Altima Resources - Hart Energy Coverage

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  • 1. VOLUME 20 / ISSUE 46 / NOV 19, 2012In This Week’s Edition FEATURESFEATURES U.S. Energy Must Focus On Shared Interests, Hart Policy Expert SaysU.S. Energy Must Focus On SharedInterests, Hart Policy Expert Says ........1 The fate of U.S. energy policy will dependLeucadia National, Jefferies Agree To heavily on the “shared interests” of both po-$3.6 Billion Merger .............................1 litical parties, according to John Kneiss, di-DUG East 2012: Operators Tap Unique rector of government affairs and U.S. policyPoint Pleasant Shale Geology ..............3 at Hart Energy. President Barack Obama’s second termRECENT FINANCINGS ....................... 5 will be “onerous and difficult” for the oilIN THE FIELD the natural-gas sectors, but there are areasHemisphere Energy Reports Drilling Of of common ground that should be the focusTwo Successful Oil Wells.................... 6 during the next few years, Kneiss told at- tendees at a Hart Energy breakfast event in Arguably, the U.S. oil and natural-gas in-Altima Licenses New Alberta Wildcat...6 Houston on Nov. 8. dustries – already strained by the ObamaCub Energy Commences Production On Such areas include jobs creation, in- administration – came out en masse for MittMakeevskoye-20 Well .........................7 creased U.S. competitiveness, improved Romney. A Romney victory, many thought,HART ENERGY’S DRILLING balance of trade, global energy stability, nat- would impart less uncertainty and greaterINTENSITY TRACKER ..........................7 ural-gas use, energy diversity and efficiency clarity. During his now-unsuccessful bid forConcentration Increases Among improvements, he said. the White House, Romney offered a “com-Operators In Unconventional Dry Gas “I don’t think there has ever been an ad- prehension” of the role energy plays in theDrilling. ...............................................8 ministration that has such little knowledge American economy – even making “energy”M&A NEWS about commerce,” Kneiss said. “There are a the No.1 point of his five-point plan. number of energy issues on the agenda, but In contrast, Obama’s second term will seeSpectra Energy Acquires One-ThirdInterest In Sand Hills, Southern Hills comprehensive legislation is unlikely. Still, a new slate of “tightening regulations,” re-Pipelines .............................................8 failure is not an option.” stricting fossil fuels – coal in particular. OnTarga Resources Bags $950 Million (continued on page 2)Bakken Midstream Acquisition ............8Sintana, ExxonMobil Announce Farmout Leucadia National, Jefferies Agree To $3.6 Billion MergerAgreement ..........................................9 Leucadia National Corp. (NYSE: LUK) and close during first-quarter 2013, is subjectDRILLING ACTIVITY Jefferies Group Inc. (NYSE: JEF) have agreed approval by both Leucadia and JefferiesHIGHLIGHTS & MAP to join forces in an all-stock merger. The shareholders.New Williston Basin Pay Zone Opened combination will represent more than $3.6 Following recent sales and asset redemp-With 4 Completions In Montana ..........9 billion in shareholders’ equity. The two are tions, Leucadia has approximately $2.4 bil-Utica Discovery in Harrison County, Ohio: long-time partners and Leucadia is Jefferies lion in cash and public securities and $9606.9 Mmcf, 1,224 Bocpd ....................10 largest shareholder. million of outstanding parent companyNew Offshore Angola Discovery Flows In the deal, Jefferies’ shareholders (other debt. At August 31, 2012, Jefferies had cash3,000 Bopd .......................................10 than Leucadia, which currently owns ap- and cash equivalents of $2.8 billion. proximately 28.6% of the Jefferies outstand- According to Jefferies, “As a subsidiaryPEOPLE ing shares) will receive 0.81 of a share of of Leucadia, Jefferies will have greaterSummit Midstream Partners AnnouncesNew Board Member ......................... 10 Leucadia common stock for each share of balance-sheet resilience and flexibility to Jefferies common stock they hold in a tax- guard against, and take advantage of, mar-Magellan Petroleum Elects Pharo To free exchange. The merger, expected to ket dislocations and opportunities. Jeffer-Board............................................... 10Reed Named Chair Of Sempra Energy; (continued on page 4)Felsinger To Retire ........................... 11 www.oilandgasinvestor.com Copyright © 2012. Hart Energy 1
  • 2. VOLUME 20 / ISSUE 46 / NOV 19, 2012U.S. Energy Must Focus On Shared Interests ... (continued from page 1)the other hand, policies advancing green required to publish a report each April have been there for over a year. All re-energy are expected from the execu- and October about new regulations that cent presidents, with the exception oftive branch during the next four years, government agencies are considering. Reagan, have issued many more regula-Kneiss said. The OMB failed to publish the April re- tions during the last quarter of their ad- “More than likely, they’ll include port. ministration. But the Obama buildup isstiffer environmental policies, limited In an early-October post, Susan Dud- unprecedented.”access to federal lands for drilling and ley, director of the George Washington Kneiss agrees. “The EPA (U.S. Envi-new regulations on hydraulic fractur- University Regulatory Studies Center, ronmental Protection Agency) agenda ining,” he said. “There will be, in my mind, warned of a “regulatory tsunami” if Obama’s first term saw numerous, majora dramatic push by the agency to justify Obama was re-elected. regulatory and environmental impacts,”taking on a national regulatory scope for In evaluating the pattern of “economi- he told attendees. “Over the past year,hydraulic fracturing,” Kneiss said. cally significant” regulations – those with things slowed considerably. Part of that Induced hydraulic fracturing – or frac- impacts of at least US$100 million per was because of presidential politics.”ing – is a technique used to release petro- year – from 1982 through the first halfleum, natural gas and other substances of 2012, Dudley said Obama has had a Keystone XL Pipelinefor extraction. Proponents of fracing note different pattern of regulations than his After more than a year of politicalthe economic benefits from vast amounts predecessors. wrangling, Kneiss expects TransCanadaof formerly inaccessible hydrocarbons The Obama “administration published Corp.’s Keystone XL pipeline will be ap-the process can capture. Opponents have a record-setting average of 63 economi- proved, likely during the first half ofraised questions about methane leaks, cally significant final rules in his first two Obama’s second term.air-quality effects and the impact of hy- years,” according to Dudley, but in the “It will get approved. It’s just a mat-draulic fracturing on drinking water. months preceding the presidential elec- ter of timing,” he said “There’s really no The U.S. already is 80% self-sufficient tion, the number of regulations slowed to technical or environmental reason forin energy production and use, but fossil a “trickle.” having a denial. Let’s look at next sum-fuels will continue to provide most of the This “drawback” in new regulations is mer, (for possible approval) when gaso-nation’s energy. Against that backdrop, evidenced by a sizeable backlog of regu- line prices are going up again.”climate change will become an increas- lations under review, she noted. The controversial pipeline has faceding part of the public conversation, ac- “Now these statistics could indicate an an uphill battle since the U.S. State De-cording to Kneiss. administration that has accomplished its partment issued a memo in November “Regardless of how you feel about that regulatory goals, and has little need for 2011 saying it needed an additional 12 toissue, climate change is not going to go further regulation. But the administra- 18 months to determine if the Keystoneaway,” he said. “It’s diminished some- tion’s official agenda of upcoming regu- XL pipeline project is in the nationalwhat, but as economic progress occurs lations suggests that is not the case,” she interest. Less than two months later,in this country Americans’ concerns said. Obama rejected the pipeline permit.about climate change will grow, and the Dudley further writes: “While his- Citing an “arbitrary” 60-day deadlineindustry needs to be prepared to address torically OIRA (Office of Information and set by Republican lawmakers, Obamathem.” Regulatory Affairs) reviews regulations said TransCanada’s application for the in under 60 days; on average, currently 1,600-mile (2,575-kilometer) pipeline wasComing ‘Regulatory Tsunami’ over 70% of the regulations under re- denied “because the State DepartmentSome officials are expecting a regulatory view have been sitting at OIRA for lon- did not have enough time to complete thetsunami after the election. By law, the Of- ger than 90 days (the default review time review process.”fice of Management and Budget (OMB) is established by executive order), and 10% www.oilandgasinvestor.com Copyright © 2012. Hart Energy 2
  • 3. VOLUME 20 / ISSUE 46 / NOV 19, 2012U.S. Energy Must Focus On Shared Interests ... (continued from page 2)Renewable Fuel Standard able-technology innovators and energy standards.A large coalition of U.S. advanced and independence. Although Congress still remains di-traditional renewable-fuel stakeholders According to Kneiss, the 113th Con- vided with the Democrats in control ofjoined forces in late September in the gress likely won’t take up the issue any the Senate and Republicans of the House,form of a new coalition aimed at defend- time soon. observers in the biomass and biofuels in-ing the country’s Renewable Fuels Stan- “I don’t expect to see any RFS re- dustries are optimistic that some issuesdard (RFS). forms in 2013. It might advance later in will be revisited next year and the RFS The campaign launch emerged as the Obama’s second term,” he added. will continue to be a part of U.S. energyEPA considered a request to waive the Other pending and upcoming EPA policy moving forward.RFS – a move that coalition members rules, according to Kneiss, include gaso- -Kristie Sotolongo, Hart Energysaid would have serious consequences line “Tier-3” sulfur reductions; ozone air-for America’s rural communities, renew- quality standard reconsideration; RFS waiver petition; and boiler-rule emissionDUG East 2012: Operators Tap Unique Point Pleasant Shale GeologyPITTSBURGH - The Utica/Point Pleasant stone. These form mini-pathways in the be an indication of original overpres-shales have been compared favorably to Point Pleasant. The permeability results sure,” said Dr. Joel Walls, director, techni-the Eagle Ford play in South Texas. How- in very high flow rates from the Point cal resources, unconventional reservoirs,ever, the Point Pleasant, especially, has Pleasant. Ingrain Inc. “There is significant porosityseveral unique geological features that “Those little, tiny, 2-cm to 3-cm thick development inside the organic mate-could make it one of the top domestic pro- limestone layers act as nice horizontal rial with its inversion ratio somewhereducers – if not the top producer. permeability layers that can connect around 40%. The organic content by vol- The geological features for the Point the vertical hydraulic fractures creat- ume is anywhere from 2% to 8%.Pleasant shale include higher resistivity ing a matrix. Very high flow rates have “Samples we’ve examined along withthan other shales, very thin limestone been reported. I think the permeability porosity-permeability results were oninterbedding, and very low water satura- mechanism within those limestone lay- a par with the lower Eagle Ford, evention of only 10%, explained Kent Bowker, ers helps add to the deliverability of the though those two formations are very dif-president, Bowker Petroleum and its part- wells. There is nothing I’ve seen like that ferent in geological age. There are somener, Sierra Buckeye LLC, at Hart Energy’s in other shale plays I’ve been involved differences in mineralogy and lithologyDUG East Conference in Pittsburgh on in,” he continued. as well. I don’t want to make too muchNov. 14. “Since we’re dealing with a very old of that analogy, but at least in terms of “I think the very thin limestone beds Ordovician system, the precursor or- reservoir quality there are some definiteare important to flow rates. Permeability ganic matter is completely different. For similarities,” he continued.of the limestone is greater than 10 milli- instance, the oil doesn’t fluoresce because Ralph Williams, president, Reservoirdarcies,” he said. “This is kind of amaz- of the chemical nature of the precursor Visualization Inc., pointed out that theing. These numbers don’t sound like organic matter. It doesn’t even smell. It Utica shale runs from St. Louis, Mo., toshale numbers. One sample has porosity kind of freaks you out,” he laughed. New York, where the Utica shale outcropsof 13.7%. That is a huge amount of poros- Another unusual feature of the shale is in Utica, N.Y., and the Marcellus outcropsity created by the fractures in the lime- “horizontal extrusion fractures that may in Marcellus, N.Y., and from Tennessee www.oilandgasinvestor.com Copyright © 2012. Hart Energy 3
  • 4. VOLUME 20 / ISSUE 46 / NOV 19, 2012into New York and Canada. “There is very little water recovered “Do I have any proof this? No, but I’m a “What continues to amaze me is the from the fracs in the Point Pleasant. You geologist and I don’t need any proof,” hemegascopic features of the Ordovician don’t get much water back from any shale laughed. “That’s what I think is going on.system, which the Utica is part of. In the plays. The lower the amount of water, the The water is not harmful to the rock.” .northeastern US, we can see the entire better the shale is. My understanding is - Scott Weeden, Hart Energywest side of the basin in our well control. that very little water recovered from fracsWe look at geobodies, net sands and net in the Point Pleasant. We’re dealing withshale to see where the positions are and a very dry reservoir.”infer if it is a delta, carbonate bank, or By putting the water into the hydrau-paleoridge like we saw in the Marcellus. lic fractures and letting it sit, the shale isWe see an extra-wide areal extent of con- imbibing the water and not filling in thetrol that we don’t see in a lot of plays,” he pores. The clay wants the water. After 60added. to 90 days, the water is imbibed into the Bowker noted that operators don’t get crystalline structure of the clay itself.much water back from horizontal play.Leucadia National, Jefferies Agree To $3.6 Billion Merger ... (continued from page 1)ies currently pays substantial Federal Jefferies, which will be the largest board also has indicated its intention toincome taxes and thus it is expected on- business of Leucadia, will continue to continue to pay dividends at the annualgoing pre-tax earnings will materially operate as a full-service global invest- rate of $0.25 per common share, but on aaccelerate utilization of Leucadia’s net ment-banking firm in its current form. quarterly basis following the merger.operating losses, creating incremental Jefferies will retain a credit rating that is Jefferies & C. Inc. and J.P. Morgan werevalue for all shareholders.” separate from Leucadia’s. Jefferies’ exist- financial advisors to Jefferies. Citigroup Upon closing, Richard Handler, cur- ing long-term debt will remain outstand- Global Markets Inc. was financial advisorrently chief executive of Jefferies, will ing and Jefferies intends to remain an and provided a fairness opinion to Jeffer-become chief executive and a director SEC reporting company, regularly filing ies. Rothschild was a financial advisor toof Leucadia, and will remain Jefferies’ annual, quarterly, and periodic financial Leucadia, and UBS Investment Bank waschief executive officer and chairman; reports. a financial advisor and provided a fair-Brian Friedman, currently chairman of Following the transaction, 35.3% of ness opinion to the Leucadia board.the executive committee of Jefferies and Leucadia’s common stock will be owned - Susan Klann, Hart Energya director, will also remain chairman of by Jefferies’ shareholders (excluding thethe executive committee of Jefferies; and Jefferies shares owned today by LeucadiaJoseph Steinberg, Leucadia’s president and including Jefferies vested restrictedand a director, will become chairman of stock units). Leucadia’s board has ap-the board of Leucadia and continue to proved a new share repurchase pro-work full time as an executive of Leuca- gram authorizing the repurchase fromdia. Ian Cumming will retire as chairman time to time of up to an aggregate of 25of the board and chief executive officer million Leucadia common shares, inclu-of Leucadia and remain a director. sive of prior authorizations. Leucadia’s www.oilandgasinvestor.com Copyright © 2012. Hart Energy 4
  • 5. VOLUME 20 / ISSUE 46 / NOV 19, 2012RECENT FINANCINGS DEBT Priced an unsecured five-year term loan facility arranged by Bank of America, N.A., Gold- man Sachs Bank USA and Jefferies Finance LLC. The new facility was priced at 98% of Chesapeake par. Amounts borrowed under the new facility will bear interest at LIBOR plus 4.50%. The Energy Corp./ LIBOR rate is subject to a floor of 1.25% per annum. The new facility is expected to close US$2.00 billion NYSE: CHK/ on November 9, 2012, subject to the execution of definitive loan documents and the satis- Oklahoma City faction of closing conditions. Net proceeds will fully repay the remaining outstanding bor- rowings under the company’s existing May 2012 term loan facility and to repay outstanding borrowings under the company’s corporate revolving credit facility. Continental Completed its offer to exchange aggregate principal amount of its 5% senior notes due Resources Inc./ 2022 for any and all of its outstanding 5% senior notes due 2022, which were issued in a US$1.20 billion NYSE: CLR/ private placement on Aug. 16. The offer fulfilled the company’s obligations regarding the Oklahoma City registration of its outstanding private notes. Intends to offer senior unsecured notes due 2020 in a private placement to eligible pur- Antero Resources/ US$300.00 million chasers. Antero will use the proceeds of the offering to repay a portion of outstanding bor- N/A: N/A/Denver rowings under its senior secured revolving credit facility. Legacy Reserves/ Intends to offer senior unsecured notes due 2020. Net proceeds are intended to fund a Nasdaq: LGCY/ US$300.00 million portion of the $520 million purchase price of its pending acquisition of oil and natural gas Midland, Texas properties in the Permian Basin from Concho Resources Inc. Closed offer to exchange its outstanding 7.5% senior notes due 2021 that were issued on August 20, 2012 for new 7.5% senior notes due 2021 that are registered under the Se- curities Act of 1933, as amended. The exchange offer expired at 5:00 p.m., Eastern time, on November 14, 2012. The exchange offer initially was scheduled to expire on November SandRidge Energy 8, 2012, but was extended to provide additional time for holders of outstanding old notes Inc./ NYSE: SD/ US$275.00 million to tender such notes for exchange. Wells Fargo Bank National Association, the exchange Oklahoma City agent for the offer, has advised that old notes in the aggregate principal amount was were validly tendered and not validly withdrawn prior to the expiration of the exchange offer. San- dRidge Energy has accepted for exchange all of the old notes, and expects to issue the new notes in exchange for the old notes on or about November 16, 2012. Shale-Inland Hold- Completed a previously announced offering of $250 million in aggregate principal amount ings LLC/ N/A: N/A/ US$250.00 million of 8.75% senior secured notes due 2019. Net proceeds were used to repay a portion of its Houston existing asset backed credit facility and pay related fees and expenses. Crestwood Mid- Plans to offer additional 7.75% senior notes due 2019 through a private offering. The notes stream Partners US$150.00 million will have the same terms as Crestwood’s existing outstanding $200 million principal 7.75% LP/ NYSE: CMLP/ senior notes due in 2019. Houston www.oilandgasinvestor.com Copyright © 2012. Hart Energy 5
  • 6. VOLUME 20 / ISSUE 46 / NOV 19, 2012 EQUITY A public offering of 4,750,000 common units was priced at $27.60 per unit to the public. The underwriters also have an overallotment option to purchase up to about 712,500 ad- ditional common units. The partnership intends to use the net proceeds, as well as the net Spectra Energy proceeds from any exercise of the underwriters’ over-allotment option, for funding capital Partners LP/NYSE: US$128.70 million expenditures and acquisitions. Net proceeds of this offering will be held as cash or in- SEP/Houston vested in short-term securities, or a combination of both. Wells Fargo Securities, Citigroup, Deutsche Bank Securities, UBS Investment Bank and Credit Suisse acted as joint book run- ning managers for the offering. BUYBACKS EnerJex Resources Inc./ OTC BB: US$2.00 million Plans to buy back $2 million worth of common stock before Dec. 31, 2013. ENRJ/San AntonioIN THE FIELDHemisphere Energy Reports Drilling Of Two Successful Oil WellsHemisphere Energy Corp. (TSX VENTURE: been producing since Oct. 31, averaging begin by the end of November.HME) reported that it has successfully about 140 barrels of oil per day with a In October, Hemisphere acquired adrilled two additional oil wells in Jenner, 0% water cut. The company said that this new 3D seismic program over additionalsoutheast Alberta. is the first horizontal well drilled in this farm-in lands. The 3D data is currently The company began drilling of these pool and that it is planning several more being processed and will be used for se-wells in late September 2012, resulting in wells. At this time, licensing has been lecting additional locations for the com-one horizontal well and one vertical well completed for two additional wells pany’s 2013 drilling program.focusing on the oil-bearing sandstones of The vertical well was Hemisphere’s Hemisphere plans to drill up to threethe Glauconitic formation. initial earnings well under its Jenner additional horizontal wells before year- According to a Hemisphere Energy farm-in agreement announced in June. end, with the first well spudding in latenews release, the horizontal well has The company expects production will November.Altima Licenses New Alberta WildcatAltima Resources Ltd., Vancouver, Brit- W5M well is scheduled to be drilled in the gas, associated condensate and frac fluid.ish Columbia (TSX VENTURE: ARH), has first quarter of 2013. Downhole pressure recorders werelicensed a new pool wildcat well at Cham- Altima also announces that the opera- run and the well shut-in. On June 21, thebers, Alberta. The well, Altima Chambers tor of the COPOL ET AL HZ CHAMBERS recorders were recovered. Altima holds a14-35-41-11 W5M, is anticipated to be 14-15-41-11 W5M well has notified Altima 30% WI in the subject well. Adverse sea-drilled to a depth of 3,065 meters into the of its intent to continue flow and build up sonal conditions have prevented furtherNordegg formation. Altima has a 100% testing operations, which are anticipated operations to this time.working Interest in the subject well and to commence within the next week, sub- The company’s mostly contiguousoffsetting section. The 14-35 well is lo- ject to weather conditions permitting ac- land base at Chambers-Ferrier totals 20cated approximately 5 kilometers to the cess. Altima had previously reported a sections (12,800 gross acres) with an ap-north of the COPOL ET AL HZ CHAMBERS limited four-day test completed during proximate average working interest of14-15-41-11 W5M well that completed the period May 23 through May 27, with 97.2% in 10 of the 20 sections and varyingdrilling in March 2012. The 14-35-41-11 the well flowing varying rates of natural interests in eight wells. www.oilandgasinvestor.com Copyright © 2012. Hart Energy 6
  • 7. VOLUME 20 / ISSUE 46 / NOV 19, 2012Cub Energy Commences Production On Makeevskoye-20 WellHouston-based Cub Energy Inc. (TSX VEN- The M-20 well was drilled to a total The R8 Pool was originally discoveredTURE: KUB), a Ukraine-focused upstream depth of 2,000 meters, perforated in the by the Makeevskoye-19 well in the secondoil and gas company, announced that it R8 zone and cased to TD in early August half of 2010. The pool was extended ap-has commenced commercial production 2012. The primary objective of the well proximately 1 kilometer to the west of theof the Makeevskoye-20 well in Ukraine. was to evaluate the potential of the R8 Makeevskoye-21 well and now has been The M-20 well began production on zone at a depth of approximately 1,450 extended approximately 1 kilometer toNov. 1 and is currently producing at a meters and further develop the Makeevs- the east by the M-20.gross rate of 1,042 barrels of oil equiva- koye R8 Pool.lent per day.HART ENERGY’S DRILLING INTENSITY TRACKER Historical Current Rig Count Trends 4Q 11 1Q 12 2Q 12 3Q 12 10/26/2012 11/02/2012 11/09/2012 11/16/2012 Change Average Average Gas Directional 106 83 51 43 44 46 46 43 -3 45 -3.9% Gas Horizontal 525 427 326 258 258 262 243 230 -13 248 -7.4% Gas Vertical 105 95 66 54 59 49 47 48 1 51 -5.4% Gas Total (Land) 736 605 443 355 361 357 336 321 -15 344 -6.6% Oil Directional 71 74 82 73 75 73 71 76 5 74 3.1% Oil Horizontal 439 512 586 642 631 618 608 616 8 618 -0.4% Oil Vertical 335 351 379 357 339 339 353 363 10 349 4.2% Oil Total (Land) 845 937 1047 1072 1045 1030 1032 1055 23 1041 1.4% Gas Shales 296 256 205 167 152 148 142 141 -1 146 -3.3% Oil/Liquid shales 419 427 455 469 460 462 442 451 9 454 -0.6% Tight Sands 159 147 123 109 113 115 104 109 5 110 -1.1% Total Unconventional 874 830 783 745 725 725 688 701 13 710 -1.2% Rigging Down (Land) 145 158 145 130 117 113 122 121 -1 118 2.3% Rigging Up (Land) 85 113 181 214 188 193 186 177 -9 186 -4.8% Total Rig Float (Land) 230 271 326 344 305 306 308 298 -10 304 -2.1% Deep 11 12 12 15 20 23 23 23 0 22 3.4% Shelf 23 27 26 23 19 20 21 20 -1 20 0.0% Inland Barge 17 14 17 14 14 16 16 15 -1 15 -1.6% Total Offshore 51 53 55 52 53 59 60 58 -2 58 0.9% Drilling Offshore 51 53 55 52 53 59 60 58 -2 58 0.9% Drilling Onshore 1581 1542 1489 1439 1406 1387 1368 1376 8 1384 -0.6% Total Oil/Gas Drilling 1632 1595 1544 1491 1459 1446 1428 1434 6 1442 -0.5%Source: Hart Energy, Smith Bits, A Schlumberger Company. For more information, contact Richard Mason at rmason@hartenergy.com www.oilandgasinvestor.com Copyright © 2012. Hart Energy 7
  • 8. VOLUME 20 / ISSUE 46 / NOV 19, 2012Concentration Increases Among Operators In Unconventional Dry Gas DrillingThe Top Ten unconventional gas drillers Rig count among the Top Ten dry gas Haynesville shale drilling coupled withaccount for 49% of domestic drilling in unconventional drillers fell 51% from 295 a minor decline in the dry gas Marcellusunconventional plays in the fourth quar- one year ago to just 144 in 2012 (though shale.ter 2012 compared to a 45% share during the number includes 11 operators with Individual rig count among the Topthe same period in 2011. four tied for the 10th spot). Ten dry gas unconventional operators in As total rig count for dry gas uncon- The four largest dry gas unconven- 2012 has also declined with EXCO, whichventional drilling falls sharply, concen- tional drillers in 2012 include Exxon- fell out of the list, down 18 rigs year overtration gradually increases, pointing to Mobil (28), Devon Energy Corp. (18), year. Devon and Anadarko are down 15who is creating those high volume gas BHP-Billiton and Southwestern Energy units, with ExxonMobil off 11. Unchangedwells in an oversupplied market. Corp. (15 each). One year ago, the top year to year is Southwestern Energy at 15 Numerically, operators employed 292 four included Chesapeake Energy Corp. units.rigs drilling domestic dry gas horizontal (85), ExxonMobil (39), Devon, (33), and - Richard Masonand or directional wells quarter-to-date Anadarko Petroleum (28).in 2012, according to Hart Energy’s Un- Gone from the Top Ten this year areconventional Activity Tracker. The num- Chesapeake, EnCana, Talisman and EXCOber is off 56% versus one year ago. Resources, reflecting sharp reductions inM&A NEWSSpectra Energy Acquires One-Third Interest In Sand Hills, Southern Hills PipelinesSpectra Energy Corp. (NYSE: SE) an- fund the remaining capital expendi- Based in Houston, the company’s op-nounced Nov. 15 that it has closed its tures through completion. The aggre- erations in the United States and Can-previously announced acquisition of a gate investment by Spectra Energy in ada include more than 19,000 miles ofone-third interest in the Sand Hills and the two pipeline projects is expected to transmission pipeline, approximatelySouthern Hills pipelines, both of which be $700 million to $800 million. 305 billion cubic feet of storage, andcurrently are under construction by DCP Spectra is one of North America’s natural gas gathering and processing,Midstream LLC, a 50/50 joint venture be- premier natural gas infrastructure natural gas liquids and local distribu-tween Spectra Energy and Phillips 66. companies serving three key links in tion operations. Spectra Energy, Phillips 66 and DCP the natural gas value chain: gatheringMidstream each own a one-third inter- and processing, transmission and stor-est in the two pipelines and will equally age, and distribution.Targa Resources Bags $950 Million Bakken Midstream AcquisitionHouston-based Targa Resources Part- subject to customary regulatory approv- capacity (expanding to 40,000 barrels)ners LP (NYSE: NGLS) has agreed to ac- als and closing conditions. and Alexander Terminal with storagequire 100% of Saddle Butte Pipeline LLC’s The business to be acquired is capacity of 30,000 barrels. The businessownership of its Williston Basin crude located in the heart of the Bakken in also includes approximately 95 milesoil pipeline and terminal system and its McKenzie, Dunn, and Mountrail coun- of natural gas gathering pipelines andnatural gas gathering and processing op- ties, N.D., and includes approximately a 20 MMcf/d natural gas processingerations for cash consideration of $950 155 miles of crude oil pipelines. The plant with an expansion under way tomillion, subject to customary purchase business has combined crude oil op- increase capacity to 40 MMcf/d.price adjustments and certain contingent erational storage capacity of 70,000 “This acquisition of a major, strate-payments. The transaction is expected to barrels, including the Johnsons Corner gic midstream business complementsclose during the fourth quarter of 2012, Terminal with 20,000 barrels of storage our extensive portfolio of midstream www.oilandgasinvestor.com Copyright © 2012. Hart Energy 8
  • 9. VOLUME 20 / ISSUE 46 / NOV 19, 2012assets, extends our footprint to the very revenues,” said Joe Bob Perkins, CEO of country.”attractive Bakken Shale play, further the general partner of the partnership. Evercore Partners acted as advisordiversifies our business with the addi- “We are very excited to expand our geo- to the partnership with respect to thetion of crude oil gathering and adds sig- graphic footprint into one of the most transaction.nificant long-term growth in fee-based important oil-producing basins in theSintana, ExxonMobil Announce Farmout AgreementSintana Energy Inc. (NYSE: SNN) an- ExxonMobil will acquire an undivided mendous potential for large discoveriesnounced that Patriot Energy Oil & Gas 70% participation interest and opera- with compelling economics. ExxonMo-Inc., wholly owned by the company, has torship in the formations defined as un- bil owns interests in, and is the opera-entered into a farmout agreement with conventional. tor of, a number of very large, highlyExxonMobil Exploration Colombia Ltd., Patriot will retain the remaining 30% complex unconventional projects ina wholly owned subsidiary of ExxonMo- interest in the unconventional play as multiple countries. It is on the leadingbil Corp. (NYSE: XOM) for the exploration well as its current 100% participation edge of developing and applying highlyand development of unconventional oil interest in the conventional resources technical methods and complex pro-and gas resources underlying the 43,000 overlying the top of the unconventional cesses to discover, develop and produceacre VMM-37 Block in Colombia’s Middle interval. unconventional reserves. We are fortu-Magdalena Basin. Sintana’s CEO, Doug Manner, said, nate to have ExxonMobil as our partner Subject to approval by the Agencia “Both the conventional and unconven- and look forward to a long and very suc-Nacional de Hidrocarburos of Colombia, tional formations on VMM-37 offer tre- cessful working relationship.”DRILLING ACTIVITY HIGHLIGHTS & MAP New Williston Basin Pay Zone Opened With 4 Completions In MontanaIHS Inc. reported that Slawson Explora-tion Inc. has opened a new pay zone inthe Williston Basin Bakken with the com-pletion of four horizontal tests in Rich-land County, Mont. The exploratory testsare on the company’s 40,000-acre Mon-Dak shale prospect. The #1-32H Culverinis in partial Section 32 of partial Town-ship 21n-60e and initially flowed 476 bbl.of oil per day from a fractured horizontalUpper Bakken interval. The lateral wasdrilled to 15,060 ft., 10,417 ft. true verti-cal. The #1-30H Cleaver is in Section 30of partial Township 21n-60w and initiallyflowed 296 bbl. of oil per day from a frac-tured horizontal Upper Bakken interval.The lateral was drilled to 14,959 ft., 10,355ft. true vertical. The #1-26H Arrowhead- drilled to 14,442 ft., 10,340 ft. true verti- was drilled to 14,643 ft., 10,109 ft. trueFederal is in Section 26-21n-59e and ini- cal. The #1-30H Dart-Federal is in Section vertical. Slawson’s headquarters are intially pumped 316 bbl. of oil per day from 30-21n-59e and initially pumped 312 bbl. Wichita, Kan.a fractured horizontal Upper Bakken in- of oil per day from a fractured horizon-terval at 10,537-14,427 ft. The lateral was tal Upper Bakken interval. The lateral www.oilandgasinvestor.com Copyright © 2012. Hart Energy 9
  • 10. VOLUME 20 / ISSUE 46 / NOV 19, 2012Utica Discovery in Harrison County, Ohio: 6.9 Mmcf, 1,224 BocpdA Harrison County, Ohio, Utica/Point to Gulfport, the gas being produced is west beneath Section 24. Gulfport alsoPleasant discovery by Gulfport Energy 1,207 Btu. Assuming full ethane recovery, plans to drill #1-28H Stout in Section 28Corp. was tested at a gross peak rate of the well is expected to produce an addi- to a proposed depth of 13,800 ft. Accord-6.9 million cu. ft. of gas and 1,224 bbl. tional 110 bbl. of natural gas liquids per ing to IHS Inc., Gulfport has budgeted upof condensate per day. The #1-16H BK 1 million cu. ft. of gas. Gulfport’s #2-16H to $225 million to drill approximately 50Stephens is in Section 16 of Moorefield BK Stephens is scheduled to be drilled gross wells in the play in 2013.Township. The venture was drilled to from roughly the same surface location7,250 ft. with a 5,276-ft. lateral and the as #1-16H BK Stephens, and is expectedtrue vertical depth is 8,225 ft. According to bottom about 1.5 miles to the north-New Offshore Angola Discovery Flows 3,000 BopdA new oil field discovery in Block 16 of discovery in Block 16. The well was tested is planning additional appraisal andoffshore Angola’s Lower Congo Basin was using a 36/64-in. choke and flowed 3,000 evaluation of the discovery. Maersk Oilannounced by Maersk Oil. The #1-Capor- bbl. of oil per day. The well is in 1,235 is operator with 65% in partnership witholo is an exploratory stepout on a sepa- meters of water and was drilled to 508 Odebrecht Oil & Gas Angola (15%) andrate structure adjacent to the Chissonga meters. The Copenhagen-based company Sonangol P&P, holding 20%.For more information on Activity Highlights, contract Larry Prado, activity editor, at Lprado@hartenergy.com.PEOPLESummit Midstream Partners Announces New Board MemberSummit Midstream Partners LP (NYSE: on the conflicts and audit committees. Tomasky currently serves as a direc-SMLP) has announced the appointment He was a senior executive for 13 years tor of two other public companies, Tes-of Susan Tomasky to the board of direc- at American Electric Power, one of the oro Corp. and Public Service Enterprisetors of SMLP’s general partner. nation’s largest electric utilities, serving Group. Tomasky was appointed to the board from 2009 to 2011 as president of theon Nov. 9 and will serve as chairperson company’s transmission business.Magellan Petroleum Elects Pharo To BoardDenver-based Magellan Petroleum Corp. and as general counsel to public oil and Randy Pharo join our board. Randy(NASDAQ: MPET) has announced its gas companies. brings to the board his extensive expe-board of directors elected Milam Ran- He most recently served as the compa- rience in the oil and gas industry anddolph Pharo to fill a vacancy on the board ny’s vice president, general counsel and public company corporate governance.resulting from the resignation of William secretary from Nov. 30, 2011, to Sept. 5, He will contribute substantially to theH. Hastings on July 16. 2012. From 1996 to 2010, he held various board’s deliberations and strategic plan- Pharo, 60, has more than 30 years of positions with SM Energy Co., including ning. With the addition of Randy to ourexperience in the oil and gas industry, vice president, Land and Legal, and se- board, we have a strong board with com-with an emphasis in the Rocky Mountain nior vice president and general counsel. plementary experience and skills.”region. He has served in private legal J. Robinson West, chairman of thepractice focusing on oil and gas matters, board, said, “We are delighted to have www.oilandgasinvestor.com Copyright © 2012. Hart Energy 10
  • 11. VOLUME 20 / ISSUE 46 / NOV 19, 2012Reed Named Chair Of Sempra Energy; Felsinger To RetireThe board of directors of Sempra Energy her appointment as CEO last year, she Felsinger has been Sempra Energy’s(NYSE: SRE) announced that chief execu- was executive vice president of Sempra executive chairman since June 2011.tive Debra Reed has been elected chair of Energy. From 2006 to 2010, she served as From 2006 to 2012, he served as chair-the company. president and CEO of Sempra Energy’s man and CEO of Sempra Energy. Prior to Effective Dec. 1, Reed will succeed two largest subsidiaries, San Diego Gas that he was the company’s president andDonald E. Felsinger, 65, who is retiring & Electric (SDG&E) and Southern Cali- chief operating officer.after a 40-year career with the company. fornia Gas Co. (SoCalGas). She also was Beginning in 1998, Felsinger led Sem-Reed was named Sempra Energy’s CEO in chief operating officer of the two utilities, pra Energy’s expansion into competitiveJune 2011. after initially being appointed president energy markets, helping to build busi- “In her year-and-a-half as CEO, Debbie of SDG&E in 2000. nesses in energy-infrastructure develop-Reed has helped Sempra Energy become Reed first joined the company in 1978 ment, power generation, commoditiesa top performer in our industry,” Fels- as an energy systems engineer at SoCal- trading and liquefied natural gas.inger said. “She has sharpened our stra- Gas. In 1988, she became the first femaletegic focus and continued to build value officer appointed at SoCalGas.for our shareholders. Our board and I be- In 2011 and 2012, Reed was recog-lieve that Debbie will be most effective in nized as one of Fortune magazine’s “50serving our shareholders and customers Most Powerful Women in Business.” Shein the dual role of chairman and CEO.” also was recognized by Forbes magazine Reed, 56, has worked for the Sempra as one of the nation’s most influential fe-Energy companies for 34 years. Prior to male CEOs.Contact Information: MICHAEL MADERE Editor BECOME A mmadere@hartenergy.com MEMBER OF .com MEMBERSHIP INCLUDES 1616 S. Voss, Suite 1000 • Houston TX 77057-2627 • USA www.hartenergy.com | www.oilandgasinvestor.com Complete access to prices & markets CONTRIBUTING EDITORS including crude oil, natural gas, NGL prices, Richard Mason, Larry Prado, Bertie Taylor, Brian O’Connell,Nissa Darbonne, Steve Toon, Leslie Haines, frac spread, and petrochemical prices. Peggy Williams, and Susan Klann. Weekly analysis and updates in the Oil and Gas Investor This Week is published weekly by Hart Energy Midstream Monitor PDF newsletter. and is included with a premium subscription to oilandgasinvestor.com. Copyright 2012. All rights reserved. Reproduction of this newsletter, in Subscription to Midstream Business, whole or in part, without prior written consent of Hart Energy is prohib- ited. Federal copyright law prohibits unauthorized reproduction by any a monthly midstream magazine. means and im poses fines up to $100,000 for violations. Permission to photocopy for internal or personal use is granted by Hart Energy pro- vided that the appropriate fee is paid directly to Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923. Phone: 978-750- 8400; Fax 978-646-8600; E-mail: info@copyright.com. www.oilandgasinvestor.com Copyright © 2012. Hart Energy 11