Contango On Schedule for Vermilion Production

- Contango On Schedule for Vermilion Production

Monday, August 08, 2011
Contango O&G Corp.

Contango announced that it is still on schedule for production to begin at its Vermilion 170 (Swimmy) discovery in September 2011 at an estimated rate of 15 million cubic feet equivalent per day (Mmcfed), net to Contango. We currently have 11 wells, producing approximately 77 Mmcfed, net to Contango.

The exploration plan (EP) for our Ship Shoal 121/134 (Eagle) prospect was submitted to the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) on March 3, 2011 and approved on July 11, 2011. We submitted our application for permit to drill on July 29, 2011 and are hopeful it will be approved in September 2011. Depending on permit approval and rig availability, we expect to spud this well in the September/October 2011 time frame. We will have a 100% working interest in this wildcat exploration prospect and have budgeted approximately $25.0 million to drill this well. We have also invested another $6.0 million in leases associated with Eagle. We have $120 million in net available cash, no debt, and $40 million of unused borrowing capacity.

Kenneth R. Peak, Contango's Chairman and Chief Executive Officer, said, "We are preparing to expend a budgeted $31.0 million of dry hole risk capital on our Eagle prospect. This is a significant capital commitment and risk for the Company, but one we believe is justified, both by the potential of the prospect and our capital position. Contango is an approximate 40% tax payer and thus has a built-in partner – the Federal Government - that 'shares' in our after-tax dry hole capital risk. Assuming a dry hole – and the probabilities are that Eagle will be a dry hole – we would incur a projected $31.0 million write off, both for GAAP accounting and income taxes. The income taxes that we would otherwise owe, however, would be reduced by approximately $12 million. Thus, a dry hole at Eagle would reduce our net, out of pocket, after-tax cash investment to $19 million. With an on-hand cash balance of $120 million and no debt, this is a financial loss - though painful – that we can afford to take. Should Eagle be a discovery, however, we will have a 65% net revenue interest in what we believe would likely be an oil discovery with a prospect size – net to Contango – of 7 to 10 million barrels."

Mr. Peak continued, "In addition to our Eagle prospect we have another four exploration ideas that we believe will mature into drillable prospects over the next 18 - 24 months. We are preparing an EP on our South Timbalier 75 farm-in prospect (Fang) which we plan to submit to the BOEMRE and, upon receiving all regulatory approvals, would expect to drill in early 2012. This prospect has an estimated $25.0 million in dry hole costs to the 100% working interest. Of our remaining three prospects, one is our Birdy prospect (Ship Shoal 121), and the other two are exploration ideas we are hopeful will mature and drill in 2012. The preliminary estimated dry hole costs of these remaining three prospect ideas are an estimated combined $50.0 million. Thus, we are managing our cash position in preparation to commit approximately $100 million to wildcat exploration ideas, or a net $60 million in after-tax risk capital, over the next 18 - 24 months. Should we have exploration success on any of our prospects, we will have the opportunity to invest significantly more capital to bring any discoveries to full production.

"The investment thesis for Contango is easy to summarize: Approximately 300 Bcfe in reserves as at June 30, 2011, 15.7 million shares both outstanding and fully diluted, $120 million in cash, no debt, 12 producing wells, five prospect ideas, no hedges and eight employees."

Oil & Gas Post

Promote Your Page Too
LINK

Statoil: Gudrun Proj. On Schedule

- Statoil: Gudrun Proj. On Schedule

Thursday, June 23, 2011
Statoil

The steel jacket for the Gudrun field operated by Statoil in the Norwegian North Sea was named on June 22 at Kværner Verdal in mid-Norway.

The champagne bottle splashed "holy" water from the Ol spring over bright yellow steel when it was broken during the traditional naming ceremony at the yard.

Performing this deed was Jørgen Suul, a Kværner Verdal employee who had proposed the name Idun for the structure.

"Today's ceremony marks an important milestone on the way to starting production in 2014," said Anders Opedal, senior vice president for projects in Statoil.

Discovered in 1974, Gudrun has had to wait for 40 years before being converted from find to producing field.

"We've take a long time to understand this reservoir, which is complex and demanding," explained Jan Einar Malmin, Statoil's venture manager for the field.

With high pressure and temperature, the formation still hides secrets. Its name can actually mean "hidden knowledge" in Old Norse.

The plan for development and operation (PDO) estimates recoverable reserves at 132 million barrels of oil equivalent – but this figure is by no means set in stone.

Systematic work will be needed to reach it, said Malmin. "The gap between the highest and lowest forecast is unusually wide in Gudrun's case."

New technology, greater knowledge of the area and re-use of existing offshore infrastructure have finally made it possible for Statoil and partner GDF Suez to develop the field.

"This is an important milestone in the project for meeting the target of a production start-up on 2014," said Carl Otto Hauge, head of non-operated licenses at GDF Suez.

"Gudrun is a very important project for us, and underscores our presence on as well as our long-term commitment to and investment on the Norwegian continental shelf."

To maximize Gudrun's value, the project team is pursuing two main strategies – tackling sub-surface uncertainty and securing future production, and reducing development costs.

"Cost efficiency and secure development are goals for all our whole portfolio," said Opedal. "With our strong focus on costs and time, good planning and ownership of these plans are crucial."

And Gudrun is on schedule, he noted. "We'd planned to name the jacket at the end of June. That's now been done, and the structure will soon be towed out to the field."

Oil & Gas Post

Promote Your Page Too

Keppel Delivers Rig Four Months Ahead of Schedule

Keppel Delivers Rig Four Months Ahead of Schedule

Tuesday, March 29, 2011
Keppel Corp. Ltd.

Keppel FELS has delivered Alpha Star, the second of two DSSTM 38 semisubmersible rigs, to Brazil's Queiroz Galvão Óleo e Gás (QGOG) four months ahead of schedule and with zero lost time incidents.

This continues Keppel FELS track record of delivering its rigs on time or ahead of schedule. It is the third early delivery this year, following the early delivery of the semisubmersible drilling tender, West Jaya, to Seadrill and of the KFELS N Class rig, Rowan Stavanger, for Rowan Companies.

Mr. Tong Chong Heong, CEO of Keppel Offshore & Marine, said, "This is our second safe and early delivery to QGOG and a sterling record for our company. This outstanding achievement is a demonstration of the great teamwork and synergy we have built with QGOG. It brings to fore the excellence of our efficient processes, project management, innovative methods and the Can-Do spirit which we apply on all our projects.

"We are glad to be able to send Alpha Star off early to contribute to Brazil's exploration and production efforts, enabling QGOG to anticipate its service from Petrobras. Our philosophy is to provide maximum value to our customers and we look forward to supporting QGOG as they expand their foothold in the deepwater drilling segment."

The rig has been chartered by Petrobras for six years to support exploration and production activities offshore Brazil.

Mr. Leduvy Gouvea, Chef Executive Officer of Queiroz Galvão Óleo e Gás said, "With this early delivery, we are able to start work earlier for Petrobras, and reinforce our status as the premier drilling operator in Brazil. We are confident that Alpha Star will be just as successful as its sister rig, the DSSTM 38 Gold Star, which is performing successfully for Petrobras in Brazil.

"Through the various projects we have been working on, they have proven to be an exceptional partner, delivering projects which exceed expectations and enabling us to efficiently serve the fast-growing oil and gas exploration industry. They share our commitment to provide technologically advanced and high quality products to our customers in a reliable and safe manner."

Jointly developed and owned by Keppel's Deepwater Technology Group and Marine Structure Consultants, the DSSTM 38 design is in the league of some of the world's most advanced drilling semisubmersibles.

Designed to maximize uptime with reduced emissions and discharges, a DSSTM 38 rig is well-suited to handle the operational requirements in the deepwater "Golden Triangle" region, which comprises Brazil, Africa and the Gulf of Mexico.