E&P Notes (August 2019)
Authors: JPT staff _ 
Published: July 2019

New Merger to Create Third-Largest US Pressure Pumper

In an all-stock deal, US service companies Keane Energy and C&J Energy Services announced that they are merging. Upon regulatory approval, the development will result in the third-largest service company based on hydraulic fracturing horsepower (HHP).

The deal will further consolidate a market segment that has been under pressure to reduce operating costs since the onset of the oil price downturn almost 5•years ago.

Ownership is to be split evenly between Keane and C&J shareholders, each holding 50% of the new stock. With unanimous approval from the board of directors of both companies, the merger is expected to be completed by the end of the year. The combined entity will be worth $1.8 billion, with an annual revenue of $4.2 billion, 66% of which will come from the pressure pumping service line.

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Hurricane Hits First Oil From Basement Reservoir in North Sea

Hurricane Energy reported 18 June that the first cargo of oil extracted from a naturally fractured basement reservoir in the UK North Sea had been successfully loaded onto a tanker.

First oil from two horizontal subsea wells was achieved from the Lancaster field, located to the west of the Shetland Islands, at the start of this month after a successful well test that had a combined production rate of 20,000 B/D. With an expected uptime of 85%, the long-term target for UK-based Hurricane is to produce 17,000 B/D.

The announcement marks an historic moment for the offshore oil and gas industry in the UK since the Lancaster field is the country’s first to produce commercial quantities from a naturally fractured basement reservoir.

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ExxonMobil Proceeds with Long-Term Vaca Muerta Shale Oil Development

ExxonMobil will move forward with a long-term oil development in Argentina’s Bajo del Choique-La Invernada block, part of the Vaca Muerta Shale, that is expected to produce up to 55,000•BOE/D within 5 years.

The project will consist of 90 wells, a central production facility, and export infrastructure connected to the Oldeval pipeline and refineries. If the expansion is successful and business and market conditions allow, ExxonMobil may invest in a second phase that would produce up to 75,000 BOE/D, the company•said.

“We are encouraged by the excellent results of our Neuquén pilot project and look forward to increased production through this significant expansion,” said Staale Gjervik, ExxonMobil senior vice president of unconventional. “The reforms implemented by the federal and provincial governments have been critically important to enabling the development of the Vaca Muerta basin as one of the country’s main energy resources.”

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Thirty Firms Awarded Blocks in UK’s 31st Offshore Licensing Round

The UK Oil and Gas Authority (OGA) has awarded 37 licenses covering 141 blocks or partial blocks to 30 companies in the 31st Offshore Licensing Round.

The round offered frontier areas on the UK Continental Shelf (UKCS) in the•Faroe-Shetland Basin, Moray Firth, East Irish Sea, East Shetland Platform, Mid North Sea High, and English Channel. It marked a continuation of a recent trend on the UKCS in which lesser-known firms and newcomers have gained stature, though some of the larger, more-familiar operators still showed a desire in the round to maintain a presence in the basin.

Privately held Corallian Energy and Equinor were each awarded five licenses, more than any other company. Corallian, based in Stroud, UK, and founded in 2015, is operator of all five of its licenses, while Equinor will operate four and serve as partner on one.

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Global Energy Demand in 2018 Grew at the Fastest Pace This Decade

Despite weakening growth in GDP and strengthening energy prices in 2018, global energy demand last year rose at its fastest pace since 2010, according to BP’s 2019 Statistical Review of World Energy. China, India, and the US were responsible for two-thirds of the 2.9% increase in consumption, BP Group Chief Economist Spencer Dale said in releasing the report. The widely followed annual statistical review said that demand growth pervaded all fuels, most of which grew more strongly than their historical averages.

Natural Gas Leads the Way Both consumption and production of natural gas grew more than 5%—one of its strongest growth rates in more than 30 years—making up almost 45% of the entire growth in global energy consumption.

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Dorado Discovery Off Australia Is Bigger Than Expected

The Santos Energy-operated Dorado-2 appraisal well has uncovered more hydrocarbons, primarily gas, from the already-large Dorado discovery offshore Western Australia reported last year.

The appraisal well, drilled down-dip 2•km from the Dorado-1 discovery in the Bedout Basin, encountered 85 m of net reservoir in the primary Caley formation. As expected, an oil/water contact was intersected at 4003•m measured depth, with 40 m of net oil pay encountered, the Adelaide-based operator said.

Another 11 m of pay was encountered in•the Upper Caley sands, with preliminary wellsite analysis indicating this upper zone is oil-bearing. But it is subject to additional analysis to confirm the hydrocarbon phase.

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Murphy Oil to Buy Deepwater US Gulf Assets for up to $1.625 Billion

Murphy Oil has agreed to acquire deepwater US Gulf of Mexico assets from LLOG Exploration for up to $1.625 billion.

The deal will result in the El Dorado, Arkansas-based Murphy adding 32,000–35,000 BOE/D net to its 2019 US gulf production, of which 60% will be oil, bringing its total US gulf output to 85,000•BOE/D net. The gulf will represent 66% of the company’s total daily•production.•

“With this transaction, Murphy becomes the eighth-highest producer in the Gulf of Mexico. Only a year ago, they were No. 20,” said Imran Khan, senior research manager, US Gulf of Mexico upstream oil and gas, at consultancy Wood Mackenzie, in comments on the•deal.