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Oil and Gas Energy News Update

Monday, July 11, 2011

Oil & Gas Post - All News Report for Monday, July 11, 2011

Monday, July 11, 2011

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Commodity Corner: WTI, Brent Settle Lower

- Commodity Corner: WTI, Brent Settle Lower

Monday, July 11, 2011
Rigzone Staff
by Matthew V. Veazey

Oil futures ended the first day of the week lower as the U.S. Dollar gained strength against other major currencies. A stronger greenback makes oil a less attractive buy for investors holding other currencies.

The price of light sweet crude oil on the New York Mercantile Exchange settled at $95.15 a barrel, marking a $1.15 slide from the previous trading day. The Brent futures price lost $1.09 to end the day at $117.24 a barrel. The Dollar Index, which gauges the price of the greenback against other major currencies, increased 1.1 percent Monday.

Speculation that debt woes in Europe will escalate provided support for the dollar Monday as the focus shifts to Italy, where some believe that a crisis akin to what Greece recently experienced could erupt. Italian government bond yields rose late last week, signaling reduced confidence in Italy's ability to avert default. The WTI futures price peaked at $96.75 and bottomed out at $94.14 Monday while the intraday range for Brent fluctuated from $115.27 to $118.29.

Buoyed by predictions of warmer-than-normal temperatures throughout the Midwest and East Coast during the next two weeks, natural gas futures gained 8.5 cents Monday. The August contract price settled at $4.29 per thousand cubic feet after trading within a range from $4.18 to $4.34.

Gasoline for August delivery lost two cents to end the day at $3.07 per gallon. It fluctuated from $3.03 to $3.10.

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Vanoil Picks BGP for Kenya Seismic Shoot

- Vanoil Picks BGP for Kenya Seismic Shoot

Monday, July 11, 2011
BGP Inc.

Vanoil has executed an agreement with the Chinese seismic firm Bureau of Geophysical Prospecting (BGP) for a survey over acreage in Kenya. BGP will commence the 2011 seismic data acquisition programs on Vanoil's 100% owned Block 3B in Kenya.

Under the terms of the contract BGP will acquire around 373 line-km, 320-fold seismic data. Completion of the data acquisition phase is expected by the end of September.

This is the second seismic program Vanoil has contracted BGP for. From further evaluation and understanding of the 2010 seismic program, Vanoil has decided to move forward with a second survey. Vanoil said that the data acquired in 2010 is currently being evaluated by Sproule Internationa and results are expected within the next few weeks.

Dal S. Brynelsen, president and CEO of Vanoil, commented, "We are very pleased to have executed a second agreement with BGP and look forward to engaging such a high quality organization to implement our seismic plans for Block 3B."

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Niko Makes Oil Find at Qara Dagh Block

- Niko Makes Oil Find at Qara Dagh Block

Monday, July 11, 2011
Vast Exploration Inc.

Vast Exploration provided the following update on the Niko-operated Qara Dagh Block in the Kurdistan Region of Iraq.

Drilling of the Qara Dagh well has reached a total depth of 3,908 meters, has been log evaluated and, as previously reported, the well has been cased to 3,558 meters with a 7 inch casing string. The following intervals have been evaluated where the results to date are summarized below.

Open Hole Interval - Shiranish Formation

This interval from 3,558 meters to 3,908 meters was acidized and flowed light oil confirming an active hydrocarbon column. The interval achieved maximum production rate of 550 barrels of oil per day and 800 mscf/d of gas, although these rates were not sustained for the entire duration of the test. The oil produced is 48 degrees API with no H2S.

From the data interpretation, and the significant spike in observed well bore pressures before the drilling was stopped, it is believed that the well has potentially entered into the first 10 meters of the next reservoir, the Cretacous aged Kometan formation, which is one of the primary target zones previously identified. It is important to note that the Kometan formation is regionally known to be a naturally fractured reservoir which has produced significant quantities of oil.

Mr. Ahmed Said, President & CEO, commented, "We are pleased with the recovery of light oil from this section. Although the reservoir quality appears to be naturally tight, the establishment of an oil column is significant. The possibility of drilling deeper to further evaluate production potential of the Kometan formation is currently under consideration."

Shiranish / Tanjero Interval

Certain sections in this cased interval was perforated and then acidized. The well had intermittent flow of light oil. The maximum rates achieved were 400 barrels per day of 42 to 47 API oil and 520 mscf/d of gas confirming a second active hydrocarbon system with no H2S.

Current Status and Forward Plan

The operator, Niko Resources, is currently in the process of testing the Aalijii Formation which consists of thick sequence of turbidities sand and argillaceous shales. While drilling this section in July 2010, it was reported that an increase in fluorescence, gas readings and free light oil in the mud system was detected.

Further, there are ongoing discussions between the consortium group to possibly deepen the well up to an additional 250 meters, subsequent to the completion of the current testing program. The primary purpose would be to drill deeper to further evaluate the production potential of the proliferous Kometan formation, the zone immediately below the Shiranish formation. Confirmation of the possibility and technical capability of re-entering the well and drilling deeper is expected over the next few weeks.

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Gulfport Adds Acreage in Utica Play

- Gulfport Adds Acreage in Utica Play

Monday, July 11, 2011
Gulfport Energy Corp.

Gulfport reported an increased acreage position in the Utica Shale of Eastern Ohio and resource assessment and provided an update on the TEW-E exploratory well in Thailand.

Utica Shale Leasing Update

Gulfport continues to actively expand its acreage position in the Utica Shale of Eastern Ohio. To date, Gulfport has acquired leasehold interests in approximately 35,000 gross (17,500 net) acres. Gulfport currently has commitments which could bring its position in the Utica Shale to approximately 110,000 gross (55,000 net) leasehold acres if it acquired all such committed acreage. Gulfport is also currently evaluating additional acquisitions in the Utica Shale that could potentially increase its commitments to approximately 130,000 gross (65,000 net) leasehold acres in the coming months. Gulfport will serve as operator of its acreage in the Utica Shale and currently plans to bring a rig into the play in early 2012 to begin drilling its acreage.

TEW-E Exploratory Well Update

Tatex Thailand III, a company in which Gulfport owns a 17.9% interest, concluded drilling operations on the TEW-E well in March 2011, the second exploratory well drilled by Tatex III on an approximate one-million acre concession block in Northeastern Thailand. The well was drilled to a total depth of 15,026 feet and logged over 5,000 feet of apparent possible gas saturated column. TEW-E experienced gas shows and carried a flare measuring up to 25 feet after drilling below the intermediate casing point of 9,695 feet.

As previously announced, Tatex III recently conducted a coil tubing operation meant to remove compacted debris that formed a blockage in the open-hole portion of the TEW-E wellbore. Due to the limited pumping capacity of the coil tubing unit, the operation was unsuccessful in removing the blockage. Consequently, Tatex III has scheduled a drilling rig to return to the TEW-E by September 2011 and commence operations to remove the debris and test the well.

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Samson O&G Projects 'Active' Drilling Program in 2H11

- Samson O&G Projects 'Active' Drilling Program in 2H11

Monday, July 11, 2011
Samson O&G Ltd.

Samson O&G has recently acquired a substantial project which expands its position in the Bakken Formation. This Roosevelt Project, along with the appraisal of the Niobrara Formation in Wyoming, and three conventional plays in the Hawk Springs project area, means that Samson will have an active drilling schedule in the second half of 2011. The combined drilling program, and the estimated cost and timing of the wells, is set out in the following table. Samson will fund this program from its existing cash resources.

As a result, Samson currently projects that it will exit the end of the calendar year with an estimated cash balance of US $32 million. This estimated cash balance takes into account existing operating cash flows, projected general and administrative expenditures, land acquisition costs, current forecasts of commodity prices and the capital expenditures noted below. However, the forecast includes no cash flow from any of these new wells during the year.

Samson's drilling program is expected to deliver appraisal results in three key areas:
  • The Hawk Springs Niobrara will be the first well to be drilled and fracture stimulated in the Niobrara 'B' zone.
  • Multiple conventional targets in the Hawk Springs project are planned, where considerable potential is observed from the 3-D data at both the Permian and Pennsylvanian stratigraphic levels.
  • The Roosevelt Project Bakken wells will be the first ever drilling in this area and will therefore will be key tests for this project.

Defender US 33 #2-29H – Hawk Springs Project - Wyoming

This well will be the first appraisal of the Niobrara 'B' zone and is the first well to be drilled and funded 100% by Halliburton under their farmin agreement. It will be fracture stimulated following the completion of a 4,300' horizontal.

Spirit of America US 34 #1-29 - Hawk Springs Project-Wyoming

This well will be drilled as an 11,000' vertical test down to the Precambrian basement to test multiple conventional targets in the Permian and Pennsylvanian sections.

State 24-63 #10-1H – Hawk Springs Project-Wyoming

This well will be drilled as an 11,447' measured depth horizontal well in the Codell Sandstone (which lies directly beneath the Niobrara Formation). Upon completion of the well in the Codell sandstone, the fracture stimulation job is expected to fracture the Niobrara Formation.

Australia II 12 KA 6– Roosevelt Project – Fort Peck Reservation, Montana

This well will be the first appraisal well in the Roosevelt Project and will be drilled as a 15,500' measured depth horizontal well in the middle member of the Bakken Formation.

Constellation US 20 State #1-36H – Hawk Springs Project-Wyoming

This well will be Samson's second Niobrara well and is located outside the Halliburton/Mountain Energy Joint Venture area. It will be fracture stimulated following the completion of a 4200' horizontal.

State 24-63 #14-1H – Hawk Springs Project- Wyoming

This well will be drilled as an 11,272' measured depth horizontal well in the Codell sandstone. Upon completion of the well in the Codell sandstone, the fracture stimulation job is expected to fracture the Niobrara Formation.

Diamondback #1 – Onshore Gulf Coast Basin, Texas

This 8,900' well will test an amplitude anomaly in the Oligocene Frio Formation on the flank of the Big Hill salt dome in Jefferson County, Texas.

Australia IV 12 KA– Roosevelt Project – Fort Peck Reservation, Montana

This well will be the second commitment well in the Roosevelt Project and will be drilled as a 15,200’ measured depth horizontal well in the middle member of the Bakken Formation.

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Rex Sees 9% Increase in 2Q Production Guidance

- Rex Sees 9% Increase in 2Q Production Guidance

Monday, July 11, 2011
Rex Energy Corp.

Rex announced second quarter production results. The company also adjusted operating expense guidance for the full year.
Second Quarter 2011 Unaudited Production

Rex Energy exceeded its previously announced second quarter guidance by 9% with an average production rate of 35.2 MMcfe/d. This is an 87% increase over second quarter 2010 and a 28% increase over first quarter 2011. Oil and natural gas liquids accounted for 41% of the total equivalent net production for the quarter. Natural gas production increased 184% over second quarter 2010 and 48% over first quarter 2011. Natural gas accounted for 59% of total equivalent net production for the quarter.
Full Year Lease Operating and G&A Expense Guidance

Rex Energy is decreasing its previously given lease operating expense (LOE) guidance from $32.0 million -- $37.0 million down to $31.0 million - $34.0 million. The decrease in LOE guidance is the result of lower operating cost assumptions.

Rex Energy is increasing its 2011 general and administrative (G&A) guidance range from $20.0 million - $21.0 million to $24.0 million - $25.0 million. The increase in G&A primarily results from one-time legal fees and costs related to the previously announced settlement in Westmoreland County and costs associated with the departure of the company's former CEO.

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Magnum Hunter Names VP of Finance

- Magnum Hunter Names VP of Finance

Monday, July 11, 2011
Magnum Hunter Resources Corp.

Magnum Hunter announced the appointment of Mr. Mark H. Wolf as Vice President of Finance for the Company, effective today. Mr. Wolf replaces Victor Ponce de Leon in this position. Mr. Wolf will report to the Company's Executive Vice President and Chief Financial Officer, Ronald D. Ormand.

Mr. Wolf has over 24 years of experience providing commercial banking, corporate finance and treasury related services to the various segments comprising the energy industry.
Management Comments

Mr. Gary C. Evans, Chairman of the Board and Chief Executive Officer of Magnum Hunter Resources commented, "It is with great pleasure today I am able to announce Mark Wolf's appointment as our new Vice President of Finance and Treasurer for Magnum Hunter. I have personally known Mark for approximately 15 years, and during that period, he has either worked as one of our lead commercial bankers or worked directly with me at the "old" Magnum Hunter. During this time, he has consistently demonstrated a vast knowledge of banking and corporate finance related matters, coupled with a strong and very professional work ethic. With the significant growth profile Magnum Hunter has achieved over the last couple of years, it was time to bring on a seasoned financial professional like Mark Wolf to assist senior management in our continued future growth plans."

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Could Energy Resources Cause Russia to Spark a Naval War in the Caspian?

- Could Energy Resources Cause Russia to Spark a Naval War in the Caspian?

Monday, July 11, 201
by John Daly

In the past three decades the Islamic Republic of Iran has developed a well-earned sense of paranoia. First, in September 1980 Saddam Hussein invaded Iran in what he thought would be a quick military victory, but which quickly turned into an eight-year bloody slugfest, leaving an estimated 500,000-1,000,000 dead before the guns fell silent.

More recently Iran has been subjected to increasingly militant rhetoric from both Tel Aviv and Washington over its civilian nuclear energy program, with thinly veiled threats of possible military action if Tehran does not abandon its efforts, even though they are completely complaint under the terms of the Nuclear Non-Proliferation Treaty (NPT), which Iran has signed.

Now however, potential is brewing for Iran from an unexpected direction - the north.

Russia is sharply increasing its military presence in the Caspian. Russian Federation Navy Commander in Chief Admiral Vladimir Vysotskii has stated that Russia's Caspian Sea Flotilla will receive up to 16 new ships over the next decade, while some aviation units will be transferred to the Navy from the Russian military's southern operational-strategic command. What has really got to have the mullahs in Tehran fingering their worry beads however is Vysotskii's promise to provide the Caspian Sea Flotilla with Bastion shore-based missile systems armed with Yakhont hypersonic missiles, which are designed to destroy surface targets at distances of up to 200 miles.

Russia's Caspian Sea Flotilla flagship, the Tatarstan frigate, is already the most powerful vessel on the Caspian, armed with Uran missiles with a range of 100 miles. Later this year the Tatarstan will be joined by a sister ship, the Dagestan.

The Caspian Sea Flotilla is also taking delivery of the first in a series of new Project 21631 Buyan-M-class rocket-artillery ships, along with three amphibious assault ships.

The Iranian Navy has a total of approximately one hundred, mostly small combat and supports ships on the Caspian. They include three Iranian-made midget submarines (of a North Korean type that can transport a group of combat divers and have a range of 1,200 miles), an outdated Salman-class minesweeper (American-made), and patrol cutters.

Russian analysts believe that Iran however has the ability to increase its Caspian naval forces by 50 percent in short order by relocating craft from the Persian Gulf.

As for the other Caspian littoral states - Azerbaijan, Turkmenistan and Kazakhstan, their naval forces are negligible, to be polite.

So, why is Russia beefing up its naval presence?

The most likely reason is the one that has bedeviled the region for the last two decades - a final treaty delineating the ownership of the Caspian's offshore waters and seabed has yet to be signed. While Moscow and Tehran might agree about keeping the U.S. locked out of exploiting the Caspian's energy resources, worth an eye-watering $3 trillion, they remain at loggerheads over the issue of dividing the Caspian, with Russia insisting that each nation receive offshore waters in proportion to its coastline, while Iran insists that all five nations receive an equitable twenty percent apiece. Under the Russian definition Iran's share would be 11-13 percent.

Complicating the issue is that international law has yet to definitively designate whether the Caspian is an inland "sea" or a lake, an adjudication which has enormous implications for both the applicability of the 1982 U.N. Convention on the Law of the Sea and negotiation of the boundary demarcation regime affecting the littoral states' rights to significant undersea oil deposits.

Ironically, Iran has itself played the "gunboat diplomacy" card in the past. On 23 July 2001, an Iranian warship and two jets forced two Azeri research vessels, the Geofyzik -3 and the Alif Hajiyev, operating in what Azerbaijan calls the Alov oilfield on behalf of BP-Amoco, to leave the field where they were conducting surveys, which lies 60 miles north of Iranian waters. BP-Amoco immediately announced it would cease exploration activities and withdrew the research vessels. Azerbaijan denounced the move as a violation of its sovereignty and on 31 July charged that an Iranian reconnaissance aircraft had violated Azeri airspace and come within 90 miles of Baku. Ramping up the pressure, Iranian former Pasdaran Commander Mohsen Reza'i pointedly reminded Azerbaijan that the whole country had once been Iranian territory and that Iran might decide to take it back, even as the Iranian press speculated that the whole thing was a provocation cooked up by Azerbaijan who was scheming to bring about American intervention in the Caspian.

In the unlikely event that hawks in Washington ever considered, then or now, to fly the Stars and Stripes on the Caspian while taking a few potshots at the evil Russkies or the even more perfidious Axis of Evil mullahs, then geography seems to have thrown a spanner in the works, as the Caspian's sole exit point, the Volga-Don canal, is controlled by... Moscow.

What seems to be happening is that Russia has decided that gunboat diplomacy has its uses, and an upping of its naval presence in the Caspian might finally persuade Iran's obstinate mullahcracy that it's time to divvy up the Caspian pie according to Moscow's formula.

And, after all, 11-13 percent of $3 trillion is no small chunk of change, even to an OPEC member.

(John Daly is an energy and geopolitical specialist with The full article is available here.)

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Merkel Tours Africa in Search of Energy Supplies

- Merkel Tours Africa in Search of Energy Supplies

Monday, July 11, 2011
Deutsche Presse-Agentur (dpa)
by Jean-Baptiste Piggin and Kristina Dunz, dpa

Chancellor Angela Merkel meets Kenyan leaders on Tuesday at the start of a three-day swing through Africa where business opportunities, especially purchases of gas and oil, are high on the agenda.

In her weekly video message to the public, Merkel explained, "In Kenya, I'll be finding out how renewable energy is coming into wider use... In Angola, we want to establish an energy and raw materials partnership."

Germany has already had such an energy partnership since a 2007 G8 summit with Nigeria, the third and last nation on her schedule, but the accord has not performed well, Merkel admitted.

"My visit is intended to give it a jolt so the partnership can develop better," she said.

A party of business leaders are travelling with her and are expected to sign deals that have been negotiated in recent months.

Merkel was due to fly out of Berlin Monday afternoon, arriving in Kenya late at night. Her return is scheduled for the small hours of Friday. It is Merkel's third visit to Africa as chancellor: the first was in 2007.

Germany unveiled a new policy on Africa last month, shifting the stress away from selfless development aid and putting more emphasis on the German interest in obtaining minerals and oil.

Berlin has been dismayed by the rush of China, Brazil and other rising powers to sew up resources deals in Africa.

Aides said the corruption that is endemic in the three nations Merkel will be visiting makes it difficult to grow investment at a time when German companies face strict scrutiny to ensure they never pay bribes.

Germany was a colonial power in Africa until the First World War ended in 1918, when it lost control of the territories that are today known as Namibia, Tanzania, Rwanda, Burundi, Cameroon and Togo.

Its interest in Africa revived in the post-colonial period, with many Germans eager to use their wealth to end world poverty, but disillusionment soon set in amid reports of waste and corruption.

Under the new policy Berlin will be adopting a tougher approach to Africa, requiring future development aid spending to achieve "value for money." It will demand better access to African markets for German companies.

The paper said Germany will stress its own values in Africa, including good governance and democracy.

Merkel criticized the three nations she is visiting this week, saying, "All three countries still have considerable problems establishing a truly stable structure of government."

Berlin officials say 600 German companies operate in Africa and employ 146,000 people there.

The centre-right government's new stance towards Africa has been criticized by aid groups.

They charge that the emphasis on investment and mineral rights means Germany will try to cut deals with tycoons and governments, and possibly leave out of account the majority of ordinary Africans who live in rural areas.

They also argue that Germany should be less aggressive towards the import controls that often protect African industries.

The chancellor's visit to Kenya will also include a visit to the offices of the UN Environment Programme (UNEP) in Nairobi.

In the Angolan capital Luanda she will meet non-government figures, described as "representatives of civil society," to show her support for freedom of speech and of the press.

Copyright 2011 dpa Deutsche Presse-Agentur GmbH

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Sevan Marine Briefs Financial Position

- Sevan Marine Briefs Financial Position

Monday, July 11, 2011
Sevan Marine ASA

The Board of Directors of Sevan Marine continues to hold constructive dialogue with bondholders and other relevant parties regarding a global restructuring of the Company's balance sheet. In particular, the Board is in dialogue with the advisors to Norsk Tillitsmann ASA (the bond trustee for the Company's bond issues) and an informal group of the Company's largest bondholders. The dialogue with the bondholder group regarding a global restructuring currently assumes that the restructuring would involve:
  • a full equitisation of the Company's existing unsecured bonds;
  • a partial but reasonably material equitisation of each of the series of the Company's existing secured bonds;
  • a corresponding substantial dilution of the Company's existing shareholders;
  • a capital raise for the Company, likely in the form of new equity, currently estimated to be at least USD 200 million, to be funded primarily by bondholders, but with a right for existing shareholders to participate;
  • extension of maturities for the Company's existing secured bonds; and
  • a revision of interest rates and amortization schedules of the Company's secured bonds to correspond with the Company's cash flow profile and debt service capacity.

The above assumptions, and the detailed terms and conditions of a global restructuring proposal, remain to be finally determined and negotiated, and will, inter alia, be affected by the contents of a revised business plan currently being prepared by the Company, and the final cost estimate and schedule developments for the FPSO Sevan Voyageur upgrade project. Any global restructuring proposal will be subject to obtaining necessary agreements with, and consents from, the Company's bondholders, shareholders and other key stakeholders and counterparties to the Company and its subsidiaries.

The Company continues to be under serious short term liquidity pressure, and the Board is currently in discussions regarding bridge financing of at least USD 35 million. Further, the Company intends to request deferrals of interest payments due under the relevant bond loans up to at least end of September 2011, and bondholders who have been approached on a confidential basis have expressed their support in principle to such proposal. The Board is optimistic that its short-term liquidity issues will be resolved and that a long-term solution to the financial challenges facing the Company can be obtained by the end of September 2011.

As for the FPSO Sevan Voyageur upgrade project, further detailed project reviews and assessments have identified additional costs to be incurred by the Company, resulting in a current cost estimate for the project in the range of USD 160-170 million. The increase from the previously announced cost estimate of USD 135 million is mainly a result of time related costs due to additional delays, certain increased procurement costs for equipment, yard services and additional contingencies. First oil is currently expected to take place during the second quarter of 2012. The review is ongoing in close cooperation with the charterer.

The Company's financial situation remains challenging. In connection with the ongoing processes, renewed scrutiny and assessment of booked assets has been required. The Board has initiated a process to impairment test the Company's asset base, which is expected to result in substantial write-downs in the closing of half-year accounts of 2011.

Notwithstanding the ongoing dialogue with lenders, FPSO Sevan Voyageur stakeholders and others, no assurance can be given that a viable global solution can be found in a timely manner, failing which the Board will be required to file for bankruptcy.

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General Motors to Sell Diesel Version of Chevy Cruze

- General Motors to Sell Diesel Version of Chevy Cruze

Jul 11, 2011

The Associated Press announced that General Motors (NYSE:GM) plans to sell a diesel version of the Chevy Cruze in the United States.

After selling about 25,000 Cruzes in June, the car model past recurrent leaders such as the Toyota Camry and Honda Accord to become the best-selling car in the U.S.

The diesel Cruze won't hit showrooms until at least 2013, according to one of the people, both of who asked not to be identified because the company hasn't made a formal announcement.

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GOM Employment Could Increase if Admin. Allows -Study

- GOM Employment Could Increase if Admin. Allows -Study

Monday, July 11, 2011
American Petroleum Institute

Almost 190,000 new jobs could be created in 2013 if permitting in the Gulf of Mexico for offshore development returned to levels before the Obama administration's moratorium, a study by Quest Offshore Resources, Inc., says. The study, "United States Gulf of Mexico Oil and Natural Gas Industry Economic Impact Analysis," also projects a 71 percent increase in Gulf development spending to $41.4 billion and a 70 percent increase in economic activity related to Gulf development to $44.5 billion.

"The slow pace of Gulf development since the accident has cost jobs, revenue and energy production," said API President and CEO Jack Gerard. "The study shows what could be accomplished on jobs if project approvals and permits could get back to a normal pace. We've done the necessary work raising the bar on safety. We cannot continue to delay developing energy and hiring people in the Gulf. The disappointing unemployment numbers from the government last week make this more important than ever," Gerard added.

Quest Offshore conducted the study for API and the National Ocean Industries Association. Quest based its forecasts on actual project development data and historical benchmarks of spending for specific equipment and services.

"Total employment related to offshore Gulf of Mexico oil and natural gas industry operations could reach 430,000 jobs in 2013 if the permitting slowdown is reversed," Gerard said. "As large as the jobs numbers are, however, they are just a fraction of all the jobs our industry could create with more forward-looking development policies in all federal onshore and offshore areas. And along with the increased jobs and energy production could come hundreds of billions of dollars of desperately needed additional revenue to the government. Policymakers now debating tax increases on the industry should understand that producing at home more of the oil and natural gas our nation will need is a far better way to help fix our economy and pay down our debt," Gerard said.

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O&G Industry Leads Ok. State to Better Revenues

- O&G Industry Leads Ok. State to Better Revenues

Monday, July 11, 2011
Tulsa World, Okla.

Oklahoma Treasurer Ken Miller's smile was as wide as a billboard advertisement for toothpaste. He had a lot to beam about as he announced last month's revenue collections. Gross revenue collections for June were slightly more than $1 billion -- $134.5 million higher than a year ago.

That's 15.5 percent more than the same month last year, largely thanks to the oil and natural gas industry.

Gross production taxes on oil and gas generated $102.53 million, a whopping increase of 28.4 percent from June 2010. Current collections, however, reflect drilling activity from a few months ago when oil topped $100 a barrel. Prices since then have dropped, and Miller anticipates that gross production collections will go down in coming months.

But Miller isn't thinking about a half-empty barrel.

"Now entering the third year of the cyclical expansion, Oklahoma's double-digit revenue growth last month shows our state's economy is clearly regaining its strength while the national economy continues its rather anemic growth," Miller said.

Here's the evidence that Oklahoma's on a roll: Every major revenue category showed growth.

Miller, also an economist, recently pointed to the state's declining unemployment rate as another sign the Oklahoma economy is strongly on the rebound. Net income tax collections, which includes personal and corporate income taxes, brought in $373.98 million, an increase of 20.4 percent from the same time last year. Personal income tax collections were $283.86 million or a 14.5 percent increase; corporate collections were $90.12 million, a 44.1 percent increase. Sales tax collections, including remittances on behalf of cities and counties, totaled $322.69 million, or a 6.5 percent increase from June 2010. The latter is good news for struggling cities that rely almost entirely on sales-tax revenues to pay the bills.

The increased revenues unfortunately come too late to do much about the state budget that reflected deep cuts, particularly to public schools. Oklahomans can only hope that next year's budget can make up for lost ground.

Oklahoma doesn't always have a lot to brag about when it comes to robust economic figures. But the state is not a bottom-of-the-barreler this time around. Oklahoma is doing better than most of the rest of country when it comes to revenue collections.

The oil and gas industry should take a bow.

Copyright (c) 2011, Tulsa World, Okla.

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Bill Would Clear Path for Oil Project Approvals

- Bill Would Clear Path for Oil Project Approvals

Monday, July 11, 2011
The Bakersfield Californian
by John Cox

A bill advancing through the state Legislature could help Kern County's oil industry by providing a clearer path of approval for certain drilling-related activities.

Senate Bill 682, sponsored by Sen. Michael Rubio, D-Bakersfield, proposes to assign the state Division of Oil, Gas and Geothermal Resources direct responsibility for overseeing underground injection of produced gases, a common if controversial method of disposing of oil field byproducts such as hydrogen sulfide, or sour gas.

DOGGR, as the division is known, has regulated such projects for more than a decade. But since new leadership was installed at the division two years ago, a backlog of underground injection applications has grown to about 200, frustrating oil companies and local politicians who say the delays are stalling investment and potential job growth.

"We want someone to process those applications -- either deny or approve them so we can put people to work across the San Joaquin Valley and, particularly, Kern County," Rubio said in a phone interview.

DOGGR has taken no official position on the bill and therefore declined to comment. But earlier this year the division acknowledged a slowdown in project approvals, a situation it blamed on inadequate staffing and the complexity of engineering and geological issues involved. It has also pointed to a lack of clear legal authority to regulate what it considers an environmentally risky practice that has the potential to contaminate sources of drinking water.

On Thursday, despite opposition by the Sierra Club, the bill cleared the Assembly Environmental Safety & Toxic Materials Committee by a vote of 8-0. It is scheduled for consideration soon by the Assembly Natural Resources Committee.

Representatives of the Sierra Club's California lobbying arm could not be reached for comment Friday.

The head of the California Independent Petroleum Association expressed hope that the bill, if signed into law, would help expedite oil companies' injection applications, some of them as much as two years old.

"This allows (DOGGR) to consider those old permits," CIPA CEO Rock Zierman said.

"We really appreciate Sen. Rubio's leadership on this," he added.

Rubio said the bill represents the "first step" in a longer process of addressing DOGGR's concerns about underground injection projects. Related issues still to be worked out, he said, regard how California oil producers handle toxic waste, water and other environmental issues.

Copyright (c) 2011, The Bakersfield Californian

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Iran: Will Spend $18B on O&G Fields in South through 2015

- Iran: Will Spend $18B on O&G Fields in South through 2015

Monday, July 11, 2011
Dow Jones Newswires
by Benoit Faucon

Iran will invest $18 billion in the development of its oil and gas fields in the hydrocarbon-rich south of the country in a 5-year development plan ending 2015, its deputy oil minister in charge of planning was quoted as saying Sunday.

The remarks comes as Iran is moving forward with projects to develop its oil and gas capacity despite international sanctions.

Speaking to Iran's oil ministry website Shana, Mohsen Khojastemehr said the plan included a $3 billion investment planned for the current Iranian year, which ends March 2012.

"Many plans are being implemented to accelerate development of shared oil and gas fields while the ministry aims to increase oil production in the oil-rich region of the south to 3 million barrels a day," the official told Shana.

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

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Pacific Drilling Secures LOA for Drillship

- Pacific Drilling Secures LOA for Drillship

Monday, July 11, 2011
Pacific Drilling S.A.

Pacific Drilling announced that a letter of Award has been converted to a definitive contract for the Pacific Scirocco following the necessary approvals from authorities. The minimum duration of the contract is for an initial one-year term, with contract commencement expected during the third quarter of 2011. The contract provides for options, to be exercised at the client's discretion, which could result in up to four additional years of contract term with an escalating dayrate dependent upon the option timing and term elected. Estimated maximum contract revenues related to the initial one-year term are expected to be approximately $200 million, excluding client requested modifications and miscellaneous adjustments.

The Pacific Scirocco is capable of operating in water depths of up to 12,000 feet and drilling wells 40,000 feet deep.

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Ford Increases Availability of Fuel-Efficient Tires Across Lineup

- Ford Increases Availability of Fuel-Efficient Tires Across Lineup

Jul 11, 2011

New fuel efficient, low resistance tires developed by Ford (NYSE:F) are expected to advance fuel economy by up to 2 mpg and are likely to be featured in Ford's up and coming C-Max Energi, C-Max Hybrid and the Focus Electric Cars.

David Rohweder, Ford's Global Chief Engineer for tire and wheel engineering said, "Tire technology, pressures and wear can make a big difference to a vehicle's fuel economy, so the company is working closely with leading tire companies to optimize performance with low-rolling-resistance tires." Ford Motor (NYSE:F) has a potential upside of 46.1% based on a current price of $13.5 and an average consensus analyst price target of $19.73.

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Elixir to Farm-Out Stake at N. Sea Tiger Prospect

- Elixir to Farm-Out Stake at N. Sea Tiger Prospect

Monday, July 11, 2011
Elixir Petroleum Ltd.

Elixir announced the conditional farm-out of an interest in Block 211/12b located in the Northern Sector of the UK North Sea.


Elixir is currently 100% interest holder and operator of the Block 211/12b. Through the use of 3D seismic data analysis and Fluid Inclusion Stratigraphy studies, a significant Upper Jurassic aged oil prospect named Tiger has been identified in the Block.

The Tiger prospect is situated close to prolific fields including the BP operated, 900 million barrel Magnus Field, the Shell operated Penguin cluster, and the more recently developed Don West field. Each of these fields could provide existing local infrastructure for the export of hydrocarbons in the event of exploration success at Tiger.

The Tiger prospect is a direct analogue to the Magnus Field, which is located 5 kilometers to the West. All of the play components, being source, migration, trap, seal and reservoir have been demonstrated to work at Magnus. The most likely, unrisked recoverable resource for Tiger is estimated to be approximately 90 million barrels.

Farmout Terms

Elixir has executed a farmout agreement with a privately owned oil and gas explorer to acquire an 85% interest in the license and operatorship in consideration for carrying Elixir's 15% interest on a partially promoted basis through the drilling of a firm exploration well, and a contingent appraisal well.

The Exploration Carry also includes all costs associated with logging and flow testing, and should it be necessary, plugging and abandonment. The repayment of the non-promoted part of the Exploration Carry is recoverable by the Farminee from Elixir's share of oil production receipts from Tiger. The total cost of the firm and contingent wells and, in the event of a discovery, the expected testing program, is estimated to be approximately £30 million.

On completion of the farmout, the Farminee has also undertaken to pay to Elixir a substantial cash contribution towards back costs.

The Farminee is obliged to complete the drilling of the firm exploration well by no later than November 30, 2012. In the event this deadline is not achieved, Elixir will be entitled to the reassignment of the Farminee's interest in the licence and operatorship.

Optional Development Carry

Under the terms of the Farmout Agreement, Elixir has also been granted an option by the Farminee to be fully carried through the development phase of the project. If a commercially developable discovery is made, Elixir will be able to exercise the option to be
carried and will not be required to contribute towards the costs of the development of the field through to the commencement of production.

The cost to Elixir of exercising this option will involve the repayment of the costs carried, the reimbursement of the Farminee's financing costs and a premium calculated as a percentage of the carried costs. At Elixir's election, the Development Carry can either be repaid directly at the time of first oil, or can be recovered by the Farminee from Elixir's share of oil production receipts (in which instance an increased premium will be levied by the Farminee). The size of the development carry given a most likely development outcome would be in the order of £50 million.

Farminee and Conditions Precedent

The Farminee is a private company owned and run by a group of experienced oil and gas professionals and financiers who have previously owned and operated oil and gas assets. The Farminee is a new entrant to the UK North Sea, and therefore is required to obtain approval as a licensee and as an operator from the UK Secretary of State for Energy and Climate Change (DECC). The receipt of the approval of DECC to the assignment of the licence interest and the transfer of the operatorship to the Farminee are the only two conditions precedent to completion of the farmout.

An initial meeting between the Farminee and DECC has been held. The Farminee will be required to demonstrate to DECC technical and financial capability in order to secure DECC's approval. DECC guidelines indicate that the approval process is likely to take approximately three months to complete. Assuming DECC approvals are received, it is anticipated the Tiger exploration well will be spudded in the first half of 2012.


We are delighted to have secured a farmout of Tiger on compelling terms which will see Elixir carried on two wells, and in the event of a discovery, with the option of a full development carry through to first oil. This transaction will be the catalyst for near term drilling activity at Tiger, one of the largest as yet undrilled exploration targets in the UK North Sea, and provides Elixir with exposure to the possibility of a significant oil development project on a low risk, essentially fully carried basis.

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Shell Awards BMT MIS Contract for Mars B Development

- Shell Awards BMT MIS Contract for Mars B Development

Monday, July 11, 2011
BMT Marine Services Inc.

Shell Offshore has awarded a contract to BMT Scientific Marine Services to provide a Marine Instrumentation System (MIS) to the Olympus TLP in the Mars B Development Project in the Gulf of Mexico.

The MIS is a comprehensive computer-based system for acquiring, displaying and recording vessel, marine and environmental data for operators. It is comprised of interdependent subsystems and software applications, including Marine Instrumentation, a Tendon Instrumentation System (TIS), Ballast Monitoring, Topside Tank Level Monitoring, Human Machine Interface (HMI) displays and Historical Archive Software (HAS).

BMT brings valuable experience to this project, having successfully provided a variety of Marine Monitoring Systems on over 47 floating platforms, including prior work for Shell.

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Songa Offshore Semisub Selected for Statoil's Troll Field

- Songa Offshore Semisub Selected for Statoil's Troll Field

Monday, July 11, 2011
Songa Offshore SE

Songa Offshore announced that its 100% owned subsidiary, Songa Rig AS, has received a Letter Of Award (LOA) from Statoil for the use of Songa Trym for a 3 years firm plus 2x1 year option Drilling Contract on the Norwegian Continental Shelf. The LOA is conditional to mutual agreement of contract terms between the parties which is anticipated to be concluded within 30 days. The firm part of the contract has an aggregated revenue value of approximately USD 462 million inclusive a rig upgrade element and an associated yard stay prior to contract commencement.

The yard stay and contract with Statoil will commence in direct continuation of the rig's current commitment and subsequent demobilization from Statoil Troll license mid-2012.

Songa Offshore will undertake full rig management and operations responsibility of the Songa Trym from current Odfjell Drilling Management at time of transition between contracts.

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Gold Oil Seeks Farm-In Candidates Offshore Peru

- Gold Oil Seeks Farm-In Candidates Offshore Peru

Monday, July 11, 2011
Gold Oil plc

Gold Oil provided the following update on its operations on Block Z34, offshore Peru.

On July 4, 2011 Gold Oil signed a definitive agreement with BGP Geoexplorer PTE Ltd for the acquisition of a marine 3D seismic survey over Block Z34 offshore Peru. The survey has been extended and is now planned to be in excess of 800 sq km over both the southern and northern part of the license area. This survey comprises the first phase of 3D seismic over the license. Depending on the results of the seismic interpretation further seismic may be required, particularly in the northern area, to evaluate completely this large and highly prospective block.

The vessel, the BGP Pioneer, departed the port of Paita, north west Peru on 6th July having met all customs clearances and commenced operations on July 9, 2011. Given the expanded scope of the survey, data acquisition is now expected to take approximately 50 days. Following the acquisition of the survey, processing and initial interpretation is expected to take a further four months. Preliminary results and the marketing of the asset to potential farm in candidates is likely, therefore, to commence towards the end of the year.

Richard Mew, Chief Executive, commented, "It is encouraging that we have been able to secure a high quality contractor at favorable rates which has enabled the Company to expand the scope of the survey to include part of the northern area. The extended survey is designed to enhance the attractiveness of the block to potential farm in candidates and will also accelerate the full evaluation and commercialization of this very promising and prospective acreage."

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Kea Disappointed by AU Drilling Results

- Kea Disappointed by AU Drilling Results

Monday, July 11, 2011
Kea Petroleum plc

Kea Petroleum expects to terminate the initial flow test program on Wingrove-2 in the coming week.

Several intervals of thin sands within the Upper Miocene Urenui Formation at depths of 1100 to 1300 m were simultaneously tested, and flowed oil and gas at low rates, together with considerable amounts of water It is considered that economically viable oil flow rates will not be achieved in this well.

The Mount Messenger Sands, typically several hundred meters deeper than the Urenui Sands, were not flow tested, as earlier log analysis had indicated they are water bearing in Wingrove-2. However, these remain as prime exploration targets in this area, as they are typically thicker and better reservoir quality. They will be the target of further drilling later this year.

Surat Basin, Australia

The Hoadleys-1 exploration well has been terminated at a depth of 2149m, after intersecting the target Precipice Sands, which were water bearing with no oil shows. The well is now being cased and suspended, in order that consideration can be given to drilling the deeper South Cabawin target with a heavier duty rig at a future date. A rig is presently being assessed for the drilling of Nangwarry-1 in the Otway Basin in South Australia, and may be suitable for South Cabawin also.

South Cabawin is defined on 3D seismic as a similar structure to the Cabawin Field, 20 km north along trend where the discovery well averaged 120 barrels of oil and one million cubic feet of gas per day in a 22 day flow test. The present rig is not considered capable of drilling to beyond 3000m to test the Permian coal measures in which the Cabawin discovery was made. Another rig is presently being assessed for this drilling operation.

David Bennet, Chief Executive, said, "It is disappointing that the secondary target Urenui Sands in Wingrove-2 have not produced oil at economically viable rates in this test. The primary target of Mt Messenger sands are proving to be very commercial oil producers elsewhere in this same basin; and our forward drilling program will be targeting Mt Messenger sands on our other prospects.

"Hoadleys was a relatively inexpensive exploration well with all the incumbent risks associated therein. The deeper South Cabawin target remains an attractive target yet to be drilled."

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Drilling Commenced at Pacific Rubiales' Colombia Well

- Drilling Commenced at Pacific Rubiales' Colombia Well

Monday, July 11, 2011
Petroamerica Oil Corp.

Petroamerica announced the July 3, 2011 spud of the Torodoi 1-X exploration well, targeting Tertiary and Cretaceous reservoir formations in the Arauca Block situated in the Llanos Basin of Colombia. The operator on the block, Pacific Rubiales, who holds a 95% participating interest in the block, will drill the well using the Petrex 22 drilling rig and is expecting to reach a total depth of 7,198 feet (measured depth) by early August, 2011. Shortly after completion of this well, it is expected that a second well on the Arauca Block will be spudded using the same rig.

Petroamerica, pursuant to a Farm-in Agreement with Pacific Rubiales, holds a 5% participating interest in the Arauca Block, but will be fully carried by Pacific Rubiales for the costs of both this and the second well.

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Orca to Boost Gas Production in Tanzania

- Orca to Boost Gas Production in Tanzania

Monday, July 11, 2011
Orca Exploration Group Inc.

Orca has signed an agreement with Songas Limited to increase the capacity of the Songo Songo gas field processing plant from 90 MMcfd to a potential of 110 MMcfd. This will increase the overall infrastructure capacity that processes and transports the gas to Dar es Salaam to 105 MMcfd.

With this higher system capacity the Company expects that Orca's Additional Gas sales will increase to an average of approximately 45 – 50 MMcfd from July 1, 2011 (compared with an average of 37 MMcfd in 2010) with a beneficial impact on cash flow.

This increase in Additional Gas production capacity is available for urgently needed power generation in Tanzania. The April and May long rains failed to replenish the reservoirs that the country depends on to generate up to 550 MWs of hydro power. As a consequence Tanzania's installed hydro power capacity is now dramatically reduced and an increase in reservoir levels is not expected until the advent of the short rains near the end of the year.

To address this shortfall, TANESCO recently re-commissioned a 112 MW gas fired power plant in Dar es Salaam (owned and operated by Symbion Power LLC). This will increase the total generation potentially consuming Additional Gas to 301 MWs (or approximately 66 MMcfd at peak load). Further additions to Tanzania's generating capacity are scheduled for next year. TANESCO has contracted Jacobsen Elektro to install a new 105 MW plant (maximum demand of 22 MMCfd) in Dar es Salaam and this is forecast to be operational by the end of 1Q 2012. In addition, Songas is making good progress with its Expansion Project to further increase Songo Songo infrastructure capacity to 140 MMcfd by 1 2013.

These increases in production capacity in Tanzania come at a time of growth and strengthening of Orca's management team and Board of Directors. Orca is now well positioned to fully utilize the breadth of experience and the proven skills of a team committed to take the Company to the next level.

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Max Petroleum Begins Testing Kazakh Appraisal

- Max Petroleum Begins Testing Kazakh Appraisal

Monday, July 11, 2011
Max Petroleum plc

Max Petroleum has begun testing of the ZMA-ET1 appraisal well in the Zhana Makat Field, successfully flowing 47 degree API oil at an equivalent rate of approximately 1,200 barrels of oil per day ("bopd") from perforations in a Triassic reservoir from depths of 1,282 to 1,288 meters during a five hour flow-back period. The well, located in Kazakhstan, will be connected to temporary production facilities later this week and brought onto production. The Company expects the well to produce at a stabilized rate between 500 and 1,000 bopd.

Completion and testing of the ZMA-ET2 well is expected to begin shortly, with production beginning in the next few weeks. Both wells will initially be placed on test production pending confirmation of reserves necessary for future inclusion in Zhana Makat's full field development program.

Michael B. Young, President and CFO, commented, "This is the best test rate we have seen in any well we have drilled to date and further confirmation of the potential of the Triassic reservoirs on Blocks A&E. We will continue to increase production this month as we bring on the ZMA-ET2 and BOR-3 wells, followed by the ASK-1 Jurassic well in August. We are also looking forward to drilling other Triassic prospects in our portfolio this quarter, including Sagiz West, Zhalgyz South, and Asanketken."

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Vanguard to Purchase Remaining Encore Assets for $998MM

- Vanguard to Purchase Remaining Encore Assets for $998MM

Monday, July 11, 2011
Encore Energy Partners LP

Vanguard Natural Resources and Encore Energy announced the execution of a definitive agreement that would result in a merger whereby Encore would become a wholly-owned subsidiary of Vanguard's operating company, Vanguard Natural Gas, LLC, through a unit-for-unit exchange. Under the terms of the definitive agreement, Encore's public unitholders would receive 0.75 Vanguard common units in exchange for each Encore common unit they own at closing, representing a premium of approximately 4.4% based on the closing prices of Encore common units and Vanguard common units on March 24, 2011, the last trading day before Vanguard announced its initial proposal to acquire all of the common units of Encore owned by the public and an approximately 51% premium over the December 31, 2010 purchase price paid to Denbury for 45.6% of the Encore common units. The transaction would result in approximately 18.4 million additional common units being issued by Vanguard. The deal is valued at an approx. $998 million. The terms of the definitive agreement were unanimously approved by the members of the Encore Conflicts Committee, who negotiated the terms on behalf of Encore and is comprised solely of independent directors. In addition, Jefferies & Company, Inc., has issued a fairness opinion to the Encore Conflicts Committee stating that they believe the exchange ratio is fair, from a financial point of view, to the unaffiliated unitholders of Encore. The members of the Vanguard Conflicts Committee, which is also comprised solely of independent directors, negotiated the terms on behalf of Vanguard and also voted unanimously in favor of the merger. In addition, RBC Capital Markets has issued a fairness opinion to the Vanguard Conflicts Committee stating that they believe the exchange ratio is fair, from a financial point of view, to Vanguard.

"We are pleased to announce our agreement to combine these two companies in a transaction that would simplify our commercial activities and organizational structure as well as lower our overall cost of capital," said Scott W. Smith, president and chief executive officer of Vanguard.

The merger is expected to provide benefits to current Vanguard unitholders by, among other things:
  • streamlining Vanguard's organizational structure, which enhances transparency for investors, while also reducing operating complexity and the company's overall cost of capital;
  • creating an enterprise of significantly increased size and scale, improved overall operating reach and greater cash flow stability;
  • realizing meaningful cost synergies primarily from eliminating public company expenses associated with Encore;
  • expanding geographic reach and diversification from an operational and employee perspective, which should improve Vanguard's ability to compete more aggressively for future acquisitions; and
  • maintaining Vanguard's strong credit profile and liquidity position by completing the merger on the basis of an all-equity, unit-for-unit exchange.

"We fully support the combination of these two successful companies," said John Jackson, chairman of the Encore Conflicts Committee. "We believe Encore's public unitholders will benefit from Vanguard's future growth potential."

The merger is expected to benefit Encore's public unitholders by, among other things:
  • providing Encore unitholders with a premium of approximately 4.4% through the exchange of 0.75 Vanguard common units for each Encore common unit based on the closing prices of Encore and Vanguard common units on March 24, 2011, the last trading day before Vanguard announced its initial proposal to acquire all of the common units of Encore owned by the public and an approximately 51% premium over the December 31, 2010 purchase price Vanguard paid to Denbury Resources, Inc. for 45.6% of the Encore common units;
  • eliminating the administrative services agreement, which currently requires Encore to pay an annual fee of approximately $6.5 million to its general partner in connection with providing certain administrative services;
  • providing Encore unitholders with ownership in a much larger and more diverse entity with an enterprise value of approximately $2.0 billion that has a stronger balance sheet and is capable of pursuing significantly larger and more meaningful growth opportunities; and
  • providing Encore unitholders with an opportunity to benefit from potential future unit price appreciation and increased cash distributions through ownership of Vanguard common units.

The completion of the merger is subject to approval by a majority of the outstanding Encore common units. Vanguard's operating company, Vanguard Natural Gas, LLC, already owns Encore's general partner and approximately 45.6% of the Encore outstanding common units and has also executed the definitive agreement between Vanguard and Encore. The completion of the merger is also subject to the approval of the issuance of additional Vanguard common units in connection with the merger by the affirmative vote of a majority of the votes cast by Vanguard unitholders. Completion of the merger, assuming the requisite unitholder votes are obtained and subject to other customary terms and conditions, is expected to occur during the fourth quarter of 2011. Distributions will continue to be paid by each company pursuant to their own cash distribution policies while the merger is pending.

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Gulfsands Discovers Oil at Syrian Wells

- Gulfsands Discovers Oil at Syrian Wells

Monday, July 11, 2011
Gulfsands Petroleum plc

Gulfsands Petroleum provided an update on its operations in Syria.

Khurbet East 19 and Khurbet East 19 Sidetrack

Rig-based operations have recently concluded on the Khurbet East 19 ("KHE-19") and Khurbet East 19 Sidetrack ("KHE-19 ST1") utilizing the Crosco E-401 rig. The KHE-19 ST1 well has been completed as a potential future oil production well and awaits a flow testing trial which will be conducted shortly via a rig-less operation. The productive section of this well is located in a horizontal side-track drilled in a south-southeasterly direction from the original KHE-19 vertical hole, which is interpreted to have encountered the primary reservoir section outside of the limits of the Khurbet East Field.

The KHE-19 vertical well encountered the Massive Formation at 1967 meters Measured Depth ("m MD") or 1561 meters True Vertical Depth sub-sea ("m TVD ss"). The well encountered a gross vertical oil column of approximately 4 meters, however formation pressure data obtained via wireline sampling in the KHE-19 well-bore indicates that the Massive section in this well is not in communication with the Khurbet East field. A flow test was not undertaken on the vertical section and the well was plugged back in order to proceed with a sidetrack contingency operation that was included in the pre-drill plan as part of the field delineation strategy.

The KHE-19 ST1 encountered the Cretaceous Massive Formation of the Khurbet East field at 2206 m MD (1545m TVD ss). A complete loss of drilling fluids was experienced soon after drilling into the Massive formation, indicating that the excellent quality vuggy reservoir of the producing Khurbet East Massive Formation had been encountered. A gross horizontal reservoir section of 67 meters was drilled before reaching a total depth of 2273m MD (1545m TVD ss). The well has since been completed with a 3.5 inch production string. Production flow testing trials will commence shortly, the results of which will be the subject of a future news release.

The Crosco-401 rig will now move to the Yousefieh East exploration well location.

Yousefieh 7

The Yousefieh 7 ("Yous-7") vertical well located on the northern flank of the Yousefieh field was spudded on the May 19, 2011 utilizing the Crosco E-501 rig. The Yous-7 well location was selected in order to gain information on reservoir extent and quality in the undrilled northern flank of the Yousefieh field.

The Yous-7 well encountered the Massive Formation at 1972 m MD (1554 m TVD ss), 18 meters deep to prognosis. The well encountered a gross reservoir pay interval of approximately 34 meters and a net oil column thickness of approximately 27 meters with average porosity of 17%. Pressure data obtained via wireline sampling in the Yous-7 well-bore indicates that the oil bearing Massive section in this well is in good pressure communication with the main producing area of the Yousefieh field with reservoir pressure showing depletion of between 30-40 psi, which is in line with expectations.

A production liner was cemented over the reservoir section of the well and following perforation of a 15 meter oil bearing reservoir section and an acid wash operation, a flow test was conducted. The well flowed at an average rate of 528 barrels of oil per day ("bopd") of 22 degree API oil on a 2" choke at an average wellhead pressure of 25 psi utilizing nitrogen lift over a period of 7 hours. It is likely that this well will require the installation of artificial lift facilities in order to produce at the planned rate of 500 bopd on a continuous basis, and discussions are underway with vendors for procurement of the equipment. Further perforation and acid stimulation operations are also planned for this well in order to improve well performance.

The results of the KHE-19 and Yous-7 wells will be considered, along with the results of the other development and exploration wells in the 2011 drilling program, in the year end re-assessment of the Khurbet East and Yousefieh field's recoverable reserves.

Yousefieh East Exploration Well (Yous-8)

The Yousefieh East exploration well ("Yous-8") will target an untested structure in Cretaceous age carbonates located approximately 3 kilometers to the east of the Yousefieh field discovery well with estimated mean unrisked oil resources of approximately 14 million barrels. The Yousefieh East well is located within the Yousefieh field Development License Area and, in the success case, could be quickly tied back and produced into the existing Yousefieh field production facilities.

Safa Exploration Well

The Crosco E-501 rig has been moved to the Safa exploration well location. This well will target

a prospect with fault bound dip closure potentially containing a Cretaceous age reservoir on trend with the Khurbet East Field. The pre-drill Mean unrisked resource estimate for the Safa area is calculated to be 27 million barrels of oil. The well will test the potential for a wider distribution of the high quality Massive karst reservoir encountered in Khurbet East.

Gulfsands drilling operations in Syria Block 26, using the Crosco E-401 and E-501 drilling rigs, are continuing as planned and have continued without interruption during recent months. Drilling operations on the Yousefieh East and Safa exploration prospects will be the subject of a future news release.

Block 26 Oil Production

Oil production and revenue receipts from the Khurbet East and Yousefieh fields continue without interruption. Both fields demonstrate continued strong performance with limited reservoir pressure loss and minimal production of formation water. Daily average oil production from both fields combined during June 2011 was in excess of 21,000 bopd. Cumulative gross oil production from the Yousefieh field now exceeds 1 million barrels and cumulative production from the Khurbet East field exceeds 15 million barrels.

Gulfsands expects that combined production from these fields will be increased to approximately 24,000 bopd by the end of 2011 with the drilling and tie-in of additional development and delineation wells and via minor upgrades and de-bottle necking of existing surface facilities.

Ric Malcolm, Gulfsands CEO, said, "We are pleased to have encountered high quality, oil bearing reservoirs in both the Yous-7 and KHE-19st wells and expect that these wells will soon add incremental volumes to the production capacity of the Khurbet East and Yousefieh fields.

We also look forward to the resumption of our exploration drilling program with the drilling of the Safa and Yousefieh East prospects. If successful, these prospects are ideal candidates for rapid development due to their proximity to existing Gulfsands operated infrastructure."

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