NGI The Weekly Gas Market Report
Oneok Partners LP is drawing up plans to build a natural gas liquids (NGL) gathering pipeline to connect two gas processing plants in the Woodford Shale play in southeast Oklahoma to the partnership’s Midcontinent gathering system. These two plants would have the ability to produce 25,000 bbl/d of raw NGL. The 78-mile pipeline extension would transport raw NGL from a gas processing plant being built by Devon Energy Corp. in Hughes County, OK, and a recently constructed gas processing plant owned by Antero Resources Midstream Corp. in Coal County, OK. The $25 million extension of six- and eight-inch diameter pipeline is scheduled for completion in 2Q2008. Oneok Partner’s Arbuckle Pipeline, which is expected to be complete by early 2009, is designed to initially transport up to 160,000 bbl/d of raw NGL (see NGI, Oct. 15, 2007). Originating from the partnership’s existing Midcontinent NGL network in Oklahoma, the 440-mile pipeline would pass through the Barnett Shale area and connect with the existing fractionation facility at Mont Belvieu and other Gulf Coast-area fractionators.
The bet made by Pioneer Natural Resources Co. to focus on U.S. exploration appears to paid off — proved reserves grew by 128 MMboe last year, and the producer replaced 357% of production primarily in its core onshore areas and through several key U.S. acquisitions. According to the Dallas-based independent, the reserve additions last year mostly came from its U.S. core onshore areas in the Spraberry field, Raton Basin and Edwards Trend and overseas in Tunisia, as well as recent acquisitions in he Spraberry, Raton and Barnett Shale locations. According to year-end estimates, about 97% of Pioneer’s proved reserves are in the United States; 62% of reserves are proved developed. Pioneer is 51% weighted to natural gas, with a reserves-to-production ratio of about 23 years. Pioneer’s 4Q2007 profit jumped on the sale of assets and sales improvements. The producer earned $204.7 million ($1.72/share) in the quarter, compared with $27.7 million (22 cents) in 4Q2006. Excluding the gains that included the sale of its Canadian operations, Pioneer earned $84.4 million (71 cents/share), up from $26 million (21 cents) a year earlier.
Range Resources is bumping up its capital spending by 18% from 2007 to $1.065 billion, and it plans to use most of the funds to develop its Texas, Midcontinent and Appalachian properties. The 2008 budget includes $783 million for drilling and recompletions, $109 million for land, $51 million for seismic and $122 million for the expansion and enhancement of gathering systems and facilities. Of the drilling and recompletion capital, 95% will be spent on “lower-risk development and exploitation activities,” and 5% will be directed toward exploration projects. This year the Fort Worth, TX-based independent expects to drill 968 gross (715 net) wells and undertake 82 (66 net) recompletions. About 56% of the budget is attributable to Range’s Southwestern region, which consists of properties in West and East Texas and the Midcontinent. Another 40% of the budget will go to Appalachian asset development, and 4% will be directed to Gulf Coast activities.
Quicksilver Resources Inc., which targets North American unconventional natural gas plays, reported that 2007 reserve additions hit a record 608 Bcfe after replacing 780% of total-year output of 78 Bcfe. The Fort Worth, TX-based independent managed to hit its milestones despite selling about 546 Bcfe of reserves in Michigan, Indiana and Kentucky to BreitBurn Energy Partners LP last September (see NGI, Sept. 17, 2007). Quicksilver’s year-end 2007 reserves numbers were essentially unchanged from year-end 2006. Reserves, which are 99% weighted to natural gas and 62% proved developed, totaled 1.55 Tcfe at the end of 2007. Of the total, 1.2 Tcfe now are estimated to be in Quicksilver’s Barnett Shale assets. Last year’s total estimated all-in finding and development (F&D) costs were $1.38/Mcfe. Quicksilver estimated that its reserves in the Barnett Shale include about 661 Bcf of natural gas and 90 million bbl of natural gas liquids, which together represent an increase of about 70% from the 2006 year-end reserves of 704 Bcfe. In Canada, the company’s year-end 2007 reserves were 328 Bcfe, up 6.5% from the 2006 level of 308 Bcfe. Total production in 2007 included 33 Bcfe from the Barnett Shale and 21 Bcfe from Canada.
A subsidiary of El Paso Corp. has closed the previously announced acquisition of a 50% interest in the Gulf LNG Clean Energy Project, a planned liquefied natural gas (LNG) terminal in Pascagoula, MS. An El Paso subsidiary also is managing the facility’s construction and will operate the terminal upon completion. The terminal is expected to be placed in service in late 2011 at an estimated cost of $1.1 billion. The Crest Group, consisting of Houston-based investors, will own 30% of the project; and Sonangol USA will own 20%. Sonangol is the state-owned national oil company of Angola. The agreement for El Paso to acquire an interest in the project from the Crest Group and Sonangol is subject to certain terms. The project, which received its Federal Energy Regulatory Commission certificate one year ago, includes the construction of two 160,000-cubic-meter storage tanks with a combined capacity of 6.6 Bcf; 10 vaporizers, providing a base sendout capacity of 1.3 Bcf/d; and five miles of 36-inch diameter pipeline, connecting the terminal to the Gulfstream, Destin, Florida Gas Transmission and Transco pipelines. Gulf LNG has negotiated 20-year firm service agreements for all of the capacity of the terminal with a group of LNG producers, including several major oil and gas companies.
Houston-based Contango Oil & Gas Co. has closed the sale of its 10% limited partnership interest in Freeport LNG Development LP to Turbo LNG LLC, an affiliate of Japan’s Osaka Gas Co. Ltd., for approximately $68 million. Contango used $20.3 million of the proceeds to pay off its debt with the Royal Bank of Scotland. Another $20 million was used to pay off its debt with a private investment firm, and the remaining $27.7 million will be used for working capital, the company said. Freeport is a Delaware limited partnership whose sole general partner is owned by individual Michael S. Smith (50%) and ConocoPhillips (50%). The limited partners are Smith (45%), Cheniere Energy Inc. (30%), Dow Chemical subsidiary Texas LNG Holdings LLC (15%) and Contango, through its subsidiary Contango Sundance Inc. (10%). Freeport is engaged in developing a 1.75 Bcf/d LNG import and gasification terminal on Quintana Island, 70 miles south of Houston. Construction of the terminal began in early 2005.
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