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Oil and Gas Energy News Update

Friday, August 12, 2011

Oil & Gas Post - All News Report for Friday, August 12, 2011

Friday, August 12, 2011


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Commodity Corner: WTI Slips; Brent Edges Upward

- Commodity Corner: WTI Slips; Brent Edges Upward

Friday, August 12, 2011
Rigzone Staff
by Matthew V. Veazey

Light sweet crude oil for September delivery surged above $87 Friday but settled well below that on mixed economic news.

The WTI received a boost for much of the day after the U.S. Department of Commerce's Census Bureau on Friday announced that retail sales increased 0.5 percent last month. Moreover, the bureau revised upward sales figures for both May and June by 0.2 percent. In addition, it reported that sales at gasoline stations rose by 1.6 percent in July.

"Consumer spending reflects the confidence of the American people, and despite recent economic turbulence, we're still seeing widespread growth in spending," Acting Commerce Secretary Rebecca Blank said in a written statement.

The WTI peaked at $87.37 a barrel but settled at $85.38, a 34-cent day-on-day loss, after Thomson Reuters and the University of Michigan reported dramatically lower preliminary consumer confidence figures. The sources' widely observed measure of consumer sentiment plunged 13.8 percent from July to August, hitting its lowest point in 31 years.

The WTI peaked at $87.37 and bottomed out at $84.02.

Brent futures eked out a slight, one-cent gain to end the day at $108.03 a barrel after trading within a range from $107.72 to $108.90.

The consumer confidence news also caused front-month natural gas to end the day lower. The September contract price lost a nickel to settle at $4.06 per thousand cubic feet. Natural gas futures fluctuated from $4.14 to $4.055.

September reformulated gasoline lost less than a penny to settle at $2.82 a gallon. The intraday range for gasoline was $2.81 to $2.86.

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Drilling Commenced at Suroco's Pinuna-6 Well

- Drilling Commenced at Suroco's Pinuna-6 Well

Friday, August 12, 2011
Suroco Energy Inc.

Suroco announced that the Pinuna-6 well has commenced drilling in the Suroriente Block in Colombia.

Pinuna-6 Well

The Pinuna-6 well will target the Villeta U and T reservoirs in an undrilled area located between the Pinuna-1 and Quillacinga-1 oil wells. It is expected that the well will reach the target in approximately 25 days and, if successful, will take approximately 20 days to complete and tie-in to existing production facilities.

Status of Pinuna-4 Well Operations

The Pinuna-4 well that preceded the Pinuna-6 well encountered drilling difficulties which resulted in delays in running the casing after the well reached total depth. Well logs run in the Pinuna-4 well indicate the presence of approximately 21 feet of oil pay in the primary target Villeta Middle U sand and minor indications of hydrocarbons in the secondary Villeta T and Caballos sands. Testing operations commenced in the Villeta T and Caballos sands, which subsequently produced significant amounts water with non-commercial amounts of oil. Testing operations in the U sand have been inconclusive and the well did not flow under natural conditions although the reservoir quality from the well logs appears to be similar to other wells that are on production from the same zone. Well operations are continuing in order to establish production from the Villeta U zone, as the test results so far may have been compromised by problems related to the complexity of the completion equipment and the multi-zone test procedures.

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EnerMech Scores Project Work for Perenco Facility

- EnerMech Scores Project Work for Perenco Facility

Friday, August 12, 2011
EnerMech Ltd.

EnerMech has been awarded a turnkey shutdown project by Perenco for its A1 plant at the Bacton gas facility in Norfolk.

The mechanical engineering specialist will play a lead role in the entire shutdown and isolation of the plant as it is removed from service for integrity inspections and additional upgrade work.

EnerMech will assist Perenco staff to isolate and drain the plant before it is handed over for nitrogen purging and the cleaning of all vessels and pipe work to allow safe entry by inspectors.

On satisfactory completion of the work scope, all vessels and pipe work will be returned to Perenco, fully re-assembled and nitrogen leak tested and processing equipment will be dried with nitrogen on reinstatement.

EnerMech will also provide all associated consumables, scaffolding, painting, grit blasting and lagging requirements on project, which is expected to last up to three months and will be managed from EnerMech's Great Yarmouth base.

Thomas Smith, EnerMech business development manager, said, "We have previously provided training services for Perenco but this is the first process and pipeline workscope we have been awarded.

"The award strengthens our growing reputation in the UK and southern North Sea as a leading provider of pre-commissioning and pipeline integrity services and it gives us a base to develop our other business lines throughout the area."

The Perenco contract is the latest of a number of awards secured by EnerMech following the recent £20 million investment in launching a new Process, Pipelines and Umbilicals division.

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Field Tests Underway at Forest Oil's Shannon Estate Lease

- Field Tests Underway at Forest Oil's Shannon Estate Lease

Friday, August 12, 2011
Fugro Multi Client Services Pty Ltd.

Field tests are currently underway on Fugro's portable rock properties analyzer, RoqSCAN™, on Forest Oil Corporation's Shannon Estate lease well in Crockett County. The vertical pilot well is being drilled and key formations cored to a proposed TD of 9,500 ft. by Forest Oil Corporation, in the Wolfcamp shale play of the Permian Basin.

"After extensive laboratory testing, we are confident that the RoqSCAN system will deliver value to our client, on site," said Guy Oliver, Fugro Robertson Director. "We believe that RoqSCAN will create a revolution in real-time well-site mineralogy, unlocking and unleashing the power of the data recovered from the drill cuttings."

The portable RoqSCAN system, pioneered by Fugro Robertson and Carl Zeiss, analyzes wellbore cuttings and core piece samples in high resolution and generates fully intuitive, highly quantitative mineralogical and textural datasets within one hour of cuttings being delivered to the RoqSCAN rig site unit. The data is captured and displayed in the form of a down-hole log.

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Exxon Mobil Back On Top As U.S.'s Valuable Company

- Exxon Mobil Back On Top As U.S.'s Valuable Company



Aug 12, 2011

After being surpassed by Apple (NASDAQ:AAPL) on Tuesday, Exxon Mobil Corp. (XOM) shares are again benefiting from a rise in the price of oil. They're up 2% Friday to $73.04, although still down for the week.

Exxon Mobil (NYSE:XOM) has a potential upside of 28% based on a current price of $72.57 and an average consensus analyst price target of $92.88.

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Honda To Invest $800 Million In New Automobile Plant In Mexico

- Honda To Invest $800 Million In New Automobile Plant In Mexico



Aug 12, 2011

Honda de Mexico (NYSE:HMC), Honda's production and sales company in Mexico, announced that it will build an automobile plant for production of fuel-efficient subcompact vehicles for the Mexican and North American markets.

Honda will invest approximately $800 million to build the plant, which is scheduled to begin operation in 2014. The company is expected to hire 3,200 associates at its full annual capacity of 200,000 units; the plant will boost Honda's capital investment in its North American operations to nearly $21 billion.

Honda Motor (NYSE:HMC) has a potential upside of 37.5% based on a current price of $33.59 and an average consensus analyst price target of $46.2.

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Gas Prices Fall $0.10

- Gas Prices Fall $0.10



Aug 12, 2011

Oil prices continued to fall during the week but gasoline prices are taking bit longer to catch up.

Some motorists saw some relief as the national average of self-serve regular gasoline fell today to $3.60 a gallon, down $0.10 from $3.70, according to AAA.

The prices of oil fell around $82 a barrel this week as anxiety increased over the European debt crisis and mounting evidence that the economy in the U.S. is slowing once again.

Many oil analysts claimed for months that oil prices were overpriced, based on market fundamentals.

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The Great Crew Change: 'Wolf Cries' or Reality?

- The Great Crew Change: 'Wolf Cries' or Reality?

Friday, August 12, 2011
Rigzone Staff
by Barbara Saunders

For more than a decade, the Great Crew Change has generated deep concern among many – and skepticism among some – in the oil and natural gas industry.

Much like the old story about the boy who cried "wolf" so many times that nobody would listen when the wolf finally was at the door, statistics confirm that the post-World War II "baby boom" generation is at the retirement door.

What remains to be seen is how well the industry on the whole heeded the "wolf cries" to usher in a well-trained new generation of both technical professionals and rig labor, the two areas of greatest perceived need.

Are We There Yet?

Although there is some controversy about whether the Great Crew Change will be all that sweeping, the age statistics are indeed alarming. According to Pete Stark, VP of industry relations for IHS, the peak age for oil and gas technical personnel has risen from 43 in the year 2000 to 50 in 2006. The peak age is expected to be 60 in 2012.

Another way of looking at the situation is about half of the industry will be retiring within the next 10 years.

Retirements in progress mean that "the big crew change is happening now and will be mostly over in five years," according to a 2011 study by Schlumberger Business Consulting. The study projects that by 2014, the inflow of younger petro-technical professionals (PTPs) will be only about 17,000, compared with roughly 22,000 experienced PTPs who are expected to leave by then, for a net shortfall of 5,000.

Other key findings of the study included:
  • Demand for graduates is recovering and outpacing the pessimistic forecasts of a year ago. Recruitment targets for technical staff in 2011 are 15 percent higher than levels planned in 2009. National oil companies (NOCs), independents and majors all plan to intensify recruitment efforts from 2011 onwards.
  • Universities appear to be on track to provide the oil and gas industry with sufficient graduates in geosciences and petroleum engineering, but supply from "quality universities will remain tight."
  • Recruitment targets for PTPs in mid-career are soaring, with NOCs and majors reporting the highest rates of increase. "The labor market for experienced PTPs will be tight over the next three years, resulting in the poaching of staff, salary escalation and higher attrition rates," the study said, continuing: "These staffing issues will have serious consequences on projects and production capacity. Companies contributing to the 2010 survey reported that staffing issues will delay projects and may drive decision makers to take more risk."

Mentoring Key

Meanwhile, the American Association of Petroleum Geologists (AAPG) teamed with the recruiting firm Working Smart in a survey this past May of technical oil company professionals age 55 and over. Of those who responded, the average intended retirement age was 65, with only 23 percent seeking to work beyond retirement age.

Many respondents felt that mentoring younger staff is a key factor in reducing adverse effects of the great crew change. The survey showed that 77 percent of respondents were currently mentoring younger staff.

Mario Carminatti, exploration manager for Brazil's national oil company Petrobras, told an industry conference that 42 percent of the company's geologists and geophysicists have less than five years of experience. "We are countering this by increasing the number of senior geoscientists and even retired professionals who operate as mentors to the younger generation," Carminatti said.

J. Ford Brett, managing director of PetroSkills, says that the price tag could be in the tens of billions for having less experienced technical personnel. If the looming demographics result in approximately 20 percent of the industry's personnel having fewer than five years' experience, Brett calculates that it's reasonable to expect a 20 percent reduction in performance across the board. "To put this into focus, in 2006 the industry spent about U.S. $170 billion on E&P. A 20 percent reduction in performance correlates with an economic cost of approximately U.S. $35 billion," Brett stated in an article for the Society of Petroleum Engineers' Talent & Technology
publication.

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Shell Managing N. Sea Gannet Spill

- Shell Managing N. Sea Gannet Spill

Friday, August 12, 2011
Rigzone Staff
by Saaniya Bangee

Shell confirmed Friday afternoon that an oil leak had occurred in a flowline serving the Gannet Alpha platform in the U.K. North Sea.

Shell spokesman Kim Blomley said, "We have stemmed the leak significantly and we are taking further measures to isolate it," he said. "The subsea well has been shut in, and the flow line is being depressurized. We continue to monitor the situation on the surface and subsea."

Shell has informed the Maritime & Coastguard Agency, the Department of Energy & Climate Change (DECC) and the Health & Safety Executive.

Spokesmen for the DECC and the Maritime & Coastguard Agency have responded to the incident and are investigating the situation.

The Gannet Alpha platform is located 180 kilometers east of Aberdeen in central North Sea. Shell operates the platform along with ExxonMobil's U.K. unit Esso.

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Lexaria Purchases Producing Oil Assets in Mississippi

- Lexaria Purchases Producing Oil Assets in Mississippi

Friday, August 12, 2011
Lexaria Corp.

Lexaria has acquired certain producing oil assets within its core operating area in Wilkinson County, Mississippi.

Lexaria has purchased all of the 10% gross working interest held by Brinx Resources Ltd, in the Belmont Lake Oil Field and in other oil and gas assets in the area. As a result of this acquisition, Lexaria now owns between 42% and 50% gross working interest in the four producing oil wells at Belmont Lake, and 42% in any future development wells to be drilled therein. At the current time, plans are to drill two more PUD development wells at Belmont Lake this season, subject to a number of conditions.

Basic terms for the acquisition of the 10% gross working interest in the Belmont Lake Oil Field and assorted other nearby oil and gas assets, are a purchase price of $400,000 of which $200,000 is paid, and another $200,000 payment is due by November 12, 2011; and the issuance of 800,000 shares of restricted common stock of Lexaria Corp.

"This acquisition will produce an immediate increase in our oil revenue, and an increase in our proved oil reserves," said Chris Bunka, President of Lexaria Corp. "It is sensible for us to increase our ownership in the Belmont Lake oil field where we have built a wealth of knowledge and experience in recent years, as we prepare to leverage that knowledge."

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PGI Acquires Asset in Tx.

- PGI Acquires Asset in Tx.

Friday, August 12, 2011
PGI Energy Inc.

PGI through its joint venture with Home Creek Energy as operator, has acquired a proven producing oil & gas asset. The field is located in Haskell County, Texas, and covers five leases with 11 production wells, 2 injection wells, pumper jacks, tanks, separators, tubing, rods and well equipment. PGI Energy owns 40% of the project which was purchased for an undisclosed amount of money. PGI will receive 40% of the Net 75% NRI from the monthly production.

"We are excited to have closed on this asset purchase and look forward to receiving revenues from this production," said Robert Gandy, Senior Underwriter for PGI Energy.

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Russia and Turkmenistan to Partner in Offshore O&G Exploration

- Russia and Turkmenistan to Partner in Offshore O&G Exploration

Friday, August 12, 2011
OilPrice.com
by Charles Kennedy

Russia's Itera and Zarubehzneft have signed a Caspian production sharing agreement with Turkmenistan for exploring the country's offshore Caspian sector for oil and natural gas.

Itera general director Vladimir Makeyev and Zarubezhneft CEO Nikolai Brunich signed a production-sharing agreement to develop jointly the 21st block of Turkmenistan's sector of the Caspian.

The production sharing agreement stipulates that Zarubezhneft is the project operator and is authorized to do all the oil-production work under the PSA on behalf of the contracting companies, The Moscow Times reported.

Initial estimates by Itera and Zarubehzneft put Block 21's recoverable oil resources at 219 million tons, associated gas at 92 billion cubic meters, and natural gas at 100 billion cubic meters, with eventual investment in the project being up to $6 billion.

According to the PSA, which follows on from a September 2009 agreement signed between Itera and Turkmenistan's presidential state agency a 51 percent stake in the project will be transferred to Zarubezhneft, with Itera retaining the remaining 49 percent.

The PSA build on a decade-long effort by Itera and Zarubezhneft, which in 2001 signed an agreement with the Turkmen government regarding their intent to participate in the development of Turkmenistan's oil and gas sector.

(Charles Kennedy is Deputy Editor of OilPrice.com. The original article appears here.)

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General Motors Recalling 15,000 Buick LaCrosse, Chevy Impala

- General Motors Recalling 15,000 Buick LaCrosse, Chevy Impala



Aug 12, 2011

The Detroit News reported that General Motors (NYSE:GM) is set to recall about 15,000 new Buick LaCrosse and Chevy Impala models in North America.

The recalls will reprogram software in some LaCrosse vehicles and inspect power steering hoses in Impalas.

General Motors (NYSE:GM) has a potential upside of 64.4% based on a current price of $26.3 and an average consensus analyst price target of $43.25.

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Norway Oil Fund Head Unruffled by US Downgrade

- Norway Oil Fund Head Unruffled by US Downgrade

Friday, August 12, 2011
Dow Jones Newswires
LONDON
by Polya Lesova

The U.S. credit rating downgrade by Standard & Poor's will have no impact on the large holdings of U.S. Treasury bonds by Norway's oil fund, the head of the agency that manages the fund told MarketWatch in an interview Friday.

"The downgrade will have no effect on our view of the situation in the U.S. nor on the valuation of U.S. Treasurys nor on our holdings in U.S. Treasurys. In a way, it's irrelevant," said Yngve Slyngstad, chief executive officer of Norges Bank Investment Management, which manages the oil fund officially known as Government Pension Fund Global.

Slyngstad's views are particularly noteworthy given the oil fund's long-term investment horizon, large size and significant holdings of U.S. Treasurys. The Norwegian fund returned 0.3% in the second quarter after gains on bond investments outweighed losses in its equities portfolio, according to data released on Friday.

The fund's market value rose to 3.11 trillion kroner (roughly $560 billion) at the end of the quarter, when it held 60.5% in equities, 39.4% in fixed-income securities and 0.1% in real estate.

S&P last Friday took the unprecedented step of cutting the U.S. rating to AA-plus from triple-A, a move that, combined with worries about global growth and the euro-zone debt crisis, triggered a week of turbulence in markets.

"It's clear that we, in line with the rest of the market, have gotten new macro numbers the last few weeks that seem to point in the direction that the speed in the economy will be less than anticipated," Slyngstad said.

"For us, it's less the macro picture and more than micro picture," he noted. "Earnings growth is slowing down in quite a few industries. There are some notable exceptions like the technology sector."

The oil fund's equity investments lost 0.7% in the second quarter, while fixed-income investments returned 1.8%, as measured in foreign currencies. In fixed income, the fund's biggest holdings were U.S. bonds, followed by U.K., German, French and Italian bonds.

The euro-zone sovereign-debt crisis, which started in Greece, spread to Portugal and Ireland and is now threatening to engulf Spain, Italy and even France, has been roiling markets.

"We have not been active neither on the buying nor the selling side in government debt in southern Europe for the last quarter and neither in this quarter," Slyngstad said. "Relative to neutral exposure, we have slightly less in debt of Southern Europe. We sold nearly half of our holdings already back in 2009. We have a cash flow every week of around a billion U.S. dollars. It does mean for practical purposes that we haven't been utilizing that cash flow to buy into those markets."

Slyngstad also said the fund is "comfortable" with its holdings of French bonds and that recent unsubstantiated rumors about a possible downgrade of France's credit rating haven't changed his views.

In equities, the fund's best-performing investment, in nominal terms, in the second quarter was Swiss food giant Nestle, followed by drug makers Sanofi and Roche Holding.

The worst-performing investment was banking group HSBC, followed by J.P. Morgan Chase & Co. and Denmark's Vestas Wind Systems.

The fund's biggest equity holdings, as of June 30, included oil giants Shell, ExxonMobil, BP as well as iPad and iPhone maker Apple.

The Norwegian government saves petroleum revenues in the pension fund, so that future generations can also benefit from the oil resources first discovered in the North Sea in 1969. Thanks to its oil wealth, Norway is one of the world's richest countries known for its generous welfare state.

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

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CNOOC: Additional OBM Identified at Bohai Bay

- CNOOC: Additional OBM Identified at Bohai Bay

Friday, August 12, 2011
CNOOC Ltd.

CNOOC announced that, according to the latest statement by ConocoPhillips China Inc (COPC), the Operator of Penglai 19-3 oil field, more oil-based drilling mud (OBM) on the sea floor was identified. This addition brings the revised volume of OBM on the seabed to 400 cubic meters (2,500 barrels). The volume of oil released to the sea surface remains at 114 cubic meters (717 barrels). The total volume of fluids spilled from the incident amounts to 514 cubic meters (3,217 barrels) of oil and OBM and exceeds 240 cubic meters (1,500 barrels) as originally estimated by the Operator.

After the incident occurred, COPC has deployed substantial resources for oil recovery and cleanup work. According to COPC, its response personnel has recovered 269 cubic meters (1,700 barrels) of OBM from the seabed near the Penglai 19-3 C platform, and approximately 70 cubic meters (440 barrels) of oil/water mix from the sea surface to date.

As the non-operator, the Company has also fully utilized its resources and personnel to assist COPC on shoreline protection activities with 111 people walking approximately 3,289 kilometers of shoreline and 19 vehicles patrolled approximately 48,645 kilometers of shoreline along the Bohai Bay area by August 11.

In order to meet the requirements set by the State Oceanic Administration, the Company will continue to urge and assist COPC to stop the leaks and complete the cleanup work by the end of August, so as to minimize the impact of the oil spill incident on the marine environment.

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API Disappointed by DOE Fracking Committee Recommendations

- API Disappointed by DOE Fracking Committee Recommendations

Friday, August 12, 2011
API

API President and CEO Jack Gerard welcomed the shale gas subcommittee's acknowledgement of the economic and energy security benefits of natural gas development, but said the specific recommendations were disappointing and confusing.

"The committee's recommendations are deficient in large part because the committee failed to adequately acknowledge existing programs and rules. It called for new air emission standards when comprehensive EPA rules already are in place or are being revised. It recommended reduction in use of diesel engines, oblivious or dismissive of the practical and economic considerations that require their use. And it ignored consideration of the potential benefits and costs of new rules, an omission that could cause harm to consumers, jobs and the economy. The shortcomings may in part be due to the fact that none of its members are from the industry or have direct experience in natural gas drilling and hydraulic fracturing operations.

"The industry is committed to appropriate environmental protections and industry best practices, but is concerned that the subcommittee's recommendations could end up frustrating the many benefits that will come from further development of America's vast supply of natural gas, including the creation of hundreds of thousands of new jobs and increasing our nation's energy security. We urge the committee to revise its recommendations to better reflect the facts on hydraulic fracturing, the extensive regulations under which the industry operates, and the industry's new best practices."

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HRT Plans to Drill 65 Wells by End-2014

- HRT Plans to Drill 65 Wells by End-2014

Friday, August 12, 2011
Dow Jones Newswires
RIO DE JANEIRO
by Diana Kinch

Brazilian oil and gas company HRT Participacoes em Petroleo, plans to drill 65 exploration wells and develop production at 52 wells by the end of 2014 in a $3.14 billion expenditure program, the company said Friday.

HRT is drilling its first wells in Brazil's Solimoes Basin and in Namibia this year, chief executive Marcio Rocha Mello told analysts on a conference call. The company's net potential resources at the two sites were recently announced at a total of 7.9 billion barrels of oil equivalent.

HRT has a cash position of 2.2 billion Brazilian reais ($1.37 billion) to finance its development program, the executive said.

"We have a queue of people knocking on our door to join the Namibia project," he said.

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

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Premier Sets Sights on Oil at Chim Sao Field

- Premier Sets Sights on Oil at Chim Sao Field

Friday, August 12, 2011
Premier Oil plc

Premier reported an exploration drilling update on its Indonesia and Vietnam operations.

Belut Laut-1 (Tuna Block, Indonesia, Premier 65% equity)

The Belut Laut-1 exploration well has reached the planned total depth of 4,948 meters. Oil shows with high gas readings were reported from a depth of 4,740 meters throughout a gross 155 meter Oligocene sandstone interval. However, logs indicated that the sandstones at this depth were of poor porosity. The well will therefore be plugged and abandoned with oil and gas shows.

Belut Laut, along with Gajah Laut Utara-1 and the successful appraisal of the Ca Rong Do discovery (CRD-2x) in Vietnam earlier this year, has confirmed the potential for hydrocarbons within the Oligocene section in the Nam Con Son basin. The ongoing sub-surface interpretation will now be focused to prospects at shallower depths where good reservoir properties are preserved up dip from proven source rocks. At least five such prospects have been identified in the Tuna acreage and also in the neighboring Block 07/03 in Vietnam. Premier plans to drill the first of these in the second half of 2012.

CS-N2P (Block 12W, Vietnam, Premier 53.125%)

The CS-N2P well, a development production well for the Chim Sáo project, has intersected the shallow part of a previously undrilled fault terrace to the north west of the Chim Sáo field. Based on Logging While Drilling data, the well encountered a 20 meter oil column in an independent closure within good quality Upper Dua Sandstones. The plan is to appraise this new accumulation as a near-field tie-back opportunity via the CS-N1P development well, through which wire-line logs and fluid samples will be acquired. The results of this well are expected in October.

Simon Lockett, Chief Executive Officer, commented, "We have learned from the wells drilled on the Tuna acreage and will now target lookalike prospects in the Nam Con Son basin where the Oligocene reservoirs are at shallower depths and are therefore of better quality.

The discovery of new resources close to the Chim Sáo development is very encouraging and we look forward to the appraisal results later this year."

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Otto Increases Stake in Galoc Oil Field

- Otto Increases Stake in Galoc Oil Field

Friday, August 12, 2011
Otto Energy Ltd.

Otto has entered into various definitive agreements to increase its stake in the producing Galoc Oil Field offshore the Philippines from an indirect 18.78% to direct 33.0% under Service Contract 14C (Galoc). Otto will assume 100% ownership of the Operating Company of the field, which is currently producing 6,800 oil barrels per day, on a 100% basis.

Under the terms of the transaction, Otto has agreed to acquire a 68.62% interest in the Galoc Production Company WLL (GPC), the operator of Galoc, from Vitol Group, increasing Otto's interest in GPC from 31.38% to 100%. Through the acquisition Otto will initially increase its stake to 59.84% of Service Contract 14C. Otto has then agreed to cause GPC to on-sell, on the same per percentage point terms, a 26.84% of this stake to Singapore energy investment company Risco Energy Pte Ltd, bringing Otto's post acquisition stake in Galoc to 33.0%. This transaction is subject to relevant Philippines government approvals.

The effective date of the purchase agreement is April 1, 2011. The total purchase price for Otto's share of the purchase price is US $18.7 million. The acquisition will be funded from Otto's existing cash reserves. Completion is scheduled to occur prior to September 30, 2011.

Attractively Priced, Low-Risk Opportunity

The acquisition will increase Otto's proved and probable (2P) reserves by 0.98 million barrels, with an additional 0.64 million barrels of contingent resources (2C). Recently the SC14C joint venture approved the upgrade to the mooring and riser system for the Galoc FPSO. This is expected to substantially increase the operating uptime of the field, and is crucial infrastructure to facilitate a Phase 2 development.

The purchase price for the acquisition is equivalent to US $19 per barrel for proved and probable reserves and US $11.50 per barrel with the inclusion of contingent resources, which relate to Phase 2. The field currently enjoys a net back of around US $50 per barrel after all costs, taxes and other charges.

Through 100% ownership of GPC, Otto becomes the Operator of the field, a crucial step in the development from an exploration to an integrated oil and gas company. The acquisition will also realize cost synergies as Otto consolidates the operating office of GPC in Manila with its current Perth and Manila offices.

Otto Acting Chief Executive Officer Matthew Allen said, "This acquisition represents an attractively priced, low-risk opportunity for Otto to increase its share of revenue from Galoc, as well as to better leverage the expertise within the group through assuming Operatorship. Galoc is a proven producing asset that we know well and that complements our high potential Philippines exploration portfolio. The revenue from Galoc continues to provide a valuable source of funds for reinvestment and this is set to grow as we move towards a Phase 2 expansion of the project. We look forward to working with our joint venture partners and the Philippine Department of Energy to advance the successful Galoc project under Otto's Operatorship."

Strong Current Production Performance

Recent performance at Galoc has been encouraging with current production at approximately 6,800 barrels per day. The field has delivered 23 offtakes to refinery customers to date with one additional cargo scheduled for delivery prior to the FPSO being taken out of the field in September.

Galoc has had an average operating uptime of 100% over the past four months, and now has a year-to-date 12-month rolling average uptime of 88%. The upgrade to the mooring and riser system is planned for the fourth quarter of 2011, and following installation is expected to improve FPSO operating uptime to in excess of 95%. The cost to Otto of the mooring and riser upgrade is modest at US $3.6 million based on a 33.0% interest in SC14C.

It is anticipated that final investment approval for a Phase 2 development of Galoc will be targeted for early 2012, subject to satisfactory results from a planned 3D seismic acquisition.

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Melrose to Shoot Seismic Survey in Bulgaria

- Melrose to Shoot Seismic Survey in Bulgaria

Friday, August 12, 2011
Melrose Resources plc

Melrose provided an update on its exploration activities in Bulgaria.

Drilling operations have been completed on the Kaliakra East-1 exploration well on the Galata block in the western Black Sea. The Palaeocene reservoir interval was found to be eroded at the drilled location and the well will be plugged and abandoned.

The Company is now moving ahead with its plans to shoot 500 square kilometers of 3D seismic over the central area of the Galata Block to the north of the Galata to Kaliakra field trend. Three further explorations leads have been identified in this area on regional 2D seismic data and these have combined prospective resources of 130 Bcf and an average chance of success 23 percent. A contractor has been selected to conduct the seismic survey which is scheduled to commence in September.

Commenting on Friday's announcement, David Thomas, Chief Executive, said, "Notwithstanding the Kaliakra East-1well results, the Galata Block remains relatively under-explored and we are looking forward to receiving the results of the 3D seismic survey over the central area of the concession. The combination of low development costs, strong regional gas prices and competitive terms make this one of the very attractive exploration environments for the Company."

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Range Reaches Planned Depth at Georgia Well

- Range Reaches Planned Depth at Georgia Well

Friday, August 12, 2011
Range Resources Ltd.

Range Resources, along with its joint venture partners Strait and Red Emperor, announced that drilling of an initial 8 ½" pilot hole has reached its planned depth of 700m and has been successfully logged with the results confirming the anticipated lithology. The pilot hole is currently being opened up to 17 ½" after which the 13 3/8" casing will be run and cemented and drilling will then resume with a target total depth of approximately 3,500m expected to be reached in mid-September.

The Mukhiani Well is targeting the Vani 3 prospect which has the following estimated undiscovered stock tank oil-in-place ("STOIIP"):
  • Vani 3 Prospect - STOIIP (MMbbls)
  • P90 P50 P10 Mean
  • Gross (100%) 41.7 92.7 178.2 115.2
  • Net Attributable to Range (40%) 16.7 37.1 71.3 46.1

The recently completed geochemical helium survey undertaken by Range confirmed the suitability of the first drill location with oil exploration and development prospectivity complementing the earlier seismic work completed on the target.

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Coastal Tests Additional Wells at Bua Ban North B

- Coastal Tests Additional Wells at Bua Ban North B

Friday, August 12, 2011
Coastal Energy Co.

Coastal announced the results of production testing on two additional wells at Bua Ban North B and the appraisal well at Songkhla H.

The Bua Ban North B-05 well was completed using an electric submersible pump (ESP) and is currently producing 2,500 bopd from the Miocene interval. The Bua Ban North B-01 well was completed using an ESP and is currently producing 600 bopd from the Oligocene interval. Total production from the Bua Ban North field is averaging approximately 7,100 bopd. The Company has also completed the B-07 water injection well and expects to complete the three remaining producing wells by the end of August.

The Songkhla H-01 sidetrack was drilled to a total depth of 9,140 feet TVD and downdip from the original wellbore to determine the extent of the field. The well encountered 30 feet of net water bearing sand in the Lower Oligocene interval. Pressure data confirmed the field limit is consistent with internal estimates based on seismic data.

Randy Bartley, Chief Executive Officer of Coastal Energy, commented, "Bua Ban North B continues to exceed our expectations and we are very pleased with the four currently producing wells. We continue to produce the Bua Ban North B wells at two-thirds pump capacity to monitor reservoir performance. Given the reservoir quality and well performance we have seen from the Miocene reservoir thus far, we are now planning to move the rig back to Bua Ban North and drill delineation wells to further define the extent of the Miocene trend. This success has also led us to begin further evaluation and remapping of the Miocene trend along the western side of the basin stretching from Bua Ban North to Benjarong. We expect to begin exploration drilling targeting the Miocene at Bua Ban South in the fourth quarter.

"The results of the Songkhla H-01 appraisal indicate an oil column of approximately 200 feet. We are pleased with the Songkhla H discovery as there are numerous other prospects which can be drilled nearby and, if successful, developed from a central Songkhla H production facility. We plan to apply for a production license in the Songkhla H area and begin developing the area following government approval."

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Aker Solutions 2Q Earnings Lower Than Expected

- Aker Solutions 2Q Earnings Lower Than Expected

Friday, August 12, 2011
Aker Solutions

Aker Solutions' operating revenues in the second quarter of 2011 were NOK 7.8 billion. Earnings before interest, tax, depreciation and amortization amounted to NOK 636 million. Order intake in the quarter was NOK 14.3 billion.

"We have a strong order intake which reflects high tendering and activity levels across all business segments. In fact, our order backlog has increased 19 percent since the beginning of the year. This is in line with our long term growth plan. However, this quarter has also provided us with some reminders about the importance of further improving our operational performance," said Øyvind Eriksen, executive chairman of Aker Solutions.

Second quarter consolidated revenues was NOK 7 809 million, compared with NOK 8 096 million in the same period in 2010. EBITDA for the second quarter of 2011 was NOK 636 million (8.1 percent EBITDA margin), compared to NOK 853 million one year ago. Profits in the quarter were negatively affected by execution challenges and the final arbitration ruling on Blind Faith.

"In the second quarter quality costs related to execution issues in Brazil alone amounted to NOK 130 million in our Subsea and Process Systems businesses. With quality and customer satisfaction as two of our top priorities, this is obviously disappointing," Eriksen said.

Order intake in the second quarter was NOK 14.3 billion. At the end of the second quarter Aker Solutions' order backlog was NOK 46 billion - an increase of NOK 5.5 billion from the previous quarter.

During the second quarter Aker Solutions concluded the structural changes outlined at the company's capital markets day in December 2010. The final step was the demerger and separation from specialized EPC contractor Kværner ASA.

"Today Aker Solutions is a pure oil service player focusing on engineering, technology, products and field-life solutions. We have a strong cash position fueled by solid earnings and gains from strategic divestments. We will convert our financial strength to capacity with the aim of facilitating further growth. However, we will also ramp up our efforts of building a stronger quality culture to further improve our day-to-day operations," said Øyvind Eriksen.

"Our growth plans are ambitious and we need qualified people to meet these objectives. In the first half of 2011 we have hired almost 1 200 new colleagues worldwide. I am pleased to see that so many new colleagues share our technology vision and company values," adds Eriksen.

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