Integrated energy company EQT Corp said it will buy about 58,000 net acres in the Marcellus shale from a group of private operators and landowners for about $280 million in cash and stock. The company said 90 percent of the deal would be funded with its stock and the remaining 10 percent in cash.
Following the closing, EQT said it will hold more than 500,000 net acres in the high-pressure Marcellus shale fairway.
EQT is part of a growing list of oil and gas companies looking to boost their acreage in the Marcellus Shale that spans across parts of Pennsylvania, West Virginia and New York, and is said to hold enough natural gas to satisfy U.S. demand for a decade, according to some geologists.
“Approximately 88 percent of the acquired acreage will be held in fee or by production from existing vertical wells and the remainder of the acreage will be subject to leases with a weighted average 10-year term,” Chief Executive Murry Gerber said in a statement.
EQT raised its average estimated ultimate recovery per well to between 4 and 4.5 billion cubic feet of natural gas equivalent (Bcfe) from a range of 3.5 to 4 Bcfe.
“At an average cost of $3 million per well, EQT’s development cost is estimated to be less than $0.75 per thousand cubic feet,” Gerber said.
Source: Reuters
UK super major BP Plc. intends to make a deal with privately held Lewis Energy Group for the expansion of its U.S. shale-gas operations, as per news published in upstreamonline.com. The transaction value of this deal is expected to be worth $150 million to $200 million.
BP will acquire a 50% stake in 80,000 acres of the Eagle Ford Shale play in the southeastern part of Texas held by Lewis Energy. BP will shell out $4,000 to $4,500 per acre.
Major energy companies are showing significant interest towards the Eagle Ford Shale play, which is currently treated as a rapidly developing oil and gas field. While ConocoPhillips holds properties in this play, Chesapeake Energy Corp. is looking to expand its position as well.
With an uptrend in the economic conditions, many large integrated energy companies have been keen to acquire smaller independent U.S. producers or their properties. BP’s move is the latest in a series of deals that have brought major oil companies into U.S. shale gas.
While the ExxonMobil − XTO Energy deal is a recent prominent example, Total’s (acquisition of a quarter of Chesapeake’s Barnett Shale operations in Texas is also significant in this space.
BP has been establishing a strong position in the U.S. shale gas and applying advanced technology for getting more out of the wells it is drilling. However, we are concerned about the North American natural gas outlook and don’t think a modest increase in the gas price is going to do much to tighten up the supply position in the North American gas market.
Source: Zack Equity Research
Anadarko Petroleum has set a 2010 capital pending plan of $5.3 billion to $5.6 billion, and expects an average annual production growth rate of 7% to 9% during the next four years.
Production growth will be driven by development of the company’s shale gas holdings in the onshore US and several oil-weighted, deepwater “mega-projects” spread across the world.
Shale gas plays are also expected to play an important role in Anadarko’s 7% annual growth rate projections. The independent has allocated $530 million (10%) of its projected 2010 spending to the Marcellus, Haynesville, Eagle Ford and Pearsall shale plays, where it holds a combined 600,000 net acres.
Production from the four emerging shale gas plays is expected to increase 60% annually over the next five years. Anadarko estimates they contain some 50 trillion cubic feet of natural gas equivalent of gross unrisked resources.
Anadarko recently partnered with Japan’s Mitsui in the Marcellus play, where it already had a separate partnership in place with Chesapeake Energy. The firm held 350,000 net acres in the play before the Mitsui deal was unveiled on Feb.2.
Source: The Oil Daily, March 2, 2010
The same technology that unleashed a natural gas bonanza in North America over the past decade has the potential to transform the European energy industry.
“A year or two from now, the activity over in Europe is going to be absolutely frenetic, and so you’ve got to get in there early,” said Craig Steinke, executive chairman of junior explorer Realm Energy International (TSXV:RLM). Realm, which has offices in Vancouver and London, is involved in eight different shale basins in seven European countries, though it doesn’t disclose specifics for competitive reasons.
The likes of ExxonMobil Corp. (NYSE:XOM), Royal Dutch Shell PLC (NYSE:RDS), ConocoPhillips (NYSE:COP) and Chevron Corp. (NYSE:CVN) have begun to grab stakes in shale formations in Poland, Germany, Hungary, Ukraine and other European countries.
Some may wonder why North American companies would look for shale opportunities across the Atlantic when there are plenty of promising plays in their own backyard.
“In North America as a whole, the lands have been bid up to significantly high prices,” said Steinke. “If you don’t have the land, you’re on the outside looking in.” In Europe, energy companies can negotiate directly with government authorities to acquire large, contiguous tracts of land – though it may not be that way for long if activity picks up, said Steinke. “Realm’s goal is to be an early mover on acquiring the lands. It’s going to put the company in a very advantageous position as the momentum builds,” he said. “The opportunity won’t be there forever, that’s for certain.”
Shale is a ubiquitous type of sedimentary rock that is as tough as concrete. Freeing natural gas molecules from within the rock is no easy feat as it requires enormous amounts of water, chemicals, sand and, above all, technical know-how. North America’s shale gas industry has its roots in the Barnett formation in north-central Texas, where energy companies began honing their techniques about 10 years ago.
Since then, horizontal drilling and multi-stage fracturing have spread to the Marcellus play in New York and Pennsylvania, the Haynesville play in Texas and Louisiana and the Horn River and Montney plays in northeastern British Columbia.
Realm collaborates with U.S. energy services giant Halliburton Co. (NYSE:HAL), which has been active in virtually all of North America’s shale gas plays. Halliburton has been helping Realm parlay expertise it garnered from North American shale gas plays into European ones, which share many of the same characteristics.
European shale gas is also on the radar of Talisman Energy Inc. (TSX:TLM), already a big landholder in the Marcellus and Montney formations. “We haven’t done any deals yet, but we are looking hard and depending on how things go, we could see an entry into an international opportunity,” Richard Herbert, Talisman’s executive vice-president of exploration, said on a conference call with analysts and reporters earlier this month.
Another reason European shale gas could be attractive is pricing. North America is currently dealing with a glut situation, in which supply is outpacing demand. European countries are also eager to stop relying on natural gas imports from Russia, which has had a history of suddenly shutting off supplies amid disputes with its neighbours.
It’s going to take several years of work before European shale gas is commercially viable, said Michael Dawson, president of the Canadian Society for Unconventional Natural Gas. Energy companies already know all the ins-and-outs of North America’s geology because so much conventional oil and gas drilling has taken place there. That’s not the case in Europe, he said.
There also isn’t much there in the way of specialized equipment needed to drill the high-tech wells. So all of that has to be built or transported from elsewhere. “I think there has to be a realization that while everybody seems to be getting on the bandwagon with shale gas right now, it just doesn’t happen overnight,” said Dawson. “It’s not a slam dunk that the shale gas potential in Europe is going to be successful.”
Reported by Lauren Krugel in Calgary for THE CANADIAN PRESS
Source: MSN.ca
Anadarko Petroleum has agreed a $1.4bn deal with Mitsui & Co. the Japanese trading and investment group, to sell a minority stake in its Marcellus Shale natural gas project in Pennsylvania.
The deal announced on Tuesday will give Mitsui control of 32.5 per cent of Anadarko’s shale-gas assets in the state, where most of the 250,000 sq km Marcellus deposit is located.
The US natural gas producers have been entering into these joint ventures to help fund development of the shale – a highly technical and expensive process – while giving foreigners access to their experience and technology.
The Japanese company said it planned to spend another $3bn-$4bn on exploration and extraction, making Marcellus one of its largest energy investments. It said it was counting on rising demand in the US for natural gas as an alternative to coal and oil.
Natural gas is about 30 per cent less carbon intensive than oil and 50 per cent less than coal, but it still emits carbon. That makes it a less attractive option to lawmakers seeking to curb carbon emissions than renewables, yet natural gas is needed to back up wind and solar.
The industry believes Congress and governments worldwide will have to turn to natural gas as a bridge fuel until renewables can power a substantial portion of electricity demand. That has led to a series of joint-venture deals similar to Mitsui’s in the past two years as an increasing number of foreign energy companies eager to tap into America’s vast natural gas reserves seek to invest in independent companies, while estimates of US supplies continue to increase.
BP and BG Group of the UK; Statoil ASA the Norwegian energy company; and Eni, the Italian oil company, have all bought into the US gas industry in the past year to gain access to the US industry while tapping into the independent groups’ experience and technical expertise.
Like other Japanese trading houses such as Mitsubishi and Marubeni, Mitsui has expanded from its original import-export business to become an important financial backer of commodities and energy projects. It owns a Y250bn ($2.7bn) interest in Russia’s Sakhalin-2 liquefied natural gas project, its biggest such investment.
Mitsui expects the Marcellus development to last 60 years and produce 360m to 460m cc ft of gas a day at peak. Most of the $3bn-$4bn in extra development would be spent in the first 10 years to drill “a few thousand wells”. It intends to close the deal on March 15.
Source: Financial Times
Royal Dutch Shell Plc and Devon Energy Corp. may join Exxon Mobil Corp. as buyers of U.S. shale- gas producers or projects, the chief executive officer of gas developer Range Resources Corp. said.
Range Resources CEO John Pinkerton said in an interview yesterday his company may be a partner or target for oil companies, like Apache Corp. and Occidental Petroleum Corp., seeking to expand shale holdings in North America.
Exxon said last month it would buy XTO Energy Inc., a Fort Worth, Texas-based gas producer, for about $37 billion in stock and debt. Petroleum companies are “clearly sniffing around,” said Pinkerton, who declined to identify companies that have approached him.
Oil companies, previously focused overseas, are now “seeing that natural gas is half the carbon footprint of coal, it’s a third cleaner than oil, and now you’ve got these gigantic shale plays in the U.S.,” said Pinkerton.
Natural gas produces less carbon dioxide, the heat-trapping gas blamed for accelerating global warming, than crude oil or coal, according to the U.S. Environmental Protection Agency. Shale gas is produced from rock formations using water, sand and chemicals.
Range Resources, based in Fort Worth, Texas, holds 1.4 million acres of leases for the Marcellus Shale, a formation that may hold 20 years’ worth of U.S. gas supplies. Improvements in shale-gas extraction technologies have helped U.S. gas reserves reach a record 1,836 trillion cubic feet, according to the Potential Gas Committee.
Shell, based in The Hague, wants Marcellus Shale acreage, said David Todd, onshore asset manager for the company’s U.S. unit.
‘Very Interested’
“We currently are very interested in the Marcellus and are looking for an entry,” Todd said in June at the Bentek Energy Market Fundamentals Symposium in Houston. “We do not have a sizeable position.”
Total SA, Europe’s third-largest oil company, agreed this month to pay as much as $2.25 billion for a 25 percent stake in Chesapeake Energy Corp.’s Marcellus fields. Chesapeake Energy, based in Oklahoma City, has raised $10.8 billion in the past two years by selling joint-venture interests in its shale-gas properties.
Partnerships may be more common than takeovers because they cost less, Range Resources’ Pinkerton said.
“The idea that you’re going to have a rash of these is a little bit naïve,” Pinkerton said. “There aren’t many Exxons and there aren’t many XTOs.”
Range Resources, which increased gas output for 27 straight quarters, has its most promising holdings in the Marcellus Shale with its leases in Pennsylvania, Pinkerton said.
Breaking Even
Wells in the Marcellus Shale break even with gas prices at $3.19 per million British thermal units, the third-cheapest break-even rate among the most productive U.S. gas fields, Bentek Energy LLC Chief Executive Officer Porter Bennett said at an investor conference in New York this month.
The Marcellus probably will yield 489.2 trillion cubic feet of gas, equivalent to a 20-year supply for the U.S., Terry Engelder, a Pennsylvania State University geologist, said in an Oct. 21 interview. Chesapeake Energy, holder of 1.5 million Marcellus acres, predicted last year it will be the largest U.S. gas field.
Gas stocks are less expensive because the price of crude oil on commodities markets is 58 percent higher than natural gas based on the amount of energy each can produce, Pinkerton said.
Oil, Gas Prices
Crude oil futures fell 3 cents to $73.64 a barrel yesterday on the New York Mercantile Exchange. An energy-equivalent price for gas would be $12.27 per million British thermal units. Natural gas fell yesterday 14 cents to $5.14 per million British thermal units.
Exxon affirmed the economy and productivity of shale-gas wells by paying a 25 percent premium to XTO’s previous closing price, Pinkerton said. Devon, based in Oklahoma City, is selling as much as $7.5 billion of offshore and overseas assets this year to cut debt and focus on U.S. shale-gas production. “We had an opportunity to get into the Marcellus in a big way a couple of years ago,” Devon President John Richels said in response to a question during in a Nov. 18 conference call. “Maybe it was a mistake, but we chose not to.”
Devon spokesman Chip Minty and Occidental spokesman Richard Kline said yesterday the companies don’t comment on merger speculation.
By Jim Polson BUSINESS WEEK
When Halliburton announced its fourth-quarter results this week, the headline news was that earnings had plunged nearly 50% over the previous year. But investors are looking beyond that. Shares of Halliburton are up 35% over the past six months, versus a gain of 18% for arch-rival Schlumberger and a loss of 11% for number-three oil services player Weatherford International.
What gives? The U.S. shale gas boom. Halliburton is the biggest player in North America, especially in providing drilling and well completion services in the booming shale gas plays in basins like the Haynesville and Marcellus.
For the quarter, Halliburton’s international results suffered in part from a downturn in drilling in Mexico, but its North American profits were “more than double what we had modeled,” notes Deutsche Bank analyst Michael Urban.
“Halliburton is the one you want to own,” says Paul Coppola, portfolio manager with Arrowhawk Capital Partners in Houston. “There’s a well-completion cycle coming, and that’s right in Halliburton’s wheelhouse.”
Shales are tough to drill, necessitating wells with lots of horizontal laterals snaking their way into thin pay zones. Plus, the rock is tight, meaning gas doesn’t flow readily unless it is cracked open; that process, called fracture stimulation (or “fracking”), is done by injecting millions of gallons of water down a well at intense pressures to break fissures into the rock.
Halliburton leads the industry in all these services, and has more exposure to North America than its large-cap peers, the premium-priced Schlumberger and the international-focused, but riskier Weatherford. Halliburton spun off its much-maligned government contracting division KBR two years ago, and redomiciled its headquarters in Dubai. Though it counts nine national oil companies among its top 10 customers, Halliburton still gets most of its business in North America. Coppola expects the company to take market share from Baker Hughes, which is busy restructuring around recently acquired BJ Services.
The shale boom should be sustainable too; in time federal carbon legislation will likely enshrine clean-burning natural gas as the bridge between fossil fuels and a wonderland of windmills and solar panels.
By: Christopher Helman, the Southwest Bureau Chief of Forbes, based in Houston
Source: FORBES.COM
By Jason Womack
Of DOW JONES NEWSWIRES
HOUSTON (Dow Jones)–Exxon Mobil Corp.’s (XOM) $31 billion bid for XTO Energy Inc. (XTO) marks the biggest endorsement yet for the exploitation of unconventional natural gas resources–and signals a growing will to carry the expertise that has revolutionized gas production beyond the North American gas market.
In a statement released Monday, Exxon Chief Executive Rex Tillerson said that the deal would benefit consumers “here and around the world,” and help the company develop natural gas and oil resources globally. Exxon, the world’s largest publicly traded oil company, has recently scooped up unconventional gas assets in Poland, Germany, Hungary and Argentina. If brought online, these resources could help feed major markets that currently face unsteady supplies.
Exxon plans to manage its global development of unconventional gas resources from XTO’s Fort Worth offices. But overseas exploitation of shale reserves face challenges not found in Texas, Oklahoma or Louisiana, where an extensive network of service companies has helped small independent natural-gas producers drill intensively in the hard-to-crack rock formations that trap the unconventional gas. Also, the geology of overseas shale plays isn’t understood as well as the U.S. rock formations, and obtaining mineral rights in foreign countries can be more difficult, said Robert Clarke, manager of unconventional gas services for the energy consultancy Wood Mackenzie.
Still, overseas markets present opportunities for potential new gas supplies. “There is vast resource potential abroad and those resources would serve undersupplied local markets,” Clarke said.
Big Oil is having an easier time accessing shale and other unconventional plays than conventional oil resources–where they have to fight off zealous governments and national oil companies.
Until recently, major oil companies have been reluctant to take big bets on shales because they are relatively new areas of exploration that require intensive drilling. It was mostly aggressive, independent natural-gas producers that learned to drill horizontal wells into tight rock formations and crack them with a high pressure solution of water and sand, releasing the gas trapped within.
But in the past two years several international oil companies have been kicking the technology’s tires. Statoil ASA (STO, STL.OS), BP PLC (BP, BP.LN) and ENI SpA (E, ENI.MI) have struck deals that give them a foothold in U.S. shale plays.
“Every major oil company is thinking about getting into these shale plays both in the U.S. and globally, the question is how,” said David Rockecharlie, co-head of the energy investment banking group for Jefferies & Co Inc. Barclays Capital and Jefferies advised XTO on the transaction.
French oil giant Total on Monday became the latest major oil company to cut a deal for access to prolific shale gas fields in the U.S., but it probably won’t be the last.
Oil companies are looking to expand holdings of natural gas amid stricter environmental laws and forecasts that use of cleaner-burning fuel will grow in coming years. They also see complex U.S. shale plays as ideal laboratories for honing technology and expertise that can be used to unlock similar formations in other parts of the world.
“Many of the companies that weren’t first in have done their homework now, and are making their move to try to correct that,” said Bob Fryklund, an analyst with IHS-Cambridge Energy Research Associates in Houston.
In Total’s case, that meant agreeing to pay $2.3 billion for 25 percent of Chesapeake Energy Corp.’s acreage in the Barnett Shale play in North Texas, as well as forming a joint venture with the Oklahoma City-based producer in the region.
Total E&P USA, a Houston-based subsidiary of the French oil company, will be the joint venture partner.
Chesapeake said Monday it had also agreed to talk to Total about teaming up to develop acreage in the Eagle Ford Shale play in South Texas and in several Canadian natural gas plays.
Similar deals have taken place in recent years as high commodity prices and improved technology enabled oil and natural gas companies to crack open dense shale rock formations and boost U.S. natural gas output.
Last month, Exxon Mobil Corp. said it would acquire Fort Worth’s XTO Energy, also a big player in the Barnett Shale, in a deal valued at $41 billion. Royal Dutch Shell, BP and others have also written big checks for access to North American shale plays.
“If you look at it, we’re close to $60 billion from mostly supermajors that have come in,” Fryklund said, counting the recent Exxon Mobil deal.
“They’re all kind of validations of shale gas developments and underpin a positive outlook for those plays and the U.S. natural gas plays in general,” said Keith Behrens, managing director of energy markets with Stephens Inc. Investment Bankers in Dallas.
Chesapeake has been involved in several large shale deals recently. The Total deal marks the company’s fourth joint venture transaction in major U.S. shale plays in the last 18 months, after transactions with London’s BP, Norway’s Statoil and Houston’s Plains Exploration and Production Co. Those moves steered a combined $10.8 billion to Chesapeake.
Chesapeake CEO Aubrey McClendon said the Total deal will allow the company to reduce its financial leverage and future capital expenditures and “further position us to deliver industry-leading finding and development costs and returns on capital for years to come.”
Under the deal, Total will pay $800 million in cash and an additional $1.5 billion in drilling and development costs. Assets covered by the joint venture include about 270,000 acres, with some 700 million cubic feet of natural gas in production and about 3 trillion cubic feet of natural gas in proven reserves.
Total CEO Christophe de Margerie said the joint venture gives his company “a solid position in an attractive long-term resource base” and praised Chesapeake as the “world’s leading shale gas operator.”
The venture also will allow Total to develop expertise it can use in other unconventional resource plays, he said.
Other major oil companies, wary of missing out on such potential, may also be on the hunt for assets in U.S. shale plays, Behrens said.
“To the extent that some of the other majors haven’t done a deal yet, yeah,” he said. “They could be looking.”
Source: RIGZONE
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