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Oil and Gas Energy News Update

Wednesday, August 10, 2011

Commodity Corner: WTI, Brent Rebound

- Commodity Corner: WTI, Brent Rebound

Wednesday, August 10, 2011
Rigzone Staff
by Matthew V. Veazey

Light sweet crude oil on the New York Mercantile Exchange rebounded Wednesday after the U.S. Department of Energy reported that inventories fell last week, catching investors off-guard.

The September WTI contract price gained $3.59 to settle at $82.89 a barrel. The Energy Information Administration (EIA) announced that commercial crude stocks declined by 5.2 million barrels last week to 349.8 million barrels. The 1.5-percent week-on-week draw starkly contrasted to the prediction of a Platts survey of analysts: a 1.8 million-barrel build for the period.

Brent futures also surged Wednesday, settling $4.11 higher at $106.68 a barrel. The WTI traded within a range from $79.53 to $82.90. The contract price for Brent fluctuated from $103.47 to $106.55.

EIA also reported Wednesday that reformulated gasoline inventories declined by a larger-than-expected volume last week: 1.6 million barrels. The 213.6 million barrel EIA figure for the week ending August 5, 2011, was 400,000 barrels below what a Platts survey of analysts had projected.

Front-month gasoline gained 11 cents to end the day at $2.78 a gallon. The September contract price peaked at $2.79 and bottomed out at $2.68.

Natural gas for September delivery edged upward by less than a penny to settle at $4.00 per thousand cubic feet. The contract price fluctuated from $3.98 to $4.08.

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Tap Oil Acquires Additional Stake Offshore Ghan

- Tap Oil Acquires Additional Stake Offshore Ghan

Wednesday, August 10, 2011
Tap Oil Ltd.

Tap Oil has executed an agreement to purchase an additional 5% participating interest in the Offshore Accra Contract Area, Ghana from Challenger Minerals Inc for USD 1.5 million.

This transaction, which will increase Tap's participating interest from 40% to 45%, is another example of Tap actively managing its asset portfolio to capitalize on commercial opportunities which arise.

This transaction is subject to the prior written approval of the Ghana National Petroleum Corporation and of the Minister for Energy of the Republic of Ghana. Subject to such approvals, the effective date of the transaction will be April 1, 2011.

Tap's Managing Director/CEO Troy Hayden said, "As with our pre-emption of the WA-351-P sale, we see this as a commercially attractive opportunity to increase our holding in a highly prospective asset.

"Early results from the 2011 3D seismic survey over the deep water leads are encouraging and this additional 5% enhances our strategic options in the area."

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Drilling Begins at FieldPoint's Lea County Well

- Drilling Begins at FieldPoint's Lea County Well

Wednesday, August 10, 2011
FieldPoint Petroleum Corp.

FieldPoint announced that drilling has begun on the East Lusk 15 in Lea County, New Mexico. The Company has an operating agreement with Cimarex to drill two wells that will target the Bone Spring formation. The total cost for each well is expected to be approximately $5,000,000.

These horizontal wells are planned to be drilled vertically to a depth of approximately 9,500 feet, to the Bone Spring formation, and approximately 4,000 to 5,000 feet laterally within the formation to the bottom hole location. The estimated time for drilling and completion is expected to be approximately 60 days.

FieldPoint is aware of at least one horizontal well within a few miles of the subject area that had production tests ranging from approximately 400 to 800 barrels of oil per day. However, this is not necessarily an indication of what these wells can be expected to produce. It is also noteworthy that EOG Resources, Inc. has a well to the south of the East Lusk 15 location in section 22.

FieldPoint's President and CEO, Ray Reaves stated, "There are two highly important aspects of this drilling program worth mentioning. First, Cimarex Energy is one of the best in the industry at completing wells in the Bone Spring formation. This is very important for well success and optimal well production. And second, if successful, this drilling program could serve to significantly increase our daily production and proved producing reserve base. Considering those two points together, this becomes quite possibly our most important project to date."

FieldPoint will own a 43.75% working interest, Cimarex will own a 37.5% working interest, and other partners will own the remaining 18.75% working interest in the two planned wells.

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Fracking, Testing Ops Commenced at Global Petroleum's Eagle Ford Well

- Fracking, Testing Ops Commenced at Global Petroleum's Eagle Ford Well

Wednesday, August 10, 2011
Global Petroleum Ltd.

Texon has advised that fracking and testing operations on the second Eagle Ford well in which Global has an interest (Tyler Ranch EFS #2H) began on August 8, 2011. The project involves 17 stages (compared with 15 in the first Eagle Ford well), with fracking expected to take about a week followed by testing.

Initial flow test results are expected to be available in two weeks.

The surface location of the well is close to the production facilities associated with the first Eagle Ford well so the well will be able to be immediately connected for production.

Global has a 7.939% working interest in approximately 1,651 acres beneath the Olmos formation including the Eagle Ford Shale. Global's interest in the Leighton prospect also includes a 15% working interest in approximately 873 acres from the surface down to the stratigraphic equivalent of the Olmos formation.

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Ivanhoe Makes Headway in Heavy Oil, Conventional O&G Projects

- Ivanhoe Makes Headway in Heavy Oil, Conventional O&G Project

Wednesday, August 10, 2011
Ivanhoe Energy Inc.

Ivanhoe reported financial results and operating highlights for the second quarter of 2011. Ivanhoe Energy has filed its quarterly financial report on Form 10-Q with the United States Securities and Exchange Commission and its Interim Financial Statements with the Canadian Securities Administrators for the period ended June 30, 2011.

  • In June the Company obtained broader and more extensive patent protection for its HTLTM intellectual property in Canada. This patent builds on and complements other issued and/or filed patents related to the core HTLTM technology and its petroleum applications. The portfolio includes the core patent, issued in the first quarter of 2011 related to the underlying HTLTM technology, which expires in 2028.
  • The Company announced that heavy crude oil extracted from its IP-5B well in the Pungarayacu field in Block 20 in Ecuador was successfully upgraded to local pipeline specifications using the Company's proprietary HTL upgrading process.
  • The Company issued Cdn$73.3 million of convertible unsecured subordinated debentures, maturing on June 30, 2016. A portion of the proceeds were used to repay a promissory note due to Talisman Energy Canada. The remaining balance of the funds raised will be used for ongoing capital and operating expenditures.
  • Revenues were $9.5 million in the second quarter of 2011 compared to $6.1 million in the second quarter of 2010 due to a combination of stronger realized commodity prices and increased production. Higher volumes were allocated to Ivanhoe Energy for reimbursement of capital expenditures incurred at Dagang.
  • In the second quarter of 2011, $6.5 million in cash flow was used in operations, consistent with $6.3 million of cash flow used in operations during the second quarter of 2010.
  • The net loss for the second quarter of 2011 was $4.1 million compared to net income of $9.3 million for the second quarter of 2010, as a result of higher operating and general administrative expenses as well as lower non-cash foreign currency exchange and derivative instrument gains.
  • General and administrative expenses were $11.7 million in the second quarter of 2011 compared with $9.1 million in the second quarter of 2010. The year-over-year increase stemmed from higher staff numbers associated with the Quito office build-out and our drilling operations in Sunwing, contract engineering work related to Ivanhoe's HTL technology and financing fees incurred in the recent Convertible Debentures issuance.
  • The Company's cash and cash equivalents balance at June 30, 2011 was $133.3 million, which will be used to continue advancing Ivanhoe's ongoing projects in Canada, Ecuador, China and Mongolia.

"During the quarter we continued to prudently position Ivanhoe Energy to advance our heavy oil and conventional oil and gas projects," said President and Chief Operating Officer, David Dyck.

"In particular, the Company enhanced the intrinsic value of our heavy-to-light (HTL) upgrading technology by successfully testing it on Ecuadorian heavy crude and by securing patent protection to 2028 in key jurisdictions. We also put in place attractive new convertible debt financing to underwrite our operations and business development efforts."

Subsequent events

Zitong Block

Ivanhoe's wholly-owned subsidiary, Sunwing Energy, submitted the Provisional Overall Development Plan to the Joint Management Committee and PetroChina on June 30, 2011. As communicated in Ivanhoe's press release on June 15, 2011, this plan includes the acquisition of 3D seismic and the drilling of horizontal wells on the Block that will include multistage fracture stimulation. The Company is currently in discussions with PetroChina on final details of the Plan. This plan is to be conducted over the next 24 months.

Both the Yixin 2 and Zitong 1 wells have completed their respective long term built up tests and the down hole recorders have been recovered and the wells shut-in and secured. Data collected from these recorders has been delivered to contracted third-party tight gas experts to conduct detailed analysis and modeling of reservoir parameters and potential completion and stimulation techniques to assist the Company in developing exploitation programs on the Zitong Block.

Mongolia Block XVI

Sunwing is currently mobilizing the drilling equipment and supplies to N16-1E, its first exploratory drill site on Nyalga block XVI, which will be drilled on a structure approximately 32 sq km in size and to an approximate depth of 2500m. As of this date, the drilling rig is more than 75 percent assembled. Remaining minor drilling preparations will continue over the next few weeks, followed by the spud of Sunwing's first exploration well in Mongolia. Drilling of the well will take approximately 30 days, with completion and testing to be carried out as required. The Company intends to drill two wells initially, with the option to drill up to three additional wells, and remains optimistic of the potential to find oil resources in Mongolia.

Ecuador Seismic Program

As communicated in Ivanhoe's June 15, 2011 news release, Ivanhoe's wholly-owned Ecuadorian subsidiary commissioned a seismic program over the southern part of the Pungarayacu Block. The first phase of this program is now complete and analysis is still underway. Early interpretation is encouraging as it indicates deeper faulting, with the potential to trap lighter oil resources which could prove beneficial for blending purposes and overall project economics. Additionally, initial internal interpretations may also suggest an extension of the field beyond what was originally estimated.

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IEA: Recession Could Put Oil Market Back Into Surplus

- IEA: Recession Could Put Oil Market Back Into Surplus

Wednesday, August 10, 2011
Dow Jones Newswires
by James Herron

The International Energy Agency said Wednesday that a double-dip recession could reduce energy demand enough to push global oil markets into surplus next year, although it made only small adjustments to its current forecasts despite the deepening economic gloom.

This assessment indicates that the recent plunge in international oil prices, down more than 12% at Tuesday's close compared with the start of August, could have some way further to fall if developed economies do slip back into recession.

However, given the tremendous economic uncertainty and the current finely balanced state of the oil market, the IEA warned against pre-emptive action from oil producers to defend high prices. "There is no justification at the present time for OPEC to think of substantially adjusting production downwards," said David Fyfe, head of the Oil Industry and Markets Division at the IEA.

OPEC members have so far made a "concerted effort" to keep the market well supplied, the IEA said in its monthly oil market report. Its most important member, Saudi Arabia, raised production in July to its highest level in 30 years, as it filled the gap left by lost Libyan exports, it said.

If global growth this year and next falls below 3%--a level previously said by the International Monetary Fund to be indicative of recession--oil demand could be significantly lower than current forecasts, the IEA said. Such an outcome could push the world's need for crude from the Organization of Petroleum Exporting Countries below the group's current production, it said, implying a market in surplus.

The IEA made clear this was only one possible scenario and has only slightly trimmed its current 2011 demand growth estimates despite growing signs of trouble in major consuming countries the U.S. and China. However, it also warned that these forecasts were based on the most recent IMF global growth estimates of over 4% for this year and next, which, "may ultimately prove too optimistic," in the current economic climate.

The IEA noted "serious concerns" about the U.S. outlook given weak second quarter GDP and high fuel prices. In recent days, the IEA, the U.S. Energy Information Administration and OPEC have all slashed their demand forecasts for the U.S. The IEA now expects U.S. oil demand to fall by 200,000 barrels a day, or 1%, this year.

China, the world's second major engine of oil demand, is also looking weaker. "For the first time since March 2009, China's monthly apparent demand contracted on an annual basis, falling by 1.5% in June," the IEA said. "The decline coincided with evidence that China's economy is also slowing down and that higher end-user prices are weighing upon demand."

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

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Antrim, Valiant Finalize Causeway Sale

- Antrim, Valiant Finalize Causeway Sale

Wednesday, August 10, 2011
Antrim Energy Inc.

Antrim and Valiant have agreed to the early completion of the Sale and Purchase Agreement of Antrim Causeway (N.I.) Limited (as previously announced March 04, 2010), subject to the approval of the UK Department of Energy and Climate Change ("DECC"). Antrim Causeway (N.I.) Limited holds 30% interest in UK Northern North Sea Blocks 211/22a South East Area and 211/23d, which contain the Causeway Field.

With the sale of Antrim Causeway (N.I.) Limited, Antrim will receive US $21.75 million contributed to Antrim's development expenses towards its remaining 35.5% interest in the Causeway Field. This transaction was originally conditional on final approval of the Field Development Plan by DECC. Early completion of the sale, however, allows the Causeway joint venture to expedite field operations in preparation for an estimated production start up in the second half of 2012.

Stephen Greer, Antrim's CEO, commented, "The accelerated execution of the Sale and Purchase Agreement is a significant step towards Antrim's first North Sea oil production, anticipated in mid 2012."

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Oilex Preps for Flow Back at Cambay Well

- Oilex Preps for Flow Back at Cambay Well

Wednesday, August 10, 2011
Oilex Ltd.

Oilex advised that all eight stages of the fracture stimulation program of the horizontal section in the Cambay-76H well were pumped successfully and according to plan.

The well is currently being prepared for flow to surface to remove stimulation fluids from the formation (well clean-up phase). After the completion of the clean-up operations a flow test will be conducted.

The Cambay-76H "proof of concept" horizontal well is evaluating the production potential of the Y Zone interval of the extensive deep Eocene "tight" reservoirs in the onshore Cambay Production Sharing Contract area, Gujarat, India.
  • Report date: August 9, 2011
  • Status: Prepare for flow back and clean-up operations
  • Past Week's Operations:
    • Completed eight stage fracture stimulation program
    • Completed micro-seismic and pressure data acquisition
    • Preparations for well clean-up operations
  • Objective: Cambay Eocene "tight" reservoir Y Zone
  • Total Depth: 2,740 meters including 610 meters horizontal section

The participating interests in the Cambay PSC are:
  • Oilex Ltd (Operator) 30%
  • Oilex NL Holdings (India) Limited 15%
  • Gujarat State Petroleum Corporation Ltd 55%

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Initial 2 Tcf Resource Booking at Beach's PEL 218

- Initial 2 Tcf Resource Booking at Beach's PEL 218

Wednesday, August 10, 2011
Beach Energy Ltd.

Beach Energy has completed its internal assessment of the resource potential of the Holdfast-1 and Encounter-1 vertical shale gas wells with the booking of an initial gross contingent resource of 2 trillion cubic feet (Tcf) of sales gas. While PEL 218 (Beach 90%) is approximately 1,600km2 in size, this resource booking has been constrained to areas of 100km2 around each of the two purpose drilled shale gas evaluation wells. Data collected to date indicate the shales are continuous across the PEL 218 acreage.

This resource booking equates to in excess of 330 million barrels of oil equivalent, or approximately 5 times Beach's June 30, 2010 reserves figure. The calculation of the shale resource is based on observed flows, following successful fracture stimulation and continued flow testing at Holdfast-1, and takes into account the main shale and mixed lithology formation target zones (the Roseneath Shale, Epsilon Formation, Murteree Shale and the top section of the Patchawarra Formation).

The resource calculation does not include significant upside potential expected in the, as yet, untested deeper sections of the Patchawarra Formation and the shallower Toolachee and Daralingie Formations. Prior to drilling Holdfast-1 and Encounter-1, the Patchawarra, Toolachee and Daralingie Formations were identified as potential resource targets for gas outside of structural closure. Both Holdfast-1 and Encounter-1 were specifically drilled off-structure to test this play, which confirmed gas saturation in these formations and the probability of a large basin centred gas accumulation in the permit.

While gas flow from the upper Patchawarra interval has confirmed that this formation is productive outside of closure, the remaining shallower intervals (Toolachee and Daralingie) and the deeper Patchawarra Formation sediments, are yet to be tested, and will be targeted for flow testing during follow up exploration and appraisal activity. This is scheduled to commence in the next six to twelve months to investigate the potential to more than double the identified resource in the permit.

This internal resource estimate of 2 Tcf will contribute to a material increase in Beach's total contingent resource, the details of which will be released later this month. As is the normal course of events, an independent review of this resource estimate will take place in due course.

Beach Managing Director, Reg Nelson said, "The booking of a contingent resource of this size is a clear indication of the potential within our shale gas acreage in the Cooper Basin. We are confident, as a result of drilling both Holdfast-1 and Encounter-1 off-structure, that we have a contiguous, thick and gas saturated shale, as well as a basin centred gas play, within PEL 218. The resource booking announced today is likely to be just the beginning of more to come as we continue to de-risk the area through further testing of our two existing wells and our pilot program set down for 2012."

Participants in PEL 218 (Permian JV) are:
  • Beach (Operator) 90%
  • Adelaide Energy Ltd 10%

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Help Wanted: Energy Firms Competing For Hires

- Help Wanted: Energy Firms Competing For Hires

Wednesday, August 10, 2011
Dow Jones Newswires
by Steve Gelsi

Despite a big drop in oil and stock prices in recent days, U.S. energy companies bearing down on the country's shale fields have yet to waver from plans to add staff this year to boost domestic production.

The industry is hiring as it brings new U.S. supply on line and demand grows from power-generation companies switching to natural gas from coal or fuel oil.

"Our industry is competing for talent," said Jim Haynes, vice president for U.S. operations at Spectra. "We continue our hiring mode."

Spectra Energy, for example, expects to add staff as part of plans by the pipeline firm and its affiliates to add up to $10 billion in infrastructure in the next five years.

The Independent Petroleum Association of America projects as many as 200,000 new jobs in the energy patch from hundreds of oil and gas producers in 2011.

"I don't think the threat of a double-dip recession will stop many companies from hiring," said Jeff Eshelman, spokesman for the trade group of oil and gas producers, once known as "wildcatters."

"Overall, the natural-gas industry is one that is adding people, not scaling back," Haynes added. "We've seen at least a 15% increase, industry-wide, over the past several years, even during the downturn." Last year, Spectra hired 130 people and it's already brought on about 129 this year.

Dave Pursell, managing director and head of securities for Houston-based research firm Tudor Pickering Holt & Co., said an analysis of shale-gas fields in the United States revealed that nearly all remain profitable with oil at $80 a barrel or less. On July 25, oil was still $100 a barrel; on Tuesday, crude futures rose 1% to $82.

"The velocity of the drop has gotten people's attention," according to Pursell. "But companies aren't going to change their strategic hiring based on a two-week move in oil."

To be sure, the industry contracted during the 2008-09 financial crisis as it became more difficult for companies to get funding for their drilling programs, but so far, that doesn't seem to be happening, he said. The 2008 crisis, for instance, saw a much steeper drop in natural-gas prices than now.

Engineers wanted

While the U.S. jobs figures for July came in better than expected, the overall picture for employment remains moribund -- outside of the energy sector.

Among the hotter areas for employment growth: Some 50,000 job additions this year are expected for the Barnett shale of Texas, and 48,000 in the Marcellus shale of Pennsylvania, West Virginia, Ohio and New York, according to the IPAA.

Besides the Barnett and Marcellus shales, U.S. energy companies plan to beef up rolls in the Haynesville shale of Texas and Louisiana, the Eagle Ford of South Texas, the Bakken of North Dakota and Utica formations of Ohio.

Hiring activity also has picked up as natural-gas firms focus on more labor-intensive oil drilling; plus, companies need to drill to hold acreage under most of their leases with property owners, Tudor Pickering's Pursell pointed out.

Another incentive to drill is to get higher-priced Louisiana sweet crude, which fetches a price near the Brent crude level of $100 a barrel, he said. "Companies are drilling because they want growth. And drilling for oil still makes money with oil below $80 a barrel in most areas."

Some of the most sought-after job candidates in the energy sector right now are petroleum engineers -- a specialization in charge of technology used to maximize returns from wells, according to Apache spokesman Bill Mintz.

"One area of concern in the industry is that a lot of petroleum engineers are in their 50s and expected to retire," he said.

Chip Minty, spokesman for Devon, said the company currently has more than 300 openings right now and no plans to curtail hiring.

"The swing we've seen in oil and equity prices does not have a bearing on our long-term operational objectives," he commented. "We do analysis as we put together our budget. We use market prices that are quite conservative. Even if oil and natural gas dropped below where they are today, we'd still be looking at wells that are economical."

Apache's Mintz said the independent energy company's ranks rose to 4,500 in 2010 up from 3,500 in 2009, and more jobs are coming in 2011. "We're continuing to hire. We've got a lot going on in all of our regions."

The company has been recruiting graduates from the Colorado School of Mines, Texas A&M University, Texas Tech University, the University of Oklahoma, University of Texas and the University of Tulsa.

Asked if Chesapeake planned to scale back hiring this year in the wake of Monday's big selloff in the equities market, company spokesman Jim Gipson said "nope," and referred to a local newspaper report about economic expansion in Oklahoma City, Chesapeake's headquarters.

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

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Gulf Keystone Bumps Up Resources at Sheikh Adi

- Gulf Keystone Bumps Up Resources at Sheikh Adi

Wednesday, August 10, 2011
Gulf Keystone Petroleum Ltd.

Gulf Keystone announced results of an independent preliminary evaluation of the Sheikh Adi resources by Dynamic Global Advisors (DGA), independent Houston-based exploration consultants.

The DGA report, based on Sheikh Adi-1 wireline logging data, core samples, 2D and 3D seismic and regional data, has indicated a significant range of between 1 billion barrels and 3 billion barrels of gross oil-in-place volumes calculated on the P90 to P10 basis, with a P50 estimate of 1.9 billion barrels.

Gulf Keystone has completed drilling of Sheikh Adi-1, the first exploration well to be drilled on the Sheikh Adi structure, to a TD (total depth) of 3,780 meters in the Triassic zone. A series of flow tests will now be performed on a number of Jurassic zones in the Sheikh Adi-1 well. Testing in the Triassic zone will not be possible due to issues relating to casing integrity at these depths.

The Sheikh Adi block is located immediately to the west of the Company's Shaikan block, where a major discovery was made in 2009. Gulf Keystone is the Operator of the Sheikh Adi block with an 80 percent working interest and is carrying the Kurdistan Regional Government's 20 percent working interest in the block.

DGA's previous assessments of assets on behalf of Gulf Keystone included independent evaluation of the Shaikan discovery, including a major revision of the gross oil-in-place volumes (4.9 billion barrels to 10.8 billion barrels calculated on the P90 to P10 basis) announced in April 2011.

John Gerstenlauer, Gulf Keystone's Chief Operating Officer commented, "This independent report demonstrates the potential of the Sheikh Adi block with between 1 and 3 billion barrels of gross oil-in-place. This report reinforces our belief in having encountered yet another potential world class oil source. We plan to further evaluate the Sheikh Adi structure and define and assess this complicated geological structure. The Sheikh Adi oil-in-place numbers are all the more significant due to our 80 percent interest in the block. These numbers are in addition to 7.5 billion barrels of P50 oil-in-place at Shaikan, 2.4 billion barrels of P50 oil-in-place at Akri-Bijeel and 1.9 billion barrels of estimated petroleum-initially-in-place at Ber Bahr. This report further demonstrates the world class nature of Gulf Keystone's assets in the Kurdistan Region of Iraq".

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