MERGERS/ACQUISITIONS/BUSINESS

SM Energy expands in Midland basin

SM Energy has entered into a definitive purchase agreement to acquire 35,700 net acres in Howard and Martin counties in West Texas, expanding the company’s Midland basin footprint to approximately 82,450 net acres. The acquired acreage complements, and is partially contiguous to, the company’s recently closed Howard County acreage acquisition and includes approximately 2,400 boed of net production. The purchase price is $1.1 billion in cash, plus 13.4 million shares of SM common stock, to be issued to the seller, QStar LLC. In a separate deal, SM Energy also entered into an agreement regarding the sale of its Williston basin assets, located outside of Divide County, for $785 million; the purchaser is Oasis Petroleum. The acquisition is expected to close in mid-December, with an effective date of Sept. 1. The divestiture is expected to close in early December, with an effective date of Oct. 1.

Shell divests Canadian shale acreage for $1 billion

Royal Dutch Shell, through its affiliate Shell Canada Energy, will sell approximately 206,000 net acres of non-core oil and gas properties in Western Canada to Tourmaline Oil Corp. for a total consideration of about $1.037 billion. The acreage includes 61,000 net acres in the Gundy area of northeastern British Columbia and 145,000 net acres in the Deep basin area of west-central Alberta. According to Shell, the assets are a combination of developed and undeveloped lands, along with related infrastructure, producing 24,850 boed of dry gas and liquids. “Shell retains a significant shale position in Canada, and we are actively working to mature our attractive core asset base in the Montney and Duvernay,” said Andy Brown, upstream director, Shell. The transaction should close in the fourth quarter.

Halliburton, U.S. Silica break record for moving largest sand unit train

Halliburton and U.S. Silica Holdings moved a record-breaking unit train, carrying nearly 19,000 tons of U.S. Silica White frac sand, from Ottawa, Ill., to Elmendorf, Texas. The train—the largest frac sand unit of its kind shipped, to date, in North America—arrived in Texas, on Oct. 13, via the BNSF railroad. The unit train took five days to build and was loaded with 30/50 and 40/70 U.S. Silica White frac sand. It was received at the Halliburton Elmendorf South Texas Sand Plant, which can handle two, 115-car unit trains simultaneously and can hold 40,000 tons in its eight silos. 

GE, Baker Hughes form digital industrial services company

GE is to combine its oil and gas business with Baker Hughes to form a new oilfield technology provider with a unique mix of service and equipment capabilities. The “new” Baker Hughes will boast a combined revenue of $32 billion and operations in more than 120 countries. By drawing from GE technology expertise and Baker Hughes capabilities in oilfield services, the new company will provide best-in-class physical and digital technology solutions. Baker Hughes shareholders will hold 37.5% of the new company with GE owning the remaining 62.5%. The transaction is expected to close in mid-2017.  “As we go forward, this transaction accelerates our capability to extend the digital framework to the oil and gas industry,” said Jeff Immelt, chairman and CEO of GE. “An oilfield service platform is essential to deliver digitally enabled offerings to our customers. We expect Predix to become an industry standard and synonymous with improved customer outcomes.”

RSP Permian acquires Silver Hill for $2.4 billion

RSP Permian has entered into definitive agreements to acquire Silver Hill Energy Partners and Silver Hill E&P II, in a deal worth about $2.4 billion. Silver Hill is comprised of two privately held entities controlled by affiliates of Kayne Anderson Capital Advisors and Ridgemont Equity Partners. Collectively, they own about 41,000 net acres in northeastern Loving and northwestern Winkler counties, Texas, with about 15,000 boed of current net production from 58 producing wells and about 3,200 gross, undeveloped locations. While both transactions will have an effective date of Nov. 1, they will close separately. The acquisition of Silver Hill Energy Partners is expected to close in the fourth quarter, while the acquisition of Silver Hill E&P is expected to close in first-quarter 2017.

EXPLORATION/DISCOVERIES

BP calls off exploration of Great Australian Bight

BP has decided to call off its exploration drilling program in the Great Australian Bight (GAB), offshore South Australia. According to the London-headquartered supermajor, the decision follows a review of the company’s upstream strategy earlier this year. “We have looked long and hard at our exploration plans for the Great Australian Bight but, in the current external environment, we will only pursue frontier exploration opportunities if they are competitive and aligned to our strategic goals. After extensive and careful consideration, this has proven not to be the case for our project to explore in the Bight,” said Claire Fitzpatrick, BP’s managing director for E&P, Australia.

Caelus reports multi-billion-barrel Alaskan discovery

Caelus Energy Alaska has reported a significant light oil discovery on its Smith Bay state leases on the North Slope of Alaska. Based on two wells drilled in early 2016, as well as 126 mi² of existing 3D seismic, Caelus estimates the oil-in-place under the current leasehold to be 6 Bbbl. Furthermore, the company said, the Smith Bay fan complex may contain upwards of 10 Bbbl of oil-in-place when adjoining acreage is included. Due to the favorable fluids contained in the reservoir, Caelus expects to achieve resource recovery in the range of 30% to 40%. Caelus CEO Jim Musselman said, “This discovery could be really exciting for the state of Alaska. It has the size, and scale, to play a meaningful role in sustaining the Alaskan oil business over the next three or four decades.” The Smith Bay development has the potential to provide 200,000 bpd of light, highly mobile oil, which would both increase Trans-Alaska Pipeline System throughput volumes and reduce the average viscosity of oil in the pipeline, extending its long-term viability.

Exxon Mobil in billion-barrel find offshore Nigeria

Exxon Mobil has reported a significant discovery, with a potential recoverable resource of between 500 MMbbl and 1 Bbbl of oil at Owowo field, offshore Nigeria. The Owowo-3 well, which was spudded on Sept. 23, encountered about 460 ft of oil-bearing sandstone. The well, which was drilled to 10,410 ft in 1,890 ft of water, extends the resource discovered by the Owowo-2 well, which encountered about 515 ft of oil-bearing sandstone. The field spans portions of the contract areas of Oil Prospecting License 223 (OPL 223) and Oil Mining License 139 (OML 139). Exxon Mobil holds 27% interest and is the operator for OPL 223 and OML 139. Its partners include Chevron Nigeria Deepwater G Limited (27%), Total E&P Nigeria (18%), Nexen Petroleum Deepwater Nigeria (18%), and the Nigeria Petroleum Development Company (10%).

PRODUCTION

Lukoil starts output at Siberian field

Lukoil has begun commercial production at Pyakyakhinskoye oil and gas condensate field in the Yamal-Nenets Autononous District. According to a statement announcing the milestone, 107 wells—including 72 oil wells and 31 gas wells—have been drilled in the field. Of the oil wells, 36 are currently producing, with an overall daily flowrate exceeding 3,000 tons (20,000 bbl). Gas production is expected to begin in the latter part of 2016. The field is expected to produce 1.5 million tons of crude oil and gas condensate and 3 Bcm of natural gas in 2017, Lukoil said.

Kashagan sends first crude for export

Kazakhstan’s beleaguered Kashagan field shipped its first batch of crude oil from the onshore processing plant after the field was reopened. Production is expected to increase gradually to 180,000 bopd, with the aim of raising production to 370,000 bopd by the end of next year. Kashagan lies in the Caspian Sea, approximately 80 km southeast of Atyrau, Kazakhstan. It is one of the largest oil fields discovered in the last 40 years, with estimated reserves of 35 Bbbl of oil in place.

BP nears completion of first phase of Oman gas project

The first phase of BP Oman’s Khazzan natural gas project is 80% complete, and on track to deliver first gas near the end of 2017, the company said in a statement dated Oct. 24. Situated on a previously undeveloped desert site, 350 km south of Muscat, work on the Khazzan tight gas project began in 2014, and the completed development will eventually contribute roughly a third of Oman’s natural gas supply. According to BP, the vast majority of the project’s infrastructure is already in place; meanwhile, the drilling program is also on track, with 38 of the 50 wells needed by first gas already drilled. More than 300 wells will eventually be drilled over the lifetime of the project. BP has plans in place, whereby extensions will contribute 1.5 Bcfgd to the Omani economy. BP Oman is the lead partner in the project, with a 60% interest. Oman Oil Company Exploration & Production holds the remaining 40%.

GOVERNMENT/REGULATORY

Russia, Norway exchange Barents Sea seismic data

The Norwegian Petroleum Directorate (NPD) and Russia’s Federal Subsoil Resources Management Agency (Rosnedra) have entered into an agreement to exchange seismic data from the areas around the demarcation line in the Barents Sea. Rosnedra initiated the exchange about two years ago, and the agreement was signed by Bente Nyland, director general of the NPD, and Evgeny A. Kiselev, director of Rosnedra, in July. The agreement entails that Russian and Norwegian authorities will exchange about the same volume of data. From the Russian side, this includes all seismic that was collected in 2013, in two major tracts: the Fedynsky license and the central Barents Sea license, in a zone that is 50 km from the demarcation line. There also will be a line from the gas discovery on the Kildinskoye High. In total, the NPD has received 6,500 km of 2D seismic from these areas. Rosnedra has received 5,900 km of 2D seismic from the Norwegian side. This includes seismic that the NPD collected in the northern Barents Sea in 2012, 2013 and 2014, limited to east of 35°E and south of 76°10^lN. The Russians also will receive a seismic line from the stratigraphic boreholes on the Sentralbank High, as well as a long line that spans north to south in the Arctic Ocean. 

Arctic Iñupiat Offshore calls for Arctic to remain in leasing plan

Arctic Iñupiat Offshore (AIO) is joining the Arctic Coalition, a collection of 21 Alaskan and nationwide organizations that support responsible energy development, in and off the coast of Alaska. The group is calling on the Obama administration to listen to the views and perspectives of Alaskan residents and keep Alaska’s Arctic offshore acreage in the forthcoming federal energy leasing program. Formed in July 2014, AIO is a JV of the Arctic Slope Regional Corporation and six North Slope village corporations, created to allow native communities to invest directly in energy-related projects in, and near, their areas. In total, the organizations collectively represent around 13,000 Iñupiat people. Following the announcement, AIO will work with other members of the coalition, which includes native groups, labor unions, higher education programs and others, to articulate the essential role that the oil and gas industry plays in the Arctic, and the importance of ensuring that the region is not ignored by decision-makers.