The first lease sale in the natural gas-rich "181 South Area" in the Central Gulf of Mexico Planning Area in two decades is proposed to be held on March 18, 2009, according to the Minerals Management Service (MMS). After the last lease sale in 1988, the 181 South Area was withdrawn as a potential drilling site and the area was included in the congressional moratorium on offshore exploration and production. In December 2006 President Bush signed into law legislation lifting the congressional moratorium on 8.3 million acres in the Lease Sale 181 area and in a tract south of Lease Sale 181 (see NGI, Dec. 25, 2006). He then quickly removed the separate presidential restrictions on leasing in the area. The proposed Lease Sale 208 encompasses 6,200 blocks covering more than 33.5 million acres offshore Louisiana, Mississippi and Alabama. MMS estimates that the proposed lease sale could result in production of approximately 0.807 billion to 1.336 billion bbl of crude oil and 3.365 to 5.405 Tcf of natural gas. The acreage is located from three to 230 miles offshore in water depths of about 10 feet to more than 11,200 feet, the agency said. For further information about the terms and conditions of the lease sale, contact the MMS office in New Orleans at (504) 736-2519.
Marathon Oil Corp.'s oil and natural gas production in 3Q2008 rose sequentially from 2Q2008 to 384,000 boe/d from 350,000 boe/d, but domestic gas production appeared to be flat sequentially and down from a year earlier. Liquid hydrocarbon and gas output available for sale in 3Q2008 is expected to be around 388,000 boe/d, above an initial guidance of 360,000-385,000 boe/d as well as the 374,000 boe/d available for sale in 2Q2008, Marathon stated. In the United States, Marathon reported that it produced 429 MMcf/d in July and August, compared with 464 MMcf/d for the full three-month period in 3Q2007, and nearly flat from the 431 MMcf/d in 2Q2008. The company is scheduled to report its quarterly earnings results on Oct. 30.
FERC denied Florida Gas Transmission's (FGT) request for a three-year delay in abandoning existing pipeline facilities while it seeks to resolve a dispute over relocation costs with the Florida Department of Transportation (DOT). It further chided the pipeline for attempting to use the FERC process to bypass the state courts. In May 2006, FERC granted FGT authorization to abandon a portion of its East Leg mainline system in Broward County, FL, and to build a replacement 36-inch diameter pipeline to accommodate a widening project of State Road 91 by the Florida DOT. In May of this year, however, FGT sought FERC approval to delay, for a period of up to 36 months, the abandoning of the East Leg facilities until the conflict related to DOT's planned highway construction is resolved. FGT has completed construction of its new replacement pipeline and placed it in service. But it not says that uncertainty regarding easement claims may require the relocation of the newly constructed line. As a result, FGT said it must keep the portion of the East Leg facilities -- 18-inch and 24-inch pipelines -- in operation to provide ongoing service. Granting FGT's request to maintain its 18- and 24-inch pipeline facilities for up to three more years "would create a shield against Florida DOT's efforts to force Florida Gas to undertake depressurization and other steps to ensure that State Road 91 can be safely widened, potentially giving Florida Gas leverage in its pending state court proceedings against Florida DOT for reimbursement of the pipeline relocation costs," the FERC order said. "While the Commission's May 3 order anticipated that Florida Gas would seek to recover relocation costs from Florida DOT, delaying the abandonment of the 18- and 24-inch diameter lines in an attempt to delay or circumvent state court resolution of the cost recovery issue would be an inappropriate use of Commission process," it noted.
Joining other energy companies' attempts to reassure investors, Anadarko Petroleum Corp. said has completed the first phase of its planned $5 billion share buyback program and retired some of its debt a year ahead of schedule. Anadarko's board in August authorized a $5 billion share repurchase plan, $600 million of which was to be completed before the end of this year. The company at the end of September had completed the $600 million share repurchase, and it also retired about $350 million of floating rate notes that were due Sept. 15, 2009. The producer expects to meet its year-end debt-to-capitalization target range of 25-35% and wuold use free cash flow above capital spending to reprchase more shares in 2009, said CFO Al Walker. Anadarko plans to provide additional details on its financial and operating results during a quarterly earnings conference call on Nov. 4.
Bobcat Gas Storage, a unit of Houston-based Haddington Ventures III LLC, asked FERC for the go-ahead to place into service pipeline facilities that will connect its salt dome natural gas storage project to the interstate pipeline grid. It said it intends to file a separate, concurrent request to start up its new storage facilities in St. Landry Parish, LA. The storage developer seeks to put the pipeline facilities in service by Wednesday (Oct. 15). The facilities include the North Pipeline Corridor interconnecting with the Transcontinental Gas Pipe and Texas Eastern Transmission systems; the South Pipeline Corridor interconnecting with the ANR Pipeline, Florida Gas Transmission and Gulf South Pipeline systems; the Southwest Corridor interconnecting with the ANR system; the West Corridor interconnecting with the Gulf South Pipeline system; and all associated metering and interconnected facilities [CP06-66]. An estimated 1.6 Bcf of capacity in Bobcat's Cavern 1 is targeted for service this fall, and 7.8 Bcf of capacity in Cavern 2 is expected to become available in August 2009, according to the company (see NGI, Oct.15, 2007). FERC earlier this year granted Bobcat's request to increase the working capacity of both caverns to 7.8 Bcf by reclassifying gas previously designated as base gas to working gas. The total capacity of the facility will be 20 Bcf.
Continuing its strategy of divesting assets considered noncore to the company, Houston-based Linn Energy LLC said it has entered into an agreement with an undisclosed buyer to sell its deep rights in certain central Oklahoma acreage, which includes the Woodford Shale interval, for cash consideration of $229 million. The independent oil and gas producer noted that the sale includes no producing reserves and that it will retain the rights to the shallow portion of the acreage. Linn Energy said it anticipates closing by the end of the year. Pro forma for the transaction, the company expects to have available capacity of more than $600 million, including cash on its balance sheet. "Consistent with our strategy of monetizing noncore positions, we have sold approximately $1 billion of oil and gas assets during the last six months, creating value for our unitholders," said Linn Energy CEO Michael C. Linn. "We believe that these transactions have benefited the company by repositioning our asset base. With this sale, we expect to considerably strengthen our balance sheet and improve our financial flexibility. We feel confident in our ability to weather the current credit environment and continue to pay our distributions."
Federal prosecutors filed a consent decree in a Michigan federal court citing Merit Energy Co. LLC and Shell Exploration & Production Co. with violating the federal Clear Air Act (CAA) and requiring Merit to take corrective action. The Department of Justice (DOJ) consent decree, which was filed with the U.S. District Court for the Western District of Michigan, holds both Dallas-based Merit and Shell liable for a $500,000 civil penalty, even though Shell sold the natural gas processing facility at issue to Merit Energy in December 2003, according to a notice published in the Federal Register last Monday. The decree also requires Merit to perform a supplemental environmental project, at a cost of at least $1 million, that would involve reducing air pollutant emissions from gas-fired compressors at several other gas handling facilities near the company's gas processing facility near Manistee, MI.
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