Proposed Shale Gas Development Stirs Passions in Poland

- Proposed Shale Gas Development Stirs Passions in Poland

Thursday, July 14, 2011
OilPrice.com
by Joao Peixe

Energy-poor Poland is about to embark upon using hydraulic fracturing to develop the country's natural gas reserves. The practice is controversial in many countries, including the U.S., because of its potential impact on the environment, particularly groundwater. Many municipalities and counties in the U.S. have adopted stringent regulations as a result.

Poland's Petrolinvest has formed a joint venture, Silurian-Hallwood, with the U.S.-based Hallwood Energy to begin shale gas extraction after funding is raised, Rzeczpospolita newspaper reported.

Silurian-Hallwood is currently attempting to raise $90-100 million, of which, $20-25 million will come from private investment with the remaining $70-75 million from an initial public offering (IPO) prior to the company being listed on London's Alternative Investment Market (AIM) later this year.

Author Jacek Skorupski observed, "Shale gas is a matter of a political nature. If we treat it like any other investment, we will be faced with mounting difficulties."

Deputy Environment Minister Jacek Jezierski ambiguously noted, "We will be able to say whether amendments to provisions regulating shale gas extraction are needed once we perform a professional assessment of its environmental impact, not an emotional one. Poland intends to control this process, not to ban it."

Marek Kryda of the Institute of Civil Affairs emphasized, "It is necessary to look after issues related to property expropriation and lease. We can already see irregularities at the stage of test drilling."

(Joao Peixe is Deputy Editor with OilPrice.com. The original article appears here.)

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How Dependent Is the U.S. on Foreign Oil? - EIA Reports Current Trends

- How Dependent Is the U.S. on Foreign Oil? - EIA Reports Current Trends

Thursday, July 14, 2011
Rigzone Staff
by Barbara Saunders

The U.S. imported about 49 percent of the crude oil and refined petroleum products that were consumed during 2010, the U.S. Energy Information Administration (EIA) noted in a recent brief on the issue.

About half of these imports came from the Western Hemisphere, EIA said, adding that U.S. dependence on foreign petroleum has declined since peaking in 2005.

Canada is the United States' leading crude oil supplier, EIA reported.

Consumption, Production and Import Patterns

The U.S. consumed 19.1 million barrels per day (MMbd) of petroleum products during 2010, making it the world's largest petroleum consumer, EIA said.

The U.S. was third in crude oil production at 5.5 MMbd. But since crude oil alone does not constitute all U.S. petroleum supplies. " . . . [B]ecause crude oil expands in the refining process, liquid fuel is captured in the processing of natural gas, and there are other sources of liquid fuel, including biofuels," EIA observed, reporting that these additional supplies totaled 4.2 MMbd in 2010.

In 2010, the U.S. imported 11.8 million barrels per day (MMbd) of crude oil and refined petroleum products. The U.S., however, also exported 2.3 MMbd of crude oil and petroleum products during 2010, so net imports (imports minus exports) equaled 9.4 MMbd, EIA noted.

Petroleum products imported by the United States during 2010 included gasoline, diesel fuel, heating oil, jet fuel, chemical feedstocks, asphalt, and other products. Still, most petroleum products consumed in the United States were refined here. Net imports of petroleum other than crude oil were 2 percent of the petroleum consumed in the United States during 2010, according to EIA.

About Half of U.S. Petroleum Imports from Western Hemisphere

Of the total crude oil and petroleum product imports, 49 percent came from the Western Hemisphere (North, South, and Central America, and the Caribbean including U.S. territories) during 2010. About 18 percent of U.S. crude and imports of crude oil and petroleum products come from the Persian Gulf countries of Bahrain, Iraq, Kuwait, Qatar, Saudi Arabia, and United Arab Emirates. The U.S.' largest sources of net crude oil and petroleum product imports were Canada and Saudi Arabia, EIA said.

Reliance on Petroleum Imports has Declined

U.S. dependence on imported oil has dramatically declined since peaking in 2005, EIA emphasized.

"This trend is the result of a variety of factors including a decline in consumption and shifts in supply patterns," EIA said, continuing: "The economic downturn after the financial crisis of 2008, improvements in efficiency, changes in consumer behavior and patterns of economic growth, all contributed to the decline in petroleum consumption. At the same time, increased use of domestic biofuels (ethanol and biodiesel), and strong gains in domestic production of crude oil and natural gas plant liquids expanded domestic supplies and reduced the need for imports."

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Williams Raises Bid for Southern Union to About $5.6B

- Williams Raises Bid for Southern Union to About $5.6B

Thursday, July 14, 2011
Dow Jones Newswires
by Ben Lefebvre

Williams Cos. raised its bid for Texas pipeline company Southern Union to about $5.6 billion in cash in the latest round of a takeover battle with Energy Transfer Equity.

Williams latest bid tops Energy Transfer's previous $5.1 billion cash-and-stock offer and its own previous bid of $5 billion in cash. The two companies have been competing to merge with Southern, with the winner of the competition expected to become the country's largest natural-gas pipeline company.

Williams said it hopes to have an agreement hammered out with Southern by Tuesday, which it maintains is enough time to share business data with Williams and hold the necessary management meetings to get approval.

"It's fairly simple as to what we have to offer," Williams Chief Executive Allan Armstrong said in an interview. "We don't think the decision process is real complex."

Representatives of Southern and Energy Transfer were not immediately available to comment.

Williams all-cash bid might be simple, but in the end it might not be as compelling as the company is portraying, said Morningstar equities analyst Jason Stevens said. Morningstar values Energy Transfer's cash-and-stock offer at $46 a share--higher than William's $44 a share offer--because of tax benefits and dividends the stock portion of the deal would offer. A merger with Southern might also force Williams to sell some of its pipeline assets in Florida to win over antitrust regulators, Stevens said.

"They'd have to sell their premiere assets," Stevens said. "It's just not as compelling an offer."

It might be difficult for Williams to go any higher than its current 10% premium to Energy Transfer's current offer, said BMO Capital Markets analyst Carl Kirst.

"Williams paying more than $44 would start facing investor blowback given the premium involved," Kirst said in an investors note.

Energy Transfer and Southern Union last week set a deal initially valued at $40 a share, four dollars lower than Williams's latest bid. Energy Transfer also agreed to sell some assets in order for the deal to pass muster with antitrust regulators.

The companies also raised the breakup fee for their agreement to $162.5 million from $92.5 million in the original agreement, another indication that a higher bid was expected. Williams in its latest bid said it would pay the breakup fee and related expenses for Southern.

Both companies had expressed willingness to assume Southern's debt, totaling $3.7 billion.

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

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Key Extends Eagle Ford Footprint with Acquisitions

- Key Extends Eagle Ford Footprint with Acquisitions

Thursday, July 14, 2011
Key Energy Services Inc.

Key Energy has reached a definitive agreement to acquire Edge Oilfield Services and Summit Oilfield Services (collectively "Edge") for consideration of approximately $300 million, consisting of approximately 7.5 million shares of Key common stock and approximately $164 million in cash, which is subject to working capital and other adjustments at closing. Key anticipates funding the cash portion of the consideration from available cash and borrowings under its credit facility. In addition to the $300 million of consideration, Key has also agreed to reimburse or fund up to $40 million of Edge's pre-closing capital expenditures related to Edge's expansion into the Eagle Ford shale, which began generating revenue this quarter.

The closing of this transaction, which is expected to occur this quarter, is subject to customary conditions including the expiration or termination of the waiting period under the Hart-Scott-Rodino Act.

Edge primarily rents frac stack equipment used to support hydraulic fracturing operations and the associated flow back of frac fluids, proppants, oil and natural gas. It also provides well testing services, rental equipment such as pumps and power swivels, and oilfield fishing services. Following the close, Edge's results will be reflected within Key's existing Fishing & Rental Services line of business, which is included in its U.S. reportable segment.

Key's Chairman, President, and CEO, Dick Alario, stated, "Edge's high performance frac stack equipment enjoys strong growth opportunities, particularly in unconventional shale markets. Furthermore, its high revenue and profit per employee fits with our overall investment strategy and should prove beneficial, especially in today's tight labor market."

Alario continued, "Edge's existing business currently generates an annual EBITDA run rate of approximately $65 million. With the expansion into the Eagle Ford that is already underway, Edge believes its EBITDA run rate will be approximately $80 million by year-end 2011. We anticipate Edge's business to be accretive to Key's margins and earnings beginning in 2011. With Edge's experienced oilfield industry veterans, we intend to aggressively expand Edge's service offerings across Key's existing infrastructure, particularly in emerging unconventional shale markets."

Edge's CEO, Darrell Brewer, stated, "We look forward to becoming a part of Key, a high quality, industry leading company, where we can better leverage our business potential via Key's extensive U.S. footprint and financial resources and where our employees will continue to enjoy a bright future."

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