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Oil and Gas Energy News Update

Wednesday, July 27, 2011

Oil & Gas Post - All News Report for Wednesday, July 27, 2011

Wednesday, July 27, 2011

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Commodity Corner: Oil Falls on EIA Stocks Report

- Commodity Corner: Oil Falls on EIA Stocks Report

Wednesday, July 27, 2011
Rigzone Staff
by Matthew V. Veazey

U.S. commercial crude oil inventories as reported by the Energy Information Administration reversed course last week, catching analysts off-guard and contributing to lower oil prices Wednesday.

Light sweet crude oil for September delivery lost 36 cents to settle at $97.40 a gallon after the EIA reported that oil stocks rose 0.65 percent last week to 354 million barrels. The 2.3 million-barrel week-on-week build contrasted with analysts' expectations; interestingly, analysts surveyed by Platts had predicted a draw of 2.3 million barrels for the period.

Prior to Wednesday's report, EIA had reported seven straight weeks of falling inventories. From May 27 to July 15, oil stocks reportedly declined by 5.9 percent. The Brent benchmark lost 85 cents to end the day at $117.43 a barrel.

The WTI traded within a range from $97.28 to $99.50 while the Brent fluctuated from $117.26 to $118.34.

The newly formed Tropical Storm Don is expected to affect operations somewhat at some Western Gulf of Mexico oil and gas installations as it tracks toward the Texas coastline. However, the National Hurricane Center on Wednesday afternoon was not expecting it to intensify into a hurricane. Front-month natural gas ended the day unchanged at $4.37 per thousand cubic feet.

August natural gas futures peaked at $4.41 and bottomed out at $4.34 during the midweek session.

Gasoline lost a penny to settle at $3.14 a gallon Wednesday. The intraday range for the August contract fluctuated from $3.135 to $3.18.

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US House Panel to Draft Plan to Split Federal Oil Money with States

- US House Panel to Draft Plan to Split Federal Oil Money with States

Wednesday, July 27, 2011
Dow Jones Newswires
by Tennille Tracy

The House Natural Resources Committee plans to draft legislation that redirects a portion of federal oil royalties to coastal states, ramping up debate on an issue that has also intensified in the Senate.

Rep. Doc Hastings (R., Wash.), chairman of the Natural Resources Committee, said at a hearing Wednesday that he was "actively" reviewing proposals to share federal oil revenue with the states. He said his committee would take up legislation to address the issue after a summer recess.

"When it is all boiled down, a revenue-sharing proposal is, and must be, about fairness," Hastings said.

Hastings didn't say how much royalty revenue he wanted to steer toward the states. A proposal in the Senate directs 37.5% of federal oil royalties to the states. With the federal government reporting more than $5 billion in offshore royalty revenue in 2010, such a move would be a big win for coastal state governments.

Debate over revenue-sharing proposals has intensified in recent weeks as lawmakers look for ways to reduce spending and raise revenues as part of plans to increase the debt ceiling.

Opponents of revenue-sharing plans, often Democrats and lawmakers from non-coastal states, say it would be unwise for the federal government to give up billions of dollars of oil royalties at a time when it's struggling to claw its way out of debt.

Rep. Ed Markey (D., Mass.), the highest-ranking Democrat on the Natural Resources Committee, said Wednesday that a revenue-sharing plan would be a "big mistake" and that it's "just something [the federal government] can't afford."

"How can we even begin to discuss this subject right now?" Markey said.

Under current arrangements, states collect royalties from oil produced within the first three miles of a coastline. The federal government then collects most of the royalties on oil produced in the next three miles and lays claim to all of the royalties beyond that.

Supports of revenue sharing, often Republicans and coastal state representatives, say state officials will be incentivized to support more offshore oil production if they can collect a greater share of the royalties.

A battle over revenue sharing in the Senate has suspended action on a long-awaited bill that would strengthen safety standards for offshore oil drilling. At a committee-level markup last week, lawmakers blocked a vote on the bill after Sens. Mary Landrieu (D., La.) and Lisa Murkowski (R., Alaska) looked set to fail in their attempts to attach a revenue-sharing proposal to it.

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

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Cobalt to Abandon Angola Well, Updates GOM Ops

- Cobalt to Abandon Angola Well, Updates GOM Ops

Wednesday, July 27, 2011
Cobalt International Energy Inc.

Cobalt announced a net loss of $19.5 million, or $0.05 per basic and diluted share for the second quarter of 2011, compared to a net loss of $41.8 million, or $0.12 per basic and diluted share, for the second quarter of 2010.

Cash expenditures (excluding changes in working capital) for the quarter ended June 30, 2011 were approximately $22 million and about $33 million year-to-date. For the full year 2011, Cobalt expects to spend $325 to 400 million which includes the cash expenditures associated with Block 20 offshore Angola. The timing of expenditures in the second half depends primarily on when the Block 20 Production Sharing Agreement is signed and when Cobalt recommences Gulf of Mexico drilling activities.

Cash, cash equivalents and investments at the end of the second quarter were approximately $1.64 billion. This includes about $339 million designated for future operations held in escrow and collateralizing letters of credit, but excludes approximately $196 million in the TOTAL drilling fund for the Gulf of Mexico. Cobalt expects it is well-funded to execute on its planned exploration and appraisal program, including expenditures relating to Block 20 offshore Angola, through the end of 2013.

Operational Update

On April 15, 2011, Cobalt completed a registered underwritten offering of 35,650,000 shares of its common stock at a public offering price of $14.00 per share, resulting in proceeds of approximately $499 million before expenses.

On May 3, 2011, Cobalt announced that the national oil company of Angola, Sociedade Nacional de Combust•veis de Angola-Empresa Publica (Sonangol), had approved Cobalt's drilling plans for its two initial pre-salt exploratory wells, Bicuar #1 and Cameia #1, on Block 21 offshore Angola. Subsequent to the end of the second quarter, on July 19, 2011, Cobalt commenced its initial two well pre-salt exploratory drilling program on Block 21 offshore Angola by spudding the surface hole of the Bicuar #1 exploratory well. On July 20, 2011, after setting the 36" conductor casing and drilling approximately 210 meters of surface hole, Cobalt encountered an over pressured water sand resulting in a water flow with limited quantities of natural gas. No safety or environmental issues resulted from the incident. Cobalt is focused now on its abandonment procedures for the Bicuar #1 exploratory well surface location. Given the unique nature of encountering pressured water sands in Angolan waters, Cobalt has agreed with Sonangol that Cobalt will take its learnings from this incident and reexamine its shallow hazard analysis of proposed Cameia and Bicuar drilling locations before moving the drilling rig to Cameia or a different surface location on Bicuar.

With respect to Cobalt's U.S. Gulf of Mexico drilling program, Cobalt believes it has satisfied all of the remaining requirements of the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) related to its North Platte #1 and Ligurian #2 applications for permit to drill (APD's), except for the submission of the U.S. Coast Guard Certificate of Compliance for the Ensco 8503 drilling rig, which cannot be obtained until the rig returns to the U.S. Gulf of Mexico. Cobalt does not anticipate any issues related to obtaining this routine U.S. Coast Guard certification and it expects that after its submission the BOEMRE will promptly issue the APD's for both the North Platte #1 and Ligurian #2 exploratory wells. Cobalt expects that the Ensco 8503 drilling rig will be returned to Cobalt in the U.S. Gulf of Mexico late in the third quarter of 2011. Upon its return, the submission of the U.S. Coast Guard Certificate of Compliance, and the issuance of the APD's for the North Platte #1 and Ligurian #2 exploratory wells, Cobalt plans to drill the Ligurian #2 exploratory well. After drilling the Ligurian #2 exploratory well, Cobalt plans to move the rig to the North Platte #1 well location to drill that prospect. Cobalt anticipates that each of the Ligurian #2 and North Platte #1 exploratory wells will take approximately six months to drill.

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Chevron Cites Dividend

- Chevron Cites Dividend

Wednesday, July 27, 2011
Chevron Corp.

Chevron declared a quarterly dividend of seventy-eight cents ($0.78) per share, payable September 12, 2011, to holders of common stock as shown by the transfer records of the Corporation at the close of business on August 19, 2011.

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Expro Opens New Operating Base in Canada

- Expro Opens New Operating Base in Canada

Wednesday, July 27, 2011
Expro International Group

Expro announced the establishment of a new, purpose-built operating base in Newfoundland, Canada.

Ground was broken on the new base in April 2011 and construction is expected to be completed in October of this year. Upon completion of construction, Expro plans to open the facility for business in November.

The new operating base will support the provision of well testing, subsea and DHV services for offshore Newfoundland. These service and product offerings will be enhanced going forward as new opportunities present themselves in the ongoing exploration and development of the offshore fields in the area.

"Expro Canada has experienced strong growth in the past few years, and the Eastern Canadian offshore is a critical part of this success as well as its future growth," said Carl Cooper, Frontier Division Manager for North America.

"Enabling this expected growth requires a purpose-built home from which our team can continue to provide world class equipment and services to the expanding industry."

When complete, the base will accommodate a team of 30 people, the majority of whom are local employees.

The new Expro facility will be located in the new Paradise Industrial Park in Paradise, Newfoundland. It will consist of a four-bay workshop with 8400 sq. ft. of warehouse area, an office annex with 6000 ft. of office space on two levels, and an acre of paved and fenced yard.

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Marathon Oil Declares Dividend

- Marathon Oil Declares Dividend

Wednesday, July 27, 2011
Marathon Oil Corp.

Marathon Oil has declared a dividend of 15 cents per share on Marathon Oil Corporation common stock. The dividend is payable on Sept. 12, 2011, to stockholders of record on Aug. 17, 2011.

On June 30, Marathon Oil completed the spin-off of its downstream business as a completely independent company, Marathon Petroleum Corporation (NYSE: MPC). As previously announced, the previous MRO dividend of $0.25 per share per quarter will initially be paid as follows: 60 percent, or $0.15 per quarter, from MRO and 40 percent, or $0.20 per quarter, from MPC. This is reflective of the number of shares outstanding for each company, with approximately twice as many MRO shares outstanding as MPC shares outstanding. Future dividends will be subject to quarterly review by the respective boards.

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Danos & Curole Bags Multi-Million Dollar Contract for Chevron Liberia

- Danos & Curole Bags Multi-Million Dollar Contract for Chevron Liberia

Wednesday, July 27, 2011
Danos & Curole

Danos & Curole was awarded a multi-million dollar contract from Chevron Liberia to provide drilling support services in Liberia, West Africa.

Danos & Curole's consultant service business will carry out preparation work for exploratory drilling activities off the coast of Liberia for Chevron Liberia and will participate in performing the operations in the first deepwater well in the 4th quarter of 2011.

Executive Vice President, Eric Danos commented, "Danos & Curole is excited to build on its long time partnership with Chevron to explore Liberia. Our focus has been on innovating ways to improve the safety and quality of our services throughout the world, and we believe our
success is recognized through additional opportunities such as this one."

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WellDog, Excel Ink MOU to Introduce Natural Gas Services in China

- WellDog, Excel Ink MOU to Introduce Natural Gas Services in China

Wednesday, July 27, 2011
Gas Sensing Technology Corp.

WellDog and Excel Team Holdings have signed a Memorandum of Understanding under which Excel will introduce WellDog's suite of technical services to the fast-growing coalbed methane (CBM) and shale gas markets in China.

"This is an exciting moment for both companies as China is gearing up unconventional gas (CBM) activities in its 12th 5 year plan," said Peter Ho, Chairman and CTO of Excel. "Our group will be acting as a main technology bridge between top notch North America CBM technology groups such as WellDog and companies that are engaged in exploiting China's vast unconventional gas resources. WellDog's alliance with us will provide the crucial technical service support for the complex coal environment in China. We look forward to WellDog's service expansion into China soon!"

The MOU covers all of WellDog's business lines, including its award-winning pre-production gas testing services, its established pressure monitoring sales and installation services, its new permeability testing services, and its reservoir engineering services, as well as its business line based around a sustainably-focused downhole water/gas separation and re-injection technology.

"We've been examining the China market landscape for two years, and Excel is exactly the market entry channel that we've been seeking," said John M. Pope, Ph.D., president and CEO of WellDog. "Rational investigation indicates that China will become the leading unconventional gas market soon -- both as a consumer and as a producer that needs best-in-class services. We're pleased to now be able to help China unconventional gas producers make more gas with less environmental impact, as we have in many other markets."

Excel recently announced that it has opened up a new Unconventional Gas Research Centre in Harbin, via its subsidiary Multi Century Energy Technology (Beijing), to provide equipment and expertise to Coal Field Geology Bureau of Heilongjiang Province. The Research Centre will provide a leading platform for foreign CBM technology providers such as WellDog to showcase and demonstrate unique CBM expertise and penetrate into China's growing upstream CBM market.

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Magnum Hunter Makes Management Changes in Finance Dept.

- Magnum Hunter Makes Management Changes in Finance Dept.

Wednesday, July 27, 2011
Magnum Hunter Resources Corp.

Magnum Hunter announced several management changes in the Company's finance department. Victor Ponce de Leon is being transferred in a lateral position and will now work at two of the Company's wholly-owned subsidiaries, Eureka Hunter Pipeline, LLC and Energy Hunter Securities, LLC.

Mr. Ponce de Leon has over 15 years of experience in the energy sector, with the last two years having served as Vice President of Finance and Treasurer at Magnum Hunter. He has previous experience as an Investment Banker with Morgan Keegan and West LB, having worked on numerous energy related transactions, including structured and corporate financings, mergers and acquisitions and fairness opinions. Mr. Ponce de Leon has also worked as an equity research analyst covering the exploration and production sector for CIBC World markets, Credit Lyonnais and Jeffries & Co. He received a B.B.A. in Finance from the University of St. Thomas and a Certificate in Accounting from the University of Houston.

Additionally, the Company has promoted E. Gabe Scott to Assistant Vice President of Finance and Assistant Treasurer of the Company. Mr. Scott has been an employee of Magnum Hunter since January 2011. He has five years of corporate finance experience with increasing management responsibilities in the energy sector, having spent the last year as a Financial Analyst for the Company. His work related experience include four years in Senior Financial Analyst positions with an upstream energy company, an energy sector focused private equity firm and with a multinational global financial services provider. Mr. Scott was a full scholarship recipient and four year letterman in baseball at the University of Alabama receiving numerous honors and recognition such as serving as team co-captain for several years, being named an ESPN Academic All-American, recognized as the Outstanding Finance Undergraduate Student for two years, a Paul Bear Bryant Student Athlete of the Year Finalist in 2005, a National Collegiate Baseball Writers Association All-American in 2005, and a First Team All Southeastern Conference choice in 2005 amongst many other awards for both his academic and athletic achievements.

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Petra Petroleum Appoints VP, Exploration and Operations

- Petra Petroleum Appoints VP, Exploration and Operations

Wednesday, July 27, 2011
Petra Petroleum Inc.

Petra Petroleum announced that Christopher Brown has been appointed as Vice President, Exploration and Operations with immediate effect. Mr. Brown has a B.Sc. (Exeter University, UK) and a M.Sc. (Imperial College, London) in Geology. He has over 30 years of international petroleum exploration experience, including a variety of technical, operational and management roles with Shell International, Enterprise Oil and Suncor Energy, where he was the Exploration Director for the North Africa and the Near East Business Unit. Mr. Brown has worked in many different parts of the world, including Qatar, Egypt, London, Rome and Athens. His most recent position was Exploration Director for AIM-listed Aurelian Oil and Gas plc where he was based in London and responsible for the company's exploration activities across 22 licenses in Poland, Romania, Slovakia and Bulgaria. In 2010, this involved acquiring eight seismic surveys and participating in several exploration and appraisal wells. Robert A. Lambert, Chief Executive Officer of the Corporation commented, "I am delighted to welcome such an experienced and well-respected petroleum exploration executive to the Petra Petroleum management team."

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Ford to Invest $1 billion In Second Car Plant in India

- Ford to Invest $1 billion In Second Car Plant in India

Jul 27, 2011

Ford is planning to build a second car plant in India. According to a person briefed in the matter, Ford will invest $1 billion in the plant that will employ 5,000 people and begin producing cars in 2014.

The company said in the e-mailed reply to questions, "Ford continues to pursue an aggressive growth strategy in India to bring world class vehicles. As part of its plan to introduce eight new products by the middle of the decade Ford is significantly expanding its capacities in its existing facility in Tamil Nadu as well as exploring other options to meet the growing demand of consumers in India and export markets across the world."

Ford Motor (NYSE:F) has a potential upside of 59.3% based on a current price of $12.35 and an average consensus analyst price target of $19.67.

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Ahmadinejad Nominates Guards Commander for Oil Ministry

- Ahmadinejad Nominates Guards Commander for Oil Ministry

Wednesday, July 27, 2011
Knight Ridder/Tribune Business News
by Farshid Motahari, dpa, Berlin

Iranian President Mahmoud Ahmadinejad on Wednesday nominated a commander of the Revolutionary Guards to head the Oil Ministry, official news agency IRNA reported.

The minister-nominee Rostam Qassemi is on a United States and European Union list of people declared persona non-grata due to their alleged involvement in Iran's nuclear program.

For that reason it is unclear whether the nominee, if approved by parliament next week, would be allowed to attend meetings of the Organization of Petroleum Exporting Countries at its headquarters in Vienna.

Observers said that because Ahmadinejad predicted a parliamentary rejection of the current oil ministry caretaker Mohammad Aliabadi, he appointed an Revolutionary Guards commander to force approval by the lawmakers.

The Revolutionary Guards have become the main military force in the country and are involved in several economic projects such as oil, telecommunications and tourism.

Qassemi has also been involved in economic projects as head of the industrial unit of the Revolutionary Guards.

The Oil Ministry has been subject of a political quarrel between Ahmadinejad and his critics in parliament.

After firing his oil minister Massoud Mirkazemi in May, the president initially wanted to become Oil Ministry caretaker himself and later merge it with the Energy Ministry.

Ahmadinejad's plan failed after parliament rejected both the merger and him becoming caretaker.

Constitutional watchdog the Guardian Council rejected the plan as illegal and said Ahmadinejad could not run the Oil Ministry as caretaker.

Copyright (c) 2011, dpa, Berlin

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Gulf Weather System Nearly Certain To Become A Tropical Cyclone

- Gulf Weather System Nearly Certain To Become A Tropical Cyclone

Wednesday, July 27, 2011
Dow Jones Newswires
by Isabel Ordonez & Ryan Dezember

U.S. forecasters said a weather system rumbling into the southwestern Gulf of Mexico will almost certainly become a tropical cyclone by Friday afternoon.

The National Hurricane Center said satellite imagery indicates a tropical depression or tropical storm could be forming 90 miles north of Cancun, Mexico. The system, passing through the channel between the Yucatan peninsula and Cuba's western tip, is moving west-northwest at 15 miles per hour, forecasters said.

The Hurricane Center has dispatched a Hurricane Hunter airplane to the area to investigate conditions. The storm has a "near 100%" chance of becoming a tropical cyclone by midday Friday, forecasters said.

The Gulf accounted for about 30% of all U.S. oil production last year, with more than 606 million barrels. Gulf wells also account for about 7.2% of U.S. natural gas production.

Shell, one of the largest producers in the Gulf of Mexico, said it has evacuated some non-essential personnel from its southwest operations due to the threat of a possible storm.

The company said it evacuated about 70 people and that production isn't affected. Evacuation started Tuesday and continued Wednesday, the company said.

"These personnel are not essential to core producing," the company said.

Shell said it began securing operations on the Perdido platform, which it operates in partnership with Chevron and BP. About 200 miles south of Galveston, Texas, in about 8,000 feet of water, the Perdido platform is the world's deepest drilling and production platform. Its peak production is the equivalent of about 100,000 barrels of oil per day.

Shell also said it is securing operations on the Noble Danny Adkins, a deep-water drill ship it is leasing from Noble which is working in the vicinity of the Perdido platform. Noble spokesman John Breed said the company isn't evacuating workers from the rig but is "securing operations" aboard the ship.

Other major Gulf of Mexico producers BP, Chevron and ConocoPhillips said Wednesday they are monitoring the weather and developing plans should it threaten their operations.

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

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Texas Oil, Gas Jobs Rebound

- Texas Oil, Gas Jobs Rebound

Wednesday, July 27, 2011
Houston Chronicle
by Tom Fowler

Employment in Texas' oil and gas industry rebounded to its pre-recession highs while oil production solidified its return to the top of the fossil fuel ladder for the first time in more than a decade, according to an index of state energy activity.

The Lone Star State employed 224,200 workers in exploration and production in June, according to the Texas Petro Index -- more than the 223,200 at the height of the last energy boom in October 2008 and nearly 15 percent more than in June 2010, said Karr Ingham, the Midland economist who created and maintains the index.

Oil production also beat out natural gas as the dominant Texas fossil fuel product by value during the first six months of 2011, reversing a trend that started in 1997 when natural gas began to dominate the state's energy production.

"In the past 12 months, the industry has added more than 28,600 jobs, which is nearly 13 percent of all jobs added to the Texas economy," Ingham said.

Oversized impact

The oil and gas industry only accounts for about 2 percent of the state's entire workforce payroll, Ingham says, but it tends to have an oversized impact on the entire state economy because it is so capital-intensive. By some estimates, as much as two-thirds of Texas' job creation in the past year could be tied directly and indirectly to the oil and gas exploration business.

"That's really an accomplishment, considering the TPI in June indicates the industry still has not recovered to the level of economic health that created the last jobs milestone," Ingham said.

Unemployment was 8.2 percent in Texas in June. Nationally, the unemployment rate is 9.2 percent.

The Texas Petro Index is a composite based on economic indicators such as commodity prices, production volumes, employment and drilling data. The index starts with 1995 as the base year, with a score of 100.

The Texas Petro Index grew in June for the 18th consecutive month to 243.5, from a low in December 2009 of 186.6. It has not yet returned to its peak, 286.0, recorded in September and October 2008, and isn't expected to reach that point again for many months, Ingham said.

That's because other elements of the index, such as natural gas prices, the number of drilling rigs active and the number of wells completed, continue to lag behind the historic highs.

Crude prices, however, have risen significantly, helping push the value of Texas-produced oil to nearly $3.16 billion in June, 29.5 percent more than in June 2010.

Natural gas production was worth $2.46 billion in June, up slightly from June 2010, but the value of Texas' natural gas production for the first six months of 2011 was down more than 17 percent from the prior year, to $14.4 billion.

A return to its roots

The current energy industry growth spurt is different than the boom from 2002 to 2008, Ingham said.

Back then the growth largely was due to the expansion of drilling and production in natural gas shales, thanks to industry perfecting a combination of horizontal drilling and hydraulic fracturing.

"In the current expansion, the industry has returned to its crude oil roots," Ingham said, but it's hardly a repeat of the oil booms in the early 1980s and 1990s.

"In the current expansion, the industry has returned to its crude oil roots," Ingham said, but it's hardly a repeat of the oil booms in the early 1980s and 1990s.

Instead, the same technological improvements that fueled the recent expansion of natural gas production is allowing producers to tap previously unavailable oil reservoirs in plays including the Eagle Ford in South Texas and the Wolfberry in West Texas.

Copyright (c) 2011, Houston Chronicle

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Britain to Expel Gaddafi Diplomats

- Britain to Expel Gaddafi Diplomats

Wednesday, July 27, 2011
Knight Ridder/Tribune Business News

Britain has officially recognized Libya's main opposition group as the country's legitimate government, and asked all diplomats belonging to Muammar Gaddafi's government to leave the United Kingdom.

William Hague, the UK foreign secretary, said on Wednesday that Britain was unfreezing 91m pounds ($150m) of Libyan oil assets to help the National Transitional Council, which the country now recognizes as "the sole governmental authority in Libya".

"We will deal with the National Transitional Council on the same basis as other governments around the world," Hague said.

"In line with this decision, we summoned the Libyan charge d'affaires here to the foreign office this morning and informed him that he and other regime diplomats from the Gaddafi regime must now leave the United Kingdom.

"We no longer recognize them as the representatives of the Libyan government and we are inviting the Libyan National Transitional Council to appoint a new Libyan diplomatic envoy to take over the Libyan embassy in London."

Britain's diplomatic moves implement a decision made at a July 15 meeting in Istanbul, Turkey during which the US, Britain and 30 other nations recognized Libya's main opposition group as the country's legitimate government.

Russia has criticized such moves as following a "policy of isolation" and going beyond the UN's mandate and taking sides in a civil war.

Britain is one of the leading participants in the NATO campaign, but the government has been under pressure over its failure to remove Gaddafi from power.

It gave the current charge d'affaires and all eight remaining staff and their dependents three days to leave the UK, the foreign office said.

'Abandon all power'

This week Hague said for the first time that Gaddafi might be able to remain in Libya, as long as he is not in power.

He said that "Gaddafi is going to have to abandon power, all military and civil responsibility", but "what happens to Gaddafi is ultimately a question for the Libyans".

France and the US have made similar statements.

On Wednesday, however, Mustafa Mohamed Abdel Jalil, the NTC's chief, said that the deadline for a proposal involving Gaddafi ceding power and remaining in Libya had expired.

"We made a proposal. The deadline has past. The proposal has expired," Jalil said of the three-point offer during a press conference in Benghazi. Under the proposal, Gaddafi would relinquish all powers and would remain under "close supervision" in a location of the "Libyan people's" choosing, he said.

The proposal marked a major shift from previous opposition demands that Gaddafi leave and be tried for war crimes in The Hague.

Deadlines are approaching for the NATO-led alliance, whose UN mandate for military action -- granted on the grounds that it would protect civilians -- expires in two months.

Fadi el-Abdallah, an official with the International Criminal Court, has said that that while the ICC cannot comment on political matters, warrants for the arrest of Gaddafi, his son Saif al-Islam Gaddafi and intelligence chief Abdullah al-Senussi are still applicable.

"A political agreement does not affect the legal obligations or the judicial process. Justice must be done, in accordance with the rules of the Rome Statute [the treaty which founded the ICC]," el-Abdallah said.

Luis Moreno-Ocampo, the ICC's chief prosecutor, said on Wednesday that Libya has "an obligation" to arrest Gaddafi, and that any future government would also be subject to the same obligation.

Meanwhile, on Tuesday, Abdul Ilah al-Khatib, the UN special envoy, said parties to Libya's crisis remain deeply divided on how to end the conflict that has raged since an uprising began.

Khatib this week visited the opposition capital, Benghazi, in Libya's east as well as the capital Tripoli.

A UN statement issued in New York on Tuesday quoted al-Khatib as saying that both sides "remain far apart on reaching agreement on a political solution".

The warring parties, however, both reaffirmed to Khatib "their desire to continue to engage with the UN in the search for a solution," the statement said.

Productive dialogue

Al-Khatib met Al-Baghdadi Ali Al-Mahmoudi, the Libyan prime minister, who said they had a productive dialogue.

The government however told al-Khatib that NATO must end air attacks before any talks can begin and that Gaddafi's role as leader was non-negotiable.

Gaddafi says he supports talks with the fighters and the West, but has shown no sign of agreeing to cede power after 41 years of unchallenged supremacy, much of it as a pariah in Western eyes.

In his talks with the Benghazi-based opposition leadership council, al-Khatib discussed ideas for ending the war but said later a firm initiative had yet to take shape.

Despite four months of NATO airstrikes on pro-Gaddafi forces, the conflict in Libya remains stalemated, with rebels failing to make significant advances west towards Tripoli.

Opposition leaders have given conflicting signals in recent weeks over whether they would allow Gaddafi and his family to stay in Libya as part of a deal, providing that he first gave up power.

Expatriate political party

Also on Tuesday, Libyan expatriates became the first to take a stab at forming a political party in Benghazi, the AFP news agency reported.

"We call ourselves the New Libya Party because everything was destroyed," said Ramadan Ben Amer, 53, a co-founder of the party, and now a resident of the UAE.

"Gaddafi says he has built Libya brick by brick but, especially Benghazi, he has destroyed it brick by brick."

He said that of the 2,000 individuals who have joined the party in Libya so far, the majority hail from his native Benghazi or Derna -- the hometown of co-founder Rajad Mabruk, 65, who lives in Dallas, Texas.

The party is also supported by some 20,000 Libyan expatriates living in the US, Canada and Germany, he said.

Copyright (c) 2011, Al Jazeera, Doha, Qatar

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Primary Executes LOI for Southern Alberta Basin Bakken Fairway Lands

- Primary Executes LOI for Southern Alberta Basin Bakken Fairway Lands

Wednesday, July 27, 2011
Primary Petroleum Corp.

Primary Petroleum has agreed to move forward in executing a non-binding Letter of Intent ("LOI") to finalize a Farmout and Joint Operating Agreement (the "Agreement") with a major U.S. based Industry Partner on its 291,000 net acres under lease and option in the Southern Alberta Basin Bakken Fairway of NW Montana.

The completion of the transaction is subject to title and environmental due diligence and final documentation. It is expected to close on or before October 3rd 2011, when specific details of the formal agreement will be disclosed. Primary's current 3D Seismic and vertical drilling program will be ongoing during the due diligence and final documentation negotiation period.

"Primary looks forward to completing this transaction and moving forward with a strong Industry Partner to delineate and prove up our acreage position in the Southern Alberta Bakken Basin in NW Montana," states Mike Marrandino, President & CEO. "The Basin continues to be de-risked by Industry on both sides of the border and Primary is looking forward to the potential of confirming economic hydrocarbons over our lands. The next couple of years will be very exciting for the Company once this transaction is completed as it will enable Primary to fulfill its business objectives of evaluating its acreage with the added technical expertise and financial strength of a strong joint venture partner."

Current Pondera-Teton Work Program

Primary also advised that its current 3D Seismic program is underway on the Dupuyer Creek prospect. It is anticipated that both the Dupuyer Creek and Marias River seismic programs will be completed by the end of August. The seismic crew will then move south to continue with our Deep Creek East and Eureka Lake programs. To-date, the Company has identified three vertical drilling locations on its existing 3D Seismic that it completed in 2008 and is underway with the well site permitting process.

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Mesa Energy Finalizes TNR Acquisition

- Mesa Energy Finalizes TNR Acquisition

Wednesday, July 27, 2011
Mesa Energy Holdings Inc.

Mesa Energy has completed the acquisition of Tchefuncte Natural Resources (TNR), a Louisiana operator that owns and operates producing properties in five fields in Plaquemines and Lafourche Parishes, Louisiana. TNR is now a wholly-owned subsidiary of Mesa Energy, Inc. which is a wholly-owned subsidiary of the Company.

TNR owns the Lake Hermitage Field in Plaquemines Parish, Louisiana. Current production at Lake Hermitage averages approximately 160 barrels of oil and 240 mcf of gas per day. Total mineral acreage held by production is approximately 3,578 acres. A third party engineering report prepared by Collarini Associates places the value of total Proved reserves using a discount rate of 10% (PV-10) at approximately $15.25 million with Proved Developed Producing reserves of $5.24 million. Probable reserves are estimated at $10.65 million.

In addition, immediately prior to the Company closing the TNR acquisition, TNR completed the acquisition of properties in four fields in south Louisiana from Samson Contour Energy E & P, LLC (Samson). These properties have aggregate net production of approximately 160 barrels of oil and 1,080 mcf per day of gas from thirteen producing wells. Mesa believes there are a number of re-completion and workover opportunities in these fields as well as new offset developmental drilling and deep gas potential. All of these potential opportunities are currently being evaluated.

"This is a significant step forward for the Company and its shareholders as we intensify our focus and growth strategy toward the acquisition of existing producing oil properties in an effort to expand and diversify our asset base," said Randy M. Griffin, CEO of Mesa Energy Holdings, Inc. "These properties have substantially increased our reserve base and will add significant monthly net revenue and cash flow, thereby increasing shareholder value."

"We are currently evaluating other producing oil and gas properties in the area and hope to complete additional acquisitions of this nature in the next twelve months," added Griffin.

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ExxonMobil Briefs 3Q Dividend

- ExxonMobil Briefs 3Q Dividend

Wednesday, July 27, 2011
ExxonMobil Corp.

ExxonMobil declared a cash dividend of 47 cents per share on the Common Stock, payable on September 9, 2011 to shareholders of record of Common Stock at the close of business on August 12, 2011.

This third quarter dividend is at the same level as the dividend paid in the second quarter of 2011.

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United Automakers and GM In Talks For New Contract

- United Automakers and GM In Talks For New Contract

Jul 27, 2011

The United Automakers along with GM (NYSE:GM) have began negotiations on a new contract together with executives and workers kicking off talks on a factory floor at a Detroit assembly plant. The existing four-year agreement between GM and the union will expire on September 14 at midnight.

"We want the new GM to succeed and when it does, everyone will benefit," said Dan Akerson, chief executive, in the announcement.

Meanwhile, UAW President Bob King added that "our talks will center on the needs of our members and the need to continue to build great products."

General Motors (NYSE:GM) has a potential upside of 52.4% based on a current price of $28.51 and an average consensus analyst price target of $43.45.

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Oil Prices Fall As Gasoline Supplies And Pump Prices Rise

- Oil Prices Fall As Gasoline Supplies And Pump Prices Rise

Jul 27, 2011

The price of oil is falling after the government announced the nation's oil and gasoline supplies increased last week.

On Wednesday morning, Benchmark West Texas Intermediate crude for September lost $1.50 to $98.90 per barrel at the New York Mercantile Exchange.

The Energy Department stated that oil inventories increased 2.3 million barrels to 354 million barrels last week. Supplies of gasoline raised to 213.5 million barrels. The demand for gas over the past four weeks remains below year-ago levels.

Prices at gasoline stations rose about half a cent on Wednesday to a national average of $3.698 a gallon which is just about $1 more than a year ago.

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American Petro-Hunter Outlines Upcoming Drilling in Ok.

- American Petro-Hunter Outlines Upcoming Drilling in Ok.

Wednesday, July 27, 2011
American Petro-Hunter Inc.

American Petro-Hunter provided an outline of plans for the next two wells to be drilled at the Company's field development program at the North Oklahoma Project. These next wells in the series have been designated as NOS-2-22 and NOW-2H.

Preparations are now underway to commence drilling of the NOS-2-22 well with a scheduled spud date in approximately 2 weeks. The well is a direct offset to the producing NOS-1-22 well and has been engineered as a 3,500 foot vertical to exploit the productive oil bearing sand formation discovered in previous drilling. This is the first of potentially 3 offsets planned on this particular lease. With production facilities already in place, the drilling is hoped to add an additional 50 BPOD net to the Company by September. An exact spud date will be announced shortly.

The NOW-2H is scheduled as the second upcoming well and is a direct offset to the producing NOM-1H horizontal at the Company's Ripley leases. The well is slated to commence drilling in early September and will include a similar lateral targeting the newly discovered Mississippi reservoir.

As previously announced, American Petro-Hunter has locked in participation on an additional 11 horizontal wells at the Ripley Leases and the NOW-2H is the first of these to be drilled under the development program which is envisioned to involve the drilling of approximately one horizontal Mississippi well every 30 to 60 days. This judicious schedule would allow for a predictable time frame to drill, complete and emplace production facilities for both oil and gas sales every other month.

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Treaty: Drilling Rig Arrived in Belize

- Treaty: Drilling Rig Arrived in Belize

Wednesday, July 27, 2011
Treaty Energy Corp.

Treaty reported the Drilling Rig and support equipment have arrived in the port of entry in Belize.

Stephen L. York, President and COO of Treaty Energy Corporation, stated, "All the equipment shipped by sea last week has arrived safely at the port of entry in Belize and we have arranged for our toolpusher/rig manager and drilling supervisor, W D Harden to arrive in Belize and be on site to supervise the un-loading and reassembly of the rig."

Mr. York added, "In addition to reassembling the rig Mr. Harden and Treaty Belize Energy employees will be coordinating services with third party companies related to the drilling of our initial well sites and securing all our equipment to their proper locations. Today Treaty Energy has moved one step closer to implementing our drilling program to extract commercial grade quantities of oil in Belize."

In summary, the equipment in this shipment to Belize by sea out of Mobile, Alabama included the following: Drilling Rig, Bulldozer, Backhoe, Fuel Truck, and 28 foot Flat Bed Truck.

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Sartor Secures Rescue Vessel Contract with Ithaca

- Sartor Secures Rescue Vessel Contract with Ithaca

Wednesday, July 27, 2011
Sartor Offshore Rescue Ltd.

Sartor Offshore Rescue Ltd has secured a three year contract with Ithaca Energy UK Ltd worth £8.2million, in a deal brokered by Clarksons Offshore, Aberdeen.

Sartor's Ocean Sprite, a multi-role offshore support vessel which will operate as a field support and emergency rescue and response vessel for the contract duration, is expected to commence the contract at the Athena field in the North Sea, 180 kilometres Northeast of Aberdeen, in Q4 2011 when Ithaca commences production there.

John Bryce, managing director of Sartor Offshore Rescue Ltd, said, "We are delighted that Ithaca Energy has chosen Sartor Offshore Rescue and our Ocean Sprite, it is a fine vessel with an excellent safety record of 2,860 days without a lost time injury (LTI).

"This is a very significant contract win for us as it is our first time to work with Ithaca Energy and I look forward to strengthening our relationship. We will supply two crews, each of 12 seamen, aboard the Ocean Sprite and I anticipate a continuation of our excellent safety record on board.

"We have invested heavily into our fleet, staff training and the Scottish shipping industry. We actively promote safety onboard our vessels and seven of our vessels have at least 1,000 days with no LTI's, with the more recent acquisitions gradually working towards this milestone. I am delighted that our strong safety record and reputation is attracting new clients such as Ithaca Energy and I look forward to a long and safe working partnership with them," he continued.

James Lund, Projects Manager of Ithaca Energy (UK) Ltd, said, "This agreement is a major contract to be awarded for the operational phase of the Athena project. Sartor Offshore Rescue Ltd and their vessel the Ocean Sprite have an excellent safety and track record which were key to their selection to support the Athena asset in the operational phase. Ithaca looks forward to working closely with Sartor over the next three years"

Sartor Offshore Rescue currently manages a fleet of 9 ERRVs (emergency response and rescue vessels) & 4 PSVs (platform supply vessels) out of Aberdeen.

The company's aim has been to continue to expand its standby and emergency response capabilities within both the Norwegian and British sector of the North Sea and to be able to provide cross-border solutions reflecting the needs of its clients.

Sartor Offshore Rescue employs approximately 330 seamen in its ERRV and PSV fleet and provides multi-role offshore and emergency rescue and response vessels for many of the oil majors operating in the North Sea.

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Delta Airlines Q2 Misses Earnings Estimates Due To Costly Fuel Prices

- Delta Airlines Q2 Misses Earnings Estimates Due To Costly Fuel Prices

Jul 27, 2011

Delta Airlines (NYSE:DAL) reported a Q2 loss of $0.43, narrower than analyst estimates for a loss of $0.46 per share. Revenues for the quarter rose 12.1% year-over-year to $9.15 billion, missing consensus estimates of $9.16 billion.

Richard Anderson, Delta's chief executive officer said, "High fuel prices are putting significant pressure on the industry, but the benefits of Delta's strategic actions and the dedication of Delta employees are evident in the solid profit we produced despite more than $1 billion in higher fuel expense. Our revenue momentum, coupled with the capacity reductions we are making in September and actions to get our non-fuel costs to 2010 levels, will generate the margins we need to hit our return targets."

Delta Air Lines (NYSE:DAL) has a potential upside of 80.1% based on a current price of $8.02 and an average consensus analyst price target of $14.44.

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Rocksource Makes Headway in 2011 Drilling Program

- Rocksource Makes Headway in 2011 Drilling Program

Wednesday, July 27, 2011
Rocksource ASA

Rocksource has now announced the drilling results from three of its five, 2011 exploration wells. Initial results show one discovery (Norvarg) and two dry holes at wells drilled to test unproven petroleum systems (Breiflabb and Kora). Wells four and five in the 2011 program are expected to spud in September.


In June Rocksource announced a gas discovery in the Norvarg prospect in the Barents Sea license PL 535, operated by Total E&P Norge AS. On Norvarg Rocksource's Electromagnetic (EM) technology successfully identified the stacked hydrocarbon reservoirs present within the structure. It is too early to conclude on flow rate characteristics; hence the partnership has decided to perform a production test to gather information about reservoir production properties. Well operations are still ongoing with the planned well test to commence shortly.The test results are expected in early August.


Earlier in July Rocksource announced a dry well on the Breiflabb prospect in license PL 416 in the Norwegian part of the North Sea. The Breiflabb prospect was characterized by a weak EM anomaly and was estimated to have a pre drill chance of success of 44 percent. The false positive response (EM anomaly not associated with hydrocarbon) is believed to have come from deeper levels that were not penetrated by the well.


The Kora-1 well in offshore Senegal and Guinea Bissau was on July 27 announced as unsuccessful. The Kora prospect had an EM anomaly interpreted by Rocksource to be associated with hydrocarbons with an approximate 50 percent chance of success. The prospect was found dry and the strong EM anomaly is believed to have been caused by a combination of lithologies (rock types) which have combined to produce unusually high resistivity. Although these lithologies were not specifically predicted pre-drill, given the lack of well control in this frontier area it was accounted for in Rocksource's prospect risking. Rocksource recently farmed down half of its interest in AGC Profond receiving as an initial consideration, USD 28 million in promoted contribution towards past expenditure and the costs of the Kora-1 well.

Commenting on the drilling results so far Chief Technology Officer John Howell said, "The average chance of success in our 2011 drilling campaign is approximately 50 percent. When you drill five wells with 50 percent chance of success, you should expect two to three discoveries and two to three dry holes. Although we would have liked more discoveries early, we believe we can still deliver a successful drilling campaign and we are looking forward to the results from the two remaining wells this year, and to test the further potential in our extensive exploration portfolio in 2012 and beyond."

The final two wells in 2011, will test the Heilo (PL 530) and Phoenix (PL559) prospects on the NCS. Both are expected to spud in September. Both wells are within proven petroleum systems and are on trend with earlier oil discoveries.


PL 530 which includes the Heilo prospect is located in the Barents Sea on trend with the Goliat discovery to the west and the Nucula discovery to the southeast. The license which is operated by GDF Suez was reported to be the most sought after block in the Norwegian 20th Licensing Round. Rocksource carries a mean volume estimate of 200 mill boe and a chance of success of approximately 50% for the Heilo prospect. A success in the initial target will trigger a sidetrack to allow further efficient appraisal of the structure.


PL 559 which includes the Phoenix prospect was Rocksource's highest priority application in the Norwegian APA 2009 license round and is located on the Nordland Ridge, immediately to the east of the Norne, Urd, Falk and Linerle fields. Prospectivity within the license consists of three main prospects and several leads. All three prospects have encouraging EM responses. Rocksource carries a mean volume estimate of 160 mill boe for the Phoenix prospect and a chance of success of approximately 50%.

In parallel with the ongoing drilling operations Rocksource is continuing to mature EM positive prospects towards drilling decisions, and expect to firm up wells for drilling in 2012 and beyond throughout the remainder of the year.

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Strike Mulls Suspending Sadie Well

- Strike Mulls Suspending Sadie Well

Wednesday, July 27, 2011
Strike Energy Ltd.

Strike reported the following progress on the testing of the Sadie 1 well (Homeplace Prospect) in the onshore Gulf Coast, Wilcox formation.

Initial fracking of deepest Wilcox zone in the Sadie 1 well has produced non commercial flow rates. The operator is now proposing to suspend the well pending further evaluation. Several shallower potential pay zones exist in the Wilcox and in the younger Cook Mountain interval. Consideration is being given to the testing of some of these intervals.

The work to connect this well to a nearby sales line has essentially been completed providing flexibility for further testing.

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Husky Boosts Production, Profit in 2Q11

- Husky Boosts Production, Profit in 2Q11

Wednesday, July 27, 2011
Husky Energy Inc.

Husky continued to execute against its strategic plan in the second quarter of 2011, recording strong growth in earnings, cash flow and production compared to the same period a year earlier. Net earnings grew 274 percent compared to the second quarter of 2010, cash flow increased 104 percent, and production grew 10 percent.

"This marks a second consecutive quarter of strong results across key performance metrics," said Husky CEO Asim Ghosh. "Over the past 12 months we have made significant progress in implementing our strategic plan and executing a financing strategy to carry out our growth initiatives. The momentum we have built in growing production combined with a strong performance from our Midstream and Downstream segments, has enabled us to deliver solid improvements in results."

Production for the quarter averaged 311,600 barrels of oil equivalent per day (boe/day), compared to 283,900 boe/day in the second quarter of 2010. Production gains were achieved despite forest fire and pipeline disruptions in northern Alberta as the Company realizes the benefits from recent acquisitions of oil and gas properties in Western Canada and increased investment in organic growth opportunities.

"In addition, we continue to achieve key milestones in advancing our growth pillars," said Ghosh. "This quarter Husky and its partner in the Liwan Gas Project reached agreements on natural gas prices and have jointly approved the Overall Development Plan (ODP) for the first phase of the development. The submission of the ODP to Chinese government authorities will now take place. This will be a cornerstone development for Husky as we look to build a substantial oil and gas business in the region."

Highlights from the second quarter included the following:
  • Net earnings of $669 million, or $0.71 per share (diluted). This compares to net earnings of $179 million or $0.19 per share in the second quarter of 2010.
  • Cash flow from operations of $1,511 million, or $1.67 per share (diluted), compared to cash flow of $739 million or $0.87 per share in the second quarter of 2010.
  • Drilling was completed on an additional producing well at the North Amethyst field in the Atlantic Region. North Amethyst achieved average gross production of 33,000 bbls/day (23,000 net to Husky) in the quarter.
  • Executed an agreement for the sale of gas from the first phase of the Liwan Gas Project The gas price mechanism is in line with the anticipated Guangdong "city gate" market price and provides for an attractive rate of return on the project.
  • Phase 1 of the Sunrise Energy Project continued to achieve its milestones, with the first 12 steam-assisted gravity drainage (SAGD) horizontal well pairs completed on schedule.
  • Closed a $1.2 billion common share offering, providing the Company with enhanced financial flexibility to accelerate its growth strategy.

Production volumes in the second quarter were in line with annual guidance of 290,000 to 315,000 boe/day. Volumes were impacted by difficult operating conditions in the Slave Lake region where forest fires caused production interruptions, and by the outage of the Rainbow pipeline. The northern portion of the Rainbow pipeline was out of operation through May and June and impacted production by approximately 13,600 boe/day. The northern portion of the pipeline remains shut down, however, Husky has been able to reduce the impact of the outage to approximately 11,000 boe/day through a number of mitigating activities.

"Our thoughts and support are with the people of the Slave Lake region as they look to recover from this devastating event and begin the long process of rebuilding their homes and lives," said COO Rob Peabody. "We are grateful none of our workers were injured and our team in the region deserves a great deal of credit for the work they are doing to mitigate the effects of the disruptions."

Reduced volumes from the Slave Lake region were offset by recent acquisitions and strong performance from the North Amethyst field, which began producing in May 2010. A turnaround of the SeaRose Floating Production, Storage and Offloading (FPSO) vessel, originally scheduled for 16 days, was completed in two days in early July.

Second quarter earnings and cash flow growth were driven by higher production, higher realized crude oil and natural gas prices and strong throughput rates and margins within the Downstream segment. This was partially offset by a stronger Canadian dollar.

Average realized crude oil pricing in the quarter was $86.90 per barrel, compared to $64.75 in the same period of 2010. U.S. refining market crack spreads increased in the quarter, with the average Chicago 3:2:1 crack spread at U.S. $28.90 per barrel, compared to U.S. $11.33 in the same period of 2010.


Western Canada - Unconventional and Conventional

The Company continues to maintain production levels in Western Canada and has accelerated development of its emerging oil and gas resource portfolio.

Oil Resource Plays

Husky has an extensive Western Canadian oil resource land base of approximately 500,000 acres and is advancing exploration and development of its highest-potential prospects.

In the second quarter, the Company acquired 11,500 acres in the Bakken formation in south central Saskatchewan, adjacent to its Oungre oil resource lands. Husky now holds 18,700 net acres in this light oil play. Current production from four producing wells is approximately 600 bbls/day and two additional wells have been drilled and will be completed once wet conditions recede. Given the positive results from the first Oungre Bakken wells, Husky has committed additional funds to accelerate the drilling and completion of 10 additional wells in the second half of 2011.

The Company continues to develop its opportunities in the Lower Shaunavon zone in southern Saskatchewan, the Viking zone in southwest Saskatchewan and central Alberta, and in the northern Cardium resource trend at Wapiti and Kakwa in west central Alberta. Spring break-up and extended wet conditions delayed drilling and completion plans in the second quarter, however, the Company expects to accelerate its activities in the second half of the year. The Company drilled two wells at its central Alberta Viking oil resource project in the second quarter, following a six well drilling program in the first quarter. A total of 11 Viking wells have been placed on production from this area along with another three from the southwestern Saskatchewan Viking oil resource project.

Gas Resource Plays

Husky continues to build its gas resource portfolio in Alberta and British Columbia, with approximately 16,000 acres of new land acquired in the quarter, adding to the Company's existing base of approximately 800,000 acres.

A key focus of activity has been the liquids-rich Cardium formation at Ansell in west central Alberta. In the first two quarters, Husky drilled 21 Cardium formation wells at Ansell and a further 12 Cardium and nine deeper multi-zone wells are planned in the second half. The Company is currently constructing additional offload capacity, which will increase total production capacity at Ansell to 56 mmcf/day and over 2,000 bbls/day liquids.

The Company took steps in the quarter to seek a joint venture partner to accelerate development of the Ansell assets. A preliminary development plan has been created which could potentially see up to 2,600 Cardium and deeper Manville formation wells drilled on the play, most of which would be horizontal.

Heavy Oil

To maintain current heavy oil production levels, the Company is accelerating thermal developments. The goal is to achieve an increasingly higher proportion of heavy oil production through thermal at finding and development (F&D) and operating costs comparable to current levels.

Construction of the 8,000 bbls/day South Pikes Peak thermal project was approximately 67 percent complete at the end of the second quarter, and is progressing on schedule and within original cost estimates. First production is expected in mid-2012.

The 3,000 bbls/day Paradise Hill thermal development is progressing on schedule and is approximately 28 percent complete. Paradise Hill will use existing Bolney infrastructure and is planned to become operational in the third quarter of 2012.


Husky successfully acquired the exploration rights to two parcels of land in the Northwest Territories in a Call for Bids in the Central Mackenzie Valley. Each block contains approximately 215,000 acres with a five-year primary term and a term extension to nine years when a well is drilled. The lands complement the existing portfolio of resource plays and are close to existing pipeline infrastructure. Development of the properties will be considered in the context of Husky's full suite of opportunities.

The Company is presently evaluating the timing of preliminary work on the new concessions, including conducting 3D seismic and well drilling.


Oil Sands

Phase 1 of the Sunrise Energy Project continues to progress on schedule towards planned first production in 2014. In the second quarter, drilling was completed on the first 12 SAGD horizontal well pairs, as part of 49 planned initial well pairs. SAGD drilling costs are trending on budget and on schedule, with the full drilling program forecast to be completed in the third quarter of 2012.

Engineering contractors achieved detailed engineering milestones during the quarter and purchases of major equipment and preparation for surface facility construction remain on schedule for the third quarter.

Conceptual development engineering for subsequent phases of the Sunrise Energy Project has been initiated and a full field development plan is expected to be completed by the end of 2011.

Progress continues at the Tucker Oil Sands Project as the Company enhances its understanding of how to develop the reservoir. Production averaged 6,400 bbls/day during the quarter and Tucker exited the quarter in excess of 7,000 bbls/day.

Atlantic Region

The North Amethyst satellite development continued to perform well through the second quarter, with average gross production of 33,000 bbls/day (23,000 bbls/day net to Husky). Drilling was completed on an additional producing well and a supporting water injection well is scheduled to be completed in the third quarter. The production well came on stream June 23 at a rate of 6,200 bbls/day.

Husky will participate in a partner-operated exploration well at Mizzen in the third quarter. The well will aid in evaluating the 2009 oil discovery on the prospect, located in the Flemish pass. Husky holds a 35 percent working interest in the field. An exploration well is also planned for the fourth quarter to test the partner-operated Fiddlehead prospect, located south of the Terra Nova field. Husky holds a 50 percent working interest in the well.

South East Asia

Development of the Liwan Gas Project offshore southeast China achieved a significant milestone, with the approval of the ODP for the Liwan 3-1 field by Husky and its joint partner, China National Offshore Oil Corporation (CNOOC). Submission of the ODP to Chinese government authorities will now take place.

The companies continue to advance the development towards planned first gas in late 2013 or early 2014.

In support of the ODP submission, a gas sale agreement has been executed with CNOOC Gas and Power Group, Guangdong Trade Branch, for the sale of gas from the Liwan 3-1 field. The gas will supply the Guangdong Province natural gas grid from an onshore gas plant on Gaolan Island, Zhuhai. The gas price mechanism is in line with the anticipated Guangdong "city gate" market price, establishing an attractive rate of return for the project.

The Liwan Gas Project is comprised of three significant gas discoveries the Company has made on Block 29/26: Liwan 3- 1, Liuhua 34-2 and Liuhua 29-1. A gas contract agreement and ODP filing for the Liuhua 34-2 field is expected later this year and similar milestones are anticipated for the Liuhua 29-1 field in 2012.

Production from the Liwan 3-1 field and the Liuhua 34-2 field is expected to ramp up through 2014 towards a rate above 300 mmcf/day (gross). In 2015, the Liuhua 29-1 field is expected to be placed on stream, increasing gross production to approximately 500 mmcf/day. Husky has a 49 percent ownership interest in production.

The Company's share of the estimated total overall integrated project cost of U.S.$6.5 billion will be approximately U.S.$3 billion.

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