Oil country hot line

Independents, deep water rule lease sale

The Western Gulf of Mexico lease sale drew $165.6 million in high bids for 320 tracts, mainly by independent producers and for deepwater tracts. Fifty firms participated in what was the fourth-largest, federal lease sale in a decade (in terms of the number of leases that drew bids). They submitted 386 bids that totaled nearly $190 million. The top three firms that submitted bids were Kerr-McGee, Spinnaker Exploration and Amerada Hess. Deepwater tracts received the highest bids. In fact, the highest single bid of $8.3 million went for Garden Banks Block 245 in water depths of about 2,624 ft. The bid was submitted jointly by Kerr-McGee, Amerada Hess and Petrobrás America. Devon Energy was high bidder on nine blocks, five of which were deepwater tracts.

MMS awards $656 million to states

A record $656 million was received by several states for their share of revenues collected from developments on federal lands inside their boundaries, or in federal waters off their coasts. The amount represents a cumulative share for January through June 2001 and surpasses last year’s figure by $294 million. Total distributions in 2000 set a record at $800 million for that entire year. Secretary of Interior Gale Norton said, "If the current price and production trends continue, this will be an all-time record year. The money goes to the state treasuries, and many states usually earmark these funds for important education and public work programs."

Global Marine, Santa Fe merge

In a $3-billion stock deal that will create the world’s second-largest offshore drilling contractor, Santa Fe International agreed to acquire Global Marine. The new conglomerate will be headquartered in Houston, Texas, and called GlobalSantaFe Corp. The firm would have a market value of about $6 billion and traded on the NYSE under the symbol "GSF." This merger of equals will modestly accredit GlobalSantaFe’s earnings and substantially accredit its cash flow in 2002, resulting in cost savings of $25 million by the end of the same year. Global Marine President and CEO Bob Rose will serve as chairman of the combined entity. Santa Fe President and CEO Sted Garber will continue in these roles at GlobalSantaFe. Gordon Anderson, current chairman of Santa Fe, is expected to serve on the combined firm’s 14-member board, which will have equal representation from each firm. By combining complementary resources, the new firm will become a leading provider of drilling management services.

Cano Limon recovers, Columbia’s output rise

After suffering rebel attacks, Cano Limon – Columbia’s second-largest oil field – have restored production. State-firm Ecopetrol said production reached 668,221 bopd in August, the highest level this year, and up 34,000 bopd from the same month last year. This production increase will help grow Columbia’s declining economy. Oil revenues account for the country’s biggest supply of foreign currency and largest source of revenue for the federal government. In fact, it added more than $2 billion to government coffers last year.

Chevron’s Texaco acquisition approved

After almost a year, the Federal Trade Commission finally approved Chevron’s $39-billion purchase of Texaco (which includes $6 billion of assumed debt). However, until shareholders approve, and also, before a huge asset sale is completed, the merger will not be completely finalized. Federal regulators made the asset sale a condition that must be met for final approval. The new firm will be named ChevronTexaco Corp., creating the second-largest oil firm in the nation and the fourth-largest in the world.

Firms told to use or give up North Sea fields

Attempting to revive North Sea production, which is stagnating at about 2.3 million bopd, the UK government threatened firms to exploit, or relinquish unexploited fields to new operators. There were 250 fallow fields and 250 unused licenses in the UK section of the North Sea. "This is a luxury we can no longer afford," said Energy Minister Brian Wilson. The UK traditionally has given operators licenses with a long time span and few conditions for activity. However, applicants in the country’s 20th licensing round, due later this year, can expect "a more time-limited approach." Retroactive conditions on existing assets are not expected, but the government is hoping firms will voluntarily release or use assets. This notion was underscored by Wilson’s announcement of his approval of Shell’s decision to develop Penguin, a field it discovered in 1974.

Abraxas acquires Grey Wolf

Abraxas Petroleum Corp. announced that about $5.1 million common shares of Grey Wolf Exploration have been tendered in exchange for Abraxas’ common stock shares. Abraxas have taken up all Wolf’s offerings and now owns 87% of the firm’s common shares. Abraxas intends to buy the firm’s remaining shares that were not tendered.

Devon to acquire Anderson Exploration

Devon Energy and Anderson Exploration have approved an acquisition agreement in which Devon will acquire Anderson’s outstanding shares for about $25.80/share. The aggregate value of the offer, including $1.2 billion in assumed debt, plus other Anderson obligations, is nearly $4.6 billion. This agreement follows on the heels of Devon’s announcement of its intent to purchase Mitchell Energy & Development Corp. for $3.5 billion. Upon completion of these deals, which are expected to close by year end, Devon stands to become the largest independent North American producer.

Correction

The following is a clarification of a Hotline item that appeared in the August 2001 issue.

The item stated that "A blowout on a Global Marine Drilling rig in the Gulf of Mexico forced an evacuation. . . ." It should have stated that "A blowout on a Marine Drilling rig in the Gulf of Mexico forced an evacuation. . . ."