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May 2015
See You at ACE!  

Summer is nearly on us, and that means convention season.  We're starting out at the AAPG's Annual Convention & Exhibition in Denver, running from May 31st to June 3rd, where we'll share booth #423 with Sirius Exploration Geochemistry. Be sure to check out our partners at Leeds Group in booth #654.

If you couldn't make it to Cairo for the golf tournament at Kattameya Dunes, don't worry!  On June 17th, we'll be sponsoring Hole 11 at the Rocky Mountain Association of Geologists's annual golf tournament, held in Denver at Arrowhead Golf Course.

Finally, from July 20th to July 22nd, we'll be exhibiting in booth #1149 at the Unconventional Resources and Technology Conference in San Antonio.

We hope we'll see you at least once!
Oil & Gas Prices

(Image courtesy of Freepik.com.) 
Kalaam: Industry Voices
First Drop in US Oil Stocks in Four Months Signals Glut Ending
by Moming Zhou
March 5th, 2015
(bloomberg.com)

U.S. crude stockpiles fell for the first time in four months as refineries processed a record amount of oil for this time of year, bolstering expectations that a supply glut is ending.

 

Supplies dropped by 3.88 million barrels last week, the Energy Information Administration said Wednesday. Refiners boosted their operations for an eighth time in nine weeks, while imports of crude dropped to the lowest in almost a year.

 

"We are going to get more declines in the coming months," James Williams, an economist at WTRG Economics, an energy-research firm in London, Arkansas, said Wednesday.  

 

"There's more upside potential for prices in the next few weeks."

 

Oil has rebounded more than 40 percent from a six-year low in March on speculation a slowdown in output growth will help drain excess supply.  

 

Total stockpiles dropped to 487 million barrels in the seven days ended May 1, the EIA said.  

Supplies are still almost 90 million barrels higher than a year ago.

 

Inventories at Cushing, Oklahoma, the delivery point for futures traded in New York, fell for a second week to 61.7 million barrels.

 

Refineries used 16.6 million barrels a day of crude and other liquids last week, up 289,000 barrels from a week earlier. Crude imports dropped to 6.54 million barrels a day, the least since May 16, 2014.

 

Stockpiles of gasoline increased for a second week to 227.9 million. Those of distillate fuel gained 1.5 million to 130.8 million.

 

WTI for June delivery gained 53 cents to $60.93 a barrel on the New York Mercantile Exchange on Wednesday, the highest settlement since Dec. 10.

 

Does this signal the end of the downturn? Email hunter.eden@stratochemlabs.com with your thoughts. . . 

Industry News
ENI Doubles Output in Egypt's Western Desert
April 20th, 2015
(www.gulfoilandgas.com)

Egypt Flag Flat
Eni reached a record level of production of 70 thousand barrels of oil per day in the Western Desert of Egypt, doubling its level of production in the area in just three years. Such result was achieved mainly thanks to the Melehia development lease, located 290 kilometers west of Alexandria.

In Melehia, Eni's production has reached 54 thousand barrels of oil per day following the exploration successes obtained in the deep plays of Lower Cretaceous and Jurassic age, where the company is currently carrying out an intensive exploration, appraisal, workover and production optimization activity. The remaining part of the production in the area comes from other three development leases (Ras Qattara, Raml and West Razzak).

In January this year, Eni signed a new Concession Agreement to operate in the Melehia Southwest block, where exploration activities on the same deep plays will start within the year. Eni deems this concession a key element for the sustainability of future production growth in the Egyptian Western Desert.

Eni, through its subsidiary International Egyptian Oil Company (IEOC), holds a 76% stake in Melehia's licence. The other partner is Lukoil with a 24% stake. The operator is Agiba, which is equally held by IEOC and the Egyptian General Petroleum Corporation (EGPC).
 
Statoil Strikes Gas Offshore Tanzanian Well
April 7th, 2015
(oilreviewafrica.com)

Tanzanian Flag
Norwegian oil major Statoil has made an additional 28.5bn cu/m to 51.3bn cu/m of natural gas discovery at Mdalasini-1 exploration well located in Block 2 offshore Tanzania

 

The discovery of the additional natural gas brings the total of on-place volumes to up to 623mn cu/m in the block.

 

According to the company, the first phase of the multi-well exploration programme offshore Tanzania has come to an end with the Mdalasini-1 natural gas discovery.

 

Statoil senior vice-president for exploration activities in Western Hemisphere Nick Maden said, "Since the start of the programme in February 2012, we have drilled 13 wells and made eight discoveries, including Mdalasini-1. We still see high prospectivity in the area."

 

Statoil carries a 100 per cent working interest in Mdalasini-1 well. Previously, Statoil and ExxonMobil had made seven gas discoveries in Block 2.

 

Statoil operates Block 2 on behalf of Tanzania Petroleum Development Corporation (TPDC) and has a 65 per cent working interest. The remaining 35 per cent is held by ExxonMobil and Production Tanzania.


US Shale Oil Firms Say Refracking Not the Best Path in Downturn
April 1st, 2015
(www.energy-pedia.com)

Refracking, the practice of fracking an oil and gas well a second time, is still too unpredictable to rely on as a way to slash costs and increase output during the oil price slump, top U.S. shale oil executives said on Tuesday.

 

Oilfield service companies, including Schlumberger and Baker Hughes, have touted refracking as a cheap way to revive output from existing shale wells. Output from existing wells, measured in barrels per day, normally drops as much as 70 percent in the year of operation. Also, some wells were not thoroughly fracked the first time. But executives from producers say the refracking technology, while promising, remains tricky.

 

'We have not tried any refracks. Our outlook on that is that it is really technical,' said Bill Thomas, CEO of EOG Resources, widely regarded as one of the most efficient U.S. shale oil producers. 'We believe that just drilling a new well, and kind of starting fresh ... is probably the preferred way to go.'

 

In fracking, a mix of pressurized water, sand and chemicals is injected into a well to force out oil and gas. In one type of refracking, tiny plastic balls, known as diverting agents, are pumped into wells to block older fractures and increase the overall pressure of the well so output climbs.

 

Output from a new well can be easier to forecast than output from refracking. 'Right now we see that (refracking) as a good forward option,' said Chuck Meloy, the outgoing head of U.S. onshore exploration and production for Anadarko Petroleum, a leading independent. 'We'd like to see the technology improve and get enhanced some and make it more predictable.'

 

Oilfield services companies, which have laid off thousands of employees and seen revenue plunge after a 50 percent collapse in crude prices since June, have talked up refracking because it would allow producers to save money on drilling, normally about 40 percent of the cost of a new well. Pullbacks by producers will likely lead to a drop in U.S. crude production this quarter, according to government forecasts.

 

In Schlumberger's first-quarter results report, Chairman and CEO Paal Kibsgaard said the company expected the refracking market to expand. 'This is quite a significant market opportunity,' he said on the company's conference call. He added that Schlumberger was prepared to 'foot the entire bill for the refracturing work, and then get paid back in production.'

Shell Challenges Exxon Dominance with $70 Billion Bid for BG
April 8th, 2015
(www.reuters.com) by Dmitri Zhdannikov & Karolin Schaps

(Reuters) - Royal Dutch Shell (RDSa.L) agreed to buy smaller rival BG Group (BG.L) for 47 billion pounds ($70 billion) in the first major energy industry merger in more than a decade, closing the gap on market leader U.S. Exxon Mobil (XOM.N) after a plunge in prices.

  

Anglo-Dutch Shell will pay a mix of cash and shares that values each BG share at around 1,350 pence, the companies said. This is a hefty premium of around 52 percent to the 90-day trading average for BG, setting the bar high for any potential counter-bid by a company such as Exxon, which has said it would also use the downturn in oil markets to expand.

  

The third-biggest oil and gas deal ever by enterprise value will bring Shell assets in Brazil, East Africa, Australia, Kazakhstan and Egypt. BG has some of the world's most ambitious projects in liquefied natural gas (LNG), where demand is growing as consumers turn away from more polluting fuels such as coal.

 

Shell is already the world's leading LNG company and it would get BG's capacity in LNG logistics - complex infrastructure that includes terminals, pipelines, specialized tankers, rigs, super coolers, regasification facilities and storage points.

 

"We are seeing a gasification of energy demand. Shell clearly recognize this," said Richard Gorry, director at JBC Energy Asia. "That said, Shell is still taking a big gamble because if the price of oil and gas doesn't go back up (in the next 24 months), I would imagine this might put them in a difficult position in terms of cash flow."

 

BOOST TO RESERVES

 

Shell said on Wednesday the deal would boost its proven oil and gas reserves by 25 percent.


Stitched together by Shell CEO Ben van Beurden and BG Chairman Andrew Gould, the tie-up follows a halving of oil prices since last June, putting a premium on access to proven assets rather than costly exploration. Record low interest rates have made it easy to raise cheap funding for big deals.

 

"We have been scanning quite a few opportunities, with BG always being at the top of the list of the prospects to combine with," Van Beurden told a conference call. "We have two very strong portfolios combining globally in deep water and integrated gas."

 

Britain's BG had a market capitalization of $46 billion at Tuesday's close, Shell was worth $202 billion and Exxon, the world's largest energy company by market value, was worth $360 billion.

 

BG's bonds traded up strongly on the deal and its shares closed up 27 percent at 1206 pence. Shell shares fell 5 percent to 1982.5 pence. They were the most traded stocks across Europe on Wednesday, with $1.6 billion of BG shares changing hands and $3 billion of Royal Dutch Shell shares.

 

BG stock has tumbled nearly 28 percent since mid-June, when the slump in global oil prices began. The agreed price is around 20 percent above BG's share price of a year ago.

 

"In buying BG, Shell is making a bold strategic bet that oil prices will recover towards the $70-90 level in the medium term," said Henderson Global Investors. Brent crude LCOc1 was trading below $57 a barrel on Wednesday.

 

Barclays Bank said Shell would have to persuade its shareholders that it can control capital spending at the new company and show BG's portfolio can deliver the promised growth options beyond Brazil, "something that, in our view, has been far from evident of late".

 

One source close to the deal said a counterbid was unlikely. The source said a U.S. company such as Exxon may be doubly wary of getting into a takeover battle after the failure of drugmaker Pfizer's (PFE.N) attempted takeover of AstraZeneca (AZN.L) last year.

 

The deal represents a windfall for Shell's adviser Bank of America Merrill Lynch. BG's advisers are Goldman Sachs and the smaller Robey Warshaw.

 

BAML has underwritten a 3.025-billion-pound bridge loan that will be syndicated to other banks and is expected to be taken out by a capital markets raising, according to the offer documents.

 

OIL PRICE IMPACT

 

With BG, Shell would be the leading foreign oil company in Brazil. Analysts at investment bank Jefferies said they now expected Shell to surpass Exxon as the world's largest publicly traded oil and gas producer by 2018, with an output of 4.2 million barrels of oil equivalent per day.

 

Global LNG production was 246 million tonnes last year. The new Shell-BG group would have 18 percent of world output.

 

Van Beurden said the presence of two large players in Australia, Brazil and China and the European Union might require a detailed conversation with anti-trust authorities, but was unlikely to lead to forced asset sales.

 

The halving in crude prices has created an environment similar to the turn of the millennium, when large mergers reshaped the industry. Back then, BP (BP.L) acquired rivals Amoco and Arco, Exxon bought Mobil and Chevron (CVX.N) merged with Texaco.

 

"A deal of this size would certainly be getting everyone interested in running the ruler over potential combinations in the natural resources sector," said Paul Gait, an analyst at Bernstein Research.

 

But some industry watchers were reluctant to predict another flurry of mega-deals, saying many oil majors cannot afford to put stretched balance sheets under further pressure.

 

"If you're looking to the next big deal, Exxon Mobil stands out as most likely to pull the trigger," said Wood Mackenzie. "But don't expect a wave of late '90s-style consolidation."

 

Shell has long been seen as a potential buyer thanks to its healthy cash flow and relatively low oil price breakeven.

 

The deal, which should generate pretax synergies of around 2.5

billion pounds per year, will result in BG shareholders owning around 19 percent of the combined group.

 

Last year, BG Chairman Gould hired CEO Helge Lund from Norway's Statoil (STL.OL) to turn around the company. Gould said on Wednesday Lund would remain the CEO through the transition.

 

However, it was evident the deal was driven by Van Beurden, who took over as the CEO last year, and Gould, a veteran executive who previously ran oil services giant Schlumberger (SLB.N).

 

"I called Andrew up and we had a very good and constructive discussion about the idea and it very quickly seemed to make sense to both of us," Van Beurden told a conference call. "What has happened in the last month, apart from it being a logical deal, it has also become a very compelling deal from a value perspective."

 

(Reporting by Narottam Medhora and Sai Sachin R in Bengaluru; additional reporting by Greg Roumeliotis and Denny Thomas, Henning Gloystein, Karolin Schaps, Kate Holton, Chris Mangham, Freya Berry, Silvia Antonioli and Vikram Subhedar; writing by Denny Thomas and Tom Pfeiffer; editing by Keith Weir and David Stamp)

Cuba Insists It Has Oil; US Companies Still Uninterested
May 6th, 2015
(www.rigzone.com)

by Mac Frank   

 

HAVANA, May 6 (Reuters) - Cuba unveiled new data on Wednesday it said confirmed there were billions of barrels of oil beneath its Gulf of Mexico waters but admitted there was little interest in new exploration even with the thaw in U.S. relations.

 

The United States and Cuba have vowed to restore diplomatic relations after more than 50 years of animosity, but the comprehensive U.S. trade embargo remains in place.

 

While U.S. tourism, transportation and agriculture companies position themselves for Cuban business, oil companies have proven less eager since three exploratory wells came up dry in 2012. Low oil prices and new opportunities in Mexico's liberalized oil sector are also seen depressing interest.

 

"Despite the opening we haven't encountered U.S. company interest," Pedro Sorzano, commercial director of state oil monopoly CubaPetroleo (Cupet), told reporters at Cuba's annual geological sciences convention.

 

Cuba hopes the discovery of oil offshore will free it from dependence on other countries, such as socialist ally Venezuela currently and the Soviet Union previously.

 

Cupet Exploration Director Rafael de Jesus Tenreyro said the new data would be presented at various international events.

 

"The study confirms the zone's potential," he said.

 

For over a decade Communist-run Cuba has asserted its Exclusive Economic Zone off the northwest coast holds more than 20 billion barrels of undiscovered crude.

 

The U.S. Geological Survey has estimated a more modest 5 billion to 7 billion barrels.

 

A dozen foreign firms have explored over the years and only the Venezuelan state oil firm PDVSA and Russia's state-run Zarubezhneft still retain exploration rights, said Roberto Suarez Sotolongo, Cupet's co-director.

 

Jorge Pinon, an expert on Cuban oil at the University of Texas who attended the closed-door meeting, praised Cuba for putting "a great deal of time and effort" into the new data but said it should be reviewed by outside experts.

 

The lack of U.S. interest so far was to be expected, he said.

 

"Besides the embargo there are three challenges for the Cubans. The low price of oil, new opportunities in Mexico's waters and their failure to date," Pinon said.

 

Some foreign companies are helping Cuba extract more oil along the traditional northwest heavy oil belt, a 200-mile (320-km) stretch of the northern coast from Havana to Villa Clara and reaching up to 3 miles (5 km) offshore. It produces poor quality oil that meets 40 percent of the country's needs.

Venezuela sends Cuba 115,000 barrels of oil per day under favorable terms.

 

(Editing by Daniel Trotta and Ted Botha.)

Continental Resources's Quarterly Loss Less Than Expected
May 6th, 2015

WILLISTON, N.D., May 6 (Reuters) - Continental Resources Inc., the second-largest oil producer in North Dakota, posted a quarterly loss that was less than Wall Street had expected on Wednesday as cost cuts helped offset low oil prices.

 

Continental, which does not hedge oil production, said it believes that oil prices will rise later this year.

 

Executives stopped short of boosting production expectations, however, though they said they expect to be cash-flow neutral, or spend as much as they make, by the middle of the year.

 

"We remain encouraged by the outlook for the second half of the year and for 2016," Chief Executive Harold Hamm said in a statement.

 

The company reported a net loss of $186 million, or 36 cents per share, compared with net income of $359.1 million, or 61 cents per share, in the year-before quarter.

 

Factoring in a writedown of assets and one-time items, the company lost 9 cents per share. By that measure, analysts had expected a loss of 12 cents per share, according to Thomson Reuters I/B/E/S.

 

Daily average oil production rose 36 percent to 206,829 barrels of oil, with the biggest jump in the company's North Dakota unit.

 

Shares of Oklahoma City-based Continental rose 0.8 percent to $48.79 in after-hours trading on Wednesday.

 

(Reporting by Ernest Scheyder; Editing by Marguerita Choy; and Peter Galloway)

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