The state of the UK North Sea

Tax incentives have encouraged capex spend...but this has led to an overheated OFS marketand rising costs have caused some marginal projects to be postponed or even cancelled (Bressay (Statoil) and Rosebank (Chevron) being well known examples)Production decline continued in 2013...Increase in planned and unplanned shutdownsAgeing infrastructure...compounded by few large field start-ups and poor exploration successWM estimates UKNS average discovery size in 2013 to be c.11.3mmbbl, which struggle to meet commercial thresholds in current high cost...

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Thoughts around using a high discount rate

Higher discount rates may be used to reflect the greater risk averseness adopted by a company/project manager. This may also be used as a screening tool, with lower NPV projects rejected. In O&G, and other fields, higher discount rates should be used in conjunction with other tools to evaluate projects.At the planning level, the use of higher discount rates has its own limitations due to conflicting interests between the project team (e.g. staying in the job) and management.Encourages projects with near term and/or higher levels of early production Implication:...

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Global upstream review - 2014

Transaction activity declined sharply in 2013Record M&A in 2010-12, companies switched focus to developing acquired acreageCorporate activity weak – NOCs faced hurdles in NAM, public companies weary of overreaching with strict capital discipline and own paper cheapIn NAM, prime acreage now leased up; valuations mixed as drilling results and understanding of plays have progressedAsian NOCs bidding aggressively on global assets as large corporate opportunities limited or more difficult to transact – have seen spending from this group of buyers...

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Repsol hit with further delays offshore Namibia: Welwitschia

Welwitschia prospect being drilled on PEL0010: Repsol (44%*), Tower (30%), Arcardia (26%)Welwitschia-1 spud last monthDue to issues with wellhead housing, well was plugged and abandonedDecision made to drill Welwitschia-1A 50m away, which was spud 1 May 2014Welwitschia-1A now at 1,879m but problems with blowout preventer system has halted drillingProspect estimated to have multi-billion bbl potential and is being drilled to test the Maastrichtian and Aptian-Albian reservoir sequen...

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Libya update: co-ordinated militia attacks against Islamists

On 16 May, forces loyal to Colonel Haftar attacked the bases of two Islamist militias in the eastern Libyan city of Benghazi: Ansar al-Sharia and 17 February Martyrs BrigadeHaftar commands the "national army"Aim of attack to remove Islamist militias from BenghaziAnsar al-Sharia aims to impose Sharia law in LibyaAllied with 17 February Martyrs, who report to the GovernmentIn Western city of Tripoli, militias allied with the Zintan Brigade also moved in support of Haftar's actions and attached the General National Congress ("GNC")Colonel Obaidi,...

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Lekoil acquires 40% WI in Otakikpo Marginal Field

20 May 2014: Lekoil announced acquisition of 40% participating and economic interest in Otakikpo, a Nigerian onshore Marginal Field; located within OML11Vendor: Green EnergyConsideration: USD7m upfront, plus USD4m contingent on production and ministerial approvalLekoil will also fund work programme for re-entry of existing wells and all costs up to production (estimated c.USD67m); this is recoverable from enhanced share (88%) of production cash flowLekoil expects to bring Otakikpo into production within 12-18 monthsAcquisition and work...

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Oryx: Appraisal drilling update for Demir Dagh, Kurdistan

Oryx holds 65% WI in Hawler licence (Operator), KNOC (15%), KRG (20%)On 19 May 2014, announced test results for Demir Dagh-3 ("DD-3") and Demir Dagh-5 ("DD-5") wellsDD-3: all four tests flowed successfully; crude quality similar to that at DD-2 and -4Spudded in November 2013, 3km south-east of DD-2Will now be completed as producer with DD-2 and -4DD-5: Logging data and drilling fluid losses during drilling, only small amount of hydrocarbons recovered to surfaceFirst production from Demir Dagh Area expected Q2 2014DD-6 plus a further 4 appraisal/development...

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