Crude Oil Price by

Oil and Gas Energy News Update

Tuesday, August 2, 2011

Oil & Gas Post - All News Report for Tuesday, August 02, 2011

Tuesday, August 02, 2011

Oil & Gas Post

Promote Your Page Too

Commodity Corner: Oil Drops 1.2% on Econ Woes

- Commodity Corner: Oil Drops 1.2% on Econ Woes

Tuesday, August 02, 2011
Rigzone Staff
by Saaniya Bangee

Crude oil futures continued to retreat Tuesday as economic concerns weighed on the market.

At its lowest in more than a month, light, sweet crude settled lower at $93.79 a barrel, down $1.10 from yesterday. Tuesday's trading session reached lows last seen on June 28.

Early Tuesday, a U.S. Commerce Department report showing a drop in consumer spending for the first time in nearly two years weighed down oil prices. The report also showed that incomes barely rose for the month of June.

Analysts believe that the series of negative economic data is overshadowing the U.S. deficit-cutting package.

The Brent contract traded between $115.77 and $118.36, before settling at $116.46 a barrel on the ICE Futures exchange in London. The 35-cent day-on-day drop came on supply disruptions in the North Sea and a refinery fire in Taiwan.

Futures for September natural gas decreased 3.3 cents Tuesday, closing at $4.155 per thousand cubic feet. According to the National Hurricane Center, the Caribbean's latest storm Tropical Storm Emily could pick up strength in a day or two; but, as of now, the storm poses a low threat to the Gulf's output. Approximately 7.4 percent of the U.S. natural-gas production lies in the Gulf of Mexico.

Natural gas prices fluctuated between $4.135 and $4.23, maintaining a similar trading range to Monday's session.

Gasoline blendstock for September delivery dropped for a fifth consecutive session, closing at $3.04 a gallon.

Oil & Gas Post

Promote Your Page Too

Cadogan Shuffles Management

- Cadogan Shuffles Management

Tuesday, August 02, 2011
Cadogan Petroleum plc

The Board has completed a review of the Cadogan Board structure and composition, with a view to putting in place a Board best suited to develop the Company, following the completion of the major transaction with Eni S.p.A.

As a result of this review, in order to manage the increased operational activity in Ukraine, Ian Baron becomes Chief Operating Officer, responsible for the Company's operations on all of its current licenses and technical support on new business activities. Bertrand des Pallieres, currently a non-executive Director, becomes Chief Executive Officer, focusing on the strategic development of the business, in particular new acquisitions, key government relationships and industrial partnerships. These appointments take immediate effect. As a consequence of this Bertrand will over the next few months relinquish his day to day responsibility as CEO of SPQR Holdings SAE. Gordon Stein will remain as Chief Financial Officer.

The new Board structure will consist of an independent non-executive Chairman, two further independent non-executive Directors, a non-executive Director appointed by SPQR Holdings SAE, and three executive Directors. The Board is satisfied that this structure complies with the UK Corporate Governance Code.

Philip Dayer (acting non-executive Chairman) and Nick Hooke (independent non-executive Director) have tendered their resignations as non-executive directors, with immediate effect, as they believe that there should be more independent directors on the Board in view of SPQR Holding's substantial shareholding, despite the proposed structure complying with the Code. The Board would like to thank both Philip Dayer and Nick Hooke for their contributions to the Company since its IPO in 2008.

Mr. Zev Furst has joined the Board as a non-executive Director and will act as interim Chairman and will lead the recruitment process for a permanent Chairman and further independent non-executive Directors. It is anticipated that these further appointments to the Board will be announced by the end of September 2011.

Mr. Furst is a leading global business and communications strategist who has advised political leaders, foreign principals and corporate executives of Fortune 100 companies. He is the Chairman and CEO of First International Resources, an international corporate and political consulting firm he founded in 1992. In recent years, he has also advised and consulted with candidates running for national office in Israel, Japan, Mexico and Ukraine. In 1986, Mr. Furst was a founding partner of Meridian Resources and Development Ltd., an international commodities trading company specializing in chemicals and petroleum products. Mr. Furst currently serves as Chairman of the International Board of the Peres Center for Peace and is a member of the Advisory Board of the Kennan Institute in Washington, DC. He has written and lectured extensively on international affairs, business and political strategy and the role of media in politics and diplomacy. Any matters to be disclosed under paragraph 9.6.13 of the Listing Rules will be announced in due course.

Oil & Gas Post

Promote Your Page Too

Drilling Preparations Underway at Cadogan's Ukraine Well

- Drilling Preparations Underway at Cadogan's Ukraine Well

Tuesday, August 02, 2011
Cadogan Petroleum plc

Cadogan reported that rig acceptance and preparations for drilling of the Pokrovskoe 1 well on the Pokrosvskoe license in eastern Ukraine commenced on July 24, 2011. As previously advised the well had been suspended in December 2010 at 5450 meters pending the sourcing of a suitable alternative all weather drilling rig. The Company recently awarded a drilling services contract to Saipem. Target depth is 5800 meters and the Company expects the drilling and preliminary testing of the well to take approximately 60 days.

Operations have also commenced on the work-over of the Zagoryanska 1 well on the Zagoryanska license also in eastern Ukraine. A work-over drilling unit will be mobilized to the location during the first week of August 2011 to undertake perforation and testing operations, which are expected to be completed by end of 3Q 2011.

Oil & Gas Post

Promote Your Page Too

Global Petroleum Names New CEO

- Global Petroleum Names New CEO

Tuesday, August 02, 2011
Global Petroleum Ltd.

Global Petroleum announced the appointment of highly respected energy industry executive Mr. Peter Hill as Managing Director and Chief Executive Officer of the Company.

Mr. Hill has extensive experience in the energy sector as a senior executive with a significant track record worldwide in high-level M&A and business development roles, primarily in the oil industry. Most recently Mr. Hill was the global head of Corporate M&A for Statoil ASA, where he was responsible for several large transactions, being a key member of the team responsible for Statoil's merger with Norsk Hydro Oil & Gas in December 2006, and leading the acquisition of EnCana's Gulf of Mexico deepwater assets in 2005. Prior to agreeing to join Global, Mr. Hill was responsible for supervising execution of the IPO of Statoil's Energy & Retail division in the latter part of 2010.

Previously Mr. Hill set up the international business of Waterous & Co as Managing Director in the UK, and before that worked for Enterprise Oil plc for many years, latterly as Head of International New Ventures. Mr. Hill started in the energy industry with Total Oil Marine and is a UK qualified Solicitor, having commenced his career with Clifford Chance. He holds an MA in Law from Oxford University.

Mr. Hill's immediate focus will be to expedite the exploration of the highly prospective project located in Namibia upon completion of the acquisition by Global of Jupiter Petroleum Limited, which is expected to occur in late August 2011.

The Board is delighted that an executive with Mr. Hill's reputation and market standing has agreed to join the Company at such a pivotal time in the development of its oil and gas projects. Mr. Hill is expected formally to commence his role with the Company at the beginning of September 2011.

Oil & Gas Post

Promote Your Page Too

Pacific Rubiales Appoints Senior VP, Investor Relations

- Pacific Rubiales Appoints Senior VP, Investor Relations

Tuesday, August 02, 2011
Pacific Rubiales Energy Corp.

Pacific Rubiales announced the appointment of Christopher (Chris) J. LeGallais as the Company's Senior Vice President, Investor Relations, effective September 2, 2011. In this position he will report to both the Chief Executive Officer and the President of the Company.

Chris LeGallais is a highly experienced and respected oil and gas executive with a diverse technical and business background. During the past 13 years, he has held various increasingly senior positions at Talisman Energy Inc. as it grew into Canada's preeminent global O&G Independent. Since 2004, Chris has headed up the Investor Relations Group, building the capacity of the team and function, which is recognized as one of the best in the industry. Prior to Talisman, Chris worked in various senior executive, business development, and geotechnical positions at a number of successful Canadian and international junior and senior energy exploration companies. Chris holds a Master's Degree in Geology from McGill University.

Ronald Pantin, Chief Executive Officer, stated "We are pleased to secure someone of Chris' stature and experience as our investor relations executive. This is a new executive position and represents an important step in the Company's initiative to develop a fully integrated in-house investor relations function. His mandate will be to align external messaging with the operational and technical strengths of the Company, maintaining full disclosure transparency and ensuring a complete understanding of the Company's assets, operations and business attributes within the financial markets."

Chris LeGallais commented, "I am delighted to join Pacific Rubiales, a company I have come to know and respect. It has a record of growth achievement, with an international focus, and has assembled a unique and valuable portfolio of business opportunities. I look forward to working with my new colleagues, senior executives and the Board, and in making a positive contribution to their continuing success in the coming years."

For the past two years, The Capital Lab has provided investor relations services to the Company and will continue to provide advisory and transition services to Mr. LeGallais. Jose Francisco Arata, President of Pacific Rubiales, commented "The Capital Lab has provided outstanding service to our Company, its investors and the analyst community for which we would like to thank them and in particular, its President, Belinda Labatte. They have been, and will continue to be, an excellent resource for the Company."

Oil & Gas Post

Promote Your Page Too

Toyota July Auto Sales Slip 20%

- Toyota July Auto Sales Slip 20%

Aug 2, 2011

Toyota Motor Sales USA Inc.(NYSE:TM) announced Tuesday that its July U.S. sales fell 22.7% as it continued to deal with parts shortages stemming from the March earthquake and tsunami in Japan.

Toyota sold 130,802 vehicles in July, compared to the 169,224 in the same month last year.

The Japanese automaker sold 27,016 of its Camry car, 22.9% down from 35,058 in July 2010.

Corolla sales dropped 35.7% to 17,577, while sales of the Prius hybrid, which is made only in Japan, tumbled 43.9% to 7,907.

Sales of the Sienna minivan rose 2.3 percent to 10,620.

Toyota Motor has a potential upside of 12.7% based on a current price of $81.96 and an average consensus analyst price target of $92.4.

Oil & Gas Post

Promote Your Page Too

'Fracking' Comment Period Firm

- 'Fracking' Comment Period Firm

Tuesday, August 02, 2011
Times Union, Albany, N.Y.
by Brian Nearing

The state Department of Environmental Conservation is unlikely to extend its 60-day comment period on proposed rules to control natural gas hydrofracking, Commissioner Joe Martens said Monday.

Speaking before the Times Union Editorial Board, Martens said anyone who wants to comment on the 1,100-page draft rules -- released last month -- are actually getting more than 60 days to react since the draft won't be finalized until later this summer, which will start the 60-day period.

"I am inclined to stick with the 60 days," said Martens.

In 2009, when DEC first unveiled proposed draft rules on hydrofracking, there were nearly 14,000 comments for the department to consider, prompting the department to come back with the revised draft rules.

Martens said the department will consider some changes before rules are made final, including whether to increase the financial security that well drillers must provide to pay for the cost of unforeseen environmental cleanups.

Currently, a well owner must post only $5,000, usually in the form of a bond. That amount has not changed in decades, and some opponents to hydrofracking said it is woefully inadequate to deal with spills or other potential pollution from wells.

Such possible changes to the draft regulations, as well as an examination of how DEC will handle enforcement of its rules, will be examined by a 12-member advisory group appointed by Gov. Andrew Cuomo.

Martens said the first meeting of that group is being scheduled for later this month.

He said the advisory group does not have a deadline for making its recommendation. That means the public comment period could end before possible changes offered by the advisory board would be made public.

Copyright (c) 2011, Times Union, Albany, N.Y.

Oil & Gas Post

Promote Your Page Too

EDITORIAL: No, Drillers Already Paying Their Way

- EDITORIAL: No, Drillers Already Paying Their Way

Tuesday, August 02, 2011
The Philadelphia Inquirer
by Matthew J. Brouillette

Despite a deep recession, Marcellus Shale gas drilling in Pennsylvania has created tens of thousands of jobs, rescued many landowners from foreclosure and bankruptcy, and generated fortunes for farmers, laborers, and businesses. Nevertheless, some have stoked fears of environmental disaster and spread the myth that drillers aren't paying their share of taxes. Such attacks have led many to the mistaken conclusion that the industry should pay a special tax or what's euphemistically called an "impact fee."

While a tax on natural gas would not drive the industry out of the state, it would be passed on to residents -- folks like Jim VanBlarcom, a Bradford County dairy farmer who testified that leasing a small portion of his land for drilling enabled him to double his herd. He's not alone: Pennsylvania's gas industry is estimated to have produced more than $7 billion in lease and royalty payments since 2006. Moreover, it's given rural areas thousands of new jobs paying an average annual salary of nearly $70,000.

The influx of new employees means local governments have seen more revenue from the emergency and municipal services tax, which is withheld from workers' paychecks. Other revenue streams have grown, too. Bradford County has received about $1 million from the drilling industry in recording and copying fees alone. And drillers have paid $1.1 billion in state taxes since 2006, according to the Department of Revenue.

But even if local residents and governments are benefiting, some feel the industry should pay more to do business in the Keystone State. This notion is bolstered by a misperception, often promoted by environmental interests, that gas companies avoid taxes through some loophole.

But drillers pay the same taxes as every other business in the state, and those taxes rank among the highest of their kind. Pennsylvania has the 10th-highest state and local tax burden in the nation, and the second-highest corporate income-tax rate in the world.

That drillers pay the same taxes as other businesses isn't good enough for some, though. They argue that gas extraction imposes environmental and other costs that justify an extraordinary tax. Most of us care about the environment and believe businesses should pay for the government they use, but those calling for an additional tax or fee on drillers fail to understand the industry's true impacts or contributions.

In recommending an impact fee, Gov. Corbett's Marcellus Shale Advisory Commission provided anecdotal examples of potential drilling impacts. But these must be compared with what gas companies contribute.

In addition to state and local taxes, gas drillers voluntarily spent more than $200 million on road repairs and improvements in 2010 alone. Ultimately, Pennsylvania law ensures that drilling companies, not taxpayers, are responsible for whatever environmental and infrastructure damage they cause. And the fees drillers pay to the state Department of Environmental Protection cover the cost of inspections.

Some of the pro-tax pressure is coming from special interests that want more funding for pet programs such as "Growing Greener." Set to lose its funding this year, the program subsidizes a wide range of projects, from alternative energy to downtown redevelopment. In fact, some of the groups pushing for the tax have received such subsidies. No matter how lawmakers or lobbyists sell it, though, Growing Greener has nothing to do with drilling impacts.

Despite the manufactured fears of disaster and cheers for a unique tax on drilling, Pennsylvania can balance economic growth with environmental protection without imposing a new tax. The true impacts of drilling can be addressed by charging drillers fees for services provided, requiring them to be insured for environmental costs, and other measures.

Any impact fee must identify specific costs tied to drilling and demonstrate that they are not already being covered. Otherwise, another tax or fee on the industry is really just a punitive tax on Pennsylvania's people and prosperity. Matthew J. Brouillette is president and CEO of the Commonwealth Foundation.

Copyright (c) 2011, The Philadelphia Inquirer

Oil & Gas Post

Promote Your Page Too

Pan Orient's Well All Wet in Indonesia

- Pan Orient's Well All Wet in Indonesia

Tuesday, August 02, 2011
Pan Orient Energy Corp.

Pan Orient reported that the SE Tiung-1 well, in which the Company holds a 97 percent working interest, is currently being plugged and abandoned at a true vertical depth of 5,973 feet. Oil shows and good quality sands were encountered within the primary Lower Talang Akar target horizon but wire line logging indicated the zone to be water bearing. The secondary objective of the Gumai and Upper Talang Akar formation sands were also present, but interpreted as being water bearing.

SE Tiung-1 was drilled on budget, but due to the repeated down time, rig repairs and resultant delays experienced during the drilling of Tuba Obi Utara-1 and SE Tiung-1, the decision has been made to release this drilling rig and defer the drilling of Betano-1 exploration well for cost and safety considerations.

Preliminary approval has been received for three additional wells planned for the Batu Gajah PSC (Tuba Obi Utara-2, Kemala-1 and Shinta-1) later in 2011, with final approval expected this week. The company is currently focused on accelerating the commencement of the drilling of these additional wells (two exploration wells and one appraisal well) with drilling to commence perhaps as early as October 2011.

The results at SE Tiung-1 have no bearing whatsoever on the prospectivity of the upcoming three well program and we remain confident in the overall hydrocarbon potential of the Batu Gajah PSC.

Oil & Gas Post

Promote Your Page Too

Logan Competes Sale of Front-End Seismic Services Division

- Logan Competes Sale of Front-End Seismic Services Division

Tuesday, August 02, 2011
Logan International Inc.

Logan announced that it closed the sale of substantially all of the assets and operations of its front-end seismic services division, Destiny Resources Services ("Destiny"), to certain subsidiaries of Clean Harbors, Inc.

Mr. David Barr, Logan's Chief Executive Officer, stated, "The completion of this transaction enables us to commit all of our management and financial resources to the growth and profitability of our downhole tool segment. The sales proceeds strengthen our balance sheet and increase our liquidity and, as a result, better positions us to pursue acquisition opportunities as well as grow our existing operations. The opportunity to realize Destiny's full value and to invest the proceeds in our core business was a key factor in selling this division."

Oil & Gas Post

Promote Your Page Too

Encore Energy Spins Off Operating Co in Tx.

- Encore Energy Spins Off Operating Co in Tx.

Tuesday, August 02, 2011
Encore Energy Inc.

Encore Energy announced plans to form an operating company in Texas.

Encore Energy, Inc., through a wholly owned subsidiary, has plans to form an operating company to supervise its drilling, completion and other future field activities in Texas.

"The purpose of this company is to work directly with contractors and oilfield service companies to supervise our future projects in Central East Texas," said Steve Stengell, Encore's President and CEO. Mr. Stengell and the other members of Encore's management team have previously served as an operator in both Texas and Oklahoma and have made several horizontal oil and natural gas discoveries in Central East Texas over the last several years.

"Horizontal drilling activity in Central East Texas remains very strong," added Stengell.

Encore is a proud member of the IPAA Independent Petroleum Association of America, Society of Petroleum Engineers and NFIB National Federation of Independent Businesses.

Oil & Gas Post

Promote Your Page Too

Foster Wheeler's 2Q Profit Up 17%

- Foster Wheeler's 2Q Profit Up 17%

Tuesday, August 02, 2011
Foster Wheeler AG

Foster Wheeler reported net income for the second quarter of 2011 of $63.3 million, or $0.52 per diluted share, compared with $58.9 million, or $0.46 per diluted share, in the second quarter of 2010.

Net income in both quarterly periods was impacted by asbestos-related provisions as detailed in an attached table. Excluding such items from both quarterly periods, net income in the second quarter of 2011 was $65.3 million, or $0.53 per diluted share, compared with $61.2 million, or $0.48 per diluted share, in the year-ago quarter.

For the first six months of 2011, net income was $86.3 million, or $0.70 per diluted share, compared with $130.9 million, or $1.02 per diluted share, for the first six months of 2010.

Foster Wheeler's Interim Chief Executive Officer, Umberto della Sala, said, "The company reported a 17% increase in net income in the second quarter of 2011, relative to the average quarter of 2010. The results were attributable to the very strong performance of the company's Global Power Group, which reported sharp increases in scope revenue and scope EBITDA relative to the average quarter of 2010."

In addition, net income for the second quarter of 2011 was aided by the continued benefit of a favorable effective tax rate.

Global Engineering and Construction (E&C) Group
  • EBITDA in the second quarter of 2011 was lower than the average quarter of 2010 due to a reduced volume of work executed, lower margins on scope revenues and costs associated with an unfavorable utilization rate. On a sequential-quarter basis, EBITDA and EBITDA margin on scope revenue improved from the first-quarter levels of $41.7 million and 11.6%, respectively, due in part to favorable timing and mix of work executed.
  • Scope operating revenues in the second quarter of 2011 were below the average quarter of 2010, primarily due to a lower volume of work executed.
  • New orders booked in Foster Wheeler scope in the second quarter of 2011 were below the level of the average quarter of 2010, reflecting the slippage of expected new awards.
  • EBITDA in the second quarter of 2011 was 65% above the average quarter of 2010 due to higher scope revenues and margins. EBITDA during the quarter was aided by lower than expected costs on projects for which the company is providing on-site erection of boilers. Also contributing to EBITDA in the second quarter of 2011 was an increase in equity earnings from the company's interest in a power plant in Chile, which benefitted from high electric power rates during the quarter.
  • Scope new orders in the second quarter reached a near-record level -- due mainly to the booking of a contract for what are expected to be the largest and most advanced supercritical CFB (circulating fluidized bed) boilers in the world.
  • Scope operating revenues in the second quarter of 2011 were 62% above the average quarter of 2010, reflecting the increased volume of boiler work.

In commenting on the market outlook for the company's two business units, Mr. della Sala said, "Markets seem to be improving for both of our business groups, although the pace of that improvement is slightly better in the power sector. Even so, all of our end markets remain competitive."

He added, "We are raising our full-year EBITDA margin guidance for the Global Power Group (GPG) to 17%-19%. GPG is having a strong year, and we further expect the group's 2011 revenues to be sharply higher than 2010. We are closely tracking firm prospects in a number of regions. However, the timing of award decisions is uncertain, and some of these prospects could slip into 2012, which would likely result in scope backlog at the end of 2011 being roughly comparable with year-end 2010."

Mr. della Sala continued, "In our Global E&C Group, we are maintaining full-year EBITDA margin guidance of 13%-15%, but we still expect to see quarterly volatility, with the third-quarter margin likely lower than the second quarter. We expect scope revenues to trend upward in the second half of 2011, but we now believe that full-year scope revenues will likely be essentially flat as compared to full-year 2010. Based on the expected timing of awards, we expect scope backlog to show growth in 2011 from year-end 2010 levels."

Oil & Gas Post

Promote Your Page Too

Apache Argentina Reaches TD at Huacalera Shale Well

- Apache Argentina Reaches TD at Huacalera Shale Well

Tuesday, August 02, 2011
Americas Petrogas Inc.

Americas Petrogas announced that the Hua.x-1 well on the Company's Huacalera Block, operated by the Company's joint venture partner, Apache Argentina, has reached total depth (TD) of 4100 meters (13,450 feet). A full suite of logs, including image logs, has been run and production casing has been successfully set all the way to TD.

The primary target Vaca Muerta Shale Formation (531 meters or 1,742 feet approximate gross thickness) has initial indications of overpressure. Gas shows were encountered in the Mulichinco Formation (140 meters or 459 feet approximate gross thickness), the Quintuco formation (414 meters or 1,358 feet approximate gross thickness) through the Vaca Muerta Formation and into the Tordillo Formation, and these results were reported to the appropriate government authorities.

The comprehensive suite of logs and mud log information will now be integrated and interpreted. The vertical cores, sidewall cores and rock cuttings have been sent to 3 different laboratories for analysis to measure the petrophysical and geochemical characteristics of the samples, both shales and sands. The results, which are expected during 3Q-2011, will provide fracking and testing options for tight sands and shale gas or oil reservoirs.

This is the first Vaca Muerta Shale gas pilot exploration well drilled in the 250,000 acre (390 sections) Huacalera block which lies along the emerging shale gas and shale oil play corridor in the western part of the Neuquen Basin, Argentina. As previously stated, Americas Petrogas has a 39% Working Interest in this large block and is carried 100% on the Hua.x-1 well by Apache.

Commenting on the drilling of this well, Mr. Barclay Hambrook, President and CEO, stated, "We are very pleased that the well has been drilled and cased successfully and, with Apache, we are looking forward to the results of fracking, testing and further exploration on this very large and promising block. Huacalera occupies a strategic location almost midway between our 5 northern blocks and 3 large southern blocks along the emerging shale play corridor."

Oil & Gas Post

Promote Your Page Too

GM July Sales Rise 8%

- GM July Sales Rise 8%

Aug 2, 2011

General Motors Company (NYSE:GM) says its U.S. sales climbed almost 8% last month, led by fuel-efficient vehicles such as the Chevrolet Cruze car.

But GM's increase may not be the standard. Analysts foretell that sales of new cars and light trucks in the U.S. rose slightly from a year earlier as few deals and economic worries kept car shoppers home.

Vice President of Sales Don Johnson reports that unemployment, low consumer confidence and uncertainty over the federal debt ceiling scared some buyers off.

GM sold 214,915 vehicles in July, including almost 25,000 Cruzes. That could potentially make it America's top-selling car for the second straight month.

Sales of the Chevrolet Equinox and GMC Terrain small crossovers rose nearly 80%.

General Motors has a potential upside of 56.8% based on a current price of $27.71 and an average consensus analyst price target of $43.45.

Oil & Gas Post

Promote Your Page Too

Report: E&P Capital Spending to Rise 12% in 2011

- Report: E&P Capital Spending to Rise 12% in 2011

Tuesday, August 02, 2011
Rigzone Staff
by Karen Boman

Capital spending on exploration and production (E&P) by 139 publicly traded oil and gas companies is expected to rise by 12 percent to $406 billion in 2011. Spending growth this year is largely fueled by strong oil prices and builds on gains of 19 percent in 2010, according to a new report by IHS.

While the increase is less than the 19 percent increase seen last year, oil and gas companies, which spent considerably less during the economic downturn of two years ago, are continuing to increase their upstream portfolio investments, particularly for oil-weighted projects, said Aliza Fan Dutt, senior analyst at IHS and author of the IHS Herold Global E&P CAPEX Review.

"Despite recent volatility and a wobbly economy recovery, oil prices remain relatively strong, which supports higher capital spending. In addition, investments in oil and unconventionals continue at a rapid clip, which conventional gas outlays remain relatively depressed."

The shift to drilling on oil and liquids-rich properties that began in 2010 accelerated through the year and continues today, according to the report. According to Fan Dutt, "those companies that shifted their portfolios earlier will benefit more than those that moved more slowly." Fan Dutt cited EOG Resources as an example of such a company. EOG, a natural gas producer, shifted to the oil side much earlier than most of its peers. AS a result, oil now contributes 60 percent of the company's revenues; EOG is posting strong earnings growth."

"Cost inflation will continue to be a key issue, with more companies competing for oil services and equipment during a time of elevated oil prices," said Fan Dutt. "Cost containment will be particularly important for natural gas-weighted producers as they struggle to achieve strong margins amid weak natural gas prices."

Mid-size U.S. E&P companies should increase spending by 25 percent, while U.S. integrated oil companies are expected to reduce their spending rate to 14 percent this year. However, as a group, integrated oils are planning to continue their massive investments in oil and gas projects worldwide.

Marathon Oil Corp., the most aggressive of the integrated U.S. companies, is ramping up spending by 37 percent as it drills on expanded U.S. acreage in the Anadarko Woodford play, the Niobrara play in the Denver-Julesberg Basin in Colorado and Wyoming and in its Bakken shale position.

The largest North American E&Ps will increase capital outlays by only three percent, which will be buttressed by spending on unconventional resources in shale basins, according to the report. "For example, Pioneer is increasing its spending by 53 percent, with its expansive holdings in the Spraberry field and Eagle Ford shale play, where it was an early entrant."

Global integrated oil companies will continue to make massive investments in oil and gas projects worldwide with a "muted" nine percent spending increase, down slightly from last year. Canadian integrated oil companies are slightly more eager to spend with a planned increase of 13 percent. Husky Energy leads this group with a 44 percent increase on operations mainly in Western Canada and offshore Canada's east coast.

Spending by integrated oil companies outside North America is expected to rise by 13 percent in 2011, the same growth rate seen last year. IHS attributed the increase to strong spending in Latin America and Russia. Colombia's state-owned oil company Colombia will spend 56 percent more this year on top of a 34 percent increase last year. Brazil's state energy company Petrobras also continues to invest heavily on its upstream portfolio with an estimated 24 percent increase. Additionally, Russia's Lukoil is expected to spend 55 percent more this year.

Oil & Gas Post

Promote Your Page Too

Trina Solar Shares Slip

- Trina Solar Shares Slip

Aug 2, 2011

Shares of Trina Solar Ltd.(NYSE:TSL) fell over 6% Tuesday in premarket trading after the company lowered its expectation for shipments of solar modules and profit margins in the second quarter.

Trina, a Chinese solar module maker, reported that it expects to report module shipments in the range of 395 to 397 megawatts for the three month period ended June 30. The company formerly said it would ship between 430 and 450 megawatts. Overall profit margins also were lowered to between 17 and 17.5%, compared with earlier forecasts of margin percentages in the "low 20s."

Company officials said shipments and profit margins suffered as demand for solar modules slowed down, in part because Italy cut solar subsidies.

Chairman and CEO Jifan Gao said, "We expect a significant improvement in production costs and an increase in shipment volumes in the third quarter."

Trina retained its prediction for 2011 shipments between 1.75 and 1.8 gigawatts. That's a rise of 65.6 to 70.3% from last year. The company will report its second-quarter results on Aug. 23.

Oil & Gas Post

Promote Your Page Too

U.S. Consumer Spending Stalled In June

- U.S. Consumer Spending Stalled In June

Aug 2, 2011

U.S. consumer spending stalled in June as a drop in hiring caused households to cut back, according to the Commerce Department in a report on Tuesday.

In June purchases June rose 0.1% after not much change, while personal incomes likely increased 0.2% in June, the smallest gain in seven months.

Because of the lack of jobs in combination with wage gains have failed to keep pace with inflation, it raises the risk of further cut backs on consumer spending that accounts for 70% of the world's largest economy.

The Gross domestic product increased to a 1.3% annually rate from April in the course of June after a 0.4% gain in the previous quarter that was less than what was earlier expected. Household spending increased 0.1%, the weakest performance since the Q2 of 2009, the end of the last recession.

Federal Reserve Chairman Ben S. Bernanke said in semi-annual testimony to Congress on July 13, "Wages are very stagnant and that's affecting consumer spending and consumer confidence. There is also ongoing uncertainty about the durability of the recovery."

Oil & Gas Post

Promote Your Page Too

Diaz Cases 1st Lloydminster Well

- Diaz Cases 1st Lloydminster Well

Tuesday, August 02, 2011
Diaz Resources Ltd.

Diaz Resources has successfully drilled and cased the Lloyd HZ 105/15-18-48-1W4 well. This is the first of four horizontal Lloydminster heavy oil wells which Diaz plans to drill in the 3rd quarter of 2011.

The Lloyd HZ 105/15-18-48-1W4 well encountered 709 meters of oil saturated porous sand in the Lloydminster zone. Based on geological samples, the reservoir section encountered in this well appears to be of higher quality than the existing offset Lloyd HZ 100/15-18-48-1W4 well, which has produced over 18,000 barrels of oil, to date.

The second well, in the current Lloydminster drilling program, Lloyd HZ 106/15-18-48-1W4, began drilling on July 30, 2011. Both wells are anticipated to be on production in approximately 2 weeks time, after the drilling rig has moved off the production lease site.

Oil & Gas Post

Promote Your Page Too

Prep Work Back On Track at Imperial's SWDF

- Prep Work Back On Track at Imperial's SWDF

Tuesday, August 02, 2011
Imperial Resources Inc.

Imperial Resources announced that preparation work for bringing its Green Tide Salt Water Disposal Facility ("SWDF") back on line is on schedule.
  • Green Tide has contracted a drilling consultant with over 30 years relevant experience to advise on drilling and completion operations;
  • Appropriate contractors are being engaged for mud logging, directional work, casing the well, verifying good cement bonds, and all other necessary experts are scheduled to be on hand ready for rig arrival;
  • Electrical power to the facility should be restored during the course of this week at which point the computer system that manages the surface plant will be tested and upgraded. During this period the pumps will be de-pickled and a number of the transfer pump actuators are likely to be upgraded. This and any other necessary work will be carried out in parallel with the wellbore deepening to ensure that the facility is brought back on line as soon as is practically possible;
  • A marketing plan is being developed and sales staff identified so that Green Tide may commence disposal sales operations as soon as drilling operations on the well are completed.

The drilling rig is expected to arrive over the course of the next three weeks after release from prior commitments elsewhere.

The aim is to deepen the Green Tide SWDF well from 3,100 to 8,500 feet to establish the well around 400 feet to 600 feet into the Ellenburger formation. Casing will then be cemented between about 7,500 and 8,500 feet and the well drilled ahead to ideally create about 2,000 feet of open hole exposure in the Ellenburger so as to maximize disposal capacity. Subject to success, commercial operations will commence immediately targeting full disposal capacity of 15,000 barrels per day as quickly as possible. At full capacity, the Company believes the Green Tide SWDF has the potential to generate significant cash flow at relatively low operating costs.

The Green Tide SWDF

The Green Tide SWDF is conveniently located for the disposal of large volumes of salt water generated from essential fracture stimulation operations on Barnett Shale gas wells. There are approximately 6,000 such Barnett wells within 20 miles of the SWDF.

Imperial plans to reopen Green Tide to dispose of up to 15,000 barrels of salt water a day. The Company's acquisition and development of the low run-time Green Tide assets and disposal permit is expected to save in excess of $5,000,000, compared to a new build cost.

Green Tide is one of two key projects identified as transformational for Imperial (the other being the Company's Oklahoma project).

Oil & Gas Post

Promote Your Page Too

Shell, CNPC Well Manufacturing System to Debut in 2013

- Shell, CNPC Well Manufacturing System to Debut in 2013

Tuesday, August 02, 2011
Rigzone Staff
by Karen Boman

Shell in 2013 plans to begin operations at its first field utilizing its automated well manufacturing system, which is under development through its joint venture with China National Petroleum Corporation (CNPC).

Through its 50-50 joint venture with China National Petroleum Corp. announced earlier this year, Shell unveiled plans to develop a high automated Well Manufacturing system to drill and complete wells. This well system approach, like a reverse assembly line, will feature drilling and completion trucks, equipped with tires for travel in various terrain year-round, moving from well site to well site in a system.

While workers will drive the trucks to the sites, the algorithms and other information needed for drilling will be sent via computer to the drilling trucks. Automated drilling will be directed by ScadaDrill, Shell's proprietary software program. The wells will be drilled via a three-pronged approach; progress will be monitored via satellite, sending information back to workers monitoring the wells. While the well can be controlled from the location from which it is being monitored, the autonomous computer that runs the drill will shut down the drilling automatically. Production will be consolidated into a hub.

Shell's automated drilling system approach offers numerous benefits, including lower well costs and ability to drill numerous wells in a standard, repeatable, safer manner. While no complete system has yet been deployed, early testing of automated drilling in North America and the Netherlands has shown positive results, and the approach is a good fit for drilling and completing large-scale coalbed methane and heavy oil projects featuring numerous wells, said Peter Sharpe, Shell's executive vice president of wells.

Growing energy demand, which is expected to double worldwide by 2050, has created significant demand for skilled workers; this growth is occurring so quickly, it is proving difficult to train enough workers to meet demand. Using an automated system will mean fewer workers are needed and operations made safer by keeping workers away from hazardous areas. Drilling operations will also create a smaller footprint that existing drilling sites. Other benefits shown in early tests include faster drilling time, more accurate drilling, and fewer bit trips.

The growth in onshore drilling activity focused on the "new conventional" resources of tight gas, shale gas and coalbed methane have changed the dynamics of drilling activity. Drilling activity has shifted from fewer complicated wells as seen in offshore drilling -- which Sharpe likened to Ferrari mechanics building a single well -- to projects with less complex but larger quantities of wells. As a result, the percentage of project capital expenditures focused on drilling is expected to grow while the percentage directed to facilities is expected to shrink, said Sharpe.

Drilling mud will be mixed at a central plant at the drilling site in order to minimize the footprint of drilling and production activity. The configuration of the production facilities will depend upon whether coalbed methane, heavy oil or shale gas is being targeted. In the case of coalbed methane wells, which produce a lot of water before gas begins producing, the water would be treated through reverse osmosis at a central facility. In Australia, home to a number of coalbed methane projects, more water is produced that will actually be used; the excess is sent to local farms for irrigation purposes, said Lance Cook, vice president of wells technology deployment and technical services at Shell.

In the case of heavy oil, a steam flood would be used to enhance oil production, like a heating up a jar of maple syrup to make the syrup flow better, and the central facility would be used to treat mud. After the initial wells are drilled, the wellheads will then be hooked up to steam from a central facility for production purposes.

The central facility configuration will change even with tight gas. In nearly all the cases, the product will be carried to market via pipeline to either an LNG plant or into a large pipeline system such as Henry Hub.

Sharpe said CNPC's strong technology background and global manufacturing capability make it an ideal partner for Shell, which is making a significant investment into the joint venture. The system will unlock resources that otherwise might not be accessible. "We want to make a step change in terms of business costs not only through technology but a change in business model," Sharpe said.

Scale and longevity are the parameters for determining whether to use the well manufacturing system approach. It wouldn't make sense for a project with 10 or 20 wells, but for projects with potentially thousands of wells to be drilled over a number of years, it would be a good fit.

Sharpe said the company will continue to use its traditional approach of utilizing drilling contractors and offshore service companies for offshore projects or projects where the manufacturing system approach doesn't make sense economically. Shell may also tender for some component parts for its well manufacturing systems. However, Sharpe sees huge opportunity for its custom-design drilling approach, with plans to drill 430 tight gas wells in the U.S. this year and more than $20 billion in investment in the sector over the next five years and between 20,000 and 30,000 coalbed methane wells expected to be drilled worldwide in the next decade.

Oil & Gas Post

Promote Your Page Too

Black Raven Finalizes Stake in Adena Field

- Black Raven Finalizes Stake in Adena Field

Tuesday, August 02, 2011
Black Raven Energy Inc.

Black Raven has completed the purchase of an 80% working interest in the Adena Field, consisting of 18,760 gross acres in Morgan County, Colorado, for a purchase price of $15.75 million. The Company will operate the field. The Company has entered into an agreement with a strategic partner which will provide geological, engineering, and management services associated with this project and will earn 24% of the Company's working interest after payout of all costs, including financing.

The Adena Field produces oil from a waterflood in the J sand and conventionally from the D sand. The Company estimates that the proved and probable oil reserves associated with this field are in excess of 3 million barrels from both formations. In addition, a gas cap in the J sand is estimated to hold more than 3 billion cubic feet of recoverable natural gas. Having produced 75 million barrels of oil equivalent from the J sand since its discovery in 1953, the Adena Field is one of the most prolific oil fields in the history of the D-J Basin. The majority of this field was abandoned during the mid 1980's after oil prices collapsed, and only a small portion has been re-activated. The Company intends re-activate the J sand waterflood and exploit the D sand, which has been largely untapped.

Black Raven's CEO, Thomas E. Riley, commented, "We are very pleased to complete this acquisition. We have been working on this for several months, and have been very pleasantly surprised at the wealth of opportunities presented by this acquisition. For a small company with a great technical staff, this field will provide growth in oil and natural gas production for the foreseeable future."

The acquisition was financed by Carlyle Energy Mezzanine Opportunities Fund, New York, New York. The Company was advised on the acquisition and financing by Stifel Nicolaus Weisel.

Oil & Gas Post

Promote Your Page Too

US Natural Gas Adds Acreage in W. Virginia

- US Natural Gas Adds Acreage in W. Virginia

Tuesday, August 02, 2011
US Natural Gas Corp.

US Natural Gas has acquired leases totaling approximately 250 acres and three producing natural gas wells in Wayne County, West Virginia.

The Fuller No. 691 well was drilled and completed in 1962 to a depth of 3608' with production occurring from both the Coniferous and McKenzie-Keefer formations. The Company intends on replacing the above ground completion components prior to placing the No. 691 well into production.

The McGee No. 2 well was drilled and completed in 1959 to a depth of 3610' with production occurring from the Coniferous formation. The Company will install new well head and above ground completion components prior to placing this well into production.

The McGee No. 622 well was drilled and completed in 1960 to a depth of 1869'. The well was later deepened to a depth of 3944' with production occurring from both the McKenzie-Keefer and Tuscarora Sandstone formations. The Company will swab this well of any fluids within the wellbore and then place the well into production.

The Company's projected daily combined production from the three wells is on average 60 mcf/day. At current pricing for natural gas of $4.50/mcf, the Company's conservative two year revenue estimate is $200,000.

"The addition of these three wells in Wayne County, West Virginia compliments our portfolio of producing properties in the area," stated Wayne Anderson, President of US Natural Gas Corp. "It is our goal to have all required work completed and the wells tied into our gathering system prior to mid-September with revenue generated immediately thereafter."

Oil & Gas Post

Promote Your Page Too

Rowan 2Q Earnings Jump on LeTourneau Sale

- Rowan 2Q Earnings Jump on LeTourneau Sale

Tuesday, August 02, 2011
Rowan Companies Inc.

For the three months ended June 30, 2011, Rowan Companies, generated net income from continuing operations of $44.4 million or $0.35 per share, compared to $83.4 million or $0.73 per share in the second quarter of 2010.

Income from continuing operations during the second quarter of 2011 included a $6.1 million pre-tax charge related to litigation settlement and $1.4 million of gains on asset disposals, for a net reduction of $4.7 million or $0.03 per share after tax. The second quarter 2010 results included a $4.5 million pre-tax charge for the expected cost to terminate the Company's agency agreement in Mexico, or $0.02 per share after tax.

Income from discontinued manufacturing and land drilling operations totaled $421.5 million in the second quarter of 2011 or $3.30 per share, including the after-tax gain on the sale of LeTourneau of $424.5 million, compared to $7.5 million or $0.07 per share in the second quarter of 2010. The after-tax cash proceeds from the sale of LeTourneau are estimated to be approximately $865 million.

Net income totaled $465.9 million or $3.65 per share in the second quarter of 2011, compared to $90.9 million or $0.79 per share in the second quarter of 2010.

Rowan's offshore drilling revenues were $223.5 million in the second quarter of 2011, compared to $282.2 million in the second quarter of 2010, as the impact of lower average day rates more than offset higher activity resulting from rig fleet additions between periods. The Company's gross offshore drilling margin was 53% of revenues in the second quarter of 2011, down from 63% in the prior-year quarter.

Matt Ralls, President and Chief Executive Officer, commented, "Over the past three months, we made substantial progress on several strategic fronts. We completed the sale of our manufacturing business and reached an agreement to sell our land drilling division, enabling us to focus exclusively on our core offshore drilling business. We significantly expanded the future growth prospects of that business by ordering two ultra-deepwater drillships that we believe will be the most capable in the global fleet upon delivery. Our first two N-class jack-up rigs commenced operations in the North Sea in June and we achieved our objective of entering the important Southeast Asia market with commitments starting later this year in Malaysia and Vietnam – Rowan's first work in that area in almost two decades. Further, over the past three months we increased our backlog of drilling revenue commitments by 67% to $2.6 billion.

"Our financial performance during the second quarter was significantly impacted by the effects of rig start-ups, several of which have occurred or will occur later than we expected due largely to delays related to more rigorous customer acceptance tests and regulatory approval processes and civil unrest in the Middle East."

Oil & Gas Post

Promote Your Page Too

Forest Oil Topped Q2 Estimates, Top Line Up 14%

- Forest Oil Topped Q2 Estimates, Top Line Up 14%

Aug 2, 2011

Forest Oil (NYSE:FST) reported Q2 EPS of $0.36, ahead of consensus estimates of $0.30 per share. Revenues rose 14.4% year-over-year to $238.1 million, topping consensus estimates of $224.8 million.

Forest Oil has a potential upside of 22.5% based on a current price of $26.4 and an average consensus analyst price target of $32.33.

Forest Oil is currently below its 50-day moving average (MA) of $26.72 and below its 200-day MA of $33.15.

Oil & Gas Post

Promote Your Page Too

SM Energy Reported Mixed Q2 Results, Top Line Up Over 78%

- SM Energy Reported Mixed Q2 Results, Top Line Up Over 78%

Aug 2, 2011

SM Energy (NYSE:SM) reported Q2 EPS of $0.91, ahead of consensus estimates of $0.53 per share. Revenues rose 78.5% year-over-year to $377.9 million, topping consensus estimates of $307.5 million.

SM Energy has a potential upside of 13.8% based on a current price of $75.56 and an average consensus analyst price target of $86.

SM Energy is currently above its 50-day moving average (MA) of $70.38 and above its 200-day of $63.32.

Oil & Gas Post

Promote Your Page Too

Marathon Oil Reports $3.87B in 2Q11 Revenue

- Marathon Oil Reports $3.87B in 2Q11 Revenue

Tuesday, August 02, 2011
Marathon Oil Corp.

Marathon Oil reported second quarter 2011 net income of $996 million, or $1.39 per diluted share. Net income in the second quarter of 2010 was $709 million, or $1.00 per diluted share. On June 30, 2011, Marathon Oil completed the spin-off of its Refining, Marketing and Transportation business, now reported as discontinued operations and excluded from segment income; as a result, income from continuing operations will be best suited for comparison. For the second quarter of 2011, adjusted income from continuing operations was $689 million, or $0.96 per diluted share, compared to adjusted income from continuing operations of $440 million, or $0.62 per diluted share, for the second quarter 2010. Second quarter revenue in 2011 was $3.87 billion, compared to $2.9 billion in 2010.

"In the second quarter we successfully completed the spin-off of our downstream business and announced the pending $3.5 billion acquisition of assets in the Eagle Ford shale in Texas," said Clarence P. Cazalot Jr., Marathon Oil's chairman, president and CEO. "Our second quarter financial results, while solid, were negatively impacted by unplanned downtime at key international operations which held our second quarter production to the lower end of guidance. These operations are all back operating at or above expected capacity.

"Importantly, our production forecast and capital expenditure guidance for 2011, excluding acquisitions, remain unchanged. Going forward, we are confident that we have the foundation in place to deliver 5 to 7 percent compound average production growth during the period 2010 - 2016. This strong growth profile is underpinned by our pending top-five acreage position in the core, liquids-rich area of the Eagle Ford, as well as solid positions across the Bakken, Anadarko Woodford and Niobrara liquids-rich resource plays.

"In the Bakken alone we have increased our production growth target and now expect to average 33,000 net barrels of oil equivalent per day (boepd) by 2016. With our plans to significantly increase rig activity to more than 40 rigs over the next 18 months, we see approximately 175,000 boepd of net production across our substantial North America unconventional portfolio by 2016. Additionally, we expect our strong base assets to deliver the cash flow and earnings to fund this growth while we continue to maintain a solid balance sheet and competitive dividend," Cazalot said.

Segment Results

Total segment income was $713 million in the second quarter of 2011, compared to $396 million from continuing operations in the second quarter of 2010.

Exploration and Production

Exploration and Production (E&P) segment income totaled $601 million in the second quarter of 2011, compared to $432 million in the year-ago quarter. The increase was primarily the result of higher liquid hydrocarbon price realizations, partially offset by decreased sales volumes in Libya and Europe and increased depreciation, depletion and amortization (DD&A). Excluding Libya, Marathon Oil was underlifted by 333,000 barrels of oil equivalent (boe) in the second quarter compared to a 1,217,000 boe overlift in the same quarter last year. There was minimal derivatives impact in the second quarter of 2011, while a pre-tax gain of $29 million was included in results for the second quarter of 2010.

E&P production available for sale for the second quarter of 2011 averaged 341,000 boepd, of which 59 percent was liquid hydrocarbons (202,000 barrels per day) and 41 percent was natural gas (833 million cubic feet per day of natural gas). Production was at the low end of guidance largely because of unplanned downtime in Norway, where the Alvheim floating production, storage and offloading (FPSO) vessel was off-line for 13 days to ensure the safe operation of the fire protection system, and to a lesser extent in Equatorial Guinea. Second quarter 2010 production available for sale was 328,000 boepd (excluding 47,000 boepd from Libya).

Marathon Oil estimates third quarter E&P production available for sale will be between 330,000 and 350,000 boepd, which reflects planned maintenance activities in both operated and non-operated assets in the U.K., and includes potential hurricane effects in the Gulf of Mexico. While the mid-point remains unchanged, the range of anticipated full-year E&P production available for sale has been narrowed to between 350,000 and 360,000 boepd, which includes an average 7,000 boepd from Libya. For the E&P segment, Marathon Oil anticipates producing on average 360,000 - 380,000 boepd in 2012, which, due to the uncertain timing of a restart to production from the Company's Libya assets, excludes any Libya production, and excludes the effect of acquisitions or dispositions not previously announced.

E&P sales volumes during the second quarter of 2011 averaged 337,000 boepd, compared to sales volumes of 342,000 boepd (excluding 44,000 boepd from Libya) for the same period in 2010. The slightly lower sales volumes were primarily the result of the timing of liftings from the U.K. and the previously discussed international downtime.

United States E&P reported income of $126 million for the second quarter of 2011, compared to $25 million in the second quarter of 2010. The increase was the result of higher liquid hydrocarbon realizations and sales volumes in the Gulf of Mexico, partly offset by increased DD&A.

International E&P income was $475 million in the second quarter of 2011, compared to $407 million in the second quarter of 2010. The increase reflects the impact of higher liquid hydrocarbon realizations, partially offset by lower sales volumes in Libya, the U.K. and Norway.

Exploration expenses were $145 million for the second quarter of 2011, including $62 million of dry well costs, compared to $125 million in the second quarter of 2010, which included $57 million in dry wells. Dry well costs during the second quarter of 2011 included $38 million related to the Earb exploration well in the Norwegian North Sea, and $22 million incurred subsequent to the first quarter of 2011 related to the Romeo well in the Pasangkayu block offshore Indonesia.

EAGLE FORD: On Marathon Oil's existing acreage, four wells have been drilled and are being tested. During the second quarter, Marathon Oil announced an agreement to acquire Eagle Ford shale assets in south Texas for $3.5 billion, subject to closing adjustments. The transaction is expected to close Nov. 1 with an effective date of May 1. Including this transaction, Marathon Oil's 2011 exit rate from the Eagle Ford is expected to exceed 13,000 net boepd.

BAKKEN: Marathon Oil has seven rigs currently operating in the Bakken in North Dakota, with current production of 16,000 net boepd. Production is expected to increase substantially in the second half of the year as the Company adds a second crew for hydraulic fracturing activities. The Company has 28 gross operated wells awaiting stimulation and plans to fracture stimulate 50 total wells before the end of the year. The Company now expects to exit 2011 with production at approximately 20,000 net boepd, and to reach 33,000 net boepd by 2016.

ANADARKO WOODFORD: Marathon Oil has ramped up to five rigs currently drilling in the Anadarko Woodford in Oklahoma, and expects to have eight rigs operating by the end of the year. The Company is currently producing less than 2,000 net boepd and plans to end the year with production of approximately 5,000 net boepd.

OTHER NORTH AMERICA ONSHORE: In the Niobrara Shale play within the DJ Basin of southeast Wyoming and northern Colorado, results have been positive from two vertical wells drilled. The Company spud its first horizontal exploration well in early July, and expects to add a second rig by September 2011. Marathon Oil continues to acquire seismic data and plans to drill eight to twelve gross wells by year end. The Company also progressed concept selection in its Birchwood in situ project in Alberta, Canada, and anticipates reaching a final investment decision on the first stage of the project in 2012.

GULF OF MEXICO: Marathon Oil has submitted plans to resume drilling on the Innsbruck prospect (Mississippi Canyon Block 993, 85 percent working interest and operator) and is awaiting regulatory approval. In accordance with the federal government's drilling moratorium, drilling on the Innsbruck prospect was suspended in the second quarter of 2010 at a depth of 19,800 feet as compared to a proposed total depth of 29,500 feet. Additionally, due to operator issues at the non-operated host platform, first production from Ozona (Garden Banks block 515) has been delayed until year end. Marathon Oil is completing the well as a single zone oil producer, and expects a 2012 production rate of more than 9,000 net boepd, of which approximately 80 percent is oil. Overall reserve estimates and project costs have remained consistent since project sanctioning. Marathon Oil holds a 68 percent working interest in the Ozona Field, and serves as operator.

POLAND: In late July, Marathon Oil closed a transaction in which Mitsui & Co. acquired a 9 percent working interest in 10 of Marathon Oil's shale gas concessions in Poland. This transaction provides further financial risk mitigation and aligns the Company with another strong partner as Marathon Oil, Mitsui and Nexen prepare to explore and evaluate the full potential of these concessions. Marathon Oil holds a 51 percent working interest in these 10 concessions and serves as operator. The Company plans to spud two wells in the country in 2011.

IRAQI KURDISTAN REGION: Marathon Oil participated in its second discovery in the Iraqi Kurdistan Region during the second quarter. The Swara Tika-1 discovery on the Sarsang block was drilled to a total depth of approximately 12,500 feet and encountered 1,500 feet of gross oil column. Flow rates were established from three zones totaling more than 7,000 barrels of light oil per day (bopd) with associated gas. The flow rates were limited by tubing sizes and testing equipment. Marathon Oil holds a 25 percent working interest in the Sarsang block.

Oil Sands Mining

The Oil Sands Mining (OSM) segment reported income of $69 million for the second quarter of 2011, compared to a loss of $60 million in the second quarter of 2010. A pre-tax gain of $53 million on derivatives was included in results for the second quarter of 2010, but there were no derivative impacts in the second quarter of 2011. The increase in segment income was primarily the result of higher synthetic crude oil sales volumes and higher price realizations as compared to the same quarter last year. Current operating expense per synthetic barrel (before royalties) is $46, compared to $54 in the first quarter of 2011, with the partners continuing to focus on reducing the per barrel cost as production increases for this very long-life asset.

The Jackpine Mine commenced a phased start-up in the third quarter of 2010, and the expanded Scotford upgrader came on line in the second quarter of 2011, increasing overall production. Marathon Oil's second quarter 2011 net synthetic crude production (upgraded bitumen excluding blendstocks) from the Athabasca Oil Sands Project (AOSP) mining operation was 37,000 barrels per day (bpd). This compares to the same period in 2010 when the AOSP produced 15,000 bpd. The Scotford upgrader achieved full capacity in June. Marathon Oil holds a 20 percent working interest in the AOSP.

Marathon Oil expects third quarter net synthetic crude production will be between 40,000 and 45,000 bpd, with anticipated full-year 2011 net synthetic crude production unchanged at between 39,000 and 45,000 bpd. Marathon Oil anticipates producing on average 40,000 to 50,000 bpd of synthetic crude in 2012. Reliable operating performance by the operator is critical to achieving these targets.

In the second quarter of 2011, as a result of life extension for the Greater Jackpine Area, and in accordance with the terms of the original 1999 AOSP Joint Venture Agreement, Shell transferred to Marathon Oil a 20 percent ownership of the portion of Lease 13 known as the Greater Jackpine Area. Marathon Oil has increased net proved developed reserves by approximately 54 million barrels.

Integrated Gas

Integrated Gas segment income was $43 million in the second quarter of 2011, compared to $24 million in the second quarter of 2010. While segment income continued to be affected by weak Henry Hub gas prices, the increase was primarily related to higher volumes. The liquefied natural gas (LNG) facility in Equatorial Guinea had operational availability of 95 percent for the second quarter, which included the impact of a scheduled turnaround.

Special Items/Corporate

During the second quarter of 2011, Marathon Oil assigned an undivided 30 percent working interest in 180,000 acres in the Niobrara Shale play, located in southeast Wyoming and northern Colorado, to another company for $270 million, recording a gain of $24 million net of tax ($39 million pretax).

In May 2011, significant water production increases and reservoir pressure declines occurred at the Droshky development. Plans for a waterflood have been cancelled and the field will be produced to abandonment pressures, expected in the first half of 2012. Consequently, 3.4 million boe of proved reserves were written off and a $178 million net of tax ($273 million pretax) long-lived asset impairment was recorded in the second quarter of 2011.

Marathon Oil's outlook for future U.S. LNG imports makes it unlikely that sufficient U.S. demand for LNG will materialize by 2021, when the rights lapse under arrangements at the Elba Island, Georgia, LNG regasification facility. As a result, Marathon Oil recorded a special item of $17 million net of tax ($25 million pretax) for the full impairment of this intangible asset in the second quarter of 2011.

During the second quarter, the AOSP operator determined the need for and developed preliminary plans to address water flow into a previously mined and contained section of the Muskeg River mine. Estimated costs of $48 million net of tax ($64 million pretax) net to Marathon Oil have been recorded in the second quarter of 2011.

Related to activity of the Company's former downstream business, which is now included in discontinued operations, income tax expense increased due to the impact of state tax law changes and state valuation allowance adjustments. Net of federal tax, $50 million was recorded in the second quarter of 2011.

Related to the tax effect of restructuring international subsidiaries, Marathon Oil recorded a one-time non-cash tax expense of $122 million in the second quarter of 2011.

Marathon Oil's 2011 capital, investment and exploration budget remains unchanged and is expected to be $3.9 billion, excluding discontinued operations, asset acquisitions and associated development capital. This includes approximately $3.4 billion for worldwide E&P, approximately $300 million for Oil Sands Mining, and approximately $200 million for the corporate budget including capitalized interest. Asset acquisitions announced to date, along with associated 2011 development capital, are expected to be approximately $4 billion.

Oil & Gas Post

Promote Your Page Too