Oil country hot line

October 1999 Vol. 220 No. 10 Hot Line Oil prices soar to 23-month highs The price of crude shot to a nearly two-year high last month, on fears that a potential workers strike in Venezuela co

October 1999 Vol. 220 No. 10
Hot Line

Oil prices soar to 23-month highs

The price of crude shot to a nearly two-year high last month, on fears that a potential workers strike in Venezuela could threaten the country’s oil exports. Crude for delivery in October closed at a high of $24.29/ bbl, continuing a trend that began last spring when OPEC and other leading producers cut oil output to halt the long slide in oil prices. As a result, shares of major energy companies, such as Exxon, Texaco and Mobil, have gained ground on the New York Stock Exchange. Oil service companies, which count on oil prices to encourage exploration and production spending, saw some of the biggest stock price gains last month. Meanwhile, OPEC ministers continued to insist that they will not back away from adherence to production cuts that have more than doubled oil prices since March.

Shareholders approve BP Amoco, ARCO merger

In a meeting held on September 1, more than 800 shareholders of BP Amoco gave overwhelming approval to the company’s proposal to combine with Atlantic Richfield Co. (ARCO). In addition, proxy votes representing 5.8 billion shares backing the merger had been received already, compared with 27.9 million against and 9.7 million abstentions — a majority of 99.3% in favor. More than 60% of the shares in issue were voted. Overwhelming majorities in favor also were recorded for other resolutions, including a two-for-one split of BP Amoco shares. Two days earlier, ARCO shareholders approved their side of the merger. Representing about 75% of all ARCO stock, they voted 97.4% of their shares in favor of the combination.

Natural gas prices increase in Canada

The price of natural gas in Canada soared to a 15-year high this summer, with consumers facing an extra charge of up to C$5.00 per month. Alberta natural gas prices have almost doubled over last year’s average, rising 40% in the past several months and exceeding the important C$3.00 barrier. Industry experts say reasons for the price increase include tight gas supplies across western Canada and the prospect of growing demand from the U.S. this coming winter. Another factor is a heat wave experienced this year in many parts of North America, where people use gas-operated air conditioners.

TotalFina, Elf merge

After a two-month long takeover battle between TotalFina and Elf Aquitaine, the companies’ boards of directors, chaired respectively by Philippe Jaffre and Thierry Desmarest, recommended to their shareholders the amicable merger of the two firms. Desmarest will run the new company, which will create the world’s fourth-largest oil group. Both companies had been at war since TotalFina initially launched an unsolicited $44 billion all-stock takeover bid for Elf in July. Elf resisted the offer, and came back with its own $53 billion cash-and-stock counterbid against TotalFina. The companies’ strengths will complement each other, and the merger will further bolster the firm’s presence in Africa and the Middle East.

Marathon makes deepwater GOM discovery

Marathon Oil made a gas discovery on its Camden Hills prospect, located in Mississippi Canyon Block 348 of the Gulf of Mexico. The 348-1 well was drilled to a 15,080-ft depth and encountered more than 200 ft of gas pay. Further appraisal drilling is planned for later this year, to fully evaluate the discovery’s extent. The Block 348 lease lies in 7,200 ft of water, about 140 mi southeast of New Orleans.

Exxon makes sixth discovery in Angola

Exxon affiliate Esso Exploration Angola has made its sixth oil find on deepwater Block 15. The discovery, named Xikomba, encountered an oil-bearing reservoir that tested 1,435 bpd. The well was drilled in 4,445 ft of water, to a total depth of 9,436 ft. Esso and Angolan state oil company Sonangol announced the Hungo, Kissanje, Marimba and Dikanza Block 15 discoveries during 1998, and the Chocalho find in June of this year. Xicomba is located 18 mi north of Hungo. Block 15’s recoverable reserve potential is in excess of 2 billion boe. The production concept for initial development is under evaluation. Other participants in the block include BP Exploration, Agip and Statoil.

Kerr-McGee high bidder on deepwater blocks

The U.S. Department of the Interior’s Minerals Management Service received 177 bids totaling $104.2 million at last month’s Western Gulf of Mexico Lease Sale 174. About 41 companies bid on 153 tracts in the Western Gulf of Mexico, offshore Texas and in Louisiana’s deep waters. Kerr-McGee Oil & Gas was the high bidder on 36 deepwater blocks. The company’s net total exposure for all high bids was $33.2 million. Kerr-McGee will operate 29 of the 36 high-bid blocks and has an 87% average working interest. With these additional blocks, the company will hold interests in more than 500 tracts in the Gulf of Mexico, of which more than half are in water depths greater than 1,000 ft.

Enterprise confirms Irish gas discovery

A successful natural gas appraisal well was drilled in Corrib field, 44 mi off Ireland’s West Coast, in 1,145 ft of water. The 18/25-1 well is Enterprise Oil’s second successful appraisal well drilled in Licenses PL 2/93 and 3/94, which encompass the Corrib field discovery. It achieved test rates of up to 64 MMcfgd. Rates were limited by the testing equipment. In June of this year, Marathon acquired an 18.5% stake in the licenses. Saga and Statoil also have interests in the field. Enterprise plans to drill the Shannon prospect next, which lies about 26 mi south of Corrib.