immediate area, which have an accumulated historic production of approximately 60,000 barrels of oil. The last two of these wells were plugged in 1991, due to the prevailing economics of the day, when producing approximately 3 to 5 barrels of oil per day. The proposed drill location is positioned to recover "attic" oil in the Keyes at a higher location on the structural feature.

Mississippian target

The Mississippian section has not been adequately tested on top of the structural feature, and is considered an exploration target.

One well on the south flank of the Verde structure had drill stem test ('DST') recovery of 190-feet of slightly oil cut mud; another well on the southeast flank had DST recovery of 70-feet of drilling mud with dead oil.

Marmaton target

The Marmaton, at 3700 feet, had an oil show on DST down dip. Interpretation of the 3D seismic shows 25 feet of Marmaton closure at the proposed location, and an amplitude anomaly indicating attractive reservoir thickness.

Matt Lofgran, Chief Executive Officer of Nostra Terra, commented, "Nostra Terra is delighted to have entered into this agreement with Plainsman Partners, which further diversifies the Company's operational relationships. The acquisition of a 16.25% working interest follows Nostra Terra's plans of continually upgrading our portfolio. We are also excited to be drilling in a location that is up dip from previous production. This could provide the participants in the Verde prospect with the opportunity to set up offset development wells."

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Cooper Plugs, Abandons Westall Well

- Cooper Plugs, Abandons Westall Well

Monday, June 20, 2011
Cooper Energy Ltd.

The Westall-1 exploration well has been drilled to a total depth of 1808 mRT and wireline logs have been run and interpreted.

During drilling there were no hydrocarbon shows observed in the primary objective (Namur Sandstone) or secondary objectives (Birkhead, Hutton and Poolowanna Formations) and the evaluation of the wireline logs has confirmed the absence of hydrocarbons in all objective horizons.

The Westall-1 well has been plugged and abandoned as dry hole, and the rig released on June 19, 2011.

The rig is currently moving to the Parsons-5 drill site as a development well.

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Skrugard Estimates Reaffirms Norwegian Continental Shelf Potential

- Skrugard Estimates Reaffirms Norwegian Continental Shelf Potential

Monday, June 20, 2011
Rigzone Staff
by Karen Boman

Statoil reported that its Skrugard discovery provides renewed optimism for the whole Barents Sea region and reaffirms its long-term prospective of the Norwegian Continental Shelf.

Statoil now estimates that the Skrugard discovery in the Barents Sea to contain approximately 250 million boe recoverable resources, with a significant upside potential in the license. The Skrugard well has significantly improved Statoil's understanding of other prospects in the area.

Finding new discoveries and enhancing production from existing fields will be critical for Norway's future. In 2010, the nation recorded the largest decline worldwide in oil production in 2010, according to the BP Statistical Review of World Energy June 2011.

BP reports that Norway had 3.3 million b/d of oil production in 2000; at the end of 2010, the country had 2.1 million b/d. Norway had estimated proved oil reserves of 11.4 thousand million barrels at the end of 2000; at the end of 2010, the country had 6.7 thousand million barrels.

Oil production in non-OPEC countries in 2010 grew by 860,000 b/d, or 1.8 percent, the largest increase since 2002, according to the review. Growth was led by China, which recorded its largest production increase ever, the U.S., and Russia, while continued declines in Norway and the UK partly offset growth elsewhere.

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GSF Labrador Gets New Look

- GSF Labrador Gets New Look

Monday, June 20, 2011
Scheldepoort B.V.

Scheldepoort B.V. has been awarded a contract to convert the GSF Labrador into an accommodation unit. The project will commence when the rig arrives in Vlissingen at the end of June and will take approximately 4 months. Among other things the main scope of work is the removal of the complete drilling package from the rig, such as the derrick, cantilever, cement and mud tanks, all drilling equipment and redundant cabling and piping.

Scheldepoort will build a new accommodation block weighing in at 400 tons which will be placed on the deck. The current accommodation facilities will be completely refurnished and new life saving equipment will be installed. The rig will be fitted with sponsons in order to comply with stability regulations. In addition, a complete survey as well as a painting program will be executed. After delivery the accommodation rig will go into service in the coastal waters of Denmark.

The GSF Labrador is an independent leg cantilever jackup rated to work in water depths up to 300'. The CFEM T-2005-C designed unit entered service in 1983. Transocean cold stacked the unit in August 2010.

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Fred. Olsen Production CEO to Resign

- Fred. Olsen Production CEO to Resign

Monday, June 20, 2011
Fred. Olsen Energy ASA

Fred Olsen Production informed that Mårten Lunde will resign as CEO of the Company on July 31, 2011.

The Board has decided to appoint CFO Jørn Røkaas as acting CEO as from August 1.

The Board regrets Lunde's decision to leave the company and will thank him for his contribution to the development of Fred. Olsen Production.

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Anadarko Pays $17 Million In Royalty Claims

- Anadarko Pays $17 Million In Royalty Claims

Jun 20, 2011

Anadarko Petroleum Corp. (NYSE:APC), along with Kerr-McGee Corp. and their affiliates will have to pay more than $17 million in royalties. According to the Justice Department, Anadarko Petroleum Corp. knowingly underpaid royalties owed on natural gas produced from federal and Indian lands.

This $17 million settlement resolves the claims that Anadarko and Kerr-McGee improperly reported processed gas as unprocessed gas in order to lower royalty payments. In recent activity, shares of Anadarko were down 1% to $69.78.

The oil and gas company has a potential upside of 33.8% based on a current price of $69.73 and an average consensus analyst price target of $93.3.

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Caterpillar Sales Up 52%

- Caterpillar Sales Up 52%

Jun 20, 2011

Caterpillar Inc. (NYSE:CAT) rose 1.3% Monday and was leading the Dow Jones Industrial Average after reporting strong sales to the U.S. Securities and Exchange Commission.

The company's three-month sales, ending in May, were up 52% compared to the same time period in 2010.

The increase has been driven by sales in Europe, Africa, and the Middle East. These sales are up 65% from a year ago. Sales rose 60% in Latin America. Stock changed at $97.24 at the latest, but has dropped 6.8% over the past month.

Caterpillar (NYSE:CAT) has a potential upside of 38.2% based on a current price of $97.36 and an average consensus analyst price target of $134.53.

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Ford Hybrids Will Use Toshiba Inverters

- Ford Hybrids Will Use Toshiba Inverters

Jun 20, 2011

Toshiba Corp. said Monday that it has been selected to supply automotive inverters to Ford Motor Co.'s (NYSE:F) hybrid electric cars and plug-in hybrids.

The U.S. automaker looks to start mass production next year on the new hybrids, and Toshiba has a previously signed contract to supply motors for the vehicles.

Toshiba will now supply both the inverters and motors as a package to Ford. The production of the new engines and inverters for Ford will have Toshiba building a new production line. The new plant in central Japan will be capable of manufacturing 150,000 inverters a year.

The new line will be ready to start supplying the inverters in April. As electric and hybrid vehicles become more widespread, Toshiba believes that power electronics, like motors, inverters, and rechargeable batteries, is a promising field.

Mitsubishi Motors Corp had chosen Toshiba's rechargeable battery for two electric vehicle models that will be coming out later this year.

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Gazprom Neft: Schlumberger to Drill Wells at Iraq Badra Field

- Gazprom Neft: Schlumberger to Drill Wells at Iraq Badra Field

Monday, June 20, 2011
Dow Jones Newswires
by Jacob Gronholt-Pedersen

A consortium led by Russian state oil producer Gazprom Neft has picked Schlumberger to drill the first wells at the Badra field in Iraq, the Russian company said Monday.

Schlumberger has been contracted to drill 11 wells over a three-year period, Gazprom Neft said.

The consortium--which also includes South Korea's Korea Gas Corp., or Kogas, Turkish Petroleum Corp., or TPAO, and Malaysia's Petronas--plans to start production from the Badra field in 2013.

Gazprom Neft estimates total costs for the Badra project at $2 billion and plans to drill 17 wells by 2017, when production should reach 170,000 barrels a day.

Gazprom Neft is the oil arm of Russian gas giant Gazprom.

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

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Salamander Begins Drilling at East Kalimantan

- Salamander Begins Drilling at East Kalimantan

Monday, June 20, 2011
Salamander Energy plc

Salamander announced the spud of the South Sebuku-2 ("SS-2") appraisal well, Bengara-1 PSC, East Kalimantan. The onshore South Sebuku gas discovery was made in 2009 and is thought to contain gross mean contingent resources of circa 80 Bcf. Salamander has a 41% interest in the Bengara-1 PSC.

SS-2 will target gas-bearing sandstones in the Tabul, Meliat and Naintupo formations and be drilled to approximately 1,370 metres total vertical depth sub-sea. It will be drilled using the HPS-1 land rig and is expected to take approximately 30 days to complete on a dry hole basis.

In the event of appraisal success, the Bengara-I partners will look to tie the South Sebuku discovery into the South Sembakung gas field, located within the neighboring Simengarris PSC. The South Sembakung development is currently on-going with a view to coming on-stream in 4Q 2012, in order to supply the Bunyu Island Methanol plant with 25 MMscfd.

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Statoil Successfully Drills Peregrino South Sidetracks

- Statoil Successfully Drills Peregrino South Sidetracks

Monday, June 20, 2011
Rigzone Staff
by Karen Boman

Statoil has reported successful discoveries in both side tracks on the Peregrino South well, immediately adjacent to the newly opened Peregrino field offshore Brazil. Both wells were drilled by Fred Olsen semisub Blackford Dolphin.

The estimates of recoverable volumes in Peregrino South are between 150 – 300 million boe. This discovery brings a phase two development of the Statoil operated Peregrino field considerably closer.

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OGX Concludes Drilling at Waikiki HZ Well

- OGX Concludes Drilling at Waikiki HZ Well

Monday, June 20, 2011

OGX announced the conclusion of drilling at the horizontal well OGX-9-44HP-RJS (Waikiki Horizontal) and through a drill-stem test (DST), the identification of excellent production conditions. This result confirms the Company's initial expectations regarding the Waikiki accumulation and offers further concrete evidence of the development potential for this area. The well is located in block BM-C-39 in the Campos Basin, and should be part of OGX's second production project in the basin.

"The information obtained through this well strengthens our understanding of this part of the Campos Basin and will allow us to accelerate the process for the declaration of commerciality for this area, ensuring the full implementation of our business plan," commented Paulo Mendonça, General Executive Officer and Exploration Officer for OGX.

The drilling of horizontal well OGX-9-44HP-RJS followed the same concept previously utilized by the Company and involved the drilling of a directional well (OGX-41D) to a depth of 2,340 meters in order to enable a horizontal entrance into the targeted reservoir. This approach resulted in a well with a 1,063 meter long horizontal extension into the carbonate reservoirs of the Albo-Cenomanian section of the Waikiki accumulation, which was originally discovered through the drilling of the 1-OGX-25-RJS well on December 8, 2010.

Following the conclusion of the drilling process, a drill-stem test was performed, which confirmed a production potential of 40,000 barrels of oil per day with an oil gravity of approximately 23° API. The tests performed in the Peró and Ingá accumulations, in block BM-C-40, adjacent to block BM-C-39, have shown oil of approximately 26° to 28° API, revealing a province of oil lighter than the one seen in the southern blocks. A complex process of selective acidification – a technology similar to the one used with great success in the Waimea accumulation at OGX-26HP – was used in eight well intervals, permitting better stimulation of the 1,063 meter horizontal well extension, thereby maximizing the oil flow.

The quality and homogeneity of the limestone reservoir seen in this region will enable very efficient drainage of producer wells limited to a flow rate of 15,000 to 20,000 barrels per day of oil, as announced in our business plan, optimizing oil recovery.

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Premier Snatches Stake in Wytch Farm

- Premier Snatches Stake in Wytch Farm

Monday, June 20, 2011
Premier Oil plc

Premier has agreed to acquire an interest of 17.715 percent in Wytch Farm (the "Wytch Farm Assets") for an initial cash consideration of $96 million. This follows a pre-emption notice received from BP on May 18, 2011. Premier intends to finance the acquisition from available cash resources.

The proposed transaction will increase Premier's interest in the Wytch Farm Assets from 12.38 percent to an aggregate 30.1 percent, adding approximately 12.5 mmboe of 2P and 2C reserves and resources as at 1 January 2011. The field is currently producing approximately 13,000 boepd (gross). Premier will support the transition of operatorship to Perenco UK Limited ("Perenco"), which will on completion of the transaction hold a 50.1 percent interest in the Wytch Farm Assets.

The acquisition is in line with Premier's stated strategy of acquiring high-quality assets in existing core areas and utilises its strong balance sheet. It provides an attractive opportunity to increase Premier's existing interests in a material package of producing oil assets with significant upside potential.


On May 17, 2011, BP announced that it had reached an agreement with Perenco to dispose of its approximately 68 percent interest in a portfolio of onshore and offshore assets in Dorset, including licenses PL089 and P534 and associated tax allowances relating to Wytch Farm for a consideration of up to $610 million. Under the terms of the operating agreements over the Wytch Farm Assets (the "JOAs"), Premier has certain pre-emption rights in the event of a sale to a third party.

Premier has notified BP that it wishes to acquire an interest of 17.715 percent in the Wytch Farm Assets. Premier has also entered into an agreement with Perenco setting out the basis on which the acquisition of the Wytch Farm Assets will be carried out as between Premier and Perenco, including the basis on which tax allowances will be allocated.

Principal terms of the arrangements

Under the arrangements, Premier will pay an initial consideration of $96 million to acquire a 17.715 percent interest in the Wytch Farm Assets. Further payments of up to approximately $14.4 million in aggregate will be payable if the Secretary of State for Energy and Climate Change approves a field development in respect of the Beacon discovery located within block 98/7a and/or in accordance with an agreed methodology relating to the average oil price between 2011 and 2013. Premier will pay a deposit of approximately $86.5 million.

The acquisition is conditional upon satisfaction of certain customary conditions, which include: (a) various third party consents being obtained; (b) the consent of the Secretary of State for Energy and Climate Change to the assignment of the licences and to the appointment of the new operator of the assets; and (c) the amendment of certain planning consents relating to the Wytch Farm Assets.

Subject to JOA partner approval, Perenco will operate the Wytch Farm Assets from completion of the acquisition.

Premier is being advised by Deutsche Bank AG.

Simon Lockett, Chief Executive, commented, "We are pleased to have this opportunity to increase our equity stake in one of our quality core producing assets to over 30 percent. In addition, it allows us to make efficient use of Premier's large existing pool of tax allowances. We look forward to working with Perenco to deliver maximum value from Wytch Farm."

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Statoil Awards Aker EPCI Contract for Asgard Field

- Statoil Awards Aker EPCI Contract for Asgard Field

Monday, June 20, 2011

Statoil has awarded Aker Solutions an engineering, procurement, construction and installation (EPCI) contract for subsea compression topside modifications on the Asgard field.

The Åsgard license has decided on a concept involving gas compressors installed on the seabed, so-called subsea gas compression. The purpose of the modification is to supply electricity to the Åsgard subsea compressor units, which will be installed in 2013.

Åsgard is the first installation worldwide to employ subsea gas processing involving gas compression and this represents an important technological step change in the development of fields in deep and demanding waters and creates exciting opportunities for the industry.

"This modification work is important for the development of gas compression on subsea installations. Aker Solutions has earlier been awarded the contract for developing the full scale subsea compression system. We look forward to working together with them in more aspects of the Åsgard development," said vice president of project procurement in Statoil, Vidar Martin Birkeland.

Scope of work includes building and installing an 800 tonne new module and integration work on the Åsgard A and B platforms in the North Sea. Delivery is set for 4Q 2014. Estimated contract value is approximately NOK 650 million.

"This is an important measure to extend the producing life of the Åsgard A platform, which will in turn increase recovery from the existing field. Subsea gas compression is a technology approach which can boost recovery rates and lifetimes for several gas fields," said Astrid Jørgenvåg, vice president for Åsgard production in Development and Production Norway in Statoil.

The contracts for pipelines, marine operations and other major procurement items in connection with the Åsgard development will be awarded in the course of the year.

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Ford Spends $1 Billion On Lincoln

- Ford Spends $1 Billion On Lincoln

Jun 20, 2011

Ford Motor Co. (NYSE:F) is spending $1 billion to revamp the struggling Lincoln brand. Ford is developing a new generation of vehicles that will be introduced over the next four years.

The Wall Street Journal said Monday that the automaker is working on seven new and upgraded vehicles. Ford also hopes to reposition the Lincoln brand as a cross between BMW and Lexus vehicles. Ford's president of the Americas, Mark Fields, stated two weeks ago that the effort is the last chance to re-establish Lincoln as a leading competitor in luxury cars.

Lincoln sold 85,838 cars and light trucks in 2010. Ford Executives said sales are likely to fall to 78,000 this year. With the seven new models, sales are expected to lift to 162,000 in 2015.

Ford Motor has a potential upside of 55.9% based on a current price of $12.77 and an average consensus analyst price target of $19.91.

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Repsol, Alliance Oil Team Up in Russian JV

- Repsol, Alliance Oil Team Up in Russian JV

Monday, June 20, 2011
Alliance Oil Co.

Repsol and Alliance Oil have signed a Memorandum of Understanding to form a joint venture that will serve as a growth platform for both companies in the Russian Federation, the world's largest oil and gas producer.

Alliance Oil will hold a 51% stake in the joint venture and contribute producing assets in the Volga-Urals Region while Repsol will own the remaining 49% and make an initial cash investment to finance future growth opportunities.

The agreement seeks to combine Alliance Oil's knowledge and privileged access to Russian exploration and production business opportunities with Repsol's know-how and technical capabilities to create a long-term exploration and production alliance.

In addition to the exploitation of the assets to be contributed by Alliance Oil, the agreement includes seeking opportunities for exploration and growth through producing assets in the Russian Federation.

"This cooperation with Alliance Oil enables Repsol to increase its producing assets and obtain privileged access to assets in the country, home to some of the largest hydrocarbon resources in the world, reinforcing this growth vector of our group," said Repsol Executive Chairman, Antonio Brufau.

"We are pleased to develop our partnership with Repsol and together create an additional important strategic upstream growth platform in Russia. I am convinced that the joint venture will create significant value for our shareholders and make a meaningful contribution to our reserves and production," said Eric Forss, Chairman of Alliance Oil Company ltd.

Repsol already owns a 3.47% stake in Alliance Oil resulting from the merger between Alliance Oil and West Siberian Resources in 2008. Repsol also owns a 74.9% stake in Eurotek-Yugra, which holds exploration and production licenses in the Karabashsky-1 and -2 blocks in the prolific West-Siberia basin.

The transaction is subject to negotiation of final contractual terms, due diligence of the assets to be contributed by Alliance Oil and the procurement of the relevant regulatory and corporate approvals, which is expected to be completed during 2011.

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Saipem Lands New Drilling Contracts for $600MM

- Saipem Lands New Drilling Contracts for $600MM

Monday, June 20, 2011
Saipem SpA

Saipem has been awarded new offshore and onshore drilling contracts worth $600 million.

Saipem has been awarded the contract by Eni to extend the charter of the Saipem 10000 drillship for the duration of 24 months, starting from August 2012.

Saipem 10000 is an ultra deepwater drillship, capable of operating in water depths up to 10,000 feet in full dynamic positioning.

Within offshore drilling activities, Saipem has been awarded a contract by Addax Petroleum extending the charter of the semisub Scarabeo 3 for a period of 6 months, starting from November 2011, for drilling activities in Nigerian waters. Scarabeo is a second generation semi-submersible drilling rig capable of operating in water depths of up to 1200 feet.

In addition, Saipem has signed a contract with NDC for the extension of the charter of the jack-up Perro Negro 2 for a period of 12 months, starting from the second quarter of 2011, for drilling activities in the waters of the United Arab Emirates. Perro Negro 2 is a jack-up rig capable of operating in water depths of up to 300 feet.

In onshore drilling, Saipem has signed new contracts for 15 rigs in Saudi Arabia, South America and Kazakhstan.

In Saudi Arabia, Saudi Aramco awarded Saipem the contract for the charter of 4 rigs, of which 3 for a period of 3 years each, starting from the fourth quarter of 2011, and 1 for a period of 1 years, starting from the third quarter of 2011.

In Peru and Colombia, Saipem has been awarded new contracts with several clients for the charter of a total of 9 rigs, for a varying period of 4 to 12 months, starting in different dates during 2011.

Finally, in Kazakhstan Saipem acquired two contracts for the charter of 2 rigs, for a period of 4 and 12 months respectively, starting from the fourth quarter of 2011.

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General Motors To Idle Two Plants For Two Weeks

- General Motors To Idle Two Plants For Two Weeks

Jun 20, 2011

General Motors (NYSE:GM) is expected to idle its Flint, Michigan assembly plant and its Fort Wayne, Indiana assembly plant for two weeks in July.The Flint plant will shut down for the weeks of July 4 and July 11 and the Indiana plant will also stop during those weeks as the automaker pares inventory of pickups and prepares the factories for output of 2012 model year vehicles.

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Statoil to Boost Output Levels to 2.5MM boepd in 2020

- Statoil to Boost Output Levels to 2.5MM boepd in 2020

Monday, June 20, 2011

Statoil presents its long term growth outlook. The company expects to raise production from around 1,9 million barrels in 2010 to above 2.5 million barrels of oil equivalents per day in 2020.

With premium positions on a revitalized Norwegian Continental Shelf (NCS) and a world class project portfolio, Statoil is positioned to deliver strong shareholder returns.

Celebrating its ten years anniversary as a publicly listed company, Statoil expands on its outlook for the coming years at the Capital Markets Day at the New York Stock Exchange.

"We have made significant strategic progress and have proven ability to deliver competitive returns since our IPO in 2001. With a premium project portfolio and strong commitment to leverage the company's competitive strengths, we will continue our journey," said Helge Lund, president and CEO of Statoil.

"The industry has changed considerably since we listed the company. Today we announce a strategy that reflects those changes and how we address them to the benefit of our shareholders," Lund added.

Statoil grew production at a compound annual growth rate (CAGR) of 3% in the last decade, excluding the Hydro merger. Production is expected to continue growing at the same rate over the next ten years, reaching a level of above 2.5 million barrels of oil equivalents (boe) per day in 2020.
  • A first wave of new projects will provide a step-up in production in 2012, delivering around 3% CAGR 2010-2012.
  • A second wave of projects will give further growth from 2014 and onwards, providing a 2-3% CAGR for the years 2012 – 2016 with production in 2013 expected to be around 2012 level.
  • A third wave of projects will provide a 3-4% CAGR from 2016 to 2020, taking production above 2.5 million boe per day in 2020.

This corresponds to an overall CAGR of around 3 % from 2010 till 2020, a growth rate backed by a strong resource base and a portfolio of world class projects. In 2020 the production from NCS is expected to be above 1.4 million boe per day, while the international portfolio is expected to produce above 1.1 million boe per day.

"The NCS has a significant potential and continues to yield long term, superior value creation opportunities in an investment friendly environment. The NCS remains a very attractive and globally competitive province for future oil and gas activities," said Helge Lund.

"To realize the project portfolio Statoil increased investments for 2011 to USD 16 billion, and expects the investments in 2012 to be at the same level."

"Towards 2020 our ambition is to establish material positions in 3 – 5 offshore business clusters outside the NCS and step up our shale gas and liquids production. These positions have significant resource potential and through exploration, business development and the application of our distinct technological capabilities we will lift value creation beyond today's levels," Lund said.

The offshore business clusters include Gulf of Mexico, Brazil, Angola, the Caspian region and Arctic outside the NCS.

Statoil today announces discoveries in both side tracks on the Peregrino South well, immediately adjacent to the newly opened Peregrino field offshore Brazil. The estimates of recoverable volumes in Peregrino South are between 150 – 300 million boe. This discovery brings a phase two development of the Statoil operated Peregrino field considerably closer.

Statoil also confirms an increase in expected volumes from the Skrugard oil discovery in the Barents Sea in Norway. The Skrugard volumes are now estimated at approximately 250 million boe recoverable resources, with a significant upside potential in the license. The Skrugard well has significantly improved Statoil's understanding of other prospects in the area.

"Our recent performance marks an early indication that our sharpened exploration strategy is working. This reaffirms that our competence and experience allow us to pursue an exploration strategy emphasizing early access at scale and priority to high impact opportunities," said Helge Lund.

Statoil expects to drill 20 – 25 high impact wells in the years 2011 – 2013.

Technology focused, upstream strategy

In recent years, Statoil has streamlined its business, reinforcing its position as a technology focused upstream company. While building a leading position on the NCS, Statoil has taken positions in a number of the world's most prolific provinces and established an attractive resource base. Since listing the company has increased its non-Norwegian production more than five fold. The core competencies and capabilities, including innovative development and application of technology coupled with the execution of complex offshore and onshore field development projects, positions Statoil as operator and partner globally.

Statoil's long term strategy focuses on six core building blocks. Firstly, Statoil will further revitalize and expand the NCS horizon with high value barrels. The company's position on the NCS remains a strong cash generator, with a set of premium projects that form the foundation for its growth outlook. Secondly, Statoil will utilize its superior gas position to deliver value in strong and growing markets. Thirdly, the company will leverage its leadership in complex offshore projects, and build material positions in 3-5 business clusters in addition to the NCS. Fourthly, it will continue to strengthen its resource base through leading exploration activities. Fifthly, Statoil will step up the company's shale gas and liquids activity, strengthening performance based on its early entry and core technology competencies. Finally, the company will further enhance shareholder return through active portfolio management.

In addition the focus on renewables concentrated around offshore wind continues. Statoil has taken important positions currently centered on the Sheringham Shoal and Dogger Bank projects in the UK.

A new industrial horizon in Norway

Statoil sees three long term business clusters on the NCS - the North Sea, the Norwegian Sea and the Barents Sea.

The Skrugard discovery provides renewed optimism for the whole Barents region. It also reaffirms the long term perspective of the NCS, where there is a set of opportunities based on current producing assets and access to new, promising areas. The delineation agreement between Norway and Russia, and statements from the Norwegian government on its intent to give access to new acreage, adds to a positive outlook for the Barents Sea.

The company will maximize the value of the North Sea through operational improvements, IOR measures and development of satellite fields. The development of new fields, such as Valemon, Gudrun and Dagny/Ermintrude represents a significant business opportunity. In the Norwegian Sea cluster, the company will fast track the projects in the pipeline, and is looking at further growth options, including opening of the resource rich areas of Nordland VI and VII.

Capturing value from gas

Natural gas is emerging as the most plentiful, cost efficient and cleanest of fossil fuels. There is a particularly strong case for an increased use of gas in power generation. Gas is cost competitive with coal, nuclear and renewables, which allows for even higher gas prices. Growing demand for gas in Asia will also impact prices in Europe through export of LNG. Statoil is well positioned to take part in this expected growth in the gas markets.

The positive outlook for gas, and the opportunities for enhanced value creation in the expanding markets worldwide, covers conventional as well as unconventional resources. Going forward our industrial roadmap for North American will focus on building the Marcellus and Eagle Ford positions, taking on operatorship and growing into new areas.

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