Exploration

Schlumberger makes offer

Schlumberger announced it is offering to acquire all outstanding shares, convertibles and warrants in Eastern Echo Holding Plc, a Cyprus-registered company quoted on the Oslo Axess Market under the ticker symbol “ECHO.”

CGGVeritas sells shares

CGGVeritas announced today that it has decided to tender its 30.9 million shares of Eastern Echo Holding Plc, representing 12.67% of Eastern Echo’s issued share capital, to the new cash offer of Schlumberger, set at a price of NOK 15 per share. The company also announced additions to its Asia-Pacific data library and the launch of its second wide-azimuth survey in the Gulf of Mexico.

EMGS acquires EM technology

Electromagnetic Geoservices ASA (EMGS) has acquired the exclusive worldwide rights to patented electromagnetic (EM) technology developed by KMS Technologies (Houston) that broadens its ability to support oil and gas exploration companies searching for new reserves in shallow waters. The KMS technology offers an alternative to EMGS’ proprietary methodologies in shallow water applications, significantly broadening EMGS’ product offering for oil companies.

Knowledge Systems patent

Knowledge Systems has developed a velocity modeling methodology that improves the quality and reliability of seismic data for greater accuracy in subsurface imaging. Knowledge Systems was issued US Patent No. 7,280,918 on Oct. 9, 2007, for methods and systems used to combine seismic data and basin modeling data. The proprietary technology allows development of more precise earth models for the identification of prospects, well planning and drilling operations.

Analysis group acquired

Weatherford International Ltd. announced that it has acquired Rotary Laboratories Inc., a strong player in the full-diameter and sponge-core analysis sector of the oil and gas industry. This acquisition augments several important components of Weatherford’s core evaluation services, including the ability to perform full-diameter analysis.
Drilling

Rotech opens new bases

Aberdeen-based Rotech Subsea will open two new overseas bases — Mexico and Singapore — to meet demand of its subsea excavation tools. The company launched its “T” mass flow subsea excavation system in 2001, and predicts a 40% increase in sales worldwide in 2008. The company has operated out of purpose-built facilities in Houston, Texas, for the past 18 months.

Arcapita acquires Varel

Arcapita Inc. completed its acquisition of Varel International Inc., a major drill bit company, for a reported US $369 million. The Atlanta, Ga.-based private equity firm purchased the company from KRG Capital Partners to further accelerate the drill bit company’s growth and product offering. The sale will not affect the company’s 1,100 employees working in 41 countries. The company will continue to invest in improving performance from its polycrystalline diamond compact (PDC) and roller cone drill bits.
Oklahoma hits new high

As of mid-December, Oklahoma had its highest level of active rigs in more than two decades. Elevated energy prices and unconventional gas production continue to stoke drilling across the state. According to Houston-based Baker Hughes Inc. the rig count climbed to 203. Karr Ingham, an economist for the Oklahoma Independent Petroleum Association, claims that state rig totals have not surpassed 200 since 1986. The Woodford shale, which underlies two-thirds of the state, is cited as the major factor for the increase. The OIPA reported that many of the rigs are flocking to an area where the formation is closest to the surface in southeastern Oklahoma primarily including Pittsburg, Coal, Hughes and Atoka counties.
Production

Pacific Stratus provides update

Exploration and production contracts have been signed by Pacific Stratus Ltd. and the Peruvian Government for Blocks 135, 137 and 138, which are located in the Maronon basin totaling 7,272 sq miles (18,835.5 sq km). The site was chosen based on its potential resources and its close proximity to existing transport infrastructure. The company will begin by conducting regional studies and seismic acquisition. Successful completion of this first phase will give the company the option to continue its exploration program with additional seismic and drilling one well for each block.

Mango field produces first gas

BP Trinidad and Tobago announced that natural gas production from the Mango field offshore Trinidad began in mid-November. Located in the south east Galeota Block, Mango field was discovered in 1971 and further appraised in 2007. It is 35 miles (56 km) southeast of Galeota Point in 235 ft (72 km) of water. The operator holds a 100% interest in the field.

Wood Group moves on oil sands

A subsidiary of John Wood Group Plc will acquire IMV Corp. for an initial cash consideration of US $140 million. The deal calls for three further cash payments due through 2014 based on future performance. The management and employee-owned company provides engineering, procurement and construction management services to the Canadian oil and gas exploration and production sector. With a workforce of around 650 people, the Calgary-based company showed profits of $23.1 million for 2007, and is considered one of Canada’s top three engineering companies for in-situ heavy oil production projects. With Canada’s 180 billion bbl proven oil reserve, it is the second largest source of oil reserves in the world. More than 173 billion bbl are heavy oil reserves with production expected to grow from an average of 1.1 million b/d in 2006 to 3.5 million b/d by 2020.

Permian assets acquired

An agreement was signed to acquire 50% working interest in assets in west Texas in the Permian basin by Gulfport Energy Corp. The US $85-million deal includes 4,100 acres net to the company’s proposed interest with current production of 800 net boe/d from 32 gross wells, primarily from the Wolfcamp. Existing production is approximately 64% oil, 23% gas liquids and 13% natural gas. Windsor Permian LLC, an affiliated company controlled by Wexford Capital LLC, will control the remaining 50% interest. An independent external engineering report by Pinnacle Energy Services LLC estimates Gulfport’s proved net reserves at 6.9 million boe.

General

E&P spending slumps

In spite of near-record oil prices, the largest international oil companies (IOCs) are plowing fewer dollars back into the ground in exploration and production work, according to a study by the Baker Institute at Rice University in Houston. Sifting through public information, Amy Myers Jaffe and Ronald Soligo put together a study titled “The International Oil Companies.” National oil companies (NOCs) control 77% of the 1.148 trillion bbl of proven oil reserves, and ExxonMobil, the largest IOC, ranks only 14th of the list of top 20 companies. Among the big five oil companies, cash flow climbed four fold since the middle 1990s, but those companies spend 56% of that cash flow buying back stocks and paying dividends. “The oil majors are not replacing reserves. It’s as if they are slowly liquidating their asset base,” Jaffe said. The next 20 US-based oil companies are spending a larger percentage of cash flow replacing reserves and production. Average production from the big five dropped from 10.25 million b/d in 1996 to 9.45 million b/d in 2005 but increased to 9.7 million b/d in 2006. The top 20 next-tier oil companies increased their production from 1.55 million b/d in 1996 to 2.13 million b/d in 2005.

Now $70 equals $30

Higher service and equipment costs and bigger government takes inflated the cost of conducting exploration, drilling and production operations. To maintain a return of just less than 15% in 2005, a company would have needed an oil price of US $30/bbl. The same company now needs $70/bbl to achieve the same return, according to Wood Mackenzie Exploration Service. The cost to drill a well rose 60% since 2004. Although changes in government policies don’t affect existing license in most cases, they will be a significant factor in new licenses.

ExxonMobil gets a break

ExxonMobil saved more than US $3.5 billion when the Alabama Supreme Court tossed out the punitive damages on a state-filed case involving underpayment of gas royalties. A lower court had assessed the company $3.6 billion in its verdict. But the higher court allowed the state to keep only the $51.9 million in compensatory damages, according to AP.

Russia ups tax bite

Russia tacked another penalty on domestic and foreign oil and gas companies as it raised its export tax to US $37.57/bbl ($275.50/ton), starting Dec. 1, 2007. “The average oil price monitored in September-October was $76.89/bbl. Therefore, oil export duty could be set at $275.50 per metric ton,” according to Alexander Sakovich, deputy head of the Russian Finance Ministry in a RIA Novosti report.

US offshore royalties rise

The US Department of the Interior will increase Gulf of Mexico royalty rates on new leases to 18.75% for the two March 2008 lease sales. In 2007, the government agency increased the royalty rate on new deepwater leases to 16.7% from 12.5% that had been the norm for years. The new rate should increase royalties from the March sales by some US $4.3 billion over 30 years with only a slight reduction in production, according to a government analysis.

Iraq nullifies Kurdish leases

Shortly after the Kurdistan government in northern Iraq awarded seven new lease blocks to foreign investing companies — including Reliance Industries
of India and OMV of Austria — the central Iraqi oil ministry declared all Kurdish contracts null and void. The regional government body previously had signed over nine licenses under its own law, which it said complied with a national law that lies stalemated in the Iraqi legislature. Iraqi officials also said companies that attempted to maintain operations under the Kurdish licenses would be blacklisted from future operations in the country. The Kurdish government maintained the Iraqi officials had exceeded their authority by nullifying the licenses.