Aubrey McClendon acquires stake in Oklahoma shale pipeline

Aubrey McClendon, the U.S. shale wildcatter who’s raised $10 billion in capital since getting fired from Chesapeake Energy Corp. last year, acquired a stake in an Oklahoma pipeline project.

An affiliate of McClendon’s American Energy Partners LP contributed natural gas lines in exchange for a minority interest in Tall Oak Midstream LLC’s planned 250-mi pipeline and processing network, Oklahoma City-based Tall Oak said in a Business Wire statement today, June 25.

McClendon’s company also dedicated drilling prospects spread throughout six Oklahoma counties to the new network, according to the statement. Casey Nikoloric, a Tall Oak spokeswoman with the public-relations firm Ten 10 Group, said the size of the acreage commitment wasn’t disclosed.

American Energy, also based in Oklahoma City, has an option to increase its stake to as much as 50%. McClendon announced plans on June 18 to expand his growing shale empire into the pipeline business, with backing from buyout firm The Energy & Minerals Group.

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Keystone foes urge top Nebraska court to void pipeline path

Nebraska landowners opposed to the proposed $5.4 billion Keystone XL pipeline urged the state’s highest court to uphold a judge’s ruling invalidating the route mapped by Governor Dave Heineman and TransCanada Corp.

The property owners urged the state Supreme Court to uphold a February ruling effectively blocking the pipeline. Judge Stephanie Stacy in Lincoln declared TransCanada a common carrier like a railroad. As such, a 2012 law giving the governor control over the path violated a part of the state constitution vesting power in the Public Service Commission.

TransCanada “offers pipeline structures for transportation services, like taxis offer rides to passengers for a fee, and truckers offer cartage for dollars per mile,” the landowners said in a June 20 legal brief. “The currently-proposed pipeline is a structure that will transport crude oil for hire.”

TransCanada, based in Calgary, seeks to build a 1,179-mile (1,897-km) conduit capable of carrying 830,000 bopd from Hardisty, Alberta, to Steele City, Nebraska, where it would connect to an existing network.

Supporters say Keystone will create jobs and promote energy independence. Opponents say petroleum derived from Alberta’s oil sands will contribute to global warming.

The decision on whether to approve Keystone will fall to President Barack Obama, who may wait until the Nebraska court rules. The judges have yet to schedule arguments, and a decision may not come until after Congress’s midterm elections.

Energy East

TransCanada has said it will seek Canadian government permission to construct a different, longer, pipeline giving it a conduit to the Atlantic Ocean. That proposed 2,700-mile pipeline, called Energy East, would carry 1.1 MMbopd across six provinces to a refinery and export terminal at Saint John, New Brunswick.

Heineman, a Republican who’s leaving office on Dec. 31, and state Attorney General Jon Bruning, who sought to succeed him, argued in April that the three landowners who sued haven’t shown they’ve been injured by the plan and lack standing to sue.

Bruning last month lost the Republican Party’s gubernatorial primary to former Ameritrade Holding Corp. Vice Chairman Pete Ricketts.

David Domina, the landowners’ lawyer and a Democrat seeking a U.S. Senate seat, said his clients have been harmed.

“There is no competitor, different regulator or differently affected landowner to bring this suit,” he said in a phone interview. “The state belongs to the citizens, and they are its saving watchfulness.”

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UK to allow shale-license holders to retain bigger areas

The UK announced new license terms to spur the development of the resource that may supply the nation with half a century of natural gas from shale rock.

The measures will allow license holders to retain bigger areas and cut costs, Energy Minister Michael Fallon said today, June 24, at a conference. The 14th licensing will be launched “shortly,” he said.

“Unlike traditional oil and gas, shale gas is not concentrated in small high-value fields, but is likely to be dispersed across large areas with ‘sweet spots,’” he told a conference in London. “I am removing unnecessary barriers and introducing a new flexibility to licenses.”

At the same time, the changes will ensure everyone has access to information earlier by cutting the length of time explorers can keep data on drilling and flow rates confidential to six months from four years, he said.

Fallon’s Conservative Party is seeking to spur shale exploration to secure energy resources as North Sea reserves decline. The Bowland basin in northern England may contain as much as 1,300 Tcf of gas, the British Geological Survey has said. That will last almost 50 years based on an extraction rate of 10%, similar to U.S. fields, according to Bloomberg calculations.

Opponents fear that hydraulic fracturing, also known as fracing, causes earthquakes and water contamination as the process uses water, sand and chemicals at high pressure to blast the fuel out of rock.

The Labour opposition party said baseline monitoring should take place for a year before extraction to ensure well integrity and safety, Tom Greatrex, shadow energy minister, said at the same conference via videolink.

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DNO falls for second day on fears Iraq tensions could spread north

DNO ASA, the Norwegian oil producer focused on northern Iraq, fell for a second day after Islamist insurgents seized several cities south of the Kurdistan region where it operates.

While no violence has been reported in the semi-autonomous region, the Oslo-based company fell as much as 5.7% and traded 0.5% lower at 22.19 kroner a share as of 2:01 p.m., extending losses to 6.4% over the last two days.

“When the unrest is at this level and terror groups are involved, the stock will never thrive,” analyst Teodor Sveen Nilsen of Swedbank First Securities said in a phone interview. “The unrest is 150 kilometers from DNO’s Tawke field and might as such not have a big impact, but investors have a lot of others stocks to choose from and will react negatively when faced with uncertainty.”

Militants

DNO, the first foreign oil company to drill in Iraq after the U.S.-led invasion in 2003, got almost 80% of its production from the Kurdish region of the country’s north in the first quarter. The area is situated north of Mosul, Iraq’s second-biggest city, which was seized by militants of the Islamic State in Iraq and the Levant this week.

The violence has raised the prospect of a resurgence of sectarian conflict in Iraq, the second-biggest producer of the Organization of Petroleum Exporting Countries, as Prime Minister Nouri al-Maliki’s Shiite-led government struggles to control Sunni-majority regions.

DNO spokesman Henrik Schwabe couldn’t immediately comment, he said in an email.

Swedbank downgraded DNO to neutral from buy on “increased political risk,” it said in a note yesterday, June 11. “It’s escalated more than I had thought,” Sveen Nilsen said today.

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Beach Energy has taken a 20% interest in an exploration permit at the offshore Otway basin in Tasmanian waters

Beach Energy  has executed a binding sale and purchase agreement (“SPA”) for the purchase of a 20% interest in the T/49P offshore exploration permit in the  Otway Basin from 3D Oil.

In addition to this, Beach and 3D Oil have established a new joint venture by executing a joint operating agreement (“JOA”). Under the terms of the SPA, Beach will pay 3D Oil $3 million in cash with 3D Oil to remain as operator under the JOA. It is anticipated that the joint venture will commence a 755 sq km seismic acquisition program within the next twelve months, with timing subject to regulatory approvals. This work is the major commitment required to be undertaken in the initial exploration phase of the permit, with the Transaction subject to the usual government and regulatory approvals.

The T/49P permit, located approximately 20 km to the west of King Island, is 4,960 sq km in size with water depths of around 100 m. Adjacent to the permit are the Geographe and Thylacine gas fields, of which Thylacine is the largest field discovered in the Otway Basin to date.

The Transaction builds on Beach’s current position in the onshore Otway Basin, which services both South Australia and Victoria in terms of gas supply.

In relation to Beach’s onshore activity, the second well of a two well exploration program on the South Australian side of the onshore Otway Basin, Bungaloo-1, recently reached total depth. Initial observations from Bungaloo-1, and the first well in the program, Jolly-1, indicate good exploration potential for gas and liquids in both shallow conventional structural traps as well as deeper targets within these wells. Follow up analysis is being undertaken to confirm these initial observations, with a priority focus on the conventional potential within the permits operated by Beach.

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Carrizo Oil & Gas provides operational updates on Niobrara, Utica activities

Carrizo Oil & Gas reported an operational update, which includes initial test results from its Niobrara A bench wells. Testing flowed at an average peak 24-hr rate of 1,127 boed, including one well which tested at 1,633 boed.

Carrizo recently began production from its first multiple geological bench downspacing pilot in the Niobrara formation. The pilot consisted of eight wells in the company' s Bringelson Ranch area in Weld County. The pilot tested both B-A-B and B-B-B lateral orientations, spaced 300 ft apart, equating to 40 acre spacing. The wells were drilled with an average effective lateral of approximately 4,000 ft and completed with an average of 14 frac stages.

The average peak rate from the eight wells was 1,021 boed, 89% oil. This compares to the company’s current Area 1 type curve, which assumes an average IP rate of approximately 800 boed, 80% oil. The five B bench wells had a peak rate of 957 boed, 89% oil, while the three A bench wells had a peak rate of 1,127 boed, 88% oil. One of the A bench wells, the Bringelson Ranch 6-20, had a peak 24-hr flowrate of 1,633 boed, 87% oil, the strongest peak rate to date from the company' s Niobrara program. Carrizo operates the Bringelson Ranch wells with an approximate 29% working interest.

The company is currently drilling its second 40-acre B-A-B downspacing pilot in its Hemberger area in Weld County. Current plans call for the pilot to include three wells in the B bench and two wells in the A bench, with the laterals spaced approximately 300 ft apart. Carrizo operates the Hemberger wells with an approximate 26% working interest.

The spudder rig has arrived on the location of Carrizo' s second Utica shale well, the Brown 1H in Guernsey County, Ohio, and drilling is expected to begin shortly. The company currently plans to drill the top hole with the spudder rig and bring in a larger rig to drill the horizontal section in July. The company plans to drill the well with an effective lateral of 6,280 ft and complete it with 26 frac stages. Carrizo operates the Brown 1H well with a 50% working interest. Carrizo currently plans to keep both the spudder and larger rig active for the remainder of the year.

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Explorers see promise in Egypt oil, gas when subsidies eased

Explorers in Egypt expect constraints on domestic energy prices to loosen, prompting new investment in oil and natural gas fields.

Companies including Citadel Capital SAE, Circle Oil Plc and Petroceltic International Plc expect President Abdel-Fattah El-Sisi to make good on promises to reduce subsidies of more than $20 billion a year and ease demands that producers sell fuel on the domestic market well below international prices, they said at a conference in London on June 27.

The changes would allow the government to cut the budget deficit and pay suppliers money owed for fuel, said Mohamed Shoeib, a managing director at Cairo-based Citadel. It’s a necessary first step if Egypt wants to lure back investors driven from the country by recent turmoil as it tries to both increase exports and meet surging domestic energy demand.

The government “should tackle the problem and not escape it,” Shoeib, whose company has about $10 billion invested, mostly in Egyptian energy projects, said in an interview. “It should happen very soon.”

Egypt is poised to become a net fuel importer as authorities divert gas from export projects to meet local demand, sometimes failing to pay the suppliers. The practice prevented the UK’s BG Group Plc from meeting contracted LNG shipments this year. The company has been in talks with the government about guarantees for future exports, with receivables for gas still owed by Egypt doubling in a year to March 31.

Oil Minister

Egypt plans to pay at least $1.5 billion to energy suppliers before the end of the year, or about a quarter of its debt as of April, Reuters reported June 26, citing Oil Minister Sherif Ismail.

Egyptian General Petroleum Corp., the state energy company, “is doing the best it can” to pay off the debt, said Chris Green, CEO at Circle Oil. “The key thing is reducing subsidy.”

Sea Dragon Energy Inc. plans to acquire additional assets in the country, said CEO Paul Welch. “The time is great now to get involved in Egypt.”

Oil producers receive international prices for their products in Egypt, while gas suppliers are paid only a fraction of what they could earn from exports when they sell on the domestic market, Stephane Foucaud, a London-based analyst at FirstEnergy Capital Corp., said in an interview at the conference.

“The gas price simply has to increase” and that will “unlock exploration” because some fields are not economic to drill at the current tariff, said David Thomas, COO at Petroceltic. “The country is full of opportunity. My question is, when the race will start?”

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CGG to acquire multi-year 3D land seismic in Saudi Arabia

CGG has announced that ARGAS, its joint venture with TAQA in Saudi Arabia, has been awarded a major contract by Saudi Aramco for an extensive, high-density land seismic program across the Kingdom. Sercel, CGG' s equipment division, will supply all the seismic equipment deployed on this survey program.

The three-year contract provides for two optional extension periods of one year each. The program is expected to start in the fourth quarter of 2014 and cover a wide variety of terrain. It will be acquired by a 50,000-channel mega-crew operating with the Sercel 428XL acquisition system, Sercel SG-10 geophones and a fleet of 24 Sercel Nomad 65 Neo vibrators. A mix of high-productivity and conventional acquisition techniques will be deployed depending on survey requirements. CGG' s broadband UltraSeis technology portfolio will be deployed to acquire the high-resolution data.

Jean-Georges Malcor, CEO, CGG, said: "We are delighted that Saudi Aramco is continuing its long-term relationship with CGG by awarding what is one of the world' s largest land seismic survey programs to our ARGAS joint venture with TAQA. With Sercel also supplying the new seismic equipment, this program marks a key milestone in our 2014-2016 strategic roadmap to benefit from the expansion of ultra-high-channel-count surveys in the Middle East region."

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