BP plc completed a landmark transaction with Russian oil giant OAO Rosneft, which gives the London-based major a 20% stake in what now is the world’s largest publicly traded oil company. BP is using some of the proceeds to buy up to $8 billion of its shares over the next 12-18 months. BP agreed to sell its half-stake in Russian explorer TNK-BP to Rosneft for $17.1 billion in a cash-and-stock transaction, which gave it a 12.84% stake in the company (see NGI, Oct. 29, 2012). BP already held 1.25%, and it used $4.8 billion of the cash it received to buy another 5.66% stake. Rosneft bought the other half of TNK-BP from Alpha Group Consortium. In total, Rosneft’s transactions are worth an estimated $55 billion.
Democratic Sens. Dianne Feinstein of California and Bill Nelson of Florida have introduced legislation to end federal incentives for oil and natural gas producers to drill in the federal Outer Continental Shelf (OCS). Feinstein’s Deepwater Drilling Royalty Relief Prohibition Act seeks to repeal Section 345 of the Energy Policy Act of 2005 that mandated royalty relief for Gulf of Mexico drilling in waters exceeding 400 meters, and prohibit the Interior Department secretary from using discretionary authority to provide royalty relief. BP plc, Chevron Corp., ConocoPhillips, ExxonMobil and Royal Dutch Shell plc made a total of $11 billion in profits last year, according to Feinstein, but ExxonMobil, Chevron and ConocoPhillips paid effective federal tax rates in 2011 of only 13%, 19% and 18%, respectively. Nelson’s measure, the Oil Spill Tax Fairness Act, would deny tax deductions for oil spill-related expenses, including legal, clean-up and other costs, and would prevent a company that causes an oil spill from writing off the expenses as a tax deduction.
Missouri Republican Sen. Roy Blunt said he is placing a hold on the nomination of Gina McCarthy to head the Environmental Protection Agency (EPA) (see NGI, March 11) until the Obama administration provides a time line on when it will release a draft environmental impact statement (EIS) for a water project in his state. Blunt and Sen. Claire McCaskill (D-MO) brought the EPA, U.S. Army Corps of Engineers and the Fish and Wildlife Service together to resolve disputes that are delaying a final decision on the St. John Bayou and New Madrid Floodway Project, but they failed to hit a March 15 deadline. Blunt’s hold is a threat to filibuster a Senate nomination; he would need the support of at least 60 other senators. The proposed Missouri project would install pumping stations and close a 1,500-foot gap in the Mississippi River levee system.
Chesapeake Energy Corp. is selling $2.3 billion in senior notes in three separate series due in 2016, 2021 and 2023 to pare more expensive debt that matures this year. The tender offerings include $500 million in 3.25% senior notes due in 2016; $700 million in 5.375% notes due in 2021; and $1.1 billion in 5.75% notes due in 2023. Some of the net proceeds from the offerings are to be used to buy a portion of the 7.625% senior notes due this year, as well as 6.875% senior notes due in 2018. A “substantial portion of the remaining net proceeds” could go to redeem 6.775% senior notes due in 2019 at par value. Moody’s Investors Service and others reacted negatively on concerns about whether the company will have enough in asset sales this year to fund its capital program.
PDC Energy Inc. has signed a midstream services agreement with MarkWest Utica EMG LLC for production in the Utica Shale. MarkWest plans to begin gathering and processing the output from Guernsey County, OH, by the end of June. Initial production would be sent to MarkWest’s Cadiz processing complex in Harrison County, OH, but during the second half of 2013 the gas would be transported to MarkWest’s Seneca complex in Noble County, OH. PDC also has increased capital expenditures for 2013 to $443 million from $365 million, with this year’s net output forecast to be 7-7.5 million boe.
Washington County, PA’s Court of Common Pleas President Judge Debbie O’Dell Seneca has ordered court records in Hallowich v. Range Resources Corp. (No. C-63-CV-201003954) unsealed, citing the importance of transparency in the legal system. Court records show Chris and Stephanie Hallowich filed a lawsuit against Range, MarkWest Energy Partners LP, MarkWest Energy Group LLC and Laurel Mountain Midstream in May 2010, alleging that fluids from hydraulic fracturing contaminated their property. The unsealed documents reveal that Range agreed to pay the Hallowichs $750,000 to settle the lawsuit, and to have any personal injury claims from the family’s two minor children referred to an arbitrator, according to the Pittsburgh Post-Gazette, one of two newspapers that had petitioned the court to unseal the records (see NGI, Dec. 17, 2012).
Japanese Prime Minister Shinzo Abe said his country wants to be included in the Trans-Pacific Partnership (TPP), which may hasten liquefied natural gas (LNG) exports. TPP currently encompasses 11 nations in Asia and the Americas. “Since early last year, the United States has been engaged with Japan in bilateral TPP consultations on issues of concern with respect to the automotive and insurance sectors and other nontariff measures, and also conducting work regarding meeting TPP’s high standards,” said Acting U.S. Trade Representative Demetrios Marantis. “While we continue to make progress in these consultations, important work remains to be done.” Japan is the world’s largest importer of natural gas.
A lawsuit filed by a several Barnett Shale mineral owners accuses Chesapeake Energy Corp. of selling natural gas to an affiliate for a reduced price and basing royalty payments on those sales, which violates the terms of the lease agreements. Fort Worth, TX billionaire brothers Ed Bass and Robert Bass are spearheading the lawsuit, lwhich was filed in U.S. District Court, Northern District of Texas (Trinity Valley School et al v. Chesapeake Operating Inc. et al, No. 3:13-cv-01082-K). According to the lawsuit, once development began on the 3,952 net acres leased, Chesapeake underpaid royalties, improperly passed along production costs and made up “sham transactions” with affiliate companies, which allowed it to set the price on which royalties were paid.
The Ohio Department of Natural Resources‘ (ODNR) Division of Oil and Gas Resources Management has issued a unitization order for Chesapeake Energy Corp. in Carroll County. The order establishes the 549.4-acre Colescott South Unit on 30 separate tracts in Loudon Township. Before filing its application, Chesapeake held 88.8% of the leasing rights in the proposed unit, well above the 65% required by state statute. Chesapeake has proposed drilling three wells from one centralized well pad on the Colescott South Unit within the next year, the ODNR said, and two additional wells within the next three years, after the initial well is completed for production.
National Fuel Gas Co. (NFG), which has raised its production guidance for 2013 by 6 Bcfe to 102-112 Bcfe, said it expects production to jump to 126-138 Bcfe in 2014. At the midpoint of the production ranges, growth for fiscal 2013 and 2014 is estimated to be 28% and 23%, respectively. In 2014 NFG expects to produce 105-115 Bcfe in Appalachia and 21-23 Bcfe from California and Kansas. Total capital expenditures (capex), which have been forecast at $665-795 million for 2013, are expected to grow substantially to $770-945 million in 2014, including $550-650 million for the exploration and production segment. Most of the 2014 capex, $460-520 million, is to be devoted to Appalachia.
Houston-based Sanchez Energy Corp. is buying producing acreage in the Eagle Ford Shale of Texas for $265 million, which more than doubles total production and increases proved reserves by 63%. The properties, to be acquired from Hess Corp., consist of about 13.4 million boe of proved reserves, 4,500 boe/d of production and about 43,000 net acres in Dimmit, Frio, LaSalle and Zavala counties. Sanchez targets the Eagle Ford, Pearsall Shale, Austin Chalk and Buda Limestone. The proposed acquisition includes estimated proved reserves of 13.4 million boe (70% oil) with estimated proved developed reserves of 6.6 million boe (64% oil).
Minneapolis-based Xcel Energy Inc.’s Public Service Company of Colorado has filed with Colorado regulators plans to raise retail natural gas utility rates while keeping retail electricity charges basically flat effective April 1. Separately, the utility filed an all-source generation request for proposals that seeks up to 250 MW of additional generation capacity in Colorado by 2018. The company said it will be “evaluating whether any proposals can serve as economic alternatives to the planned fuel switching” at the coal-fired Arapahoe Unit 4 and Cherokee Unit 4.
Three counties due north of the wet gas window of the Marcellus Shale, Mercer County, PA, appear poised to benefit from development of both plays in the near future. According to Mercer County Recorder, the county recorded 1,460 oil and natural gas leases during the first two months of 2013, compared with 572 oil and gas leases during January and February of 2012, about a 150% increase. As of March 18 the county has recorded 292 oil and gas leases for the month. The most active companies are Halcon Resources Corp., Hilcorp Energy Co. and Chevron Corp. To date the Pennsylvania Department of Environmental Protection has issued six drilling permits for Mercer County.
Energy XXI Ltd. has a deal with Apache Corp. to explore some salt dome structures within a 135-block area of mutual interest on the Outer Continental Shelf of the Gulf of Mexico. Energy XXI also has acquired a 25% working interest in 21 nonproducing primary-term leases with Apache. A wide azimuth seismic program is underway to define the potential of the AMI, covering close to 633,000 acres. No financial details were disclosed.
Washington County (PA) Court of Common Pleas Judge John DiSalle denied a motion by Range Resources Corp. to remove himself from presiding over Range’s lawsuit against Robinson Township, on the grounds that his wife, Diane, is active with Peters Township Marcellus Shale Awareness (PTMSA), an environmental group opposed to hydraulic fracturing (fracking). Range sued Robinson Township on Jan. 28, alleging the municipality has deliberately delayed the approval process for two Marcellus Shale natural gas wells (see NGI, March 18). In 2011, PTMSA drafted a failed referendum calling for a ban on fracking in Peters Township (see NGI, Nov. 14, 2011).
A Quinnipiac University poll has shown that for the first time that Republican voters in New York State have an unfavorable opinion of Gov. Andrew Cuomo. According to the poll, 49% of Republican respondents now disapprove of the way Cuomo, a Democrat, is handling his job as governor. That represents a steep drop from the 69% approval rating Cuomo received from Republicans in a poll taken on July 25. Cuomo still enjoys overall support in the poll, with 55% approving of his job as governor and 27% disapproving. The poll also showed that 62% of upstate voters are either “somewhat” or “very dissatisfied” with the direction the state is headed, while 52% of all respondents felt that way as well. The Quinnipiac poll, released on March 19, surveyed 1,165 registered voters between March 11 and 17 and has a margin of error of plus/minus 2.9%.
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