Chesapeake CEO: Utica Shale Acres Worth $15B-$20B

- Chesapeake CEO: Utica Shale Acres Worth $15B-$20B

Monday, August 01, 2011
Dow Jones Newswires
HOUSTON
by Ryan Dezember

Chesapeake Chief Executive Aubrey McClendon said Friday that the company believes its acreage above the Utica Shale formation in eastern Ohio, 1.25 million acres the company has quietly pieced together over the last year and a half, is worth $15 billion to $20 billion.

"That's a big number to share but we believe we understand the hydrocarbon potential under our acreage and we also know a fair amount about how to create and extract value from a play such as this," McClendon told investors during a conference call to discuss the company's second-quarter earnings. "The Utica should emerge as a key driver in the future growth of U.S. energy supplies, especially in natural gas liquids."

Oklahoma City-based Chesapeake reported earnings of $510 million, or 68 cents a share, compared with a prior-year profit of $255 million, or 37 cents a share. Excluding mark-to-market and other impacts, adjusted earnings rose to 76 cents from 75 cents. Revenue jumped 65% to $3.32 billion on higher production and rising oil and gas prices.

Analysts surveyed by Thomson Reuters expected a per-share profit of 72 cents on revenue of $2.77 billion.

In order to contend with rising oilfield service costs and ramp up drilling in Ohio, Chesapeake said it will boost spending by $1 billion over the next two years to between $6 billion and $6.5 billion annually.

McClendon said Chesapeake, which is drilling into the Utica with five rigs, plans to add three more rigs by the end of the year and eventually have as many as 40 drilling in eastern Ohio by the end of 2014.

Chesapeake has spent between $1.5 billion and $2 billion on leasing property in eastern Ohio and continues to add parcels, McClendon said. The acreage will exceed the $15 billion to $20 billion range once more of it is developed into producing oil fields, but that is its value now as Chesapeake shops it to potential joint venture partners.

Chesapeake plans to sell a stake in the property during the fourth quarter.

The Utica, a deeply buried rock formation, lies below parts of eight states, from Tennessee to New York, as well as parts of Canada. Oil companies, however, have concentrated their leasing and exploration efforts in eastern Ohio, which they believe will yield more valuable oil and natural gas liquids.

While McClendon decline to detail the results from the 15 Utica wells it's drilled so far, he said the activity that will come there should lift an Ohio work force that has suffered for years as manufacturers flee the Rust Belt. Abundant water, needed to hydraulically fracture shale formations, easy transport by rail, highway and river, and a large base of industrial workers make the Utica more attractive and potentially more profitable than many other recent shale discoveries, McClendon said.

"We think that our activity can help rejuvenate this area and we're quite pleased with the size of the work force and the quality of the work force," he said. "This is pretty much the most ideal place in America for a new play."


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

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Petrobras Confirms Continuity of Accumulation in Guara Area

- Petrobras Confirms Continuity of Accumulation in Guara Area

Monday, August 01, 2011
Petrobras

Petrobras has completed drilling of the second extension well in Guará area, 3-SPS-82A (3-BRSA-923A-SPS), located in the Santos Basin pre-salt.

Informally known as Guará Sul (South Guará), the well was drilled 5.7 km south of wildcat discovery well (1-SPS-55). In a water depth of 2,156 m, Guará Sul is located 315 km off the coast of the state of São Paulo. Including the wildcat well, this is the third well in the Guará area.

Preliminary analyses confirm satisfactory conditions of the reservoir and its lateral continuity. The monitoring of pressures compared to those from the discovery well, currently undergoing Extended Well Test (EWT), verified the hydraulic communication of the reservoir between both wells. This scenario indicates a good perspective of production for this accumulation.

Cable test in the pre-salt reservoirs demonstrated the presence of light oil around 27º API. Formation tests still have to be executed to assess the reservoir's productivity.

Petrobras is the operator of the consortium for the exploration of block BM-S-09 (45%), in partnership with the BG Group (30%) and Repsol Sinopec Brasil (25%). The consortium gives continuity to the activities foreseen in the Guará Evaluation Plan.

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Dominion Petroleum Picks Up Block Offshore Kenya

- Dominion Petroleum Picks Up Block Offshore Kenya

Monday, August 01, 2011
Dominion Petroleum Ltd.

Dominion Petroleum announced the award of Block L15 of the Lamu Basin, offshore Kenya. This new award follows Dominion having secured Block L9, offshore Kenya, in March 2011.

The Company concluded negotiations with the Government of the Republic of Kenya by executing heads of agreement ("HoA") which define the terms for Block L15, with Dominion serving as operator with a 100% working interest.

The award of L15 is subject only to the signature of a Production Sharing Contract ("PSC") by Dominion and Kenya's Ministry of Energy; currently scheduled to take place in the coming weeks in Nairobi.

With Block L15 now added to its portfolio of exploration assets in offshore East Africa, Dominion holds a leading exploration portfolio in the deepwater East African margin by now operating 3 blocks in Tanzania and Kenya. The directors anticipate that the expanded, combined portfolio may gain even more industry interest going forward. The Company can now adopt a partnering strategy for the assets in terms of moving toward the drilling of this expanded portfolio.

Block L15 lies immediately to the north of Block L8, where the reportedly 1 billion barrel Mbawa prospect shall likely be drilled in mid 2012. Dominion's new Block is on the Davy-Walu structural trend, as is Block L9. The only well in Block L15 is Kofia-1, which was drilled by Union Oil in 1985 and encountered good oil shows in the Palaeogene and Upper Cretaceous intervals. Planned drilling by other operators along the Davy-Walu trend over the next 12 months may serve to de-risk the prospectivity in both L9 and L15 before firm drilling commitments are made in either PSC.

Following signature, the Initial Exploration Period of the PSC will last for two years. During this time, a gross minimum work commitment of $2.85m inclusive of the acquisition of 250 square kilometres of 3D seismic data is required.

Following the Initial Exploration Period, there is an option to relinquish the PSC or commit to another two year exploration period with the obligation to drill one well in that period.

The terms and the commitments for L15 defined in the HoA compare very favorably to other countries in the region relative to the potential resource the block represents.

Andrew Cochran, Chief Executive of Dominion Petroleum, commented, "We are delighted to add Block L15 to Dominion's East Africa deepwater exploration portfolio, one of the most sought after addresses in the exploration industry these days. The region is seeing both growing attention from, and accelerated activity by, major players with Kenya now due for deepwater drilling within the next year following the last year's successes in Tanzania and Mozambique.

"Dominion's new award represents a material expansion of an already enviable deepwater East African portfolio. We can now focus our attentions on the business of exploring these blocks, realizing their true value and embarking on substantive discussions with potential partners to establish plans for drilling."

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Egdon to Sell Interest in Avington Field

- Egdon to Sell Interest in Avington Field

Monday, August 01, 2011
Egdon Resources plc

Egdon reported that its wholly owned subsidiary Egdon Resources Avington Limited ("ERA") has reached agreement to sell a 10% interest in the Avington oil field under license PEDL070, for £400,000 in cash.

Under the transaction, ERA has agreed to sell a 5% interest to IS E&P Limited and a further 5% interest in the license to IS NV Limited (together the "IS Companies"). The consideration payable by each of the IS Companies for their respective 5% interests will comprise £200,000 in cash payable on completion and the assumption of their pro-rata shares of a Net Profit Interest ("NPI") payable to Heyco Energy Holdings S.L. The NPI varies between 5 and 10% dependent upon oil price. The effective date of the transaction is June 1, 2011.

The transfers of interest are subject to approval by the Department of Energy and Climate Change.

Prior to the transaction ERA held a 16.67% interest in PEDL070. Egdon Resources U.K. Limited also holds a further 20% interest in the license meaning that on completion Egdon will retain an aggregate 26.67% interest in the license and the Avington oil field.

The Avington oil field is located in the County of Hampshire and is operated by Star Energy Oil UK Limited. Oil is currently produced from the Jurassic age Great Oolite reservoir from two wells, Avington-2Z and Avington-3Z. Production averaged approximately 70 barrels of oil per day in June 2011.

The sale will reduce Egdon's daily production by a maximum expectation of 7 barrels of oil per day and reduce its Proven and Probable reserves by an estimated 23,000 barrels of oil. The contribution to net profit from the 10% interest for the eleven months to end June 2011 after depreciation and amortization was £18,500 before tax (unaudited). The gross cash flow from the interest for the same period was £58,000 (unaudited). The carrying value of the asset sold as at June 30, 2011 was £422,390 (unaudited).

The proceeds of the sale, which will total £400,000 payable on completion, will be utilized on Egdon's active UK and French exploration, appraisal and development program where the Company believes it can generate a better return on investment.

The IS Companies are private companies involved in oil and gas exploration and production. InfraStrata is a 50% shareholder in both companies although both companies have independent boards. Egdon directors Ken Ratcliff and Walter Roberts are also directors of InfraStrata plc and Walter Roberts and John Rix have shareholdings in the IS Companies. As such an independent committee of Egdon directors comprising Philip Stephens, Alan Booth and Mark Abbott was set up to consider the offers and negotiate and approve the transaction.

Commenting on the sale Egdon's Managing Director Mark Abbott said, "These transactions realize a significant proportion of our expected future value from the transferred interest in cash at a time of strong oil price. Egdon believes it can utilize this cash on its higher potential projects in the UK and France to provide a better return for shareholders. We still retain a material interest in the Avington field and any upside which may be realized from future drilling".

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