BUSINESS/MERGERS/ACQUISITIONS

Shell sells North Sea asset package for $3.8 billion

Shell will sell a package of UK North Sea assets to Chrysaor, in a deal worth up to $3.8 billion, including an initial consideration of $3.0 billion. The asset package consists of Shell’s interests in Buzzard, Beryl, Bressay, Elgin-Franklin, J-Block, the Greater Armada cluster, Everest, Lomond and Erskine, plus a 10% stake in Schiehallion. The decommissioning costs associated with the package are expected to be $3.9 billion, of which Shell will retain a fixed liability of $1 billion. Chrysaor will assume the remaining liability. The deal, which is expected to close in second-half 2017, has an effective date of July 1, 2016. Following its completion, Shell will retain a more focused presence in the UK North Sea, with production from the Schiehallion redevelopment and Clair Ridge project expected to come onstream.

Exxon Mobil doubles Permian resources with multi-billion-dollar deal

Exxon Mobil will expand its Permian basin resource base to 6 Bboe through the acquisition of companies owned by the Bass family of Fort Worth, Texas, with an estimated resource of 3.4 Bboe in New Mexico’s Delaware basin. The company will make an upfront payment of $5.6 billion in Exxon Mobil shares, and a series of additional, contingent cash payments totaling up to $1 billion, to be paid beginning in 2020 and ending no later than 2032, commensurate with development of the resource. Exxon Mobil Chairman and CEO Darren W. Woods said, “By utilizing Exxon Mobil’s technological strength, coupled with its unconventional development capabilities, we can drill the longest lateral wells in the Permian basin, reducing development costs and increasing reserve capture.” The acquired companies, which include operating entity BOPCO, hold about 275,000 acres of leasehold, and net production of more than 18,000 boed, about 70% of which is liquids. This includes about 250,000 acres of leasehold in the Permian basin, the bulk of that in contiguous, held-by-production units in New Mexico’s Delaware basin, with more than 60 Bboe estimated-in-place. The companies also hold producing acreage in other areas of the U.S.

Noble acquires CWE in $2.7-billion deal

Noble Energy has executed a definitive agreement, under which the company will acquire all of the outstanding common stock of Clayton Williams Energy for $2.7 billion in Noble Energy stock and cash. The acquisition includes 71,000 highly contiguous net acres, directly adjacent to Noble’s existing 47,200 net acres, in the core of the southern Delaware basin in Reeves and Ward counties, Texas. In addition, there are an additional 100,000 net acres in other areas of the Permian basin. In a separate $300-million transaction, Noble added another 7,200 net acres to the company’s southern Delaware basin position in Reeves County. These properties, which include associated production of approximately 2,400 boed, are situated within, and directly adjacent to, Noble’s existing acreage.

Halliburton, Petrobras enter cooperative agreement

Halliburton has announced a technology cooperation agreement with Petrobras that will advance collaboration in a diverse set of projects targeting complex reservoirs, such as deepwater pre-salt and mature fields. The multi-year agreement will facilitate the development of solutions in geophysics; drilling and completions; reservoir characterization; well testing; flow assurance; and production. The project portfolio will focus on three main challenges: reducing well construction investment, long-term reservoir monitoring and increasing well productivity. Image: Halliburton. 

EXPLORATION

TGS kicks off first Permian basin seismic project

TGS has commenced field operations on the West Kermit 3D seismic survey in the Delaware basin. This project will encompass a minimum of 150 mi2 in Loving and Winkler counties, Texas. This high-resolution 3D survey is designed to assist in the evaluation and development of multiple-zone potential, including highly productive Wolfcamp and Bone Spring intervals. Data acquisition is expected to begin early in the second quarter, with final data available in the fourth quarter. The data will be processed by TGS. “This first project in the Permian basin is an important milestone in TGS’ onshore strategy, and provides a platform for future growth in this prolific area,” said Kristian Johansen, CEO, TGS.

ConocoPhillips reports major discovery in Alaska

ConocoPhillips Alaska has made a new oil discovery in the Greater Mooses Tooth (GMT) Unit in the northeastern portion of the National Petroleum Reserve—Alaska (NPRA). The Willow discovery wells—Tiɳmiaq 2 and 6—were drilled in early 2016 and encountered 72 ft and 42 ft of net pay, respectively, in the Brookian Nanushuk formation. The two discovery wells lie about 28 mi west of the Alpine Central Facility, and are approximately 4 mi apart. The Tiɳmiaq 2 well was tested and established good reservoir deliverability with a sustained, 12-hr test rate of 3,200 bpd of 44^o API oil. Initial technical estimates indicate the discovery could have recoverable resource potential in excess of 300 MMbbl. Appraisal of the discovery was due to commence in January, with the acquisition of state-of-the-art 3D seismic. Subject to appraisal results and the choice of development scenarios, Willow could produce up to 100,000 bopd. Initial commercial production could occur as early as 2023. ConocoPhillips has a 78% working interest in the discovery, and Anadarko Petroleum holds the remaining 22%. In a follow-up to the Willow discovery, ConocoPhillips and its bidding partner, Anadarko, were successful in December’s federal lease sale on the western North Slope, winning 65 tracts. ConocoPhillips independently was successful in December’s state lease sale on the western North Slope, winning 74 tracts.

Exxon Mobil hits pay offshore Guyana

Exxon Mobil made a new discovery with its Payara-1 well offshore Guyana. Payara is the company’s second oil discovery on the 6.6-million-acre Stabroek Block and was drilled in a new reservoir. The Payara-1 well, which was drilled by Exxon Mobil affiliate Esso Exploration and Production Guyana, encountered more than 95 ft of high-quality, oil-bearing sandstone reservoirs. The Payara discovery is about 10 mi northwest of the 2015 Liza discovery. In addition to the Payara discovery, appraisal drilling at Liza-3 identified an additional high-quality deeper reservoir directly below Liza field, which is estimated to contain 100–150 MMboe. This additional resource is being evaluated for development in conjunction with the world-class Liza discovery. Esso Exploration and Production Guyana Limited operates the Stabroek Block with a 45% interest. Hess Guyana Exploration holds a 30% interest, and CNOOC Nexen Petroleum Guyana holds the remaining 25%.

PRODUCTION

BP’s Thunder Horse South Expansion starts up

BP has put the Thunder Horse South Expansion project onstream in the deepwater Gulf of Mexico. The project, which came online 11 months ahead of schedule, is expected to boost gross production at the facility by an estimated 50,000 boed. The Thunder Horse South Expansion project adds a new subsea production system, roughly 2 mi to the south of the existing Thunder Horse platform. The system is a collection point for wells connected to the Thunder Horse platform by two 11,000-ft flowlines installed on the seabed in late 2016. The project was completed more than 15% below budget, by relying on standardized equipment and technology, rather than building customized components. According to BP, the first new well for the project tapped into the highest amount of hydrocarbon-bearing sand seen, to date, at Thunder Horse field, with drilling results confirming more than 500 ft of net pay. Developed with partner Exxon Mobil, the Thunder Horse platform sits in more than 6,000 ft of water and began production in June 2008. Image: BP. 

Gazprom Neft expands production from Arctic platform

Gazprom Neft met its annual production targets at the Prirazlomnaya offshore platform, with a total 2,154,000 tonnes of ARCO (Arctic Oil) being produced at the field in 2016—a more-than-2.5-fold increase on 2015. Prirazlomnaya is the only field on the Russian Arctic Shelf at which commercial hydrocarbon production is ongoing. Oil produced at Prirazlomnoye field is characterized by its high-density, high-sulphur content, low carbon residue, and the high volume of fractions that can used in lubricant production. Production at Prirazlomnoye field commenced in December 2013, with the first consignment of ARCO dispatched in April 2014. Oil transportation from the field is being handled by two shuttle tankers—the Mikhail Ulyanov and the Kirill Lavrov.

W&T Offshore starts production from new Mahogany field well

W&T Offshore’s Ship Shoal 349 A-18 well, the company’s most recently completed well at Mahogany field, was brought onstream on Jan. 17. The well is ramping up to full rates and, as of late January, had achieved a production rate of 3,275 bopd and 5.6 MMcfgd, for a total of approximately 4,200 boed, at a flowing tubing pressure of over 9,000 psi. The company expects to increase the well’s production rate to more than 5,000 boed. This deep shelf subsalt well was drilled to a TVD of approximately 20,000 ft, in a water depth of 372 ft on the western side of Mahogany field. W&T holds a 100% working interest in the field.

REGULATORY/GOVERNMENTAL

BOEM denies Atlantic seismic permits

In early January, the U.S. Bureau of Ocean Energy Management (BOEM) denied six permit applications to conduct air gun seismic surveys in the Mid- and South Atlantic Planning Areas of the Atlantic Ocean. According to BOEM, the decision was based on a number of factors, including a diminished need for additional seismic survey information, because the Atlantic Program Area has been removed from the 2017-2022 Outer Continental Shelf Oil and Gas Leasing Program. “In the present circumstances, and guided by an abundance of caution, we believe that the value of obtaining the geophysical and geological information from new air gun seismic surveys in the Atlantic does not outweigh the potential risks of those surveys’ acoustic pulse impacts on marine life,” said Abigail Ross Hopper, BOEM’s then-director. However, API hit back, saying it was a “politically driven decision that flies in the face of the best available science.” API Director of Upstream and Industry Operations Erik Milito said, “As BOEM has reiterated a number of times previously, seismic surveys are a safe, efficient and scientifically proven way to find potential new sources of energy.”

BSEE, USCG sign agreements to increase collaboration

The U.S. Bureau of Safety and Environmental Enforcement (BSEE) and U.S. Coast Guard (USCG) have signed four revised memorandums of agreement (MOAs) this week, to improve regulatory collaboration related to the energy industry on the Outer Continental Shelf (OCS). The agreements leverage each agency’s authorities and areas of expertise, to increase collaboration, clarify responsibilities, and streamline information-sharing. The revised agreements address best practices for managing civil penalties, incident investigations, management systems and oil discharge preparedness. Under current regulations, both BSEE and the Coast Guard share jurisdiction over the regulation of OCS energy industry facilities. The revised MOAs clarify the responsibilities of each agency regarding oversight of systems and sub-systems.