Schlumberger Buys Into Ophir Energy In Equatorial Guinea

 

Ophir has signed a non-binding Heads of Terms Agreement with Schlumberger whereby Schlumberger will, subject to due diligence, definitive documentation and Government approval, receive a 40% economic interest in the Fortuna FLNG project, offshore Equatorial Guinea.

Ophir and Schlumberger will now work towards signing a definitive agreement, which is expected to be signed in 2Q 2016, ahead of Final Investment Decision.

Under the definitive agreement Schlumberger will reimburse 50% of Ophir's past costs in the form of a development carried interest. This is expected to cover Ophir's share of capital expenditures up until first sales of LNG.

As previously indicated, Ophir is also presently shortlisting the gas off-take offers and expects to complete this process within the coming weeks. All workstreams are progressing in line with expectations and the project remains on track to achieve FID in mid-2016.

Mercedes Eworo Milam, Director General of Hydrocarbons in the Equatorial Guinea Ministry of Mines, Industry and Energy ('MMIE'), commented: 'MMIE continues to lend full support to Ophir, GEPetrol and Sonagas as it progresses the Fortuna FLNG project towards FID.'

On the 22nd January 2016 an agreement was signed between Golar and Schlumberger to jointly develop gas reserves through FLNG technology. Subject to a successful FID and implementation of the partnership in the Fortuna project both Schlumberger and Golar have expressed interest to extend this partnership to include other existing or potential new Ophir assets

Ophir's 2015 operating cash flow from producing assets and capex remain broadly in line with previous guidance. Production for 2015 averaged 13,000 boepd on a full year proforma basis. This exceeded guidance with both the Bualuang and Sinphuhorm fields producing ahead of budget.

Capital expenditure in 2015 was approximately $250 million on a full year proforma basis. Group cash at year end was approximately $620 million with a net cash position of approximately $360 million. Group gearing at year end was in the region of 12%.

Ophir's 2016 production guidance is 10,500 boepd to 11,500 boepd, with the Kerendan gas field expected to start contributing to these volumes in the second half of the year.

Ophir's 2016 capital expenditure is expected to be between $175 million and $225 million. Group operating cashflow from producing assets in 2016 is forecast to be between $75 million and $100 million.

This, along with a planned 2016 refinancing of the Group debt facilities, is expected to lead to a 2016 year end cash position of between $550 million and $600 million, a net cash position of between $225 million and $275 million, and an estimated gearing of 17%.

Ophir has a low cost production base that is cash generative materially below current commodity prices. The Bualuang oil field has a 2016 post-tax operating cashflow break-even of approximately $17 per barrel before capex (approximately $25 per barrel after capex).

Ophir's total production base has a post-tax operating cashflow breakeven price of approximately $15 per boe.

SOURCE: www.oilvoice.com

 

Shell Not Sure When Recovery Will Emerge

 

There's a durable sense of weakness in the oil economy and, while recovery is expected, it's uncertain when, Royal Dutch Shell said Wednesday.

Shell said it expects fourth quarter profits to come in at around 50 percent lower year-on-year as the industry continues to suffer from the dramatic declines in crude oil prices. The price for Brent crude oil tumbled 2.8 percent in early Wednesday trading in a sign of protracted weakness in the energy markets.

A spokesperson for Shell said the company was positioning itself for a sustained downturn by cutting capital investments. The company is planning to merge with British counterpart BG Group and, combined, spending of $33 billion for the year marks a 45 percent reduction from its peak.

Shell said an oversupplied market is the fundamental reason behind the sector decline. Once production falters from maturing fields and investments in future output falls off, supply pressures should ease and markets will start to recover.

"Overall production capacity is estimated to be falling by about 4 million barrels a day, so the world needs an additional five million barrels a day just to stand still in terms of meeting demand," a Shell spokesperson said in response to email questions. "These fundamentals point to the oil price recovering, but when and to what level is a matter of speculation."

Provided the deal with BG Group is completed, the company said the combined footprint will be positioned well to take advantage of resilient sectors like liquefied natural gas and deep-water exploration, which will combine to act as a springboard for the combined entity.

Shell Chief Executive Officer Ben van Buerden said teaming up with BG Group would mark the start of a new chapter for the Dutch supermajor. Costs will move lower by about $4 billion for 2016, but also result in widespread redundancies.

"These actions will include a reduction of some 10,000 staff and direct contractor positions in 2015-16 across both companies, as streamlining and integration of the two companies continue," he said in a statement.

Shares in Royal Dutch Shell (NYSE:RDS) held steady, while those for BG Group (LON:BG) were off 2.4 percent in early Wednesday trading.

SOURCE: UPI.COM

 

CNOOC Trims Global Production Target

 

China National Offshore Oil Corp., the country's largest producer, said its 2016 production forecast is lower than last year by about 3.5 percent.

CNOOC set a production target for the year in the range of 470 million to 485 million barrels of oil equivalent.

"The net production targets set for 2017 and 2018 are around 484 and 502 million boe respectively," the company said. "The estimated net production for 2015 was approximately 495 million boe."

The decline comes as the slowing in the Chinese economy is putting downward pressure on crude oil prices. The Chinese National Bureau of Statistics reported the economy in 2015 grew 6.9 percent year-on-year for its slowest rate in a quarter of a century.

Wang Baoan, the head of the NBS, was quoted by China's official Xinhua News Agency as saying the country has the "daunting task" of enacting deep reforms to slow the pace of economic decline.

CNOOC said that, in light of the economic pressures, it would put cost control and efficiency at the forefront of its agenda for 2016.

"In response to the continued challenge posed by low oil prices, we will maintain prudent financial policy and further strengthen cost-control measures in order to make steady progress in the overall business, including exploration, development and production," Chief Financial Officer Zhong Hua said in a statement.

CNOOC said spending for 2016 would be "no more than $9.1 billion." That's down nearly 11 percent from last year.

SOURCE: UPI.COM

Weak Oil Economy Leaves Energy Companies With Less Capital To Invest

 

Nearly 3 million barrels of oil developments may see production delays given the capital pressure from lower crude oil prices,Wood Mackenzie finds.

"The impact of lower oil prices on company plans has been brutal," Angus Rodger, Wood Mackenzie's principle researcher in exploration and production, said in a statement.

The price for Brent crude oil, the global benchmark, is down roughly 70 percent from the most recent high in June 2014 and off 16 percent from the start of 2016. That leaves energy companies with less capital to invest in exploration and production, or the upstream part of the energy sector.

U.S. supermajor Chevron in its latest budget forecast said it plans to spend about $26.6 billion this year, about a quarter less than total expected investments for 2015. The overall budget for ConocoPhillips of $7.7 billion is a 25 percent reduction in expected full-year capital spending for 2015

Wood Mackenzie found about $170 billion in spending through 2020 has been delayed from 68 projects pulled off the table. By 2021, that means a deferred volume of around 1.5 million barrels per day and 2.9 million bpd by 2025. Those delays mean companies aren't expected to produce new oil from new projects until at least the middle of the next decade.

"But against a backdrop of overwhelming corporate pressure to free-up capital and reduce future spend -- to the detriment of production growth -- there is considerable scope for this wall of output to get pushed back further if prices do not recover and/or costs do not fall enough," he said.

Crude oil prices are lower in part because robust production levels are pushing markets toward the supply side as the global economy struggles to show growth. A balance between supply and demand should develop by the end of this year, though a recent report from the U.S. Energy Information Administration said Brent will only reach $50 per barrel by 2017.

"Tumbling prices and reduced budgets have forced companies to review and delay final investment decisions on planned projects, to re-consider the most cost-effective path to commerciality and free-up the capital just to survive at low prices," Rodgers said.

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