ConocoPhillips' natural gas and oil production worldwide rose in the first three months of the year, but its exploration and production (E&P) unit apparently suffered because of lower gas prices in North America. In an interim quarterly earnings update, the Houston-based producer said it expects 1Q2009 production to be about 30,000 boe/d more than in 4Q2008. E&P results, however, are expected to be impacted by "losses in the U.S. Lower 48 and Canada mainly due to lower realized natural gas prices." Exploration expenses for the quarter were estimated to be around $275 million before taxes. CEO Jim Mulva early this year projected that the company's output in 1Q2009 would be flat sequentially (see NGI, Jan. 26). The company swung to a loss of $34 billion in 4Q2008. Midstream operating results are seen falling in 1Q2009 because of a drop in natural gas liquids prices. However, Conoco expects to record an $85 million gain related to the recognition of deferred gains on shares issued by a unit of DCP Midstream Partners LP, a joint venture of Spectra Energy and Conoco. Conoco is scheduled to issue its quarterly results on April 23.
Six House Democrats have introduced legislation that would bar drilling for oil and natural gas in federal waters off the Mid-Atlantic and North Atlantic coastlines. Specifically the bill (HR 1696) seeks to amend the Outer Continental Shelf Lands Act to permanently prohibit the secretary of the Department of Interior from issuing leases for the exploration, development or production of oil, natural gas or any other minerals in the two regions of the Outer Continental Shelf (OCS). The measure has been referred to the House Natural Resources Committee. But it's unclear if the bill will see any major action, given that House leadership has signaled that it will not pursue the reimposition of the congressional OCS moratorium, which was lifted last October (see NGI, Oct. 6, 2008).The legislation seeking to reimpose the ban in the Mid-Atlantic and North Atlantic offshore regions is sponsored by Rep. Frank Pallone Jr. of New Jersey, and co-sponsored by Reps. Kathy Castor of Florida, William D. Delahunt of Massachusetts, James Moran of Virginia, Steven Rothman of New Jersey and Albio Sires of New Jersey.
Cadeville Gas Storage LLC is holding a nonbinding open season for a planned gas storage facility in Ouachita Parish about 10 miles southwest of Monroe, LA. Commercial storage services are scheduled to commence at the facility in 2011. The facility is expected to provide 420 MMcf/d of peak deliverability and 420 MMcf/d of peak injection. Cadeville, a subsidiary of Cardinal Gas Storage Partners LLC, will be converting a depleted gas reservoir to develop 16.5 Bcf of working capacity. The facility may have the ability to interconnect to Tennessee Gas Pipeline Line 100, Gulf South's Middle 30, Gulf South's 42-inch diameter East Texas to Mississippi Expansion, Texas Gas Transmission, CenterPoint Energy Line CP, the Perryville Hub (via CenterPoint Energy's Line CP), the proposed Tiger Pipeline and the proposed ANR Haynesville Lateral. The open season will end at 5 p.m. CDT on April 30. A completed expression of interest form should be faxed to Kevin Holder at (713) 350-2557. Information is available at www.cadevillegasstorage.com or by contacting Holder at (713) 350-2507 or (214) 300-1876 or via email firstname.lastname@example.org. Cardinal is a joint venture of Martin Resource Management Corp. and Energy Capital Partners LP. Cardinal also owns Arcadia Gas Storage LLC and Perryville Gas Storage LLC. Through Arcadia, Cardinal is developing a 13.8 Bcf salt cavern facility near Arcadia, LA.
DCP Midstream Partners LP has completed the acquisition of an additional 25.1% ownership interest in DCP East Texas Holdings LLC from the owner of its general partner, DCP Midstream. Through the transaction -- which was financed through the issuance of partnership units to DCP Midstream, the partnership now owns 50.1% of the East Texas joint venture, with DCP Midstream owning the remaining interest. The East Texas joint venture includes a 780 MMcf/d processing complex, approximately 900 miles of gathering pipelines, 25,000 hp of compression and the Carthage Hub, an exchange point for the purchase and sale of residue gas with aggregate delivery capacity of 1.5 Bcf/d. The companies in March said they had fully restored operations at the East Texas complex following a Feb. 11 explosion and fire resulting from a third-party pipeline rupture (see NGI, March 16). "This transaction is immediately accretive to cash flow, increases our ownership position in the dynamic East Texas area and delivers on another key element of the business plan we committed to in December," said partnership CEO Mark Borer. DCP Midstream contributed the 25.1% interest in exchange for 3.5 million Class D units. The Class D units will automatically convert into common units in August and will not be eligible to receive a distribution from the partnership until the second quarter distribution payable in August, according to the companies. DCP Midstream said it also provided the partnership with a fixed-price natural gas liquids (NGL) hedge by NGL component for the period of April 2009 to March 2010 for the newly acquired interest. The transaction is expected to generate approximately $15 million of adjusted earnings before interest, taxes, depreciation and amortization for the partnership during the next twelve months.
PAA Natural Gas Storage LLC has begun commercial operations of the second of three storage caverns at its Pine Prairie facility in Evangeline Parish, LA, increasing aggregate working gas capacity to approximately 13.8 Bcf. Phase I development of the Pine Prairie facility consists of three caverns with aggregate permitted capacity of 24 Bcf. The first cavern began operation in October. The second cavern received the requisite permits in March and has just begun operations. Leaching operations on the third cavern began in December, and this cavern is expected to begin operations during the second quarter of 2010. The company is indirectly owned 50% by Plains All American Pipeline LP and 50% by Vulcan Capital.
Houston-based Noble Energy Inc. announced a discovery offshore in the deepwater Gulf of Mexico (GOM) at the Santa Cruz prospect in Mississippi Canyon Blocks 519/563. The well, located in 6,515 feet of water, was drilled to a total depth of 18,900 feet. Open-hole logging indicated more than 140 feet of net gas condensate pay and more than 110 feet of net oil pay in multiple high-quality reservoirs. The overall thickness of the reservoirs encountered was more than originally estimated, Noble said. Current plans consist of subsea tiebacks to nearby infrastructure, with first production in 2011. The next exploration test "likely" will be late this year at Deep Blue in the Green Canyon region, "which will be testing our largest deepwater GOM prospect to date," said Noble COO David Stover. Noble operates the Santa Cruz discovery with a 23.25% stake. BP Exploration & Production Inc. has a 46.5% interest in the project, while Red Willow Offshore LLC controls 20.25% and Houston Energy LP holds a 10% stake.
SUEZ LNG NA LLC will soon resume work on the Neptune LNG Deepwater Port, the subsidiary of GDF SUEZ Energy North America said. Neptune will be located about 10 miles off the coast of Gloucester, MA. A vessel will survey a 13-mile pipeline lateral that was laid and buried in the seafloor last year. In early May two construction vessels will begin installation of the pipeline manifolds and the hot tap that connects the pipeline lateral to the existing Spectra Energy HubLine, SUEZ said. In July another vessel will begin buoy installation. Work areas will be primarily limited to the submerged buoy connections in federal waters and the HubLine connection in Marblehead waters, with exclusion zones surrounding the construction vessels. Progress updates are available at: www.neptunelngconstruction.com. The Neptune port ultimately will consist of an unloading buoy system where specially designed LNG vessels will moor and discharge gas via onboard vaporization. The gas will be transported via the pipeline lateral to Spectra's HubLine, which will deliver the gas throughout New England.
The Minerals Management Service (MMS) has set Aug. 19 for its Western Gulf of Mexico (GOM) Lease Sale 210. The proposed lease sale, to be held in New Orleans, encompasses about 3,400 unleased blocks covering 18 million acres in the Western GOM Planning Area, which is offshore Texas. The blocks are located from nine to about 250 miles offshore in water depths of 16 feet to more than 10,975 feet (five to 3,346 meters). The sale could result in the production of 1.64-2.64 Tcf of gas and 242-423 million bbl of oil, MMS said. To view the proposed terms and conditions for the sale, go to www.gomr.mms.gov. The Final Notice of Sale and the lease terms are to be published at least 30 days before the event, MMS said. Copies are available by contacting the MMS GOM Regional Office, Public Information Unit, 1201 Elmwood Park Blvd., New Orleans, LA 70123; or by calling (504) 736-2519 or 800-200-GULF.
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