Daily Archives: September 17, 2012

USA: EPL Acquires Shallow Water GoM Assets from Hilcorp for USD 550 Mln

EPL Oil & Gas, Inc. (EPL or the Company) announced it has executed a purchase and sale agreement to acquire certain shallow water Gulf of Mexico (GOM) shelf oil and natural gas interests from Hilcorp Energy GOM Holdings, LLC (Hilcorp) for $550 million.

The assets are currently producing approximately 10,000 barrels of oil equivalent (boe) per day, about 50% of which are oil. Estimated proved reserves as of the July 1, 2012 economic effective date totaled approximately 36.3 million boe, 54% of which are oil. The properties include three fields that Hilcorp had acquired from Chevron Corporation in Ship Shoal Block 208, South Pass 78, and South Marsh Island 239, which are all on the Central GOM shelf in the vicinity of EPL’s existing core field areas. These three fields account for 64% of the current proved reserves, and approximately 82% of the total proved acquisition PV10 value estimated at $626 million using strip prices as of August 31, 2012 (see discussion of PV10 in appendix). The currently estimated asset retirement obligation to be assumed by EPL in the acquisition is expected to total approximately $120 million.

Gary Hanna, EPL’s President and CEO commented, “This is the fourth acquisition we have made since 2011, and it is the most transformational. This accretive acquisition provides scale and diversification while continuing to focus the value of our Company in the Central gulf, which is the most prolific, oil bearing region of the GOM. These underdeveloped, legacy Chevron assets allow us to leverage our proven strengths as an efficient exploiter of shallow water shelf assets.

The high operating control of 95% will permit us timely access to the development opportunities that exist on these properties. There are already over 90 low-risk, oil-rich shallow behind pipe and drilling opportunities, as well as numerous optimization projects that our operational teams will vigorously pursue. Meanwhile, as our successful strategy has demonstrated with prior acquisitions, we will apply our proven regional knowledge and technical skills to identify and exploit the upside potential of these acquired properties in short order.”

Gary Hanna continued, “This transaction nearly doubles our proved reserves to approximately 74 million boe. Additionally, it drives our production above 20,000 boe per day, supports EBITDAX generation in 2013 in the range of $450 million to $500 million and is very accretive to our key operational and valuation metrics. This transformational acquisition fits all of our acquisition criteria.”

In conjunction with signing the purchase and sale agreement, EPL will add to its crude oil and natural gas hedge positions to provide downside protection. The Company is planning to hedge 80% of the forecasted proved producing oil and natural gas production of the assets being acquired for years 2013 through 2015, with 2013 hedges scheduled to be secured early this week representing approximately 80% of forecasted proved production. Approximately 50% of EPL’s existing oil production is hedged for 2013.

In addition to utilizing cash on hand to finance the purchase, EPL has obtained committed financing from Bank of Montreal to complete the transaction, including an increase in its senior secured credit facility from $250 million to $750 million. The borrowing base under this expanded credit facility has been increased from $200 million to $450 million in conjunction with the acquisition. Additionally, Bank of Montreal and BMO Capital Markets have provided the Company a commitment for $200 million in the form of a senior unsecured bridge loan, which is expected to remain unutilized as the Company plans to access the high yield market for permanent financing before the anticipated closing date in late October.

The purchase is subject to customary closing conditions and adjustments. Hilcorp has indicated to EPL that this sale represents their exit from the GOM shelf. The economic effective date is July 1, 2012, with closing expected by October 31, 2012. EPL has submitted a 10 percent cash deposit to Hilcorp under the terms of the purchase agreement.

USA: EPL Acquires Shallow Water GoM Assets from Hilcorp for USD 550 Mln| Offshore Energy Today.

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Huisman Builds New Production Facility in Brazil

 

Huisman, specialist in lifting, drilling and subsea solutions, has announced its plans to build a new production facility in Brazil and recently initiated the land fill works. The new facility will be located alongside the river Itajai-Açu in the city of Navegantes in Santa Catarina state, a state in the southern part of Brazil bordering the Atlantic Ocean. This facility will be used for the manufacturing of construction equipment for the Brazilian offshore market.

The first investment phase includes over 15,000 square meter of production facilities. The next investment phase will include a 200m long quay side with an artificial bay to protect vessels from the seasonal river’s high currents. With the quayside in place, the Huisman do Brasil facility will be easily accessible for seagoing vessels, allowing for fast installation, commissioning and testing of the Huisman designed and built offshore construction equipment onboard. The new Huisman production facility is planned to be operational in the second half of 2013.

Subsea World News – Huisman Builds New Production Facility in Brazil.

 

Study: Biofuels mandate could increase EU CO2 emissions

Published 17 September 2012

European biofuel mandates are unlikely to deliver a significant reduction and could even increase greenhouse gas emissions unless land use factors are considered, says a study by the International Council on Clean Transportation (ICCT).

The ICCT report suggests that Brussels is on the right track with its new biofuels rules, leaked last week, in which the EU executive backtracked on its policy goal of a 5.75% share for biofuels in the transport sector’s renewable energy targets.

The ICCT paper claims that, if not revised to address indirect land-use change (ILUC) the renewable energy directive could be expected to deliver a carbon saving of only 4% compared to fossil fuels, with a 30% chance actually of causing a net emissions increase.

The implementation of indirect land use change factors is likely to significantly increase carbon savings from biofuel policy, it says.

Such factors would also allow Europe to meet the directive’s target for a minimum 50% reduction in greenhouse gas emissions from biofuels compared to fossil fuels.

All of the carbon savings from the policy are likely to come from use of bioethanol, since its main source – sugarcane – uses less land than biodiesels made from palm and vegetable oils.

Biodiesel from non-waste vegetable oil, the study says, is “likely to have a worse carbon footprint that fossil diesel“.

No basis for biodiesel

“Given that biodiesel production is also expected to be worse for a range of other environmental indicators (e.g. acidification, eutrophication, biodiversity) … than fossil diesel, there is no environmental basis for the EU to continue to support the supply of biodiesel … from non-waste vegetable oil.”

Under the leaked EU proposal, the EU executive will end all subsidies for crop-based biofuels after the current legislation expires in 2020, a major blow to a sector worth an estimated €17 billion a year in Europe alone.

Angela Corbalan, EU media and communications officer for Oxfam, said her organisation viewed the leaked Commission proposal as a “step in the right direction.”

“If adopted”, she said in emailed comments, “it will send a strong signal that the Commission eventually wants to stop promoting the use of food for fuel and climate change damaging biofuels.”

A ‘crystal ball’ exercise

Rob Vierhout, secretary-general of ePure, a trade group representing the bioethanol industry, said he doubted the significance of ILUC factors in contributing to greenhouse gas emissions.

“I don’t trust this science”, he said, adding that at this particular point in time no clear methodology exists: “It’s a crystal ball exercise. No one can give hard numbers on iLUC.”

Vierhout also condemned the Commission policy u-turn as “inconsistent policymaking”.

“We’ve invested billions of euros”, he said. “Now the Commission says they’re going to change the game.” ePure would put up a strong fight against the proposed law, he vowed.

The criticism echoes many others in a biofuel industry which argues that current modelling, such as that used in the ICCT study, is not robust enough for use in policymaking.

Food prices vs CO2 emissions

Nusa Urbancic, clean fuels campaigner for the Transport & Environment NGO, said that despite the Commission proposing to cut the use of crop-based biofuels, the bioethanol industry could benefit from the new law.

European demand for biodiesel exceeds bioethanol, as more European cars run on diesel but, while the proposed law would hit all crop-based fuels – including ethanol made from sugar cane – the market for fuels better in iLUC factors could increase.

“It will still be good for them because there will be an incentive to move towards biofuels with lower factors”, Urbancic said.

Land used to power European cars with biofuels for one year could produce enough wheat and  maize to feed 127 million people, said a study released by Oxfam ahead of the EU Energy Ministers’ meeting today (17 September).

“With the world’s poorest at greater risk of hunger as a result of spiralling food prices, the international agency is calling on the EU to rethink its dangerous love affair with biofuels”, read a statement accompanying the study.

Positions:

Biofuels are wreaking havoc on tight food markets and our forests, increasing hunger and accelerating climate change just so Europe can fuel its cars,” said Robbie Blake, the biofuels campaigner for Friends of the Earth.

“The EU needs to comprehensively close the carbon accounting loophole [from ILUC], otherwise biofuels will continue to expand agriculture for fuel at the expense of forests and natural habitats, and increase carbon emissions.” He continued: “After months of delay, the Commission has come up with a messy compromise that acknowledges that ILUC is extremely serious, but then fails to address it in all pieces of legislation. This proposal would see an increase in Europe’s biofuels made from food, when what we need at this time of food crisis is to stop burning them altogether.”

“Europe has helped spark a global rush for biofuels that is forcing poor families from their homes, while big business piles up the profits. Biofuels were meant to make transport greener, but European governments are pouring consumers’ money down the drain, whilst depriving millions of people of food, land and water,” said Natalia Alonso, Head of Oxfam’s EU Office.

Study: Biofuels mandate could increase EU CO2 emissions | EurActiv.

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