Chevron hits pay in deepwater GoM
Chevron kicked off the New Year on a high-note with the announcement of an oil discovery on the Big Foot prospect located in Walker Ridge block 29, approximately 225 mi south of New Orleans. The Chevron-operated Big Foot No. 2 well, situated in about 5,000 ft of water, was drilled to a total depth of 25,127 ft and encountered more than 300 ft of net oil pay.
At print, sidetrack drilling was underway. The operator added that further appraisal drilling would be necessary to determine the commercial potential of the discovery.
“Big Foot is our latest success in the deepwater GoM and reflects our efforts to increase energy supplies to the US market,” said Ray Wilcox, president of Chevron North American Exploration and Production Co. “This discovery should ultimately provide the country with much needed crude oil and natural gas,” he added.
Paul Siegele, VP of Chevron’s GoM Deepwater Business Unit, commented, “Big Foot follows our earlier success at the Knotty Head discovery and is confirmation of further potential of our exploration acreage. This discovery follows a string of GoM discoveries that is a result of executing our focused, high-impact exploration program.”
The discovery is located approximately 20 mi southwest of the BP-operatedMad Dog spar in Green Canyon block 826. Chevron owns a 15.6% working interest in the floating production facility, gained through acquisition of Unocal.
Chevron is operator and 60% owner of Big Foot; Anadarko Petroleum Corp. holds 15%; and Plains Exploration & Production Co. and Shell each own a 12.5% working interest.
Independence Hub expansion
Enterprise Partners LP and the Atwater Valley Producers Group have agreed to increase both the processing capacity of theIndependence Hub semisubmerisble production platform and the transportation capacity of the Independence Trail Natural Gas Pipeline from 850 MMcf/d to 1 Bcf/d.
These $28 million expansions are required to accommodate natural gas production from three additional discoveries drilled in the area since the project was initially sanctioned, bringing the total number of initial start-up fields to 10, according to Enterprise. The floating production facility is designed to accommodate up to an additional nine fields.
The three additional natural gas discoveries slated for tieback into theIndependence Hub include the Anadarko-operated Mondo NW discovery (Lloyd Ridge blocks 1 & 2), Anadarko-operated Cheyenne discovery (Lloyd Ridge block 399), and the Hydro-operated Q discovery (Mississippi Canyon block 961).
The Anadarko-operatedIndependence Hub, at print was under construction with the hull approximately 60% complete and the topsides roughly 70% complete. First gas from the facility is expected in 1Q 2007. An affiliate of Enterprise owns 80% of the Hub and Cal Dive International, Inc. holds the remaining 20% working interest.
Fabrication yard consolidation targets deepwater
Gulf Island Fabrication, Inc. (GIFI) has exe-cuted an $80 million ($40 million in cash and $40 million in GIFI stock) agreement with Technip-Coflexip USA Holding, Inc. for purchase of all facilities, machinery and equipment of Technip-subsidiary, Gulf Marine Fabricators, located near Corpus Christi, Texas. The transaction was officially closed on February 1.
Through the acquisition, GIFI gains two fabrication yards located on the Gulf Intercoastal Waterway near Corpus Christi, which provides for a strategic advantage in that it allows for open, unrestricted access to the GoM. In addition, the acquired facilities, which are situated on over 400 acres of land, maintain a shear-leg crane providing over 4,000 short tons of lifting capacity. One analyst covering the acquisition indicated that GIFI plans to increase the crane’s capacity by 50% for $8 million.
The logistical advantages gained through purchase of the fabrication yards will enable GIFI to target a multitude of deepwater projects that it could not compete for prior to this transaction.
Kerry J. Chauvin, chairman and CEO of GIFI, commented, “This important acquisition enhances GIFI’s ability to secure more fabrication work and to perform dockside integration work for the anticipated increased activity for deepwater projects.”
Furthermore, the facility includes a deep hole greater than 75 ft adjacent to the yard, which allows for loading/offloading from submersible heavy-lift ships. The yard’s geographic position, coupled with its heavy-lift capabilities, allow for dockside integration of deepwater structures versus having to perform the work offshore.
In connection with the agreement, the parties have also entered into a cooperation provision, whereby GIFI will provide fabrication-related services in a subcontractor role to Technip, which bids on EPC projects. The cooperation agreement will be effective upon the closing of the acquisition and has a five-year term.
Finally, at print, the only significant contract being assumed by GIFI through the acquisition is Gulf Marine’s topsides fabrication contract for Chevron’s Tahiti spar. Construction of the facilities was scheduled to get underway late last year, with an expected delivery date around mid-2007.
M&A continues
M&A activity in the GoM continues in 2006 with two major announcements. First, CalDive announced that it and Remington Oil & Gas have signed an agreement under which CalDive will acquire Remington for approximately $1.4 billion. The deal is expected to close in 2Q 2006, pending shareholder and regulatory approval.
“This transaction fits perfectly within the company’s strategic evolution of tying its service expertise to oil and gas production services,” according to Equity Research Analyst, Raymond James & Associates, Inc. CalDive will gain approximately 280 Bcfe in proved reserves through the transaction, as well as access to Remington’s 150 prospects, with a risk-adjusted reserve potential of over 1.1 Tcfe.
After the merger, CalDive will be about a $5 billion company in terms of market capitalization. “In the future, CalDive hopes to be able to leverage its larger balance sheet with more acquisitions and eventually replicate its successful business strategy from the GoM into other markets such as the North Sea or Asia-Pacific,” added Raymond James.
In other M&A news, W&T Offshore announced that it has entered into an agreement to merge a subsidiary of W&T with a subsidiary of Kerr-McGee, which holds the company’s interest in oil and gas properties on the GoM shelf, for approximately $1.34 billion in cash. The transaction is effective from Oct. 1, 2005, and is expected to close in 2Q 2006, pending regulatory review and customary closing adjustment and conditions.
W&T estimates that through the properties acquired from Kerr-McGee, it will gain approximately 362 Bcfe of natural gas of net proved reserves, as of the transaction effective date. The company adds that the reserves estimate could be as high as 650 Bcfe with the addition of possible reserves.
The properties acquired include interest in approximately 100 fields on 249 blocks (83 are undeveloped), primarily in water depths less than 1,000 ft. W&T plans to operate 36 of the producing fields. The company says it has identified 95 exploration prospects related to these properties through the early stages of evaluation.
When the transaction closes, W&T says it expects to be included in the top three acreage holders in the GoM, with approximately 2.3 million gross acres.
Kerr-McGee, on the other hand, is involved in this transaction for an entirely different reason. The company said, “This sale is the final step in our announced strategy to divest of lower-growth, shorter-lived properties and to focus on higher-impact opportunities.”•
Owner: Independence Hub LLC, 80% Enterprise, 20% Cal Dive
Managed by Enterprise
Operator: Anadarko
Capacity: 1 Bcf/d (expanded)
Producers: Anadarko, Kerr-McGee, Dominion, Spinnaker, Devon
Start of operation: 1Q 2007
17 of 20 planned wells drilled
Initial reserves: 1.6 Tcf
Current reserves: 2.5 Tcf
Discoveries: Cheyenne, Mondo NW, Q
Prospects: Tubular Bells, Caterpillar, Adirondack
Hull fabrication: 57% complete
Topside fabrication: 70% complete
Load-out and transport of hull: April 2006
Topside lift onto hull: June 2006
Onshore integration: Jun/Aug 2006
Installation & commissioning: Aug/Oct 2006
Pipeline commissioning: Oct/Dec 2006
Subsea completions: Jan/Feb 2007
Mechanical completion: February 2007
Commissioning: February 2007
First production: March 2007
Western GoM Lease Sale 196 nets over $283 million
The MMS has accepted the high bids on 342 of 346 tracts for a net amount of $283,441,874 offered during Western GoM Lease Sale 196, held on Aug. 17, 2005.
Of the 346 tracts receiving bids during the sale, the MMS rejected four high bids totaling $1,750,991 as insufficient for fair market value.
The highest bid accepted on a tract was $26.5 million by LLOG Exploration Offshore, Inc. for High Island block 156. This tract is located in water depths averaging up to 200 m, and received 1 bid.
The second and third highest bids accepted were $21.6 million by LLOG Exploration Offshore Inc. on High Island block 139, situated in water depths averaging up to 200 m, and $19,334,351 by Eni Petroleum Exploration Co. Inc. for Keathley Canyon block 1008, which is located in water depths greater than 2,000 m.
The MMS says “this sale indicates the continued strong interest of major and independent oil and gas companies in the Gulf. The results also indicate a continuing interest in shallow water areas.”
