PRODUCTION

Exxon Mobil brings two major U.S. projects onstream

Exxon Mobil has started production at two major projects—one in Alaska and one in the deepwater Gulf of Mexico. On April 22, the company announced that its Point Thomson project, the first company-operated project on Alaska’s North Slope, was onstream. The project’s central pad facilities are designed to initially produce about 5,000 bopd and 100 MMscfd of recycled gas. The recycled gas is re-injected for future recovery. At full-rate production, the facility can produce up to 10,000 bopd and 200 MMscfd of recycled gas. It is anticipated to reach that level when the western pad well is online in a few months. Meanwhile, the company also reported first oil at Julia field in the deepwater Gulf of Mexico. According to an April 19 company statement, the first production well is online, and a second well was due to begin output in the coming weeks. The initial development phase uses subsea tie-backs to the Chevron-operated Jack/St. Malo production facility. The Maersk Viking drillship is drilling a third well, which should come online in early 2017. Production results will assist in the evaluation of additional wells included in the initial development phase, which has a design capacity of 34,000 bopd. “This initial production will provide Exxon Mobil with insight into the potential future development of the reservoir,” said Neil W. Duffin, president of Exxon Mobil Development Company. Discovered in 2007, Julia field comprises five leases in the ultra-deepwater Walker Ridge area of the Gulf of Mexico. 

Husky starts production at Canadian thermal project

Husky Energy has initiated output at its Edam East Lloyd Thermal Project in Saskatchewan, the first of three thermal developments scheduled to come online this year. First oil at the 10,000-bpd development was achieved about seven weeks after the startup of steaming operations. “Edam East is another example of the quick ramp-ups that we’ve come to expect from these developments, which have operating costs amongst the lowest in the industry,” said CEO Asim Ghosh. Husky’s operating costs for its Lloyd thermal product line averaged about $7/bbl, including energy, in fourth-quarter 2015. Two additional Lloyd thermal projects are expected to begin production in the third quarter: the 10,000-bopd Vawn project and the 4,500-bopd Edam West project. Husky’s total thermal production is expected to reach approximately 80,000 bopd by the end of 2016.

CNOOC starts production at Panyu 11-5 oil field

CNOOC’s Panyu 11-5 oil field has started production. The field is in the Pearl River Mouth basin of the South China Sea and has an average water depth of approximately 110 m. In addition to fully utilizing the existing facilities of Panyu 5-1 oil field, three horizontal wells were drilled in Panyu 11-5. One well is currently on production, producing approximately 3,270 bopd. The field is expected to reach its ODP designed peak production of approximately 3,900 bopd in 2016.

Premier reports first oil from Solan field

Premier Oil has reported first oil from Solan field, offshore the UK. The first producing well is flowing naturally at a deliberately restricted initial rate, according to a company statement. According to the development plan, the well will remain free-flowing for a short period of time, after which the ESP will be turned on. Following this initial period and, taking advantage of the availability of the Superior Flotel, over which Premier has contractual options until the end of May, the firm intends to carry out a planned production shutdown to complete the final commissioning of the water injection plant; the tie-in of the second water injection well; and preparation for the tie-in of the second producing well. As of Premier’s statement on April 13, the Ocean Valiant semisubmersible was drilling the second producing well, where 1,500 ft of high-quality reservoir sands have been intersected, and which is expected to be completed and tied-in by mid-year. Production from the field is expected to build up to an anticipated production rate of 20,000-25,000 boed in the second half of 2016, when both pairs of producer-injector wells will be onstream.

GOVERNMENT/REGULATORY

Halliburton, Baker Hughes kill merger deal

Halliburton Company and Baker Hughes Incorporated announced on May 1 that the companies have terminated the merger agreement that they entered into in November 2014, effective April 30, 2016. “While both companies expected the proposed merger to result in compelling benefits to shareholders, customers and other stakeholders, challenges in obtaining remaining regulatory approvals and general industry conditions that severely damaged deal economics led to the conclusion that termination is the best course of action,” said Dave Lesar, Chairman and CEO of Halliburton. “I sincerely thank both our employees, as well as the Baker Hughes employees, for their tireless efforts throughout the regulatory review process,” added Lesar. “Today’s outcome is disappointing because of our strong belief in the vast potential of the business combination to deliver benefits for shareholders, customers and both companies’ employees,” said Martin Craighead, Chairman and CEO of Baker Hughes. “This was an extremely complex, global transaction and, ultimately, a solution could not be found to satisfy the antitrust concerns of regulators, both in the United States and abroad. As we turn the page on this chapter, I want to thank our customers for their patience and continued loyalty over the past 18 months. I also want to thank the entire Baker Hughes team for their unwavering dedication and commitment during this process.” In connection with termination of the merger agreement, Halliburton will pay Baker Hughes a fee of $3.5 billion by Wednesday, May 4, 2016.

API: U.S. exploratory drilling crashes in first quarter

Exploratory oil completions fell 90%, compared to 2015 first-quarter estimates, according to API’s 2016 Quarterly Well Completion Report, First Quarter. Total feet drilled decreased 73%, with the largest decrease seen in the footage of exploratory wells. In addition, estimated natural gas well completions decreased 70% in the first quarter of 2016 compared to year-ago levels. “America’s shale energy revolution has helped the U.S. lower our greenhouse gas emissions while making energy cheaper for American consumers,” said Hazem Arafa, director of API’s statistics department. “To continue this progress, we must revisit current energy policy, speed up the LNG export approval process and avoid unnecessary regulations to help U.S. producers to compete effectively in the global market under the low-price environment.”

MERGERS/ACQUISITIONS/BUSINESS

Devon Energy sells non-core Mississippian assets for $200 million

Devon Energy has entered into a definitive agreement to sell its non-core Mississippian assets in northern Oklahoma to White Star Petroleum, LLC for $200 million. The transaction is expected to close in the second quarter, with an effective date of Jan. 1, 2016. Net production from the Mississippian assets averaged 12,800 boed in the first quarter of 2016, of which approximately 30% was oil. As of Dec. 31, 2015, proved reserves associated with these properties amounted to 11 MMboe. Field-level cash flow accompanying these assets, which excludes overhead costs, totaled $8 million in the first quarter.

Schlumberger, Packers Plus enter into global alliance

Schlumberger and Packers Plus have entered into a global alliance, enabling the two oilfield service companies to become channel partners in key markets around the world. “By combining the strength of Packers Plus’ technologies in multi-stage completions with Schlumberger’s impressive customer footprint, our two companies will be able to rapidly deliver best-in-class solutions to a wide variety of operators around the world,” said Packers Plus President Ian Bryant. As part of the alliance, Schlumberger will sell Packers Plus’ technology internationally, and Packers Plus will sell complementary Schlumberger technology in Canada.

GE begins production of flexible risers for Shell’s Prelude

GE Oil & Gas has started production of four HPHT dynamic flexible risers destined for the world’s largest FLNG facility, Prelude, to be operated by Shell, 250 km off the coast of Western Australia. GE has partnered with Shell on the project since 2011, following an initial order for turbomachinery equipment. The two companies have since collaborated on the subsea flexibles scope, to ensure that the raw materials and proposed end-product are qualified in accordance with the project’s requirements, a coordinated effort that led to Shell Australia awarding a multi-million-dollar contract to GE in April 2014. GE will complete manufacturing of the flexible risers at its facility in Newcastle, UK. Once manufactured, the flexible risers will be packaged onto purpose-built large-diameter reels, and transported more than 11,000 km between Newcastle and Southeast Asia, in readiness for subsea installation.

Marathon Oil sells $950 million of non-core assets

Marathon Oil has signed agreements for the sale of certain non-core assets for $950 million, bringing the total to approximately $1.3 billion since last year. In the largest transaction, the company will divest all of its Wyoming upstream and midstream assets for $870 million, excluding closing adjustments. The upstream properties, comprised primarily of waterflood developments in the Big Horn and Wind River basins, averaged 16,500 boed in first-quarter 2016. The assets sold also include the 570-mi Red Butte pipeline, which is the only export line in the area. The effective date of this transaction is Jan. 1, 2016, and closing is expected in mid-year 2016. In separate transactions, Marathon Oil signed agreements for the sale of its 10% working interest in the outside-operated Shenandoah discovery in the Gulf of Mexico; operated natural gas assets in the Piceance basin in Colorado; and certain undeveloped acreage in West Texas for a combined total of approximately $80 million.

DISCOVERIES/EXPLORATION

Statoil reports positive production test at appraisal offshore Brazil

Repsol Sinopec, with partners Statoil and Petrobras, has completed the Gavea A1 well in the ultra-deepwater, pre-salt Block BM-C-33 in the Campos basin, offshore Brazil. The well encountered a hydrocarbon column of 175 m in a good-quality reservoir of silicified carbonates of the Macabu formation. The well reached a TD of 6,230 m and was tested successfully, producing around 16 MMscfg and 4,000 bopd on a 32/64-in. choke, Statoil said in a statement. This is the fourth appraisal well in the license, which comprises the Seat, Gavea and Pão de Açucar (PdA) discoveries. In 2013-2015, the consortium drilled and tested the Seat-2, PdA-A1 and PdA-A2 appraisal wells. With Gavea A1, the consortium has finalized the appraisal activities in BM-C-33, and will now evaluate the sub-surface data and assess lean, cost-effective development concepts. Repsol Sinopec Brasil (35%) is operator of BM-C-33. Statoil (35%) and Petrobras (30%) are partners. Statoil is to take over operatorship of the license, a transition which is expected to take place in the third quarter.