E&P Notes (March 2018)
Authors: Rassenfoss Stephen , Zborowski Matt , Parshall Joel , Whitfield Stephen 
Published: March 2018

E&P Notes

North Sea Discoveries Highlight Rebound in the Slumbering Sea

Stephen Rassenfoss, JPT Emerging Technology Senior Editor

BP announced two North Sea discoveries, adding more energy to the rebound of what once looked like a moribund play.

The Capercaillie and Achmelvich discoveries were made last year in established areas with nearby pipelines and platforms, which could make it possible for BP to put them into production relatively quickly. While BP officials will not say if the discoveries justify development, the company sounds optimistic.

“We are hopeful that Capercaillie and Achmelvich may lead to further additions to our North Sea business,” Mark Thomas, BP North Sea regional president, said in a news release, adding that, “These are exciting times for BP in the North Sea as we lay the foundations of a refreshed and revitalized business that we expect to double production to 200,000 B/D a day by 2020 and keep producing beyond 2050.”

 

Chevron, Total Log Big Discovery in Deepwater Gulf of Mexico

Matt Zborowski, Technology Writer

A sidetrack well is under way in the deepwater Gulf of Mexico to assess the Chevron-operated Ballymore prospect following a big oil discovery.

The Ballymore discovery well reached total depth of 8898 m and encountered 205 m of net oil pay in a high-quality Norphlet reservoir, partner Total said. The prospect lies in 2000 m of water and 120 km off Louisiana on four blocks in the Norphlet formation, including Block MC 607 where the discovery was made.

Norphlet includes Shell’s Appomattox discovery, which is expected to produce oil by the end of the decade. Shell’s other Norphlet discoveries include Vicksburg, Rydberg, and Fort Sumter.

 

UK Shale Horizontal Drilling Under Way, Fracturing To Follow

Matt Zborowski, Technology Writer

Cuadrilla Resources has started drilling the UK’s first horizontal shale well at its exploration site at Preston New Road, Lancashire, and hopes to begin hydraulic fracturing of two wells in the second quarter. No wells have been fractured in the UK since 2011, when a Cuadrilla well triggered small earthquakes in Lancashire.

Advancement of the drilling program comes as the operator recovered data suggesting “excellent rock quality for hydraulic fracturing and a high natural gas content in several zones” of the Bowland shale. Cuadrilla drilled a vertical pilot well to 2.7 km through the Upper and Lower Bowland shale rock intervals, taking 375 ft of core samples from three separate intervals. Wireline logs retrieved data across the entire Bowland shale section.

 

Majors To Feature Heavily in Global Upstream M&A Activity in 2018

Matt Zborowski, Technology Writer

Major operators with freshly repurposed portfolios and sanctioned projects may soon begin looking to pounce on opportunities that would build up their long-term growth prospects.

“The majors have done a lot of work getting themselves in good shape at $50/bbl,” said Greig Aitken, Wood Mackenzie principal mergers and acquisitions (M&A) analyst, during a webcast on the topic. “As a result of that, they are looking generally pretty solid from a balance sheet perspective, and they have got pretty solid near-term growth outlooks. And, on that basis, the primary order of business should be normal portfolio management.

“But, with these strong balance sheets and improved cash generation, they have got the strength to target the longer end of production outlooks, so we can expect to continue seeing some larger acquisitions from these companies targeting the long end of production growth,” he said.

 

Another Outlook for Industry Predicts Healthy 2018

Joel Parshall, JPT Features Editor

The global oil industry appears poised for stronger performance in 2018, having benefited from the financial discipline and cost-cutting innovation driven by several years of low oil prices and looking ahead to somewhat more stable market conditions.

While oil prices have recently risen above $60/bbl, likely reflecting a number of short-term supply disruptions and concerns over Middle East tensions, forecasts generally call for prices to fluctuate sustainably between $40/bbl and $60/bbl and end the year in the higher part of that range.

“Higher prices in or above that range will increase supply as countries lessen compliance with production quotas and United States shale production keeps increasing,” said Moody’s Investors Services in its 2018 industry outlook.

 

E&Ps Hedging Production To Support Cash Flow and Returns Goals

Stephen Whitfield, Senior Staff Writer

Nodding to increased investor pressure, a new report from IHS Markit indicates that North American exploration and production (E&P) companies were more hedged than usual entering 2018.

The report, IHS Markit Comparative Peer Group Analysis of North American E&Ps, showed that a group of 43 companies studied had hedged 25% of oil production, or 1.37 million BOPD, at $53.40/bbl by the end of 3Q 2017. The companies had also hedged 36% of gas production, or 12.37 Bcf/D, at $3.13/MMcf. This is an increase from 12% of oil and 31% of gas production hedged at the end of 2Q 2017.

Paul O’Donnell, principal energy analyst at IHS Markit and author of the analysis, said in a statement that the hedging from the E&P peer group suggests a shift in strategy, as companies are taking advantage of the initial oil-price rally to the low-$50s/bbl range last year.

 

ExxonMobil Plans To Triple Permian Output

Matt Zborowski, Technology Writer

Bolstered in part by recent cuts in the US corporate tax rate, ExxonMobil plans to triple its production from the Permian Basin of West Texas and southeastern New Mexico to 600,000 BOE/D by 2025, including a fivefold increase in tight oil output from the Delaware and Midland Basins.

The Irving, Texas-based supermajor, which expects to lift its Permian horizontal rig count by another 65% over the next few years, notes that it has doubled its footage drilled per day on horizontal wells in the basin since early 2014 while reducing its per-foot drilling costs by 70%. At the end of the third quarter of 2017, the firm had 20 operated rigs working in the basin but said it intended to increase the count to 30 by year end 2018.