Argentina and China lead shale development outside North America in H1 2015

As recently as last year, only four countries in the world were producing commercial volumes of either natural gas from shale formations or crude oil from tight formations: the United States and Canada, and more recently, Argentina and China. In the last two years, China has drilled more than 200 wells, and Argentina has drilled more than 275 wells. Following are the details on the shale development-

In Argentina:

Much of the initial activity has targeted shale oil and natural gas in the Neuquen Basin's Vaca Muerta shale formation, located in west-central Argentina. YPF, the largest shale operator in the country, reported production in April 2015 of 22,900 bpd and 67 MMcf/d from three joint ventures in Vaca Muerta: one with Chevron at the Loma Campana field, a second one with Dow Chemical at the El Orejano field, and a third joint venture with Petronas at La Amarga Chica field.

In addition, Sinopec and Gazprom have recently signed a memorandum of understanding with YPF to jointly develop shale from the same basin.

In China:

China has targeted the Longmaxi formation in the Sichuan Basin, located in south-central China, as its initial shale gas exploration and development objective. According to China's Ministry of Land and Resources, Sinopec and CNPC (PetroChina) are on schedule to reach 600 MMcf/d of shale gas production by the end of 2015. CNPC has drilled 125 shale wells, bringing 74 of them into production, and is on schedule to produce 250 MMcf/d of shale gas by the end of this year. Sinopec has a commercial-scale effort underway at the Fuling shale gas field in the Sichuan Basin, currently producing 130 MMcf/d. By the end of 2014, Sinopec completed 75 test wells at the Fuling field, with plans to drill an additional 253 wells.

In other countries:

Countries including Poland, Algeria, Australia, Colombia and Russia have also begun to explore for shale gas and tight oil. Drilling is also underway in Mexico, particularly in the country's portion of the Eagle Ford Shale and in La Casita formation within the Burgos Basin in northeastern Mexico. In May 2015, Pemex released the results for 13 of its shale exploration wells, with 10 of these categorized as commercial. These 10 shale gas wells have initial production ranging from 2 to 11 MMcf/d. Pemex also drilled three horizontal wells into the Tampico-Misantla Basin's Pimienta formation in 2013, and the company plans to complete all three wells this year.

Click here to view the press release

Pioneer puts Colorado leases for sale

Pioneer Natural Resources has retained Meagher Energy Advisors to assist in the sale of 640,000 acres located in Bent, Cheyenne, Crowley, Elbert, Kiowa, Kit Carson, Lincoln, Prowers and Washington Counties of South-eastern Colorado. The leases are due for expirations in 2016-2018 with favorable 5 year extensions.

Reservoir and Resource

• Unconventional play potential in upper Cherokee and middle Atoka shales
• Drilled five and cored three vertical unconventional test wells
• Drilled two lateral appraisals, one Cherokee and another Atoka, both testing oil to surface
• Conventional opportunities in Mississippian and Morrow formations
• Shallow Niobrara oil and gas opportunities

Prospects & Seismic

• 137 square miles of 3D
• Eight seismically defined vertical targets identified
• Drill ready prospects with combined 9MMBO reserve potential

Bids for the acreage are due July 9, with a closing date of August 14.

Lundin reports Alta appraisal wells completion

Lundin Petroleum announced that it has successfully completed the drilling of appraisal well 7220/11-2 and sidetrack 7220/11-2 A in the western part of the Alta discovery in PL609. Lundin Norway is the operator holding 40% interest in PL609 and with partners RWE and Idemitsu holding 30% interest each.

The Alta discovery well 7220/11-1 was completed in October 2014. The preliminary evaluation of the gross recoverable oil and gas resource range from the Alta discovery well after the first well was estimated at 125 to 400 mmboe.

The objective of the wells was to delineate the 7220/11-1 discovery and also investigate the extent of the reservoir and hydrocarbon columns. Well 7220/11-2 encountered a 50-metre gas column in reservoir rocks with good to poor reservoir quality. The oil zone is in tight rocks and a decision was therefore made to drill a sidetrack, 7220/11-2 A, about 330 metres to the west. Well 7220/11-2 A encountered gas and oil in reservoir rocks with good to poor reservoir quality. The age of the reservoir rocks is uncertain, but is assumed to be Triassic and/or Permian.

Appraisal wells 7220/11-2 and 7220/11-2 A were drilled to vertical depths of 2020 and 2041 metres below the sea surface, respectively, and were terminated in basement rocks. Water depth is 379 m. The wells were drilled using the drilling rig Island Innovator and are now being permanently plugged and abandoned. The Island Innovator will then proceed to drill the next appraisal well, 7220/11-3, on the eastern flank of the Alta discovery in PL609. The well is expected to spud mid-June.

Hess and Global Infrastructure form Bakken Midstream JV worth $5.4 billion

Hess Corporation and Global Infrastructure Partners have announced the formation of a strategic partnership focused on midstream infrastructure assets in the Bakken Shale. This Bakken Midstream JV, Hess Infrastructure Partners, is valued at $5.35 billion and includes the following highlights:

• Hess to sell 50% interest in Bakken midstream assets for $2.68 billion
• Total after-tax cash proceeds to Hess of $3.0 billion including JVdebt issuance
• Hess to retain operational control of Bakken midstream assets

The transaction is expected to be completed early in the third quarter of 2015. The midstream assets to be included in the JV are located primarily in Williams, Mountrail and McKenzie counties, North Dakota, and are comprised of:

• Natural gas processing plant in Tioga, North Dakota
• Rail loading terminal in Tioga and associated rail cars
• Crude oil truck and pipeline terminal in Williams County, North Dakota
• Propane storage cavern and rail and truck transloading facility in Mentor, Minnesota
• Crude oil and natural gas gathering systems in North Dakota

Gulfport shells out $407 million for additional Utica assets

Gulfport Energy has entered into agreements to acquire additional acreage in the Utica Shale, associated assets and incremental firm transportation commitments from American Energy  Utica LLC (AEU).

Acquisition Highlights

• Contiguous bolt-on acreage acquisitions totalling ~35,325 net acres in Monroe, Belmont and Jefferson Counties, Ohio
• 11 mile gas gathering system currently in-place and operational in Monroe County to support near-term development
• Incremental 287,000 MMBtu per day of firm transportation commitments provide access to favorable pricing points outside of the Appalachian Basin

Belmont/Jefferson acquisition

Gulfport purchased ~6,198 gross (6,198 net) undeveloped acres in Belmont and Jefferson Counties  from AEU for a purchase price of $68.2 million. This acreage is located near theacreage acquired by Gulfport from Paloma Partners for $301 million.

Monroe acquisition

Also , Gulfport entered in to a definitive purchase agreement with AEU to acquire ~38,965 gross (27,228 net) acres located in Monroe County,  14.6 MMcfpd of net production estimated for April 2015, 18 gross (11.3 net) drilled but uncompleted wells, one fully constructed four well pad location and an 11 mile gas gathering system for a total purchase price of $319.0 million, of which approximately $52.0 million has been allocated to the existing production and the drilled but uncompleted wells and $20.0 million has been allocated to the gathering system.

Gulfport has also agreed to acquire an additional 4,950 gross (1,900 net) acres in Monroe County for an additional $19.4 million from AEU.

Development plan

Gulfport currently intends to add one rig to operate on this acreage beginning in the first quarter of 2016. 

On completion, Gulfport will hold ~262,000 gross (243,000 net) acres in Utica Shale play. Gulfport will become the operator and anticipates that this acreage will add approximately 200 net locations to its existing drilling inventory, based on 160-acre spacing.

Sterling and Tullow to explore Block C10, off Mauritania

Sterling Energy plc has signed an agreement with Tullow Oil to acquire a 13.5% interest in the Production Sharing Contract for Block C-10, located offshore in the Islamic Republic of Mauritania. Sterling will acquire the stake including an entitlement to some of the past costs associated with the participating interest and will pay Tullow US$50,000 in cash as consideration and in repayment of interim period costs.

The current ownership of the PSC is: Tullow (Operator, 90%),  Societe Mauritanienne des Hydrocarbures et de Patrimoine Minier (SMHPM) (10%). Following completion, the ownership of the PSC will be: Tullow (Operator, 76.5%),  Sterling (13.5%), SMHPM 10%.

About Block C-10:

 The PSC for Block C-10 (10,725 sq km), awarded in 2011, is in the second phase of the exploration period. The current phase will expire on 30 November 2017 and has a minimum work obligation of 1 exploration well. The block surrounds the Chinguetti field and lies in water depths of 50m to 2,400m with full 3D seismic coverage.

Work Program:

In 2014, Tapendar-1 in Block C-10 was a dry hole and was plugged and abandoned. The operator has identified a drill ready Neocomian carbonate prospect in water depth of approximately 100m. The joint venture anticipates that the exploration well will be drilled in 2016. The gross cost of the well is anticipated at $77m. Following the completion of Phase 2, the joint venture may elect to enter into Phase 3 (with a 3 year term) with a minimum work obligation of 2 wells. Sterling and Tullow will carry SMHPM’s 10% interest proportionally during the exploration period of the PSC.