Hess Corp. sees enormous opportunity in Bakken

Hess Corp. CEO John Hess's comments on the Bakken from the Credit Suisse presentation on the 5th of February

*the number rigs employed by Hess in the Bakken reduced by half this year

*Bakken is profitable with WTI at $45

*Enormous opportunity to grow reserves over time

The purchase of Talisman's Bakken assets by Crescent Point looks like a great move.

The presentation is available here.

Arabs looking for oil in Canada

FP: Abu Dhabi hunts more acquisitions in oil sands: source

"Abu Dhabi National Energy Co., the Persian Gulf petroleum and power producer known as Taqa, is hunting for acquisitions in Canada's oil sands, home of the world's second-largest crude deposits outside Saudi Arabia, according to two people involved in the search."

"The companies that could become targets for takeover are the smaller distressed ones that are going through bank reviews now from a credit perspective," said Will Lee, an analyst at CIBC World Markets Inc. in Toronto."

IMO Conacher Oil & Gas(TSX:CLL), Habanero Resources(TSX-V:HAO),Bronco Energy (TSX-V:BCF), Oilsands Quest (AMEX:BQI), Petrobank Energy(TSX:PBG), Enerplus Reources Fund(NYSE:ERF), Baytex Energy Trust(NYSE:BTE) are some of the public companies that Taqa might be interested in.

Out of work

Upstream: Atwood rig does not see work until June

"Offshore driller Atwood Oceanics said it does not expect to receive any contract for one of its rigs till 30 June, as low oil and gas prices continue to hit oil companies right through the first half of the year..."

The Southern Cross was build in 1976 and has maximum water depth rating of 2000 feet and max drilling depth of 20 000 ft.

Seadrill nielaisemassa PetroMenan?

Seadrill on ostanut 1.1 miljardilla kruunulla(~30% alennuksella) 1.6 miljardin nimellisarvosta Petromenan velkaa(bondeja), jonka vakuutena on kaksi rakenteilla olevaa ultra deep water semiä(Petrorig I ja Petrorig II), jotka valmistuvat tämän vuoden huhtikuussa ja syyskuussa. Petrorig I on viiden vuoden sopimus Petrobrasin kanssa $410 000 day ratella ja Petrorig II viiden vuoden sopimus Pemexin kanssa $353 000 day ratella.

Seadrill sanoo tätä matala riskiseksi sijoitukseksi ja siltä se näyttää, tosin kenellekkään muulle kuin öljynporaajalle ei tuo sijoitus ole lähelläkään matala riskistä: Petromena ei voi myydä kumpaakaan lauttaa ilman SDRL:in ja muiden velkojien suostumusta. Jos PMENA löytää lautoille ostajan SDRL saa sijoitetun pääoman takaisin plus 45% voiton plus korot. Jos taas PMENA defaultaa lainat saa SDRL yhtiön hallintaan suurimpana velkojana, jolloin se ilmeisesti voi joko muuttaa velan osakkeiksi ja fuusioida yhtiö ostotarjouksen kautta SDRL:n tai myydä lautat markkinoilla itselleen tai muille. Koska SDRL nousee tämän oston avulla PMENAn suurimmaksi velkojaksi se pystyy estämään yritykset löyhentää lainojennehtoja. Jos yhtiö päätyy konkurssiin mitätöityvät jo tehdyt sopimukset Pemexin kanssa, mutta jos katsoo viime aikojen deepwater sopimuksia tämä on itseasiassa hyvä asia, koska noiden sopimuksien dr ovat noin 100 000 ja 150 000 dollaria alle tuoreiden dw-poraus sopimuksien tason.

Tiedotteessaan SDRL vihjaa melko suorasti että oston tarkoituksena on saada lautat haltuun eli käytännössä SDRL aikoo ilmeiseti ajaa PetroMenan konkkaan. Tämä sijoitus lisää SDRL velkaa, mutta ostos näyttää SDRL:n kannalta "win big-win huge" tilaisuudelta, joita tulee todella harvoin vastaan. Todella vaikuttava siirto John Fredrikseniltä ja Tor Olav Trøimiltä.

Jos nuo lautat päätyvät osaksi Seadrilliä kasvattavat ne yhtiön liikevaihtoa vuositasolla vähintään n. 380 miljoonalla dollarilla ja tulosta n.140 miljoonalla.

Petromenan osake kävi tänään tuon Seadrillin ilmoituksen jälkeen jopa 40% piikissä, muuta päätti päivän 23 prosenttia plussalle. Osake on pudonnut peräti 98% viimeisen 12 kk huipusta. Osakkeilla saattaa olla jotain arvoa jos SDRL päättyy konvertoimaan velkansa osakkeiksi konkurssin sijaan ja lunastamaan muut osakkeet. Paljonko mahdollinen lunastushinta saattaisi olla? Veikkaisin että alle 2 kruunua jolloin koko yhtiön arvoksi tulisi 300 miljoonaa. Tuo lunastus tapahtuisi varmaan lähinnä siksi että se olisi nopeampi keino yhtiön saada lautat haltuun kuin konkkaan ajo.

LISÄYS (ja korjaus):
SDRL:n hallituksen jäsen ja Fredriksenin oikea käsi Trøim sanoo että he odottavat PMENAn maksavan lainan takaisin. Jos PMENA pystyy tavalla tai toisella hankkimaan rahat lainojen maksuun SDRL tienaa tästä virityksestä 500 miljoonaa Norjan kruunua ja mahdolliset korot(josta vähennetty SDRL:n omat korkokulut), eli vähintään n.75 miljoonaa dollaria tai ~$0.19 per osake. Tuo 75 miljoonaa vaikuttaa pieneltä summalta siihen nähden että vaihtoehtona saattaa olla mahdollisuus saada yksi tai kaksi tuliterää ultra deep water semiä jopa 200 miljoonan dollarin alennuksella per alus, eli saa yhteensä $400 miljoonan hyöty.

LISÄYS II
Kolmen viikon takaisen Petromenan ja velkojien edustajien välisen tapaamisen tiedoitteista näyttäisi käyvän ilmi että PMENA on käytännössä defaultannut lainat mutta velkojat ovat antaneet yhtiölle armonaikaa ja ovat sopineet kahden arkipäivän varoitusajasta ennen default-ilmoituksen antamista. Seadrill voi siis ilmeisesti kolmessa päivässä käynnistää PMENAn konkurssin.

Rig count

US: -44, Canada: -55

US natural gas rig count decreased by 46 and the oil rig count grew with two units. A fluke? Oil rig count may have actually bottomed, but the number of rigs drilling primarily natural gas(land rigs, jackups and submersibles, ) will probably continue to decrease.

"PetroMena sells PetroRig I for $450m"

Offshore247:

"Norwegian listed drilling outfit PetroMena says it has to sell its deep water semi-submersible rig PetroRig I for $450m.
PetroMena did not reveal the indentity of the buyer, except that it was an international player."

PetroMena was offered 640 million for the same rig in last August, that is almost 200 million or 42% more than the new offer is worth. Management doesn't get much worse than this.
So who is the buyer? Diamond Offshore is a likely candidate as DO's President and CEO Larry Dickerson told Bloomberg earlier this week that they are interested in buying assets from distressed companies. The Indians are another candidate, but my bet is on DO. The price to be paid is very low and the buyer(whoever that is) is getting a real bargain.

Fresh contracts

Energy Current: PEMEX charters Rowan Gorilla IV

"HOUSTON: Rowan Companies has obtained a 785-day contract with Petroleos Mexicanos (PEMEX) for jackup Rowan Gorilla IV. Work offshore Mexico is expected to begin in the second quarter of 2009.

The contract is expected to provide around US$124 million of drilling revenues. "

DR ~$155 000. The dr is 25% below that of the last contract.

Upstream: StatoilHydro opts for Safe Scandinavia

"StatoilHydro has lined up Prosafe's Safe Scandinavia accommodation support rig for operations at the Snorre A platform in the Norwegian sector of the North Sea.

In a statement, Prosafe said it had been awarded a letter of intent (LoI), which is subject to approval by the Snorre licence partners.

The contract linked to the LoI has two firm durations, six months starting in early May next year and six months starting in early April 2011.

StatoilHydro has the option to replace the two firm periods with a continuous 17-month contract starting in May next year. The option must be exercised before January 2010, and is subject to vessel availability. "

DR $250k or $200k. Safe Scandinavia's current dr is $220 000.

Long on deepwater

Transocean's CEO Bob Long's comments on deepwater:

Positive Long Term Deepwater Outlook

Near Term
* Limited availability of deepwater capacity until 2011
* Strong recent fixtures
* Vantage/Petrobras eight-year contract
* Dryships/Petrobras three-year contract
* Uncertainty in the markets is preventing near term commitments by operators
* Decreased urgency to sign forward start contracts

Long Term
* Expect stronger deepwater rig demand than previously anticipated
* Industry fundamentals will remain strong

Transocean's Howard Weil presentation(.pdf)

Energy Trust Netbacks in Q4/08

A glance at the fourth quarter operating netbacks (per boe) and the y-o-y change of selected Canadian upstream income trusts:

Advantage Energy(AVN.UN) C$28.67 (-9%)

Crescent Point(CPG.UN) C$40.42 (-5%)

Canadian Oilsands(COS.UN) C$31.49 (-35%)

Daylight Resources(DAY.UN) C$28.98 (-5.3%)

Freehold(FRU.UN) C$42.14 (-9%)

Harvest Energy(HTE.UN) C$23.08 (-30%)

NAL Oil & Gas(NAE.UN) C$34.92 (+6.7%)

Pengrowth(PGF.UN) C$26.23 (-30%)

Penn West(PWT.UN) C$27.31 (-16%)

Peyto(PEY.UN) C$36.26 (+2%)

Provident Energy(PVE.UN) C$24.54 (-10%)

Vermillion(VET.UN) C$46.23 (+5.8%)

Some of the figures contain extraordinary items, which does distort the comparison somewhat. Vermillion had the highest netback with C$46.23 per boe and Harvest had the lowest with C$23.08. Only three trusts(Crescent, Freehold and Vermillion) were able to breach the 40 Canadian dollar mark. As one would expect Canadian Oilsands Trust had the biggest decrease in it's netback. Harvest, Penn West, Pengrowth and Provident have a dual Canadian/US listing and the lowest netbacks.

Nearing the bottom?

US rig count down by 41, Canadian count down 61.
Still big reductions, but I think we're getting close to the bottom. Although I still predict that the drilling activity will bottom in June, the coming rig count decreases should be much smaller than the ones we've seen during the recent months.

"Exploration in Cuban waters of Gulf increasing"

Energy Current:

HAVANA, CUBA: Geological exploration for hydrocarbons in Cuba's exclusive economic zone in the Gulf of Mexico is increasing, government paper Granma and state news agency AIN quoted basic industry minister Yadira García as saying, according to BNamericas.

García made the comment at the inauguration this week of Cuba's third earth sciences convention that runs through Friday and includes an oil and gas congress.

The zone holds the highest potential for crude and non-associated natural gas, according to García.

The geological areas in the Gulf of Mexico, however, are very expensive to develop because they are deep and just within the limits of current deepwater drilling technology, the CEO of Toronto-based Sherritt (TSX: S), Ian Delaney, said recently.

Deepwater is the word.

CPG.UN Q4

Revenues C$605.7 million

Net income C$361.4 million

Funds flow per unit C$0.87 (-12%)

Net income per unit C$2.84 (+455%)

Payout ratio 79%

Production 39,554 boepd(88% liquids, 12% natural gas) (+19%)

Average realized prices
liquids(bbl) C$60.02 (-20%)
natural gas(mcf) C$7.23 (+14%)
per boe C$58.06 (-17%)

Netback
without derivatives C$37.70 (-18%)
with realized derivatives C$40.42 (-5%)

Reserves 191.0 million boe, RLI(P+P) 13.7 years

F&D costs per boe(P+P) $20.91

Balance sheet

Assets
Current C$178.7 million
Total C$3,307.6 million

Liabilities
Current C$138.6 million
Total C$1,462.9 million

Equity C$1,844.8 million

Outlook (summary)

"Crescent Point continues to execute its proven business plan of creating value added growth in reserves, production and cash flow through management’s integrated strategy of acquiring, exploiting and developing high quality, long life, light and medium oil and natural gas properties. Crescent Point’s strong balance sheet, 3½ year risk management program and high quality asset base position the Trust well to maintain production and distributions through volatile commodity price cycles.Pro forma with the assets acquired from Talisman, Crescent Point will have increased its low risk development drilling inventory to more than 1,600 net locations, representing more than 16 years of low risk drilling inventory to maintain production levels. Through infill drilling, production optimization and water flood implementation, management believes the Trust has the potential to more than double its proved plus probable reserves over time."

"Crescent Point’s development capital budget for 2009 was set in December 2008 at $225 million, with average production forecast at 38,250 boe/d. Assuming the successful completion of the acquisition of the Talisman assets, Crescent Point has
upwardly revised its average 2009 production guidance to 40,500 boe/d, while maintaining its $225 million capital program for the year. Exit production is forecast greater than 42,000 boe/d."

"Crescent Point’s management believes that with the high quality reserve base and development inventory, excellent balance sheet and solid hedging program, the Trust is well positioned to continue generating strong operating and financial results and
delivering sustainable distributions through 2009 and beyond."

The report in pdf format

P/B 1.84

Comments: An OK quarter in spite of the tumbling commodity prices. Production costs should be coming down somewhat in the next quarters with lower rig rates and drill pipe prices. I expect that the distribution will be cut by 10-25% after the Talisman acquisition has been completed. Overall the future for Crescent Point looks very good: high quality, long life, moderate cost reserves and potential to grow the production. Virtually no political risks. Very good management.
The stock isn't cheap, but isn't expensive either.

Counting Rigs

US -44(oil -5.6%, gas -3.6%), Canada -79

Some drillers are bleeding bad.

Petrobank Q4

Revenue C$206.16 million (+62%)

EBITDA C$138.53 million (+47%)

Funds flow per share C$1.63 (+55%)

Net income per share C$0.34 (-26%)

Balance sheet
Assets
Current C$222.27 million
Total C$2,361.7 million (goodwill 62.3 million)

Liabilities
Current C$272.6 million
Total C$1,145.3 million

Equity C$1,035.2 million

Production 37,618 boepd(oil 93.5%, natural gas 6.5%) (+110%)

Average realized prices
CBU liquids C$57.71 (-28%)
CBU nat.gas C$6.86 (+13%)
LBU C$54.93 (-28%)

Operating netbacks in Q4

CBU liquids C$40.13 per boe(-40%)
CBU nat.gas C$5.03 per mcf (+1%)
LBU C$42.45 per boe(-31%)

Reserves 2P: 156.7 million boe(+65%)
3P 205.9 million boe

Undeveloped land
Petrobank: SE Saskatchewan(Bakken)(oil) 115 000 net acres, Torquay(gas) 87 000 net acres, Montney(gas) 14 net sections, Horn River(gas) 45 000 net acres(65 sections/100% WI + 14 sections/15.5% WI)

Petrominerales: Columbia 1.9 million net acres, Peru 1.43 million net acres

FD&A costs per boe(2P reserves) C$25.46

Available liquidity
Petrobank C$65 million
Petrominerales C$80 million +C$11 million


P/E 7.7, P/B 1.65

The reports: Finance(.pdf), Reserves & Production(.pdf)

Comments: Petrobank's liquidity situation doesn't look at all good. The company will have to issue new equity or sell assets or do both. As the credit lines are tied to the Canadian assets it is Petrominerales or a part of it which will probably be sold if the company can't raise equity.
The tar sands, Montney and Horn River shale gas are high cost resource plays which currently are marginally economic if at all. The Bakken isn't a low cost play either, but it is profitable with todays prices.
THAI seems to be going forward and the political and economic pressure exerted by the Obama administration on tar sand producers should benefit PB and THAI. However as PB is strapped for cash its further development will probably be delayed.

Deepwater news

Anadarko has big plans for Asia

"Anadarko Petroleum has big deep-water exploration plans this year for China and Indonesia, which it hopes will become its next international deep-water mega-project play."

Tullow antes up for Liberia stake

"UK outfit Tullow Oil bought 25% interest in LB-15, LB-16 and LB-17 licenses in Liberia in January, exploration boss Angus McCoss said today. "

"It will be “typical deep-water exploration” with a “commitment for seismic and drilling of an exploration well,” McCoss said on a conference call with reporters. "

Tullow Oil FY08 results

Revenue £692 million (+8%)

Operating profit £300 million (+59%)

Profit before tax 299 (+162%)

Basic earnings per share £0.309 (+335%)

Production 66,600 Boepd (-9%)


Balance sheet

Assets
Current £498.4 million
Total £2,932.2 million

Liabilities
Current £646.0 million
Total £1,309.1 million

Equity £1,309.1 million

Reserves

"Exceptional exploration and appraisal success with 17 discoveries from 22 wells led to a 274 million barrel increase in our reserves and resources. This resulted in a revised total of 825 million barrels of reserves and resources at year-end. Our reserves replacement ratio was 582%, averaging over 200% per annum for the last three years. Through our exploration and appraisal strategy we are realising the true potential of our portfolio and as we continue to execute successful drilling campaigns, we expect to further enhance and replenish our reserves and resources base over the coming years."

Outlook

"Given the current economic climate these will be challenging times for the oil and gas sector but Tullow is well positioned following an outstanding year in 2008. For 2009, the Group is focused on progressing Phase 1 of the Jubilee project in Ghana, fast tracking the commercialisation of Ugandan reserves and executing selective high-impact exploration and appraisal campaigns. The Group is in a very strong position, from an operational and financial perspective, to deliver these exciting and transformational projects as we move into our next phase of growth."

The report can found here

P/E 25.5, P/B 4.9

Tullow is a very interesting company, but it seems very expensive at the moment. However Tullow's discoveries in Uganda and Ghana are very promising and are likely to deliver several hundred million barrels worth of reserve additions.

Another Bakken deal

PENN WEST ENERGY TRUST ENTERS INTO AN ARRANGEMENT AGREEMENT TO ACQUIRE REECE ENERGY EXPLORATION CORP.

"The acquisition will be accomplished through a plan of arrangement (the "Arrangement") wherein each Reece share will be exchanged for 0.125 of a Penn West trust unit. Including the assumption of Reece's debt, the total acquisition cost is expected to be approximately $92.2 million."

Release(.pdf)

Reece has a working capital deficiency and basically no hedges so the acquisition is some what expected. Penn West is offering 0.125 trust units for every RXR share, which equates to value of C$1.20 per share. This is a crappy deal for Reece shareholders, but there aren't any alternatives available.
Painted Pony Petroleum and Ryland Oil are the last Bakken focused public Canadian juniors and both are very likely acquisition targets. If I remember correctly Shelter Bay, a private company controlled by Crescent Point Energy Trust has a shareholding in PPP.

One man's loss is another man's gain

North Sea costs falling says Talisman head:

"Supply vessel rates in the North sea have dropped by around 50% and North American rig rates have experienced a 30% fall, Manzoni indicated, as reported by Canada's Financial Post."

Noble Energy

Noble Energy (NYSE:NBL)

Noble Energy is a leading global oil and gas exploration and production company. The company's substantial domestic presence offshore in the Gulf of Mexico and onshore in the Gulf Coast provides the resource base from which to make the most of its opportunities. Noble Energy's outstanding portfolio of international projects represents a clear growth path for several years to come.

Noble Energy is distinguished by its:

* Natural gas orientation
* Strong discretionary cash flow
* Ability to take advantage of opportunities
* Clear path to multi-year growth.

Market cap $7.41 billion(PPS $42.75)

P/E 5.46

P/B 1.18

Yield 1.6%($0.16/Q)

EPS: 2008: $7.58 2007: $5.45
2006: $3.79 2005: $4.20 2004: $2.82

Balance sheet

Assets
Current $2,158 million
Total $12,384 mllion(goodwill $759 million)

Liabilities
Current $1,174 million
Total $6,075 million

Equity 6,309 million

Reserves(proved) 2008: 864 MMBoe(natural gas 64%, oil 36%) 2007: 880 MMBoe 2006: 835 MMBoe 2005: 806 MMBoe

Undeveloped land US onshore: 1.3 million net acres, North Sea: 54 000 net acres, Israel: 807 000 net acres, Ecuador 852 000 net acres, Equatorial Guinea: 250 000 net acres, Cameroon 563 000 net acres

Production 2009P: 212-220 000 Boepd 2008: 215 000 Boepd 2007: 200,062

Total production costs per boe 2008: $7.84 2007: $6.99 2006: $6.97

Divestments/acquisitions:
2008: Mid-continent acquisition $292 million 2007: Argentinian asset divestment $117.5 million 2006: Gulf of Mexico shelf asset divestment $625 million, United States Exploration acquisition $411 million 2005: Patina merger $4.9 billion

Ownership profile
Major shareholders: NWQ Investment Management 9.7%, Axa Financial 8.5%, Barclays Global Investors 8.4%, FMR LLC 6.3%, Wellington Management Company 5.4%

Insiders own 3.03% of outstanding shares

Comments:
Current reserves are located onshore and offshore US, Israel, Ecuador, North Sea, Equatorial Guinea, Cameroon and China. The natural gas "orientation" isn't a plus as the majority of independents are willingly or unwillingly natural gas weighted reserve-wise. NBL's current reserves are located in relatively stable countries.

Offshore discoveries

Energy Current: Oil tanker strikes sunken jackup in U.S. Gulf

Energy Current: Tullow makes deepwater discovery offshore Ghana

High yield pipes

High and sustainable yield sounds like an impossible combination especially today. Oil and natural gas pipeline operators should be somewhat shielded from the full effects of the current economic downturn. A glance at the yield and outlook of some of the larger American and Canadian pipeline companies.

Enbridge:

"As a result of our solid business model and our unwavering focus on safety, income and growth, we are one of very few Canadian companies to have a positive return to our shareholders in 2008," said Mr. Daniel. "As we announced in December 2008, we expect our 2009 earnings per share to grow by 20% as we continue to advance our portfolio of liquids pipelines growth projects. At present, our core business operations have been largely unaffected by the crisis in the financial markets and the recent slump in energy prices."

Yield:
Enbridge Inc.(NYSE:ENB)4.09%
Enbridge Energy Partners, L.P.(NYSE:EEP):15.51%

Pembina Pipeline Income Fund:

"For 2009, Pembina has identified $230 million in potential capital projects. This includes approximately $150 million related to the Nipisi and Mitsue Pipelines with the balance directed to the completion of development projects started in 2008, and to other discretionary projects and upgrades. Pembina expects to finance its capital spending program from a combination of undrawn bank facilities, cash flow from operations, Pembina's Premium Distribution, Distribution Reinvestment and Optional Cash Purchase Plan and from additional financing.

Pembina's Board of Directors, following a strategic review in response to the enactment of legislation introducing the taxation of specified investment flow-through entities, such as income trusts, has approved plans to convert from trust to corporate form at some time prior to the January 1, 2011 effective date of trust tax. Further, based on internal projections and certain assumptions, Pembina expects that it will be able to sustain its current distribution objective of $1.56 per Trust Unit annually over the next five years (in the form of a dividend after corporate conversion). Pembina's proven business strategy and premium assets, together with well developed growth initiatives, are expected to produce the solid, sustainable results that Pembina projects will support this commitment."

Yield:(TSX:PIF.UN)12.6%

TransCanada:

“TransCanada made significant progress on a number of major projects in 2008, including the Keystone oil pipeline system, the North Central Corridor expansion, the Bruce Power refurbishment, and three large-scale, gas-fired power plants. These major projects are all under construction today. In 2009, we expect to invest approximately $6 billion in these and other capital projects. The strong cash flow generated by our operating assets, along with recently completed debt and common equity issues, mean we are well-positioned to fund our sizable capital program. Looking forward, we expect to generate strong, long-term financial returns for our shareholders as a result of our growing portfolio of high-quality energy infrastructure assets, our proven project development and execution capabilities, and our strong financial position.”

Yield:
TransCanada Corporation (USA)(NYSE:TRP)5.18%
TC Pipelines LP.(NASDAQ:TCLP)11.74%

Kinder Morgan Energy Partners

"KMP previously announced that it expects to declare cash distributions of $4.20 per unit for 2009, a 4.5 percent increase over 2008. "We continue to be well positioned for future growth and anticipate that our business segments will generate over $3 billion of earnings before DD&A in 2009," Kinder said. "Growth will be driven by the continuation of our substantial capital investment program, which includes both expansions of existing assets along with new projects. As examples, we have three major natural gas projects scheduled to begin service in 2009."

The 2009 budget assumes an average West Texas Intermediate (WTI) crude oil price of $68 per barrel for the year. The majority of cash generated by KMP is fee based and is not sensitive to commodity prices. In its CO2 segment, the company hedges the majority of its oil production but does have exposure to unhedged volumes, most of which are natural gas liquids. For 2009, every $1 change in the average WTI crude oil price per barrel is expected to impact the CO2 segment by approximately $6 million (or about 0.2 percent of our combined business segments' anticipated distributable cash flow). If the average WTI crude oil price per barrel in 2009 were the same as the price experienced in 2008 (about $100 per barrel), then KMP would generate distributable cash flow that could support cash distributions of approximately $4.52 per unit for 2009. This sensitivity to the WTI price is very similar to what the company experienced in 2008."

Yield:(NYSE:KMP)10.09%

El Paso Pipeline Partners L.P.

"Building on a successful 2008, the partnership also announced future outlook highlights. In 2009, the partnership expects to generate approximately $180 million of distributable cash flow. This represents an increase of more than 20 percent over 2008, due to higher interests in its equity pipelines CIG and SNG, and recently completed expansion projects.

The partnership expects to spend $64 million in expansion capital, and $2 million in maintenance capital.

CIG and SNG are expected to spend total growth capital of approximately $200 million for expansion projects in 2009, which will be funded by amounts recovered from notes receivable under the cash management program with El Paso, and by capital contributions from their partners, including El Paso Pipeline Partners. The partnership anticipates its share of such capital contributions to be approximately $40 million in 2009."

Yield:(NYSE:EPB)7.62%

Rig Count down countinues

US rig count drops by 73(oil: 19 rigs/-7.3%, gas 54 rigs/-5.56%), Canada is down 95.

Seadrill Update

Monday: John Fredriksen has increased his exposure to Seadrill by 500 0000 shares through TRS-contracts

Today: Seadrill subscribes to Scorpion private placement
Seadrill subscribed ~37% of the new shares offered.

Big moves in South Saskatchewan

Talisman to sell Bakken assets

"Calgary independent Talisman Energy Canada and its affiliate, Fortuna have agreed to sell their assets in Bakken play in southwest Saskatchewan and Daniels County, Montana for about C$720 million (US$565.6 million) to Crescent Point Resources and TOG Partnership, an affiliate of Tristar Oil & Gas..."

In addition Crescent Point Energy Trust is converting into a corporation.

"“Conversion to a corporation is an exciting and necessary step in the continued growth of Crescent Point,” says Mr. Saxberg. “At the current growth and development stage of the southeast Saskatchewan Bakken light oil resource play, there are too many opportunities available to Crescent Point to be
constrained by the federal government’s Safe Harbour growth limitations. Our business model will remain unchanged."

The Talisman asset acquisition metrics for CPG

2009 Cash Flow Multiple:
- 5.8 times based on production of 4,000 boe/d (US$50.00/bbl WTI, Cdn$5.00/mcf AECO and
$0.80 US$/CDN$ exchange rate)

Production:
- $69,875 per producing boe based on 4,000 boe/d
- Operating costs of less than $11.50 per boe.

Reserves:
- $13.25 per proved plus probable boe
- $19.14 per proved boe


The acquisition looks ok and the conversion is an expected move, though it does take place much earlier than I expected. CPG is funding the purchase through issuance of new equity, monetization of hedges and through bank lines. Adding debt in todays finance market is a bold move, but in a better environment the number on the price tag of these assets would have been much greater. CPG's ability to raise 200 million worth of common equity with modest costs to its current unitholders clearly reflects company's high quality asset base and healthy financial position. The acquired 312 net sections of undeveloped land in Saskatchewan and 125 net sections of Bakken land in Montana should enable Crescent Point to sustain and even grow its reserves through the drill bit in the coming years.
Talisman's decision to focus on unconventional gas seems outright stupid as allmost every single oil & natural gas company in North America is more or less involved in unconventional gas.

XOM hits paydirt in Brazil

ExxonMobil Notifies Brazil ANP of 2nd Find at BM-S-22

"The Brazilian unit of global oil titan ExxonMobil Corp. notified Brazil's National Petroleum Agency that it had made a second oil discovery at the BM-S-22 offshore block.

In a routine filing with the ANP, Exxon said that it had once again discovered traces of oil in a well drilled in the Santos Basin's BM-S-22 block. In January, Exxon said it had discovered oil in the same 1ESSO3SPS well.
ExxonMobil's local press office confirmed that discovery, which was dated Feb. 17 but posted on the ANP's Web site late Tuesday, was new but declined to give any further details. It's unclear if the find was made after deeper drilling of the well."

"The BM-S-22 block was the last to be drilled in a promising region that could hold deposits of up to 33 billion barrels of oil equivalent, or BOE, government officials have said. The block is part of a cluster of four blocks that contain a gigantic geographical structure, which industry experts and analysts believe could contain several discoveries the size of Petrobras' Tupi find."

RIG jackup contract terminated

Transocean cold stacks rig after Petrobel termination

"ALEXANDRIA, EGYPT: Petrobel, an Egyptian oil company jointly owned by the Egyptian General Petroleum Corp. and Eni, has terminated its contract for Transocean jackup GSF Key Singapore. Transocean is challenging the validity of this termination.."

It is difficult to draw any conclusion out this since the information provided is very limited. This is the third Transocean contract that has been terminated pre-maturely, the two others were terminated due to financial woes of the customers.

Vantage Drilling Double

Vantage Drilling Company's (AMEX:VTG) two ultra deep water drillships have been awarded contracts by ONGC and Petrobras. Platinum Explorer has been awarded a five-year contract starting in the fourth quarter of 20120 worth $1.1 billion(dr ~$585k) by ONGC.
The Titanium Explorer has been contracted by Petrobras for an eight period. The contract commences in the third quarter of 2011 and will generate revenues worth 1.6 billion dollars(dayrate ~$547k).

The ultra deepwater demand and dayrates still show no weakness.

Saudi Arabia to Cut Drilling Rigs Amid Lower Oil Demand

RIGZONE:

"Saudi Arabia, the world's largest oil exporter, is expected to cut the number of oil rigs by as much as 20% until year-end amid lower crude output, people familiar with the situation said.

Last year, Saudi Arabian Oil Co., or Saudi Aramco, the state-run oil company, had about 130 offshore and onshore rigs in operation at peak times, a number that is set to fall by up to a fifth throughout 2009, the people said.

"They haven't announced any specifics but they are saying there will be a reduction in the number of rigs by 20%," one Gulf-based oil industry official told Zawya Dow Jones..."

Aramco employs land and shallow water rigs and as the day rates of these rigs are already under pressure the Saudi cuts will push the rates straight to the bottom.

Oil field with 100 mln-ton reserves found in Inner Mongolia

China Knowledge:

"A large oil field has been found in Siziwang Banner in northern China's Inner Mongolia autonomous region, which is known as the landing place of the Shenzhou-7 space module in 2008.

The oil field has a proven reserve of 100 million tons, and has a workable reserve of 35 million to 40 million tons based on preliminary estimate.

The Siziwang Banner government will input RMB 20 million (US$2.9 million) in the first half of 2009 to establish five exploratory shafts for further exploration, and plans to invest RMB 200 million in the next three years to dig 100 wells with an annual oil output of 150, 000 tons.

This is the second oil field found in Inner Mongolia which already has a proven reserve of 700 million tons. It is expected the oil reserve will amount to over 4 billion tons in this region."

The field isn't very large as the recoverable reserves are estimated to be around 300 million barrels, but the location is interesting.