Staggering -- If You Think About It -- May 28, 2015

From RBN Energy today, a most remarkable blog. One can talk all day about solar and wind energy, but when it comes down to reality, in global energy, it's all about coal and natural gas. Today's RBN Energy post is about LNG exports to Asia. Maybe some day they will find huge natural gas reserves in Asia, but apparently not there yet.

From RBN Energy today:

Asian consumers of liquefied natural gas hope to use the current supply glut—and the start-up of U.S. LNG export facilities--to their long-term advantage. Their very understandable goal is to up-end the old market structure, which for years has had them paying far more for LNG than their Western European counterparts. How will the coming revolution affect U.S. natural gas producers and the next round of U.S. LNG export projects? Today, we continue our review of the fast-changing global market for LNG with a look at a new set of Asian LNG buyers and at the region’s fast-changing supply/demand dynamics.

Most of Asia has experienced significant economic growth in the first 15 years of the 21^st century—not just powerhouses like China and India but smaller, more mature economies like South Korea’s, Taiwan’s and Singapore’s, and still-developing nations like Pakistan, Bangladesh, Thailand and Vietnam. In most places that growth is being fueled in large part by energy from natural gas, and that trend is very likely to continue, especially if (as seems probable) gas prices remain competitive with oil and coal. Asia’s gas reserves are spotty, though, forcing many countries (Japan, Korea, China and India among them) to turn to LNG imports and—if possible—gas delivered by pipeline.

As we said in Episode 1 of our series, the market for LNG has evolved gradually over the last 50-odd years, but it remains dominated by long-term LNG supply deals. At first LNG prices were fixed, but starting with the OPEC oil crisis in 1973-74, oil and LNG prices were linked, with the goal of mitigating risks for buyers and sellers.

In Episode 2, we ran through five major catalysts shaking up the LNG trade:

1) New LNG capacity coming online, mostly in Australia and the U.S.;

2) Fixed liquefaction tolling agreements being offered by U.S. LNG developers and natural gas costs tied to price index percentages (typically 115%) of the U.S. Henry Hub, LA benchmark;

3) The collapse in oil prices and the resulting drop in oil-indexed LNG prices;

4) The roll-off of long-term LNG supply deals and the increasing share of LNG capacity available to the spot market; and

5) The recent slump in Asian LNG demand-and prices--that have occasionally  made Western Europe a more attractive market for spot LNG sales.

In Episode 3, we looked at existing and future demand in China and India, which are expected to be the world’s biggest LNG growth markets—along with the use of LNG as a ship bunker fuel.

And in Episode 4, we considered Japan and Korea, by far the world’s largest LNG consumers, and (with China and India) the driving forces behind reshaping the Asian market.

In RBN Energy's next episode, RBN Energy will look at why the Asian and European sub-markets for LNG have been so different, and at whether there’s a chance that, with lots of new LNG capacity coming online, those sub-markets might finally start to look more alike. RBN Energy will also consider Asian LNG-buying alliances and the potential for an Asian LNG hub—two things that could help keep a lid on LNG prices in the region.

Population:

• China: 1.357 billion (10x Japan; 27x Korea)
• India: 1.252 billion 
• Japan: 127 million
• South Korea: 50 million

And everyone in China and India wants to have the lifestyle of the Japanese and/or the South Koreans.

*******************************

Apple Page

Apple, also, has some exciting news today. Apple announced a new retail store to open on Saturday, June 13 in Upper East Side, Manhattan, NYC. 

The comments were interesting: mostly a complaint that there were not enough Apple retail stores in NYC. As hard as it is to believe, there is no Apple retail store near Wall Street. Apple must have a very, very interesting algorithm when determining when/where to open a new retail store.

This is only Apple's seventh store in NYC, and apparently some New York boroughs still have no Apple stores.

Apple overnight added signage to its upcoming retail location in the Upper East Side of Manhattan that confirms the store will open on June 13. The new store will be located at 940 Madison Avenue, on the corner of 74th Street, and remains under construction ahead of opening. The new store will be Apple's seventh retail location in New York City alongside Fifth Avenue, Grand Central, SoHo, Upper West Side, West 14th Street and Staten Island stores.

*******************************

Wow, Will This Year's Global Warming Ever Quit?

Caribou, Maine, Reporting Record Snowfall Today

Ice Age Now is reporting: 

Not much, but it’s still a record.

“The 0.3″ of snow observed at Caribou yesterday was the greatest snowfall on record so late in the season,” says National Weather Service Tweet.

“Old record 0.2″ on 5/25/74.

Chinese Buy Into More US Oil And Gas Assets

Bloomberg is reporting:

Goldleaf Jewelry Co., a Chinese jewelry retailer with gold mining investments, plans to buy U.S. oil and gas operator ERG Resources LLC for at least $665 million.

The Beijing-based company will pay for the acquisition with a private share placement, raising as much as $940 million from no more than 10 investors, Goldleaf said.

Buying closely held ERG would give Goldleaf a foothold in oil assets along the Gulf Coast and California, adding to $16 billion of oil and gas deals announced by Chinese companies in the past year, according to data compiled by Bloomberg. ERG sold 13 oilfields to Australia’s Linc Energy Ltd. in 2011 for $236 million.

The number of producing acres was not provided in the press release, at least that I could see. 

Friday -- Aetna Expects To Lose Money Due To ObamaCare

Active rigs:

	2/7/2014	02/07/2013	02/07/2012	02/07/2011	02/07/2010
Active Rigs	191	184	202	166	90

RBN Energy: how the US shale gas boom benefits Asian LNG importers.

Using the US natural gas production boom to promote the idea of a sustainable “global gas glut”, Asian importers have successfully managed to chip away at the longstanding oil-indexed pricing mechanism for liquefied natural gas (LNG) overthe past two years. While oil-indexation in LNG contracts will certainly not disappear overnight, the shale revolution has provided gas importers with significant negotiating leverage and a new degree of pricing flexibility. Today we examine the trend toward more US centric LNG pricing.

In January 2012, Cheniere Energy signed a 20-year agreement with Korea Gas Corporation  to supply 3.5 million tonnes per annum  of LNG from its Sabine Pass facility (equivalent to 0.5 Bcf/d) for a $3/MMBtu liquefaction fee plus 115% of the current Henry Hub, LA natural gas price.

Subsequent contracts based on Henry Hub prices have followed suit. In November 2012, Japanese power utility Kansai Electric signed a 15-year import contract with BP Singapore with Henry Hub natural gas as the price basis. That agreement marked Japan’s first-ever long-term LNG import contract fully linked to a gas benchmark.

More recently in 2013, Freeport LNG in Texas signed 20-year tolling agreements with Asian industrials Toshiba (Japan) and SK (Korea) for a premium of $7/MMBtu over Henry Hub.

Jobs report: horrendous.

The Wall Street Journal

Pentagon drops plan to mothball the USS George Washngton, aircraft carrier, after the White House intervened to head off a brewing political fight. 

Apple repurchases $14 billion of its own shares in two weeks.

Sony forecasts $1.1 billion loss.

Target breach began with contractor's electronic billing link:

The hackers that carried out the massive data breach at Target Corp. appear to have gained access via a refrigeration contractor in Pittsburgh that connected to the retailer's systems to do electronic billing.

Fazio Mechanical Services Inc., a privately held company with about 125 employees, said Thursday it was "a victim of a sophisticated cyberattack operation" and was cooperating with investigators at the Secret Service.

The details in a statement by the company's owner, Ross Fazio, provide new clues to how hackers infiltrated Target's computer system and eventually stole the data of 40 million credit- and debit-card numbers during a security breach that lasted from Nov. 27 to Dec. 18. The thieves also stole personal data like email addresses and phone numbers of 70 million customers.

Fazio Mechanical began working with Target in 2006 installing and maintaining refrigerator systems in stores as the discounter expanded its fresh food offerings. Through that relationship, the contractor was linked remotely to Target's computer systems for "electronic billing, contract submission and project management," Mr. Fazio said.

LinkedIn, a glorified Facebook for executive-wannabes, sees weak sales. 

Greenbrier to offer safety retrofit for rail tankers.

Greenbrier Cos., the nation's second-largest maker of railcars, said the industry needs to move faster to make tank cars more crash-resistant, and will begin offering to retrofit older tanker cars that carry potentially explosive crude oil.

The move, which comes in advance of expected new federal standards for such cars, makes Greenbrier the first U.S. manufacturer to embrace upgrades proposed by a rail-industry panel for the tens of thousands of older tank cars now in service in the U.S. The cost of the proposed modifications has been estimated at $15,000 to $80,000 a car.

In an interview Thursday, Greenbrier Chairman and Chief Executive William Furman criticized the 10-year timetable for modifying older tank cars that haul crude oil and ethanol suggested by a rail-industry trade group in December. He said safety improvements could be made in half the time, and at less cost, with a slimmed-down list of retrofits.

 AOL blames financial problems on two "distressed babies." Oh, oh.

AOL'schief executive angered employees Thursday when he said that care for two staffers' "distressed babies" in 2012 cost the company about $1 million each, expenses that helped drive up AOL's overall benefits costs and forced management to make difficult decisions to cut the company's 401(k) plan.

The remarks came as CEO Tim Armstrong addressed employees during an all-staff-conference call to explain the company's rational for the cuts, which were disclosed earlier this week.

 Aetna expects to lose money on health-law marketplan. Well, duh.

KKR profits soar. Search the blog for KKR's connection to the Bakken.

The Los Angeles Times

I just love the spin. Everyone knows it was a horrendous jobs report, but The LA Times, in a headline, front-page story: US economy adds a modest 113,000 jobs in January. LOL. The LA Times is more liberal -- or least more of a mouthpiece for Obama -- than the New York Times. But in the very first paragraph, the newspaper was forced to tell the truth, it appears:

Job growth was sluggish in January for the second straight month, likely renewing concerns that the economy and labor market recovery may be faltering again. 

And then this: stocks move higher as unemployment rate falls. Nope: the market moved higher for many reasons but not because the unemployment rate dropped from 6.7% to 6.6%. Which no one believes anyway.

We have another nominee for the fourth product placement vehicle for Liam, Samuel, and Archie: the Jeep Cherokee. 

Back To The Kinder Morgan Ocean-Going Tanker Story

Updates

January 7, 2014: whoopee! Just as I said, regarding the Kinder Morgan Energy/tank company story. Motley Fool has a piece on this same story and comes to same conclusion!  

So while Enterprise and Buckeye stick closer to the mainstream in the midstream sector, Kinder is again cutting a slightly different path. Keep an eye on this transaction and its performance after it's consummated. Kinder might just use its "bird's eye" view of the oil and gas industry to put more money to work in the Jones Act area if the deal works out well. 

Original Post

On Christmas eve I happened to post a story, actually a response to an article in SeekingAlpha. It had to do with Kinder Morgan's purchase of two tanker companies. This was the purchase:

Kinder Morgan Energy will spend $962 million in cash to buy two tanker companies as the transportation and storage company expands its shipping business.

American Petroleum Tankers has a fleet of five tankers that can hold 330,000 barrels of cargo.

State Class Tankers has commissioned the construction of four tankers that hold 330,000 barrels of cargo. They are expected to be completed in 2015 and 2016. 

I made some comments, thinking out loud, behind the strategic thinking on this purchase.

Don sent me an interesting link to a thread over on the Yahoo!Finance MDU board which probably connects the dots better than I did. The link takes you to a Wall Street Journal article: Asian refiners get squeezed by US energy boom. 

Asian oil refiners have become significant players in the global market for liquid fuels, thanks to investments in large, modern facilities. But they are facing growing pressure from a previously unlikely region—the U.S. Refiners in the U.S. have gained access to relatively inexpensive domestic shale oil and Canadian crude, which is giving them a competitive edge in the export market for fuels such as gasoline and diesel.

Rivals in Asia started feeling the pressure when tankers leaving U.S. ports started unloading cargo in Europe and South America. Now the U.S. companies are starting to venture into Asia. BP PLC and Vitol Group SA in recent weeks have sold U.S. jet fuel to Chinese buyers, according to Singapore-based traders, reversing the usual flow and underscoring the impact that unconventional oil is having on the global fuel trade.

Japanese utility Tokyo Electric Power Co. said in February that it would import 200,000 tons of liquefied petroleum gas from U.S.-based Enterprise Products Partners EPD  between 2013 and 2016. The deal makes sense for Tepco, which has had to sharply increase its purchases of hydrocarbons since suspending operations at its nuclear power plants in the wake of the March 2011 earthquake and tsunami.

Recently RBN energy had a piece on global propane prices, and here's another reference:

Propane, for example, costs around $620 a ton in the U.S. compared with more than $1,000 a ton in China. The price difference for butane is even wider, according to DNB Bank.

For more, see this Market Realist story on how soaring US propane exports are affecting prices.

Currently, domestic propane trades at a discount to international propane. This is because domestic propane production has continued to grow and despite a growing amount of propane exports, export capacity has been limited by a lack of infrastructure. However, this price disparity provides an economic incentive to build the necessary infrastructure to export propane. Midstream companies have already announced projects to build or expand propane export terminal facilities, which should result in increased propane exports and support for propane prices.

This year Enterprise Products Partners finished an expansion of an export facility earlier this year and current propane deliveries are over 7.5 million barrels per month. EPD also recently announced an expansion project that will add 1.5 million barrels per month of capacity starting 1Q15. Additionally, the company announced construction of a second export terminal on the Gulf Coast with initial loading capacity of 6-6.5 million barrels per month of propane or butane, expected to be in service 4Q15. In total, the company expects to have loading capacity of 15-16 million barrels per month of low ethane propane and/or butane at its marine terminals.

Interesting, huh? Puts the Kinder Morgan ocean-going tanker story in perspective. I'll leave readers with this:

Until recently, U.S. oil products mainly went to markets that were relatively close to refining centers in and around the Gulf of Mexico, where more than 40% of U.S. refining capacity is located.

Brazil, for example, has been buying more U.S. diesel, displacing at least three shipments a month from Asia, according to oil traders. Traders estimate U.S. diesel deliveries to Europe have doubled to around 1.3 million barrels a day over the past year. Overall, European imports have remained relatively stable at between three million and four million barrels a day.

That has undermined the profitability of fuel sent to Europe from Asia, Russia and the Middle East. The more-recent forays of U.S. shipments to Asia could become more common once an expansion of the Panama Canal is completed in 2016, likely cutting shipping costs and further increasing the price competitiveness of U.S. exports.

Readers should go to the linked article for the full story.

Connecting Some Dots On A Slow Saturday Morning; A123 Becomes B456 -- Owned By The Chinese

Back on November 17, 2013, I wrote a long "whining" post on the most recent edition of Bloomberg Businessweek.

The opportunity "forced" me to actually look at the "special issue" much more closely than I otherwise might have looked. The blog has served me very, very well .... 

Here are some dots to connect, to think about.

From the Bloomberg Businessweek special edition, the lead-off story, with what to watch for in 2014. The two-page "headline" spread, which I complained about, may have been more helpful than I realized. It included five head shots of the movers and shakers for 2014. I recognized all but one. The one I did not recognize was of Chinese Premier Li. The caption was simply "LI." I thought it was the page number in Roman numbers, page 51.

Then this article linked over at Drudge: taxpayers lose $139 million on Fisker.  

Happy Thanksgiving from the Obama administration. The Energy Department has sold off its $192 million loan guarantee to Fisker Automotive to Chinese billionaire Richard Li for $25 million — the biggest taxpayer loss on a green loan since the failure of Solyndra.

The Energy Department will announce the "selling of the promissory note” to Hybrid Tech, which is owned by Chinese billionaire Richard Li, according to sources familiar with the sale. The DOE sold the loan to Li for $25 million after lending the financially troubled green automaker a total of $192 million since 2009.

But in this case, the dots probably don't connect. I am not aware that Chinese Premier Li and Mr Richard are related.

Except for the fact that they are Chinese. 

So, although the dots don't connect as well as I would like, the exercise revealed there are some new movers and shakers to watch going into 2014.

According to an undated post: 

Hybrid Tech Holdings is new investor group that was formed on October 29 in Delaware. There's no available info on the company at the time of writing and it is unknown whether or not Hybrid Tech plans to restart Fisker Karma production.

The Chinese are getting deep into American battery technology. From the Daily Caller article linked above:

It was reported last month that Li and the Obama administration were ironing out the details of the Fisker loan sale after the Energy Department had completed its auction. Li’s purchase of the government’s loan represents the second acquisition of an Obama-backed green energy company by Chinese investors. Earlier this year, the Chinese auto parts conglomerate Wanxiang Group bought the electric car battery maker A123 Systems, renaming the company B456.

CNOOC Ltd To Examine LNG Development In British Columbia, Canada Through Nexen

CNOOC Ltd to examine LNG development in British Columbia, Canada through Nexen:

Co announced today that its wholly-owned subsidiary Nexen Energy ULC (Nexen), has entered into an exclusive agreement with the Government of British Columbia, Canada to examine the viability of constructing a liquefied natural gas (LNG) plant and export terminal at Grassy Point near Prince Rupert, British Columbia, Canada. The agreement with the Government of British Columbia, represented by the Ministry of Forests, Lands and Natural Resource Operations, grants Nexen and its joint venture partners INPEX Corporation and JGC Corporation, the exclusive right to pursue long-term access to Crown land at Grassy Point.

Related posts:

• http://themilliondollarway.blogspot.com/2013/02/third-lng-export-license-given-out-by.html
• Platts is reporting the growing rift between British Columbia and Alberta over oil shipments, rail and pipeline.   
• US and Canada vie for big NG export projects
• http://themilliondollarway.blogspot.com/2013/06/increasing-interest-in-using-lng-in.html

China Acquires More Shale Acreage in Texas: $1.7 Billion For 80,000 Net Acres In The Wolfcamp

This is old news for some; I can't remember if I've posted anything on it.

But it's part of one of the big stories (see sidebar at the right).

For newbies: as you read the story below, remember this bit of trivia about the Wolfcamp: the Wolfcamp is probably the thickest of any onshore U.S. oil shale play, with up to 1,000 feet of potential payout across hundreds of thousands of acres. In comparison, the middle Bakken is about 75 feet thick; thicker in some areas, less thick in other areas. The Three Forks, around 300 feet thick. (Again, these are my opinions, world view; others will have different numbers; their numbers are probably more reliable.)

The Oil & Gas Journal is reporting:

Sinochem Group has closed its previously announced $1.7 billion purchase of Wolfcamp assets in Texas from Pioneer Natural Resources Co.

PNR of Dallas sold 40% of its interest in 207,000 net acres in the horizontal Wolfcamp shale in the southern portion of the Spraberry trend.

Back-of-the-envelope (numbers rounded):

• 40% of 207,000 = 80,000 net acres
• $1.7 billion/80,000 = $20,000 / acre
• Obviously there is production, other assets but, for me, that gives me an idea of valuation of these acres. Production is close to 10,000 boepd, according to the press release, which, at $50/bbl = $200 million/year.  

According to the press release:

At closing, Sinochem paid $631 million in cash of which $109 million was Sinochem’s 40% share of net expenditures in the joint interest area.

Sinochem will pay the remaining $1.2 billion by carrying 75% of PNR’s share of future drilling costs until the drilling carry is fully utilized.

 Again, lots of "moving parts" and I may be misinterpreting the deal, but that's how I see it for now.

Tokyo Gas Buys Natural Gas Stake in Texas

Rigzone is reporting:

Quicksilver Resources, a natural gas producer is selling a 25-percent stake in its Barnett Shale oil and gas assets to TG Barnett Resources LP, a subsidiary of Tokyo Gas Co. for $485 million.

Quicksilver will remain as operator of the assets which are located in Texas. The company holds about 130,000 net acres within the Barnett Shale formation in the Fort Worth basin of north Texas. The assets currently produce about 275 million cubic feet per day of shale gas and natural gas liquids marketed in the United States.

The world is changing. China and Japan buying US energy assets.

ObamaCare: Let's Just Make Sure It's Not a Third-World Experience -- Obama Administration; Could China Buy Range Range Resources, Chesapeake, Africa?

It seems like today is the day for ObamaCare stories.

Everything else is quieting down. Expectations in the Middle East have been lowered. The area is quiet again. The Kurds and the Turks have called a truce. Everybody's feeling better about Cyprus; by Monday, it will have disappeared (not the story, the country -- as a viable tourist destination). The price of oil is going back up but trading in a reasonable range. And, except for the C-companies (CHK, COP, and CLR), things in the oil patch are going swimmingly well.

So, now back to the subject at hand. It seems like this is the day for ObamaCare. From the administration as being reported by The Washington Examiner:

With time-running out before the major provisions of President Obama’s health care law are set to be implemented, the official tasked with making sure the law’s key insurance exchanges are up and running is already lowering expectations.

“The time for debating about the size of text on the screen or the color or is it a world-class user experience, that’s what we used to talk about two years ago,” Henry Chao, an official at the Centers for Medicaid and Medicare Services who is overseeing the technology of the exchanges said at a recent conference. “Let’s just make sure it’s not a third-world experience."

Chao also described himself as “nervous.”

Wow, that's lowering expectations.

“Let’s just make sure it’s not a third-world experience."

I don't know if folks saw the button Colin Powell was wearing some months ago, but the button is more relevant than ever: "it could be worse."

***********************

Another "C" word: China. Over at Minyanville, this story: what's going on with the Chinese buying spree and who's next?

In fact, we’ve seen Chinese oil companies embark on an aggressive international energy asset buying spree. In 2012, China’s state-owned oil companies coughed out a record $35 billion buying oil and gas assets all over the world. There was, for example, CNOOC’s $15.1 billion offer to buy Canada’s Nexen, Sinopec’s $2.2 billion purchase of Devon Energy’s shale gas assets in the US, and PetroChina’s $1.63 billion buyout of BHP Billiton’s holding in Woodside Petroleum.

What's behind all this?

.... most experts say that Chinese oil companies have been snapping up foreign assets for two reasons: to secure its own domestic energy needs and to pick up expertise in shale gas and oil sands drilling and extraction.

“Over 90% of the energy used in China comes from low grade coal, and the Chinese are literally choking on it. Nuclear energy is on the way with more than 50 plants in operation or under construction,” ...“However, they require oil now for transportation and infrastructure needs, and China, while it has oil of its own, does not have prolific oil fields or reserves and must look abroad for both technology and reserves.”

So, what's next on China's list to buy? Chesapeake and Range Resources. Go to the link to see more.

China Looking To Buy Into North American Shale

With no confirmation of the story about Chesapeake selling its Bakken acreage that ran March 1, 2013, one starts to wonder about the story's veracity. However, this Bloomberg story might a) put it in perspective; and, b) explain what might be going on.

China National Petroleum Corp., the country’s biggest oil company, is seeking its first stake in the U.S. as Chinese explorers with $40 billion of cash try to join an energy renaissance unlocking billions of barrels of crude.

“We are currently studying” investing in U.S. oil, Jiang Jiemin, chairman of the state-run company, said yesterday at the National People’s Congress meetings in Beijing. Domestic rival China Petrochemical Corp. last month agreed to buy stakes in an Oklahoma field from Chesapeake Energy Corp. for $1.02 billion. 

Chinese oil companies using government loans want stakes in shale fields that are fostering the most crude production in the U.S. in 21 years and helping wean it off Middle Eastern imports. They’ll be guided by the experience of China’s CNOOC Ltd., whose $19 billion bid for Unocal Corp. was blocked by U.S. lawmakers eight years ago. CNOOC last month won U.S. approval for a $15.1 billion purchase of Nexen Inc., albeit with curbs on operating the Canadian company’s Gulf of Mexico fields in U.S. waters. 

Another LPG-Export Terminal

In the process of searching for something else, I ran across this, as reported by Argus Media.

Data points:

• new LPG-export terminal; Beaumont, Texas; Japan + European joint venture
• exports predominantly to Asia-Pacific
• hinted at this project in 2011 due to glut of propane but didn't say anything until yesterday
• Japan: 34% stake
• first phase: $500 million; will include a 100,00 b/d de-ethanizer (strip ethane from propane)
• to be completed by 4Q14
• differential between US propane / Asian propane: $452/t
• several other LPG-export facilities mentioned in the linked article

Note: the ethane will be stripped out, adding to even more ethane stateside. (Corrected: see comment from "anon 1.")

Chesapeake To Sell 50% Stake In Oklahoma Assets To China's Sinopec

AP is reporting:

Chesapeake Energy said on Monday that it will sell a 50 percent stake in oil and natural gas-rich land in Oklahoma to Chinese oil company Sinopec for $1.02 billion as the natural gas producer continues selling off assets to repay debt.

Chesapeake is the second-largest producer of natural gas in the U.S. after Exxon Mobil. Hurt by low natural gas prices, it has sold off billions in assets to pay off debt incurred as it rushed to buy land and other assets. It's also increasingly focused on more lucrative oil and gas liquids.

From Yahoo!In-Play:

Co and Sinopec International Petroleum Exploration and Production announced the execution of an agreement which provides for Sinopec to purchase a 50% undivided interest in 850,000 of Chesapeake's net oil and natural gas leasehold acres in the Mississippi Lime play in northern Oklahoma.

The total consideration for the transaction will be $1.02 billion in cash, of which ~ 93% will be received upon closing. Payment of the remaining proceeds will be subject to certain customary title contingencies. Production from these assets (including Mississippi Lime and other formations), net to Chesapeake's interest and prior to Sinopec's purchase, averaged ~ 34 thousand barrels of oil equivalent per day in the 2012 fourth quarter and, as of Dec 31, 2012, there was ~ 140 million barrels of oil equivalent of net proved reserves associated with the assets.

All future exploration and development costs in the joint venture will be shared proportionately between the parties with no drilling carries involved.

$1.02 billion (almost all in cash) / 425,000 acres ---> $2,400/acre. 

SandRidge: 1.8 million net acres (per Filloon) x $2,400 ---> $4.32 billion. Market cap for Sandridge is $2.71 billion today.

Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read at this site.

Chinese Company To Buy Acreage in West Texas

Link to Oil & Gas Journal:

Sinochem Petroleum USA LLC, a subsidiary of China’s Sinochem Group, plans to pay $1.7 billion to acquire 40% of Pioneer Natural Resources Co.’s stake in 207,000 net acres in the Wolfcamp shale in the Spraberry trend of West Texas.

At closing, Sinochem will pay $500 million in cash to PNR, before normal closing adjustments, and will pay the remaining $1.2 billion by carrying a portion of Pioneer’s share of future drilling costs.

Sinochem and PNR plan to drill 86 horizontal Wolfcamp shale wells during 2013, 120 wells in 2014, and 165 wells in 2015. The transaction is expected to close during the second quarter, subject to customary governmental approvals.

Previously reported.

Mitsubishi and EnCana Form a Natural Gas Partnership in British Columbia -- Absolutely Nothing To Do With the Bakken -- February 17, 2012

Source: naturalgasintelligence - Montney. 

Updates

February 15, 2023: Montney update, RBN Energy.

March 28, 2022: Vermilion Energy makes strategic acquisition in the Montney.

June 30, 2021: Montney update, RBN Energy, takeaway. 

June 14, 2021: Montney rivals merge; Canada's largest natural gas producer now larger. Tourmaline Oil acquires Black Swan.

 

May 19, 2021: Montney update, RBN Energy.

October 30, 2020: Canada finally approves 2021 expansion of NGTL's gas pipeline network. 

 

July 22, 2020: COP to buy Montney acreage. 

June 7, 2019: update on the Montney -- RBN Energy. 

May 12, 2019: recent headlines from  naturalgasintelligence - Montney:

• Encana's well costs have dropped $1 million/well after merger with Newfield Exploration in February, 2019
• Montney's unconventional potential of almost 2,000 trillion cubic feet (333 billion boe?) said to be barely tapped
• Duvernay, Monteny growth requires natural gas pipeline expansion
• links between fracking, earthquakes remain elusive, Canadian report
• Encana adds Anadarko Basin to "core three" with Montney, Permian

April 6, 2018: COP announces acquisition in Montney. 

January 29, 2018: update on Montney.

September 27, 2017: update on Montney.

August 7, 2017: canceled LNG project casts shadow over Canada's biggest shale play.

Petronas' decision to cancel its Pacific NorthWest LNG project is a blow to the growth outlook for Canada's largest shale play, eliminating a potentially huge source of future gas demand.

Gas from the Montney shale play in western Canada would have supplied the C$36 billion ($28.7 billion) project in northern British Columbia. The project, majority-owned by Malaysia's Petronas, would then have shipped 12 megatonnes per year of liquefied natural gas to Asia.

Instead, state-owned Petroliam Nasional Bhd (Petronas) subsidiary Progress Energy will keep developing and selling gas from its vast Montney position into a North American market where prices have been languishing at historically low levels.

May 20, 2017: as a natural gas play, Montney, "Permian of the North" is back

March 13, 2016: competing with the Marcellus for eastern Canada. 

March 3, 2016: update on polyethylene cracker in North Dakota; the tsunami will include the natural gas from Montney.  

Original Post

Asia Continues to Buy North American Assets

Link here.

Mitsubishi Corp. agreed to acquire a partnership with EnCana Corp. to develop Cutbank Ridge undeveloped lands in northeastern British Columbia. Terms call for Mitshbishi to invest $2.9 billion (Can.) for a 40% interest.

The partnership holds 409,000 net acres of Encana’s undeveloped Montney formation gas assets in the Cutbank Ridge play. Encana will operate the partnership and be the managing partner with 60% interest in the partnership.

Randy Eresman, Encana president and chief executive officer, said Encana began nearly a decade ago to assemble its land position in the Cutbank Ridge in the foothills of the Canadian Rockies.